FDI from Mauritius Crosses $50 bn.

NEW DELHI: India's foreign direct investment (FDI) through Mauritius, considered a tax haven, has crossed $50 billion accounting for 42 per cent of the total FDI inflows, according to the latest official data.

India has a Double Taxation Avoidance Treaty (DTAA) with Mauritius, under which the corporates registered there can choose to pay taxes in the island nation.

Experts said companies prefer to route their investment through the famous Mauritius route because of as low as three per cent effective rate of corporate tax on the foreign companies incorporated there.

Besides, an investor routing his investments through Mauritius into India does not pay capital gains tax either in India or Mauritius.

"Mauritius is an offshore financial centre. There is no provision of capital gains tax," said PWC Executive Director Akash Gupta.

According to FICCI Director General Rajiv Kumar "clear reason for bulk of the FDI coming from Mauritius is the DTAA which allows higher returns to investors... It is a good channel to use, as it gives significant savings."

It is estimated that the government may be losing Rs 2,000 crore per annum because of the "treaty shopping".

Of the total USD 121.26 billion FDI that has come between April 2000 and August 2010, Mauritius accounted for USD 50.16 billion, according to the latest official data.

Though India has a DTAA with about 75 countries like the US, UK, Japan, France, and Germany, it is Mauritius which is the most preferred route for FDI inflows because of low or zero corporate tax, an official said.

Even though India offers several exemptions and reliefs to companies on the corporation tax of 30 per cent, the effective rate in the country for the corporate is no less than 20 per cent.

After Mauritius, India received highest FDI of $11.27 billion from Singapore, $8.91 from the followed by UK ($6.15 billion) and the Netherlands ($4.96 billion), Japan ($4.53 billion), Cyprus ($4.2 billion), and Germany ($2.86 billion) since 2000.

Source : economictimes.indiatimes.com