Dubai: With India and UAE amending their bilateral Double Taxation Avoidance Agreement (DTAA), foreign insitutional investors (FIIs) from the Gulf nation may now route their investments from Mauritius to minimize tax.
While individual investors in United Arab Emirates will continue pouring money in India, the volume of funds from FIIs could be affected after the two countries amended the treaty in March during the visit of the Gulf country’s vice president Sheikh Mohammed Bin Rashid Al Makhtoum to India.
Institutions may now hesitate to park funds directly in India by routing them through Mauritius, Dubai-based Barjeel Geojit Securities’ director K V Shamsudheen told ‘Gulf News’.As per the India-Mauritius DTAA, investors do not have to pay capital gains tax.
But as per the amendments in India-UAE DTAA, gains arising on the sale of stocks within one year are now being taxed at 10%. Long-term capital gains from sale of capital assets, other than listed securities, are now subject to 20% tax.
Short-term capital gains from the sale of shares other than listed securities shall be taxable at 30% for individuals and 40% for companies. “There is no issue for individual investors who put in a small amount of money through portfolio management accounts because they have been doing this (paying the tax) for decades,” Evolvence Capital managing director Jay Jeganathan told ‘Gulf News´.
“But it does negatively impact the institutional funds. I may (now) have to go through the same grind of Mauritius,” he said, adding “(but) Mauritius is a tried and tested route”.