The India-Mauritius Double Taxation Avoidance Agreement (DTAA) has been amended to introduce a Principal Purpose Test (PPT) under Article 27B, denying treaty benefits in cases of treaty shopping and tax avoidance arrangements.
India-Mauritius DTAA Amended to Block Treaty Abuse
The Double Taxation Avoidance Agreement (DTAA) between India and Mauritius has been amended effective October 1, 2026, to strengthen provisions against treaty abuse. The revised agreement replaces the preamble and introduces a Principal Purpose Test (PPT) under Article 27B, which denies treaty benefits where one of the principal purposes of an arrangement is to obtain such benefits in a manner inconsistent with the intent of the treaty.
The PPT aligns the DTAA with the minimum standards under the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan, particularly targeting cases of treaty shopping by foreign investors routing investments through Mauritius to avail capital gains tax exemptions. Tax authorities may now deny treaty benefits if the structure lacks commercial substance or is primarily driven by tax avoidance motives.
For legal practitioners, this amendment necessitates careful review of investment structures involving Mauritius, particularly in private equity and fund arrangements. Advisors must now assess whether transaction design meets the PPT standard and document commercial and economic justifications. Retroactive application is not expected, but ongoing structures should be re-evaluated for compliance.
Citations
- India-Mauritius DTAA (Amended 2026) Article 27B
