Marc Hein says some changes in regulations recently introduced are far-reaching and Mauritius waits to see how they work in practice.

Mauritius remains committed to prevent round-tripping—a form of money-laundering—and ensure that only companies meeting a certain amount of commercial “substance” are able to benefit from the double taxation avoidance agreement (DTAA) between India and the island nation, according to Marc Hein , chairman of the Financial Services Commission (FSC), which regulates non-banking financial services in Mauritius.

Mauritius, long criticized as a tax haven, recently laid down rules for global business companies that require them to create a tangible business structure—not just a company on paper—to claim benefits under DTAA.

Companies now have to adhere to stricter regulation to help authorities determine if the management and control of a firm is in Mauritius. The new rules also listed minimum expenditure and asset requirements for companies and regulations around directors.

In an email interview, Hein expressed the hope that these changes will bring about a “win-win situation” for India and Mauritius while ensuring that more jobs are created locally and more money is spent by companies in Mauritius.

Edited excerpts:

1.Why has FSC decided to tighten regulations for companies that operate from Mauritius?

1. The FSC as the regulator for non-banking financial services and global business is stronglycommitted to the sustained development of Mauritius as a sound and competitive financial servicescentre. The amendments brought to section 3 of chapter 4 of the Guide to Global Business is tofurther implement the government policy of encouraging “substance” in Mauritius by global businesscompanies.
2. However, it is to be noted that these new guidelines are also prescribed to formalize existingpractices so as to create a level playing field in the industry.

2.Can you explain the rationale behind the rules that have been introduced, governing management and control of companies, directors in these companies and the composition of the companies?

1. We want the people of Mauritius to benefit more from global business companies based here by creating jobs, renting offices, spending more money locally and, hence, further establish themselves as truly resident. We also welcome such companies to list on the Stock Exchange of Mauritius and encourage them to settle their disputes locally within the Mauritius International Arbitration Centre.

3.Do you think these steps will address the concerns raised by the Indian government around the misuse of the double taxation treaty between India and Mauritius?

1. I do not agree that there is a misuse of the treaty. These new guidelines are in line with a series of other initiatives to bring substantive business in Mauritius. I strongly believe we have addressed and keep addressing the concerns of the Indian government. We want the Mauritius International Financial Centre to be a true partner of India—in terms of Indian inbound as well as outbound investments.
2. Will it curb round-tripping and prevent companies that do not have a genuine presence in Mauritius from availing the benefits under the India-Mauritius DTAA?
3. We have repeated on many occasions that we will clamp down on round-tripping whenever it is reported to us or whenever it is detected by us. It also depends what you style as “genuine presence”. Only those companies which are tax residents will have access to the treaty.
4. These measures have also been undertaken further to the commitments of our government that Mauritius will issue tax residence certificates upon compliance with enhanced commercial substance.
5. Therefore, these measures refer to the implementation of government policy of encouraging substance in Mauritius by global business companies.

4.What has been the response of the Indian government? Have you shared the changes in regulations with the Indian tax authorities?

1. The Indian government communicates with our ministry of finance, and both parties meet at the level of the joint working group.
2. I do believe we will end up with a win-win situation, (rather) than a lose-lose situation detrimental to both countries.

5.Is FSC looking at any more changes to ensure that only genuine Mauritius-based companies get the benefits under DTAA?

1. Some of the changes recently introduced are far-reaching and we wait to see how they work in practice.
2. In this uncertain business climate, a better financial regulation remains a pivotal aspect of making the financial sector safer and more stable.
3. The FSC strongly believes that there are several good reasons why investors use Mauritius as a jurisdiction of choice within the African continent.
4. One major factor is that Mauritius has the three factors that investors look for before making investments in any particular jurisdiction, and they are: stability (financial, legal, regulatoryand political), certainty and transparency.
5. What I mean is that companies using Mauritius to invest in India do not do so only because there is a DTAA. They do so because Mauritius is today a respectable international financial centre.

6.Do you foresee any negative impact of these changes on foreign investment routed through Mauritius?

1. We do not foresee any negative impact. We are, in fact, consolidating our financial services sector. We are doing more to ascertain that companies using our jurisdiction are more closely associated to our economy.

7.How are the talks on amendments to the India-Mauritius DTAA progressing?

1. This issue is being currently handled at high levels of both governments and will continue at the next meeting of the joint working group, hopefully to reach a consensus.

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