India recently amended its Double Taxation Prevention (DBA) agreement with Mauritius to fill some gaps. Now a Mauritian company has to pay capital gains tax while selling shares in a company in India from April 2017. Previously, the company could avoid paying taxes because it was not a “resident” in India. It could also move away from the helmsman in Mauricie, due to the non-taxation of capital gains for its residents. As a result, many Shell companies in Mauritius have embarked on the goal of taking advantage of investments in India and leaving without paying taxes. The DBAA aims to make a country an attractive investment objective by facilitating double taxation. This is done by exempting income collected abroad in the country of reside or by granting credits as long as taxes have already been paid abroad. In some cases, DBAs also provide for reduced rates. DBAAs can be either complete to cover all sources of income or limited to specific areas such as the taxation of income from shipping, air transport, inheritance, etc. India has DTAAs with more than eighty countries, including global agreements with Australia, Canada, Germany, Mauritius, Singapore, the United Arab Emirates, the United Kingdom and the United States. The outcome of the discussions with the Netherlands is not yet known, but it is worth preparing, so we should expect the treaty with the Netherlands to be amended in the same way. As we understand it, Russia has also had discussions with the Netherlands in previous years on clarifying other tax issues related to the double taxation convention.
The outcome of these discussions is not known, even if the Dutch internal market is taken into account in relation to other jurisdictions. It is possible that Russia and the Netherlands will agree that the amendments will come into force in 2021. The new requirements introduced by the multilateral instrument (for example. B the main audit, the minimum participation period of 365 days for dividends, etc.) should be included in the renegotiated contract. Russia negotiates double taxation agreements with Cyprus, Luxembourg, Malta and the Netherlands. On 11 September, Russia and Cyprus signed a protocol amending the treaty. It is also holding discussions on renegotiating contracts with Hong Kong and Switzerland. Russia insists that most dividends and interest paid to residents of these countries be subject to a 15% withholding tax rate. This will have an impact on holding and financing structures with Russian assets. In Russia, under the renegotiated contract, royalties are not subject to tax (the general tax rate in Russia is 20%).
There may be double income and double taxation; but don`t expect a double escape. BEPS are tax evasion strategies that exploit loopholes and discrepancies in the tax rules of different countries to artificially transfer profits from regions with higher tax regimes to countries with lower taxes. The 2012 G20 summit instructed the OECD to set minimum standards to prevent such tax evasion.