On a Tight Leash

Investors looking for treaty shopping may meet with failure as government hardens stance on tax evasion.

- Dipak Mondal

Even as reports say that foreign portfolio investors, or FPIs, are setting up shop in the Netherlands and France after India plugged loopholes in tax treaties with Mauritius, Singapore and Cyprus, tax experts and officials are confident that the trend will be short-lived. The reason: the government is working on renegotiating and plugging the gaps in tax treaties with other countries as well. Several of these treaties have ‘beneficial’ provisions for companies and foreign investors that help them avoid paying capital gains tax in India. Before India reworked its treaties with them, Mauritius, Singapore and Cyprus used to be the three major tax jurisdictions used by companies to avoid paying tax in India.