It is not unusual for a business or individual who is resident in one country to make a taxable gain (earnings, profits) in another. This person may find that he is obliged by domestic laws to pay tax on that gain locally and pay again in the country in which the gain was made. Since this is inequitable, many nations make bilateral double taxation agreements with each other. In some cases, this requires that tax be paid in the country of residence and be exempt in the country in which it arises. In the remaining cases, the country where the gain arises deducts taxation at source (“withholding tax”) and the taxpayer receives a compensating foreign tax credit in the country of residence to reflect the fact that tax has already been paid. To do this, the taxpayer must declare himself (in the foreign country) to be non-resident there. A Double Taxation Prevention Treaty, in principle, enables offsetting tax paid in one of 2 countries against the tax payable in the other, in this way preventing double taxation.
Another important factor is the grant of an exemption or tax at a reduced rate on certain receipts such as interest, royalties, dividends, technical services and others that are connected with a transaction carried out between parties associated with the Double Taxation Prevention Treaty.
When certain income is taxable under the Mauritius Income Tax Act but there is an exemption (reduced tax) under any Taxation Treaty, the income is taxed, if at all, but only according to the provisions of the Taxation Treaty.
Double Taxation Agreements
So far Mauritius has concluded 43 tax treaties and is party to a series of treaties under negotiation. The treaties currently in force are:
Bangladesh, China*, India, Malaysia, Nepal, Pakistan, Sri Lanka, Singapore & Thailand
Botswana, Congo, Egypt, Lesotho, Madagascar, Mozambique, Namibia, Rwanda, Senegal, Seychelles*, South Africa, Swaziland, Tunisia, Uganda, Zambia, Zimbabwe
Belgium, Croatia, Cyprus, France*, Germany (New), Guernsey, Italy*, Luxembourg, Malta, Monaco, Sweden(New), UK*
Australia, Barbados, Kuwait, Oman, Qatar, UAE
Treaties awaiting ratification (4):
Gabon, Kenya, Nigeria and Russia
Treaties being negotiated (16):
Algeria, Canada, Czech Republic, Greece, Hong Kong, Lesotho(new), Montenegro, Portugal, Repulic of Iran, Malawi, Saudi Arabia, Spain, St. Kitts & Nevis, Tanzania, Vietnam & Yemen
* Amendment through Protocol