Indonesia-Mauritius DTA Terminated

by Lorys Charalambous, for LawAndTax-News.com, Cyprus

19 February 2004

It emerged this week that the Indonesian government has decided to revoke its double taxation agreement (DTA) with Mauritius, citing "tax treaty abuses".

According to reports, the Indonesian authorities objected to the fact that non-Mauritian investors could, via offshore companies, invest in Indonesia companies and take advantage of the tax benefits afforded by the treaty as if they were resident in Mauritius.

A letter sent to the Mauritian Ministry of Foreign Affairs and International Commerce via Indonesia's Ambassador in Tanzania revealed that this decision was reached as a result of an evaluation of the implementation of the treaty conducted last year.

Speaking to Le Mauricien, the Indian Ocean jurisdiction's Minister for Economic Development, Financial Services and Corporate Affairs, Sushil Khushiram acknowledged that some changes may need to be made on a local level in order to address the problem.

However, he suggested that the Indonesian government's actions may have been due to a misunderstanding or misinterpretation of the situation, and revealed that a high level official from the Indonesian government is expected to visit Mauritius in the near future to discuss the way forward.

Meanwhile, it also emerged this week that Mauritius has signed a new DTA with Uganda.

The treaty which was signed last month in Pretoria by the Mauritian Ambassador to South Africa, and his Ugandan counterpart, covers income tax, capital gains tax, business profits tax as well as various other levies. Under the treaty, the maximum rate for dividends, interest and royalties are each set at 10% and capital gains other than on immovable property is taxed in the country of residence.

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