India and Mauritius have signed a protocol to amend the double taxation avoidance agreement (DTAA), which included a principal purpose test (PPT) to decide whether a foreign investor is eligible to claim treaty benefits.
- A new article has been added to the protocol “Article 27B Entitlement to Benefits”.
- The introduction of the PPT aims to curtail tax avoidance by ensuring that treaty benefits are only granted for transactions with a bona fide purpose.
- The amendment represents a move by India to align with global efforts against treaty abuse, particularly under the Base Erosion and Profit Shifting (BEPS) Action 6 framework.
- Action 6 of BEPS introduced the principal purpose test (PPT) as one of the Minimum Standards to be implemented by the countries participating in the BEPS Inclusive Framework.
