Recently Treaty has introduced Principal-Purpose Test (PPT).
PPT test means ensuring that treaty benefits are granted only for transactions with a genuine
purpose.
Why PPT test is being introduced
- Mauritius is a country which does not impose Capital gain tax on investments made in
Mauritius.
- Further in year 2016, treaty was amended to tax capital gain transactions in shares
routed through Mauritius.
- With introduction of PPT test, tax authorities can scrutinize the transactions more
closely & treaty benefits can be granted only when entity set up in Mauritius is not a
shell company but is a proper functioning company with directors, staff & all facilities.
