Indias varied regimes for foreign investment confusing AccountSpeak
June, 28th 2007
The very strong links Mauritius has with India both historically and contemporarily make it a very attractive country for the Indian professional.
Mr Avinash Sunassee, a practising barrister in Mauritius
The tax benefits available under the Comprehensive Economic Co-operation Agreement (CECA) between India and Mauritius has led to several companies setting up entities in Mauritius for investing in India and tens of thousands of crores flowing into the country as foreign direct investment.
The most common form of investment in India from Mauritius is through the incorporation and operation of a Mauritian company resident in Mauritius and the most common and basic form of assistance and advice is in relation to the incorporation of companies, according to Mr Avinash Sunassee , a practising barrister (or advocate) in Mauritius specialising in the areas of commercial and company law.
He studied law at the London School of Economics and Political Science.
Speaking to Business Line on the issues involved, right from setting up a company to client concerns and taxation structure, he said that legal practitioners usually handhold clients in issues relating particularly to company consti tution (memorandum and articles of association and shareholders agreements) and thereafter in relation to operations, such as passing of resolutions and conduct of board meetings.
For companies seeking to invest in India, factors that are often considered are the country of residence of the investor and the advantages of using Mauritius, in terms of proximity, time zones, availability of relevant support service providers and taxation.
Stating that the concerns of clients vary from issues relating to ease of transfer of shares and inheritance, to issues of taxation, he said that in practice, different clients have different concerns. By the time they come to Mauritius, some have a clear idea why they want to invest in, or from, Mauritius. Most people do not want their financial status or matters to be in the public domain and confidentiality is very often an issue.
He informed that Mauritius has an increasingly friendly attitude to foreign expatriate staff and even has schemes in place where people are able to obtain employment/residence permits fairly easily.
Mauritius also has the advantage of having a population that is multilingual. Communications facilities are also developed and being improved. Our company law is extremely flexible and allows for share transfers and other relevant operations to be effected quite easily.
Besides, the island nation provides a number of advantages for outbound investments from India, such as availability of a free zone area to set up a regional distribution hub for Africa and West Asia and tax advantages (including its tax treaty network).
According to Mr Sunassee, legal practitioners in Mauritius tender advice covering a whole range of other issues, such as reviewing contracts and agreements in the ordinary course of business, legal opinion on status and current standing of Mauritian companies and effecting share transfers and acquisitions.
Besides, they provide legal opinion on specific Mauritian law issues, like validity and enforceability of charge instruments or other forms of security under Mauritian law where the investment is being financed by banks or by other means.
Legal due diligence of companies, for instance in relation to acquisition of shares in a Mauritian company that has investments in India, is also available.
Clients can avail of legal services in the areas of: tax issues as a result of investing in or through Mauritius, collective investment schemes, disputes and litigation between the parties, and ancillary issues relating to work permits for foreign nationals.
Mr Sunassee said that the legal profession in Mauritius is divided between attorneys (or solicitors), barristers (or advocates) and notaries, all of whom provide different types of services.
Practitioners of law are not allowed to associate in partnerships or as firms for the purposes of offering legal services to the public, which may change in the near future in light of the statements made on behalf of the Government in relation to the opening up the legal profession to foreign law firms.
Matters arising under the laws of a foreign jurisdiction are referred by the client to legal advisers licensed to tender advice under the laws of the relevant jurisdiction. Stating that the different regimes in place in India for foreign investment such as FII, automatic route, FIPB and SEZs are confusing, he said that it would help if these regimes and procedures involved are streamlined.
Quite a lot of work needs to be done in relation to both inbound and outbound investments. For instance, it takes about two weeks to get a PAN in India. In comparison, it can take as little as two hours to get a Tax Account Number in Mauritius (a process which in itself involves three different Government Departments).
Mr Sunassee also said that the countrys financial services sector is fast developing. Skills in demand include corporate secretaries and accountants and in the IT sector, he added.
Recently, the countrys Finance Minister, Mr Ramakrishna Sithanen, announced further tax reductions for both individuals and corporates, resulting in a uniform tax rate of 15 per cent, making the island one of the lowest-tax platforms within the developing world.
The very strong links Mauritius has with India both historically and contemporarily make it a very attractive country for the Indian professional. Adapting to local life should be easy; in fact, they should feel right at home.