Double Taxation Avoidance Agreement

Double taxation occurs when the same activity is taxed more than once under the standard tax regime, and this situation mainly occurs in cross-border transactions involving foreign subsidiaries.

To limit this double taxation, a Double Taxation Agreement (DTAA) is signed between the two countries, firstly establishing a preferential tax rate and secondly, one of the foreign deduction methods against which the tax is levied. As a department, it aims to enable the use of tax relief. If your country of residence does not tax income earned abroad, it can be treated as an expense or treated as an exemption method. Alternatively, a foreign tax credit offsets taxes paid in one country on foreign income against taxes on the same income in that country.

The concept of tax residency is different from the concept of actual residency for tax purposes. By using the facilities and resources available in a country, it is conceivable that a company’s profits come from that country’s borders, which allows that country to levy taxes accordingly. This situation could lead to double taxation and in such a situation the use of a bilateral tax treaty would have a significant advantage as it determines the residence for taxation purposes and how the tax is to be distributed between the two countries.

Mauritius Tax Treaties

Mauritius has 44 tax treaties in effect at the time of this writing, and this includes 15 treaties with African countries.

Maximum applicable tax rates when using the Mauritian DTAA when investing in the following African countries: