On Monday, the Council of Ministers decided to terminate the DTAA agreement between Nepal and Mauritius.
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The Government of Nepal has formally informed the Government of Mauritius of its decision to terminate the Double Taxation Avoidance Agreement (DTAA).
The Cabinet on Monday decided to terminate the DTAA agreement between Nepal and Mauritius. Director General of the Department of Inland Revenue Madan Dahal informed the government of the decision on Wednesday.
‘The Government of Nepal has formally informed the Government of the Republic of Mauritius of its decision to terminate the bilateral Double Taxation Avoidance Agreement (DTAA) concluded on August 3, 1999,’ a statement issued by the Department of Inland Revenue said. ‘As the competent authority designated by the Government of Nepal, Director General of the Department of Inland Revenue Dahal has today sent a formal letter through diplomatic channels terminating the agreement in accordance with Article 29, Clause 1 (Termination Provisions) of the DTAA.’
The strategic decision was made to bring the international tax structure in line with significant changes in both domestic law and the global tax environment, the department said.
‘The Income Tax Act, 2058 (2002) enacted by Nepal includes modern tax abuse control provisions that affect the implementation of treaties and a limited benefit provision under Section 73. (5) of the Act,’ the statement said, ‘There have been radical changes in the global tax regime since 1999. For example, initiatives such as the OECD’s Base Erosion and Profit Shifting (BEPS) project have led to demands for greater transparency and control of tax abuse in international tax treaties.’ The department claims that the termination of the treaty has paved the way for a contemporary treaty that complies with new global minimum standards.
Nepal will actively pursue bilateral economic and tax cooperation with the Republic of Mauritius. This includes further opening up the possibility of negotiating a new, modern double taxation avoidance agreement and a bilateral investment protection agreement, the statement said. The department also stated that any future agreement will be made on the basis of mutual benefit, greater transparency and consistency with the changed domestic and global economic environment.
Even though the government has now revoked the agreement, the department has clarified that the provisions of the act will be implemented only from next July 1.
