The income tax treaty between Estonia and Mauritius was signed on 19 February 2021. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Estonian and Mauritius income taxes.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services through employees or other engaged personnel if the activities continue for the same or connected project within a Contracting State for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

• Dividends - 0% if the beneficial owner is a company or where dividends are paid to the government of a Contracting State, institutions wholly owned by the government of a Contracting State, certain specified institutions, and investment funds established in and supervised by a Contracting State; otherwise, 7%
• Interest - 0% if the beneficial owner is a company or where interest is paid to the government of a Contracting State, institutions wholly owned by the government of a Contracting State, certain specified institutions, and investment funds established in and supervised by a Contracting State; otherwise, 7%
• Royalties - 0% if the beneficial owner is a company; otherwise, 5%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

• Gains from the alienation of immovable property situated in the other State;
• Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State; and
• Gains from the alienation of shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other State.

Gains from the alienation of other property by a resident of a Contracting Party may only be taxed by that Party.

Double Taxation Relief

Estonia generally applies the exemption method for the elimination of double taxation, while Mauritius applies the credit method. However, Estonia will apply the credit method in respect of income covered by Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 16 (Entertainers and Sportspersons). For dividends paid by an Estonian company to a resident of Mauritius that directly or indirectly controls at least 5% of the capital of the Estonian company, Mauritius will provide a credit for the Estonian tax paid on the profits out of which the dividends are paid.

Entitlement to Benefits

Article 23 (Entitlement to Benefits) includes the provision that a benefit under the treaty shall not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.

Arbitration Clause

Article 25 (Mutual Agreement Procedure) includes the provision that if any issues of a case cannot be resolved under MAP within two years from the date all required information has been provided to both competent authorities, the person that presented the case may request that the case be submitted to arbitration. Unresolved issues may not, however, be submitted to arbitration if a decision on the issues has already been rendered by a court or administrative tribunal of either State.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged and will apply in Estonia from 1 January of the year following its entry into force and in Mauritius from 1 July next following its entry into force.