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HMRC internal manual

Double Taxation Relief Manual

From
HM Revenue & Customs
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DT: Mauritius: double taxation agreement, Article 11: Interest

  1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
  2. However, subject to the provisions of paragraph (3) of this Article, such interest may also be taxed in the Contracting State in which it arises and according to the law of that State.
  3. Interest arising in a Contracting State shall be exempt from tax in that State provided it is derived and beneficially owned by:

a. the Government or a local authority of the other Contracting State;

b. such agency or instrumentality of the Government of the other Contracting State as may be agreed in writing between the competent authorities of both Contracting States; or (c) a bank carrying on a bona fide banking business which is a resident of the other Contracting State.

  1. The term `interest` as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and whether or not carrying a right to participate in the debtor’s profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article. The term `interest` shall not include any item which is treated as a distribution under the provisions of Article 10 of this Convention.
  2. The provisions of paragraphs (1), (2) and (3) of this Article shall not apply if the recipient of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt- claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.
  3. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred and such interest is borne by that permanent establishment or fixed base then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
  4. Where, by reason of a special relationship between the payer and the recipient or between both of them and some other person. the amount of the interest paid exceeds, for whatever reason, the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Convention.
  5. The provisions of this Article shall not apply if the debt-claim in respect of which the interest is paid was created or assigned mainly for the purpose of taking advantage of this Article and not for bona fide commercial reasons.