Kathmandu. The Government of Nepal has decided to revoke the Bilateral Double Taxation Avoidance Agreement (DTAA) signed with the Government of the Republic of Mauritius on August 3, 1999.
Madan Dahal, Director General of the Inland Revenue Department, in his capacity as the designated competent authority on behalf of the Government of Nepal, sent a formal letter to the government through diplomatic channel in accordance with the Article 29 (Clause 1) (Provision on Termination) of the DTAA. This strategic decision of the Government of Nepal has been taken as it is necessary to align its international tax structure with significant changes taking place both in domestic law and in the global tax environment.
{{TAG_OPEN_span_11}TAG_CLOSE_span_11} The Income Tax Act, 2001 (2002) enacted by Nepal incorporates modern tax abuse control provisions affecting the implementation of the treaty. In particular, Section 73 of the Act. (5) contains provisions relating to limited benefit (LOB).
Global Tax Cooperation: Since 1999, there have been radical changes in the global tax regime. For example, initiatives such as the OECD’s Tax Base Reduction and Profit Shifting (BEPS) project call for greater transparency in international tax agreements and curbing tax abuse. This repeal has paved the way for a contemporaneous agreement that adheres to new global minimum standards.
Nepal will continue to work actively to promote bilateral economic and tax cooperation with the Republic of Mauritius. It opens up the possibility of negotiating a new, modern Double Taxation Avoidance Agreement and a Bilateral Investment Protection Agreement. Any future agreement will be based on mutual benefit, greater transparency and alignment with the changing domestic and global economic environment.
The date of repeal of the existing DTAA is in accordance with the provisions mentioned in Article 29 in the case of Nepal, in the case of the next fiscal year 2083. It will be valid from July 18, 2018.
