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Offshore Tax Haven PDF Print E-mail
Friday, 05 December 2008 15:26

Offshore Tax Haven

The Mauritius fever has apparently caught the Indian public sector. Following the innovative tax saving methods adopted by foreign and private Indian companies to use tax havens, Life Insurance Corporation of India, the public sector insurance monolith, has decided to set up a wholly-owned subsidiary in Mauritius.

The new company will function as LIC’s offshore centre for its international operations. The idea is to tap the niche market of non-resident Indians based in the US and in European countries, said a senior LIC official. It will also manage its overseas investments, he added. But the proposed offshore centre will not make any investment in India. It is expected to operate in countries that have a double taxation avoidance treaty with Mauritius.

Offshore Tax Haven - Mauritius

Since Mauritius is a tax haven, profits from premium income or investments made by this offshore centre will have no tax obligation in that country. Importantly, such income transferred to India will not be taxed by the Indian authorities under the Avoidance of Double Tax Treaty that exists between India and Mauritius.

“The purpose of setting up the company in a tax haven is to take the tax advantage,” admitted a senior LIC official.

The Finance Ministry had earlier issued a notification saying that any company registered in Mauritius and conducting business there would not be taxed under the double taxation avoidance treaty. LIC has also decided to enter other countries like Oman and Dubai through joint ventures or agreements with general agents, sources said. It is also going to apply for the grant of a licence in Nepal.

Offshore Tax Haven - Private Operators

Apprehending a threat from private operators following the opening up of the insurance sector, LIC has decided to appoint fund managers to manage its own huge corpus.

Currently, LIC has a total asset size of Rs 1,60,000 crore and its total annual income (including premium, rental and real estate) is around Rs 30,000 crore.

Under the new regulations LIC will have to invest 50 per cent of this in Government securities. As for the remaining 50 per cent, LIC is free to invest in corporate debts or equities for which it is appointing the fund manager.

 

   

 

Last Updated on Tuesday, 06 January 2009 14:05
 

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