On 28 August 2024, the New Delhi High Court delivered a landmark judgment in Tiger Global International II Holdings, et al. v. The Authority For Advance Rulings (Income Tax) & Ors. that has most certainly reinforced Mauritius’ legitimacy as an international financial center. Overturning a decision of the Authority for Advance Rulings (AAR), which had previously denied Tiger Global Management the benefits of grandfathering provisions in the India-Mauritius Double Tax Avoidance Agreement (DTAA, the court affirmed the validity of the Tax Residency Certificate (TRC) issued by Mauritius tax authorities, qualifying same as “sacro-sanct”.

Background of the Tiger Global Case

The petitioner, a Mauritius-based company, was primarily set up for investment purposes, with shareholders comprising private equity funds from over 30 jurisdictions. Between 2011 and 2015, the petitioner acquired shares in Flipkart Singapore, which held significant assets in Flipkart India. In 2018, the petitioner sold its controlling stake in Flipkart Singapore to Walmart. Citing its Tax Residency Certificate (TRC) and the India-Mauritius DTAA, the petitioner sought a ‘nil’ withholding tax certificate, arguing that the shares were acquired before the April 2017 amendment, exempting them from Indian taxation.

The AAR had denied the claim, suggesting that Tiger Global was a conduit lacking economic substance. The Delhi High Court, however, overturned this decision, ruling that the TRC should be respected as “conclusive evidence of residency” unless there is “demonstrable fraud or misuse.”

Key Findings Relevant to Mauritius

The High Court ruled that Mauritius-issued TRCs should not be dismissed without concrete evidence of abuse. It held, “In the absence of specific evidence showing that the TRC was obtained through misrepresentation or for an improper purpose, it cannot be disregarded.”

Crucially, the court observed that the mere establishment of investment vehicles in tax-friendly jurisdictions does not automatically lead to assumptions of tax evasion or treaty abuse. The court acknowledged that multinational corporations often structure their subsidiaries and holding companies in various jurisdictions to facilitate cross-border investments and optimize global tax strategies. It reinforced the importance of “substance over form,” but clarified that legal entities fulfilling their obligations under a valid DTAA should not be dismissed.

Mauritius’s Legitimacy as an International Financial Center Reinforced

The judgment solidifies Mauritius as a reliable jurisdiction for global investors. By affirming the legitimacy of the TRC and underscoring the importance of substance, the ruling sends a clear message that Mauritius is a jurisdiction where global tax treaties are respected and upheld. While the TRC remains a key instrument, this judgment emphasizes the need for Mauritius to continue enforcing substance regulations to ensure companies maintain real business activities.

The judgment serves as a pivotal moment in reaffirming Mauritius as a credible substance jurisdiction, despite the inevitable outflow of business following the 2017 amendments to the India-Mauritius DTAA. While these changes diminished Mauritius' tax treaty advantages, the Tiger Global case highlights a vital shift in perception and reinforces the country's regulatory robustness and adherence to international standards.

True it is that post-2017, Indian businesses have been reassessing their tax strategies, with some choosing other jurisdictions that offer more favorable tax benefits. However, the Tiger Global ruling underscores Mauritius' growing emphasis on substance, demonstrating that entities incorporated in the country must now show genuine economic activity to benefit from the jurisdiction’s financial offerings. This aligns Mauritius with global trends where tax transparency and economic substance requirements are increasingly critical to maintaining investor confidence.

In this context, the judgment reinvigorates Mauritius as a destination for substantive, long-term investment. It reflects the jurisdiction’s evolution from being a mere conduit for tax advantages to one that provides a sustainable, well-regulated environment for global business. Thus, despite the initial outflow of tax-driven business, operators in financial services industry in Mauritius remain confident that the country remains competitive by offering a more solid, compliant, business friendly and respected financial ecosystem.

And the Tiger Global case is all but a timely reminiscence that Mauritius, long classified by the West as a convenient tax-friendly hub, is above all a jurisdiction that investors can trust for its regulatory integrity and economic substance.