Mauritius Transfer Pricing: MRA Rules, GBL Substance and India

Mauritius applies the arm’s length principle to transactions between associated persons through the Income Tax Act’s associated-person provisions — the engine records the Income Tax Act 1995 as the governing statute, and the Act’s consolidation into the Income Tax Act 2018, whose transfer-pricing Part (Part IV on the practitioner’s reading) carries the arm’s-length rules, is confirmed locally; no section reference is verified here. The Mauritius Revenue Authority (MRA) administers the regime, against guidance aligned with the OECD Transfer Pricing Guidelines (the formal adoption status unverified), with the Mauritian entity typically the tested party and the OECD method set available. Mauritius is a treaty jurisdiction and a transfer pricing jurisdiction, and since the 2016 Protocol it has been both at once: the island’s global business sector and its convention network put the documentation and the substance of the Mauritian entity at the centre of the analysis — for Port Louis and for New Delhi alike.

The framework

Element	The content
The standard	Transactions between associated persons are priced as independent persons would agree in comparable circumstances; where they are not, the MRA adjusts the Mauritian income — the arm’s length rule on the statute’s associated-person concept (the participation and control thresholds are not verified in our source)
The scope	Associated-person transactions, cross-border and domestic — the routing entity’s intra-group fees, interest, royalties and share transactions are all in field
The methods	The OECD set — the CUP, the resale price, the cost plus, the profit split, the TNMM — on the best-method rule, applied through the MRA’s OECD-aligned guidance
The range	The interquartile range (25th–75th), the OP/OC and OP/Sales indicators; no prescribed multi-year averaging or year-end true-up in our rules
The documentation	Contemporaneous documentation available to the MRA; the local file is the recorded tier — the master-file and country-by-country tiers, the thresholds and the notification duties are not verified in our source and rest on the MRA’s instruments

The framework is therefore OECD-standard in method, thin in codified mechanics — which in practice shifts the argument away from the jurisdiction’s rules and onto the entity’s facts. The Mauritian file is read as a substance file: what the entity does, who it has, what it decides, and whether the return it books matches that record.

The documentation duty

• The content — the entity’s description (the FAR: the functions performed, the assets used, the risks assumed, and — for a global business entity — the people and the decision-making actually located there), the controlled transactions, the method and the rationale, the benchmarking, the financials: the OECD Local File skeleton.
• The production — documentation produced to the MRA on request; the period is not verified in our source, so the file is held to the maintain-and-produce standard the stricter neighbours impose (Malaysia’s 14 days, Vietnam’s ten working days) — the contemporaneous documentation discipline, in one file serving several jurisdictions.
• The language — English or French, per our rules; English is the working language of the corporate practice.
• The group tiers — the country-by-country obligation is recorded for Mauritius in our rules, while the master-file tier is not; the CbCR guide covers the group mechanics, and the in-scope group confirms the local filing and notification position with the MRA’s current instruments.
• The safe harbour — none verified. The safe income concept historically applied to Global Business Licence companies (the deemed profit on the qualifying expenditure — the percentage, the years and its current form are not verified here and must be confirmed against the MRA’s and the global-business licensing authority’s current guidance) belongs to the licence/substance conversation, not to the arm’s length computation.

The examination and the penalty landscape

Our source records a higher audit risk for global business and cross-border service arrangements — precisely the population an India-linked group populates. The examination practice, at the confidence the sources carry:

• The substance test first — the MRA’s enquiry runs to the entity’s real activity: the officers, the decision-making, the premises, the headcount, the commercial rationale for the transaction’s terms. The paper holding that charges a management fee carries the benefit test as its weakest point.
• The pricing test second — the method, the comparables, the range, on the OECD-standard questions and the matrix defence.
• The cost of failure — the understated income attracts the Income Tax Act’s interest and penalty provisions; the transfer-pricing-specific exposure is not verified in our source, so the mechanism is described generally: the adjustment, the tax, the interest on the statute’s clock.
• The relief — MAP under the convention network (including the Indian convention), the MAP route where the two administrations adjust the same fee.

The India reading: the corridor after the 2016 Protocol

Mauritius is the historic India investment corridor — for two decades the largest single source of reported FDI into India — and the 2016 Protocol to the India–Mauritius convention ended that design. The Protocol’s limitation-of benefits clause (the objective, non-tax- reasons test, with the trading-tangibility limbs) and the shift of taxation rights to India on interest and on gains after the protocol’s transition (the transition years and the grandfathering per the treaty text, confirmed with Indian counsel) mean the arrangement that once routed capital-gains exposure-free now routes taxable payments. The consequences for the file:

The Mauritius node	The Mauritian question	The Indian question it triggers
The holding/investment entity	The holding’s return and its costs, the substance behind the fee streams it charges	The treaty claim’s beneficial ownership and the LOB test; the Indian TDS and characterization of the payment
The regional principal/IP holder	The royalty and the DEMPE record — who develops, supports, maintains, protects, exploits	The Indian payer’s intangibles benchmark and the s.92 deduction question
The service/funding node	The service fee’s benefit and the intra-group loan’s pricing and capacity	The financial-transactions reading on the India side, and the thin-capitalization argument

Same economics, two files — and after the Protocol, two taxing administrations with an interest in the same margin: the MRA on the Mauritian income, the Indian transfer pricing officer on the Indian deduction. A Mauritius entity with real substance supports both positions; a shell supports neither, and the treaty claim now carries the burden the LOB clause puts there.

The working position for the group with a Mauritius node

1. Substance before pricing — the people, the decisions, the premises, the commercial rationale documented; the characterization derived from the FAR, not from the licence category.
2. The OECD benchmark on the Mauritius-tested party — the routine nodes (the holding, the service entity, the lender) priced on the methods overview with the limited-risk and Amount B references where the function is routine; nothing resting on an unverified safe income rule.
3. One contemporaneous file, two lists — the MRA’s content expectations and the Indian Rule 10D expectations served from one dataset, retained where the group’s strictest regime requires.
4. The treaty position on the record — the LOB/objective-reasons test evidenced, the beneficial-owner analysis prepared, the characterization of each payment aligned between Port Louis and New Delhi, and the MAP route identified before the double adjustment.

See also

• Jurisdiction comparison — the six-jurisdiction table
• India TP overview — the mirror file
• MAP and the DTT network — the treaty layer
• Shared services — the routing entity’s fee