Interested in relocating to Mauritius, a tiny East African island with a population of roughly 1.3 million, the number one country in Africa in terms of ease of doing business and the number three country in Africa with the highest GDP per capita? This is probably the best time to give it a shot, especially if you are a remote worker. The country has just launched Premium Travel Visa policy for any non-citizen who intends to stay in Mauritius for a maximum period of one year as a tourist, retiree or a professional willing to come with his/her family and carry out his business or work remotely from Mauritius.
All the intended visitor has to present to show that they are qualified for the Premium Visa, is a proof of their long stay plans and sufficient travel and health insurance for the initial period of stay while meeting the following criteria:
The applicants should not enter the Mauritius Labour Market;
The main place of business and source of income and profits should be outside Mauritius;
Documentary evidence to support application such as purpose of visit, accommodation etc.; and
Other basic immigration requirements.
An online platform for the e-Visa application will be available shortly.
Before now, average stay under a Mauritian visa does not exceed 90 days within a 180-day period. At the same time, 60 nationalities are eligible for a 30-day visa on arrival, while other five can obtain a 15-day visa on arrival. Travelers eligible for a visa on arrival must provide a hotel booking confirmation, proof that they can financially sustain themselves for the entire time they are in Mauritius ($100 per day), and documentation (ticket, e-ticket) showing you will leave the country.
Mauritius Remote workers visa Mauritius Remote workers visa Mauritius Remote workers visa
As far as Africa goes, Mauritius has already racked up a number of African “firsts” in terms of international business achievements. These include Economic Freedom of the World (2017, Fraser Institute), Forbes Survey of Best Countries for Business (2017) and the Global Competitiveness Index (2017–2018).
It also secured first place in Africa and 25th position overall out of 190 countries on the World Bank’s Ease of Doing Business Report, receiving recognition in terms of its political, social and economic stability, efficient and effective regulatory framework, state-of-the-art infrastructure, transparent and innovative legal framework and its highly competitive tax system.
With a government focused on promoting foreign and domestic investment, it has enabled free repatriation of profits, no withholding tax on dividends, interest and royalties, no capital gains tax, and no estate duty, inheritance tax or gift tax. Plus it has 44 tax treaties with countries across the globe and another 32 in various stages of negotiation and ratification.
Mauritius is also known for its beaches and luxury resorts, but also offers hiking in its forested and mountainous interior and world-class diving and snorkeling offshore.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
Only two African economies rank in the top 50 on the ease of doing business, according to a report released by the World Bank. Mauritius ranks 13th, ahead of countries like Australia, Germany, Canada or China, while Rwanda ranks 38th, ahead of the Netherlands, Belgium or Hungary.
Top Ten African Countries
In terms of performance, about ten African countries are ranked in the first 100 in the world.
S/N
AFRICAN COUNTRIES
RANKING IN THE WORLD
SCORE (%)
1
Mauritius
13
81.5
2
Rwanda
38
76.5
3
Morocco
53
73.4
4
Kenya
56
73.2
5
Tunisia
78
68.7
6
South Africa
84
67.0
7
Zambia
85
66.9
8
Botswana
87
66.2
9
Togo
97
62.3
10
Seychelles
100
61.7
The Doing Business 2020 report also notes that effectiveness of trading across borders also varies significantly from economy to economy.
Economies that predominantly trade through seaports incur average export border compliance costs as high as $2,223 per shipment in the Democratic Republic of Congo and $1,633 in Gabon compared to only $354 in Benin and $303 in Mauritius, the report notes.
More than half of the economies in the top-20 cohort are from the OECD high-income group; however, the top-20 list also includes four economies from East Asia and the Pacific, two from Europe and Central Asia, as well as one from the Middle East and North Africa and one from Sub-Saharan Africa. Conversely, most economies (12) in the bottom 20 are from the Sub-Saharan Africa region.
Economies that score highest on the ease of doing business share several common features, including the widespread use of electronic systems. All of the 20 top-ranking economies have online business incorporation processes, have electronic tax filing platforms, and allow online procedures related to property transfers.
The Doing Business 2020 data also suggest that a considerable disparity persists between low- and high-income economies on the ease of starting a business. An entrepreneur in a low-income economy typically spends about 50.0% of income per capita to launch a company, compared to just 4.2% for an entrepreneur in a high-income economy
Togo and Nigeria Ranked The Top Ten Improvers In The World
The Doing Business report also acknowledges the 10 economies that improved the most on the ease of doing business after implementing regulatory reforms.
In Doing Business 2020, the 10 top improvers are Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan, Pakistan, Kuwait, China, India, and Nigeria (table O.2). These economies implemented a total of 59 regulatory reforms in 2018/19 — accounting for one-fifth of all the reforms recorded worldwide. Their efforts focused primarily on the areas of starting a business, dealing with construction permits, and trading across borders.
The motivation for reform in Nigeria, Tajikistan, and Togo was in part the developmental achievements of their neighbors. Rwanda’s progress over the past 10 years inspired authorities in Togo, leading several Togolese delegations to visit Kigali to learn about successful reforms. Togo’s president set a goal to be number one in West Africa in Doing Business 2020. To achieve this target, Togo made significant reform efforts in the areas of starting a business, registering property, and getting credit…
Nigeria has embarked on a comprehensive reform journey following the example of Kenya, the report notes.
Sub-Saharan Africa Remains The Weakest On The Ease Of Doing Business Index
The report notes that sub-Saharan Africa remains one of the weak-performing regions on the ease of doing business with an average score of 51.8, well below the OECD high-income economy average of 78.4 and the global average of 63.0. Compared to the previous year, Sub-Saharan African economies raised their average ease of doing business score by just 1 percentage point in Doing Business 2020, whereas economies in the Middle East and North Africa region raised their average score by 1.9.
Somalia ranks the worst country in the world as well as in Africa to do business in, followed by Eritrea, Libya, South Sudan, Central African Republic, Congo Democratic Republic (DRC), Chad, others.
Global Performance
Worldwide, 115 economies made it easier to do business, according to the report. New Zealand however remains the number one country in the world in terms of ease of doing business, followed by Singapore, Hong Kong, Denmark, Korea Republic, United States, Georgia, United Kingdom, Norway and Sweden.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
For businesses rushing to Mauritius to benefit from their friendly tax policies, which used to be among the lowest in the world, EU has become the latest body (after OECD) to announce that this is no longer the case. European Union finance ministers have agreed to remove the United Arab Emirates, Switzerland and Mauritius from the bloc’s lists of countries deemed to be acting as tax havens, a move that activists called a “whitewash.”
Here Is All You Need To Know
The 28-nation EU set up a blacklist and a gray list of tax havens in December 2017 after revelations of widespread avoidance schemes used by corporations and wealthy individuals to lower their tax bills.
Blacklisted states face reputational damage and stricter controls on transactions with the EU.
As part of the regular review of the lists, the ministers decided to drop the UAE from the EU blacklist that covers jurisdictions that have failed to cooperate with the EU on tax matters.
The Marshall Islands has also been removed from that list, which still includes nine extra-EU jurisdictions — mostly Pacific islands with few financial relations with the EU.
The UAE, the largest financial center which was blacklisted, was removed because in September it adopted new rules on offshore structures, the EU said, giving it a clean-sheet on its tax practices.
The Gulf state charges no corporate taxes, making it a possible target for firms seeking to avoid paying tax in the countries where they actually operate.
The EU does not automatically add countries that charge no tax — a sign of being a tax haven — to its blacklist, but it requested the UAE introduce rules that would allow only companies with a real economic activity there to be incorporated in order to reduce risks of tax dodging.
“SWEET TREATS”
Under an initial version of the overhaul, the UAE exempted from the requirement “all entities in which the UAE government, or any of the Emirates of the UAE, had direct or indirect ownership (no threshold) in its share capital”, an EU document said.
That reform was deemed insufficient by EU states and prompted an amendment, adopted in September, that excluded from the requirement only companies in which the UAE government owns directly or indirectly a 51% share of the capital.
This reform was considered by EU ministers as sufficient to remove the UAE from the blacklist.
Jurisdictions that remain blacklisted are Belize, Fiji, Oman, Samoa, Trinidad and Tobago, Vanuatu and the three US territories of American Samoa, Guam, and the US Virgin Islands.
Major economic partner Switzerland was removed from the EU gray list covering countries that have committed to change their tax rules to make them compliant with EU standards. It has delivered on its commitments, the EU said, and therefore is no longer listed.
They also removed the Indian Ocean island of Mauritius, Albania, Costa Rica, and Serbia from the gray list, leaving around 30 jurisdictions on the list.
Countries in the gray list could be moved to the blacklist if they fail to deliver on their commitments.
“The EU has whitewashed two of the world’s most harmful tax havens,” Chiara Putaturo of Oxfam, an anti-poverty group, said in reference to the decision of delisting Switzerland and Mauritius.
“Despite recent reforms, both countries will continue to offer sweet treats to tax-dodging companies,” she said.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
The Africa Finance Corporation (AFC) has admitted Mauritius as its 23rd member nation. This comes few weeks after Madagascar joined the Corporation, becoming the Corporation’s 22nd member. The AFC, an investment grade multilateral finance institution with an equity capital base of US$1 billion, to be the catalyst for private sector-led infrastructure investment across Africa has been experiencing surging growth with a current balance sheet of approximately US$4.5 billion, making it the second highest investment grade rated multilateral financial institution in Africa.
Mr. Samaila Zubairu
Mauritius membership is coming at a time the southern African island nation is registering impressive economic progress across the board, including a near fivefold increase in its GDP per capita in the last 30 years. Moreso, Mauritius has consistently maintained one of the highest-ranking countries in Africa in the UN’s Human Development Index striving to move from a middle income country to a high income country. The government also said that this development is in line with the current economic strategy, titled “Achieving the Second Economic Miracle” which places high emphasis on infrastructure investment which informs the country’s identification with the Africa Finance Corporation (AFC) focus on power, transport & logistics.
With this development, the AFC is now free to start series of engagements with Mauritius and its private sector on the best ways it can contribute towards developing the country’s infrastructure, leveraging AFC’s award-winning approach to deliver high quality, sustainable infrastructure projects. Equally noteworthy is the fact that the Mauritius Africa Fund (MAF), SBM Group and AFC are in discussions currently with regards to the establishment of an Africa-focused infrastructure and industrialization fund (the Fund). The Fund, a Mauritius initiative, will seek to collaborate and mobilize funds from key institutional investors for investment in crucial infrastructure projects and facilitate the setting up of special economic zones across the African continent. It would be similar to the Nigerian Trust Fund (NTF) domiciled at the African Development Bank (AfDB).
Speaking on the development, the President & CEO of the Africa Finance Corporation (AFC) Mr. Samaila Zubairu, expressed the Corporation’s pleasure in welcoming Mauritius as a Member State of AFC. Noting that through its commitment to promoting private sector-led solutions for its development challenges, Mauritius presents an excellent partnership opportunity for AFC’s mandate to develop and finance infrastructure, natural resource and industrial assets for enhanced the productivity and economic growth of African states. He added that the Corporation looks forward to significantly contributing to Mauritius’s growth story.
It could be recalled that the Africa Finance Corporation (AFC) has an A3/P2 (Stable outlook) rating from Moody’s Investors Service and that it successfully raised US$650 million in 2019, US$500 million in 2017 and US$750 million in 2015 through Eurobonds all of which were oversubscribed and attracted investors from Asia, Europe and the USA. Combining specialist industry expertise with a focus on financial and technical advisory, project structuring, project development and risk capital to address Africa’s infrastructure development needs and drive sustainable economic growth, the AFC has invested in high-quality infrastructure assets that provide essential services in the core infrastructure sectors of power, natural resources, heavy industry, transport, and telecommunications in projects within 29 countries across Africa.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.
Mention Mauritius and most South Africans will think of its pristine beaches and luxury resorts, but this small country is becoming a big business player not only in Africa but on a global scale.
Mauritius may just be an island — its annual tourist influx of 1.4 million outnumbers its own population of around 1.3 million — but this hasn’t stopped it, over the past three decades, from growing into a giant on the business front.
Many ‘Firsts’
As far as the continent goes, it’s already racked up a number of African “firsts” in terms of international business achievements. These include Economic Freedom of the World (2017, Fraser Institute), Forbes Survey of Best Countries for Business (2017) and the Global Competitiveness Index (2017–2018).
It also secured first place in Africa and 25th position overall out of 190 countries on the World Bank’s Ease of Doing Business Report, receiving recognition in terms of its political, social and economic stability, efficient and effective regulatory framework, state-of-the-art infrastructure, transparent and innovative legal framework and its highly competitive tax system.
With a government focused on promoting foreign and domestic investment, it has enabled free repatriation of profits, no withholding tax on dividends, interest and royalties, no capital gains tax, and no estate duty, inheritance tax or gift tax. Plus it has 44 tax treaties with countries across the globe and another 32 in various stages of negotiation and ratification.
Together with its low tax rates, its fiscal regime has seen it being listed in 2017 on the Organisation for Economic Co-operation and Development (OECD) “white list” in terms of transparency and being a fully compliant tax jurisdiction in terms of best practice international standards. It was, indeed, one of only three such top-rated jurisdictions in the world.
It is welcoming foreigners with open arms and — as a country in Africa — it’s certainly giving South Africa a run for its money.
Along with 4% growth in its economy, its reputation is also growing for being the best financial hub and base for businesses coming to Africa.
Investors from places such as France, India, and the UK — not to mention South Africa itself — are all seeing it as a safe place to set up shop. It’s why we, as The Business Exchange (TBE) with our own home base in South Africa, have set up our latest coworking space here, to meet the growing demand for office space on the island. It’s a destination we believe is out-investing South Africa
A Business Safe Haven
A safe investment climate, efficient financial infrastructure and political stability are always going to be highly conducive towards attracting and conducting business. Little over an hour longer in flying time than the time it takes to travel between Cape Town and Johannesburg, the third smallest country in Africa is, therefore, becoming an attractive destination in which to live, work, play and stay… quite possibly forever.
Its private and government institutions are strong. Good schooling (in English with French as a second language), state-of-the-art healthcare facilities, and a low crime rate are starting to see a number of South Africans turning their heads north in its direction — families as well as companies.
As a property ownership destination, it’s already been proving its worth for a number of years now, initially for holiday and second homes but, today, increasingly for residency, relocation and retirement. A huge attraction for investors and in particular those looking to attain passive rental income, has been its property development schemes for foreign non-citizen investment. An investment of $500 000 or more in a PDS will also grant an investor permanent residence status.
And, as we ourselves have found as The Business Exchange, there’s a great deal that’s attractive to invest in from a business perspective as well. Not only is there an ideal opportunity for us to service the rapidly growing need for professional office space on the island, but we’ve also decided to use the country as the perfect base from which to launch our own growth into the rest of Africa. Legislation around setting up companies and ownership structures in Mauritius are quite straightforward and relatively simple to administer with the right partners and advisors onboard.
It may well have been a place of beaches to start with, a few decades ago — and, believe me, those pristine sands are still just as beautiful — but it’s business opportunities are now among its biggest attractions. And as South Africa continues to reflect uncertainty, I’ve no doubt that Mauritius’s positive offerings will continue to grow even brighter.
David Seinker is the CEO of The Business Place, an office and co-working space with a number of locations throughout Johannesburg — and now in Mauritius.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world
The Stock Exchange of Mauritius (SEM) has announced the inclusion of the African Export-Import Bank (Afreximbank) in the SEM-10 index. An announcement by SEM listed Afreximbank among the SEM-10 Constituents for the third quarter starting 3 July 2019.
Other companies on the list are MCB Group Limited; IBL Ltd; SBM Holdings Ltd; Grit Real Estate Income Group Limited; ENL Limited (Ordinary A Shares); CIEL Limited; New Mauritius Hotels Limited; Rogers & Company Limited; and Lux Island Resorts Ltd.
The index tracks the performance of the 10 largest stocks on the SEM in terms of market capitalization and the 10 most liquid stocks in terms of average value traded and trading frequency during the preceding three months.
Being part of the SEM-10 index is expected to enhance Afreximbank’s visibility with local and international investors and, potentially, encourage institutional investors that track the index to include the Bank’s Depositary Receipts in their investment portfolios.
Ninety percent of foreign investors’ transactions on SEM-listed stocks is targeted towards companies that are included in the SEM-10 index. Moreover, some of the larger companies in the index are tracked closely by global data vendors like Bloomberg, Factset, and Refinitiv, as well as by global Index providers, such as S&P, Dow Jones, MSCI and FTSE.
The SEM-10 Index is subject to quarterly reviews and to remain in the index, companies need to ensure regular trading of their securities.
Afreximbank currently ranks as the SEM’s third best-performing stock on a year-to-date basis in 2019, with a performance of 26.5 percent.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.
Mauritius is not leaving anything behind as it begins a major clampdown on foreign funds flowing into the country. Here is the latest on the new tax reform initiated by the Mauritian government: The country’s financial services regulator Financial Services Commission (FSC) has said it would process all applications submitted to it for the purposes of determining whether a business is qualified to benefit from any tax treaties entered into between Mauritius and other countries within two months, provided the applicants fulfill all legislative obligations that include meeting know-your-customer (KYC), anti-money laundering, counter-terrorist financing, and substance requirements, among other things.
“FSC is emboldening its commitment to be a progressive and transparent regulator by fixing a shorter time frame for its own internal processes,” said Neha Malviya, director, Wilson Financial Services.
Mauritius has always been faulted for operating a tax haven economy where foreign companies flock to in order to avoid tax in their home countries. But all that is about to stop, at least to a larger percentage. Going forward, Mauritius foreign businesses coming into Mauritius would be required to comply with the new tax reform.
‘‘If the authorities find that it is not in Mauritius, then the entity is not a tax resident at all, and if it’s not a tax resident, then the treaty benefits it gets with other countries will not be available to it,”experts said.
Many of the business structures currently in place for international companies may be reviewed by Mauritius itself following the tax reform. Other existing structures will be forced to increase the substance requirements within Mauritius for them to continue getting the tax benefits.
“It is a significant change and the way they look at it will be different and may have new test to figure out whether these companies are complying with the new norms. It needs to figured out what are the tests they are going to lay out,” Suresh Swamy, Partner, PwC told Asian Age.
This change would hit hundreds of offshore funds operating out of the island nation and investing in their countries to take advantage of the double taxation treaties between their countries and Mauritius.
As An Example
A South African company may have its board of directors in Mauritius while it is managed from South Africa. In this case, the authorities could say the company is not eligible for tax residency. They will now look at the substance on the ground in Mauritius.
In many cases, the board meetings happen in Mauritius, directors are in Mauritius but the control and management are actually not in Mauritius. This would no longer be the case under the new arrangement.
The fallout of this move will be that many of the structures currently set up in Mauritius and claiming treaty benefits on the basis that they have tax residency certificates may now have to take a look at the structures again.
So, many of the Mauritius structures may get challenged in Mauritius itself and several existing structures will be forced to increase the substance requirements within Mauritius for them to continue getting the tax benefits, experts said.
In simple terms, the consequence of not being considered tax resident in Mauritius is that the company would not benefit from the numerous tax advantages that obtainable from running its business in Mauritius. So, it is not a case of claim benefit from Mauritius, but do business in your home country. You have to manage your business in Mauritius before you claim the benefits.
Mauritius is a tax treaty jurisdiction and has so far concluded more than 42 tax treaties which are in force with the countries listed above.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
Mauritius is preparing for some radical reforms to its current tax regime. Its 2019–2020 budget proposal is saying so. Changes range from international tax reforms; value-added tax changes; new corporate tax relief measures, including a new patent box regime; a regime for peer-to-peer lending; individual tax breaks; and a tax amnesty scheme.
Below are some of the changes.
Companies or Startups Involved In Innovation Activities Would Get An Eight-Year Tax Holiday
Mauritian 2019–2020 budget is proposing a big incentive for highly innovative companies and startups. For newly established startups and companies, in innovation-driven activities, they stand a greater chance of benefiting from an eight-year tax holiday on income derived from their intellectual property assets which were developed in Mauritius. For existing startups or companies, the eight-year tax holiday would be on income derived from intellectual property assets developed in Mauritius after June 10, 2019.
The Budget also makes changes concerning loss carryforwards for companies. Presently, in Mauritius, the accumulated losses of a company lapse if there is a change in the ownership of the company. However, in the case of a manufacturing company, the Minister may allow the carry forward of the losses if he is satisfied that it is in the public interest to do so and provided conditions relating to the safeguarding of employment are complied with. This derogation will be extended, under the new rule, to any company facing the financial difficulty that is taken over by another shareholder provided conditions imposed by the minister are met. This amendment will be deemed to be effective as from July 1, 2018.
A Five-Year Tax Holiday For E-commerce Startups, Peer-To-Peer Lending
The Budget also proposes a five-year tax holiday for a startup or company setting up an e-commerce platform provided the company is incorporated in Mauritius before June 30, 2025.
Also within the five-year bracket are peer-to-peer lending operators, provided the company starts its operation prior to December 31, 2020.
All interest income received by an individual from peer-to-peer lending will be subject to income tax at the rate of three percent (3%). Any bad debt and fees payable to the peer-to-peer operator will be deductible from taxable interest income. No tax deduction at source will be applied to peer-to-peer interest income.
Also, Mauritian businesses spending on capital goods, which are goods that are used in producing other goods, rather than being bought by consumers, would now breathe some relief. This is because the Budget also improves tax relief for expending on capital goods. Presently, capital expenditure incurred on plant or machinery may be fully expensed in the year incurred if the amount does not exceed MUR30,000 (USD835). The threshold will be raised to MUR60,000 under the new regime.
Four Year Tax Holiday For Oil Bunkering
The new budget also places a four-year tax holiday on all income derived from bunkering of low Sulphur Heavy Fuel Oil.
Under Its Tax Amnesty Rule, Small and Medium Enterprises Will Be Given An Opportunity To Regularize Their Tax Default
To this effect, Small and medium enterprises (with a turnover not exceeding MUR50m) will be given the opportunity to regularize any undeclared or underdeclared income with the Mauritian Revenue Authority free from penalty and interest, provided payment is made on or before March 31, 2020.
The proposed tax amnesty scheme also allows a person making a voluntary disclosure on or before March 31, 2020, to be subject to tax on the disclosed chargeable income at a rate of 15 percent, free from any penalty and interest. However, criminal proceeds are excluded from this grace.
The GDP in Mauritius expanded 4.1 percent year-on-year in the last quarter of 2018, following a 3.3 percent growth in the previous period. Manufacturing rebounded (2.3 percent compared to -1.2 percent) and faster increases were seen in financial and insurance activities (5.2 percent compared to 5.1 percent); real estate (3.1 percent compared to 2.6 percent); and construction (10.1 percent compared to 6.8 percent). Wholesale rose 3.7 percent, the same as in Q3 and agriculture went up 1.7 percent, also the same as in Q3. Considering full 2018, the economy expanded 3.8 percent, the same as in 2017. GDP Annual Growth Rate in Mauritius averaged 3.89 percent from 2001 until 2018, reaching an all-time high of 9.80 percent in the first quarter of 2003 and a record low of -0.80 percent in the first quarter of 2005.
Value-Added Tax (VAT) Also Saw The Greatest Reforms
Under the new VAT regime, cooking gas for domestic use by households in cylinders of up to 12 kg is being made zero-rated for VAT, and certain foodstuffs, including bread, will be newly exempt.
The Budget also says that a wholesale dealer in liquor and alcoholic products will have to be registered with the Mauritian Revenue Authority as a VAT-registered person. The Budget also provides that where there is a splitting of a business entity into different entities to avoid registration for VAT purposes, each entity will be required to be compulsorily registered for VAT.
Consequently, with a view to expediting the processing of VAT refunds, all VAT-registered persons will have to file their VAT return and pay VAT electronically as from March 1, 2020.
As it stands now, a VAT-registered person in Mauritius may claim repayment of input tax in respect of capital goods such as building, plant, machinery, or equipment. The Budget also proposes for provisions to be made to allow repayment of VAT paid on goodwill on acquisition of a business; and the acquisition of intangible assets such as software, patents, or franchise agreements.
Mauritian Banks Who Grant Loans And Other Credit Facilities To Startups, Agric and Renewable Energy Businesses Would Receive 5% Less Tax On Their Taxable Income
Under the new arrangement, a reduced tax rate of five percent (5%) is applicable on the chargeable income of a bank in excess of its chargeable income in the base year (year of assessment 2017/2018) if the bank grants at least five percent of its new banking facilities to any of the following categories of businesses: SMEs in Mauritius; enterprises engaged in agriculture, manufacturing, or production of renewable energy in Mauritius; or operators in African or Asian countries.
Generally, a new taxation system for banks will be re-modeled as follows:
income derived by banks from Global Business Companies will be exempted from the levy under the Value Added Tax Act;
The rate of the levy will be increased from four percent to 4.5 percent of operating income for banks having operating income exceeding MUR1.2bn in a year;
a cap will apply on the increase in levy payable by a bank in order to ensure that no bank is burdened by an excessive levy amount;
it will be clarified that the levy is not a deductible expense under corporate tax; and
no foreign tax credit will be allowed.
Mauritians Will Become Increasingly Tax-Free Under The New Proposal
The new tax regime also sees major changes to personal income tax, including increases to tax-exempt allowances and relief for carers for persons with disabilities.
The Budget that as it concerns inheritance tax, the lump-sum income received by a person by way of payment of pension before the legal due age, death gratuity, or as compensation for death or injury will be excluded from the computation of the solidarity levy. This change will be backdated to take effect as from July 1, 2017, the date the solidarity levy was introduced.
The law will, however, be amended to clarify that an individual’s share of income in a society or succession will be taken into account in the computation of the solidarity levy.
There Would Be Major Changes In The Way International Taxes And Transfer Pricing Are Done In Mauritius
The budget also seeks to amend the Income Tax Act of Mauritius. The amendment of the Income Tax Act would be to implement the recommendation of industry stakeholders regarding the determination of tax residency for companies so that a company will not be considered as tax resident in Mauritius if it is centrally managed and controlled outside Mauritius.
The budget will also address the deficiencies identified by the EU in the territory’s partial exemption regimes.
To this effect, the Income Tax Regulations 1996 will be amended to:
define the detailed substance requirements that must be met in order for a taxpayer to enjoy the partial exemption benefit; and
lay down the conditions that must be satisfied where a company outsources its core income generating activities — namely:
the company must be able to demonstrate adequate monitoring of the outsourced activities;
the outsourced activities must be conducted in Mauritius; and
the economic substance of service providers must not be counted multiple times by multiple companies when evidencing their own substance in Mauritius.
Mauritius also intends to introduce controlled foreign company rules, and the legal provisions relating to the arm’s length test for transfer pricing purposes will be fine-tuned, the Budget says, “to remove any doubt or uncertainty about its application.”
Mauritius is ranked 20 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Mauritius improved to 20 in 2018 from 25 in 2017
Mauritius Would Soon Be A Regional Hub For Fintech
The budgets are not taking the disruptive and profitable nature of Fintech for granted. It sets out measures the territory will take to establish Mauritius as a hub for Fintech in the region. Accordingly, the Financial Services Commission will:
establish a regime for Robotics and AI enabled financial advisory services;
introduce a new license for Fintech Service providers;
encourage self-regulation for Fintech activities in consultation with the United Nations Office on Drugs and Crime;
introduce the use of e-signatures and e-licenses on a pilot basis; and
create crowdfunding as a new licensable activity.
Development of Real Estate Investment Trusts
The Budget announces proposals for new rules and an attractive tax regime to promote the development of Real Estate Investment Trusts (REITs); an “umbrella license” for wealth management activities; and a scheme for headquartering of “e-commerce” activities.
Tax Break For Electric vehicles
The Budget proposes improvements to tax breaks for electric vehicles, including a double deduction for businesses investing in a fleet of eco-friendly cars.
The Gross Domestic Product per capita in Mauritius was last recorded at 10186.10 US dollars in 2017. The GDP per Capita in Mauritius is equivalent to 81 percent of the world’s average.
Gaming Tax Enforcement
The Budget says appropriate amendments will be made to the Income Tax Act to reduce the possibility for a casino or a gaming house to split payment to winners in order to avoid the 10 percent tax on winnings exceeding MUR100,000.
Tax Perks For Marinas
The Government has announced incentives for the development of marina, including new regulations for marinas and a yacht code; an eight-year income tax holiday for a newly set-up company developing a marina; and a VAT exemption will be provided on the construction of marinas.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
Until recently, Mauritius used to be the tax haven where all businesses flock to. But that is about to change. The Mauritius government’s proposal to amend tax residency rules for companies is giving jitters to foreign funds operating from the tax haven. The current order is that companies set up their corporate offices in Mauritius while having their business operations overseas, in other countries.
The new proposal by the Mauritius government is that any moment from now, a company will not be considered tax resident in the country if it is centrally managed and controlled outside Mauritius. In other words, the era of tax haven in Mauritius is crawling to an end. Consequently, funds may lose tax benefit after the rule amendment.
To Understand The Implication of This, Here Is A Quick Recap of Ways of Taxing Foreign Companies In Mauritius
Under the Mauritian Global Business sector, a foreign company can fall in either one of two categories: GBC1 or GBC2.
A Global Business Company (GBC 2)
A Global Business Company (GBC 2) is a company that has its office in Mauritius but does business outside Mauritius. At all times, the company has the Management Company acting as Registered Agent in Mauritius. The GBC 2 is non-resident for tax purposes and therefore is a tax-exempt entity and cannot avail itself of the relief under the Double Taxation Treaty in force in Mauritius. Thus, a GBC2 company pays no corporate tax; no withholding tax on dividends; no interest and royalties; no Capital Gains tax; and has no access to the Double Taxation Avoidance Treaty.
The proposed amendment announced in the latest budget said that the Partial Exemption Regime under the Income Tax Regulations 1996 will be amended to define the detailed substance requirements that must be met in order for a taxpayer to enjoy the partial exemption benefit.
A Global Business Company 1(GBC 1)
A Global Business Company 1(GBC 1) can be in the form of a Trust, Sociéty and Partnership. This includes small and medium scale businesses. A GBC 1 is considered to be tax resident in Mauritius and is subject to corporate tax at 15%. Tax advantages for GBC 1 in Mauritius are that there is no capital gains tax and also no withholding tax on dividends, interest, and royalties paid or estate duties.
The expanding network of Double Taxation Treaties has further reinforced Mauritius as a tax efficient jurisdiction and is also one of the prime reasons explaining the growing investment in GBC 1. Activities commonly undertaken by a GBC 1 requiring no specialized license are Investment Holding, Trading and International Consultancy and it normally takes an average of 3–4 weeks to incorporate a GBC 1 with such standard activities.
Interpretation of The Intended New Rule
From the above, only the GBC 1 has access to Double Taxation Treaties between their countries and Mauritius. That is, where the business is run in South Africa and Mauritius at the same time. South Africa is a party to a Double Taxation Treaty with Mauritius. And as such, the business in Mauritius would be considered tax resident in Mauritius and is subject to corporate tax at 15%. Tax advantages for GBC 1 in Mauritius are that there is no capital gains tax and also no withholding tax on dividends, interest, and royalties paid or estate duties.
Example of the benefits derivable from a double taxation treaty arrangement
Should this new rule come into effect, hundreds of similar offshore funds operating out of the island nation would be heavily hit.
The question now, therefore, will be what operations are centrally managed and controlled?
The general rule is that a company will have to demonstrate that its entire management resides in Mauritius and if it is centrally managed and controlled outside, then it may not be entitled to it.
“If the authorities find that it is not in Mauritius, then the entity is not a tax resident at all, and if it’s not a tax resident, then the treaty benefits it gets with other countries will not be available to it,” experts said.
This change would hit hundreds of offshore funds operating out of the island nation and invest in their countries to take advantage of the double taxation treaties between their countries and Mauritius.
As An Example
In determining what operations of a company are centrally managed and controlled, let’s study this scenario.
A South African company may have its board of directors in Mauritius while it is managed from South Africa. In this case, the authorities could say the company is not eligible for tax residency. They will now look at the substance on the ground in Mauritius.
In many cases, the board meetings happen in Mauritius, directors are in Mauritius but the control and management are actually not in Mauritius. This would no longer be the case under the new arrangement.
The fallout of this move will be that many of the structures currently set up in Mauritius and claiming treaty benefits on the basis that they have tax residency certificates may now have to take a look at the structures again.
So, many of the Mauritius structures may get challenged in Mauritius itself and several existing structures will be forced to increase the substance requirements within Mauritius for them to continue getting the tax benefits, experts said.
In simple terms, the consequence of not being considered tax resident in Mauritius is that the company would not benefit from the numerous tax advantages that obtainable from running its business in Mauritius. So, it is not a case of claim benefit from Mauritius, but do business in your home country. You have to manage your business in Mauritius before you claim the benefits.
Mauritius is a tax treaty jurisdiction and has so far concluded more than 42 tax treaties which are in force with the countries listed above.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
The island of Mauritius, with a population of just 1.2 million people is not only good for business, but is almost crime free. This is probably why a majority of high net worth of South Africans are migrating there. Below, we examine the reasons for this migration.
Foreigners Can Own Landed Property In Mauritius And Get Automatic Residence Permit
Following the passage of the the Non-Citizen (Property) Restriction Act into law by the Mauritian government, any non-citizen (whether individual, corporate or trust) of Mauritius can purchase immovable property (such as land for commercial purposes) subject to obtaining the approval of the Prime Minister’s Office, channeled through the Board of Investment of Mauritius. Prior to this law, only non-citizens of Mauritius who have permits to invest, work or live in Mauritius could purchase specific types of immovable property in Mauritius.
Even when the non-citizen is not yet in Mauritius, but in South Africa, the purchase of a residential unit acquired under the Mauritian Property Development Scheme (PDS)or Smart City Scheme can give the non-citizen an automatic right to residence in Mauritius without applying for any further permit to reside, provided that the property’s purchase price is above USD 500,000.
Other Ways of Getting Automatic Residence Permit Are:
Occupation Permit (OP) :
When you plan to work in Mauritius, you would also get an automatic residence permit, provided that you make an Initial investment of $100,000 in a business activity that should generate an annual turnover of at least MUR2 million ( $58,000) for the first year and cumulative turnover of at least MUR10 million for the subsequent two years.
Permanent Residence Scheme (PRS)
Foreign nationals investing more than $500,000 into the Permanent Resident Investment Fund (PRIF) for a period of 10 years are eligible for permanent residence, along with their spouse and children under 18 years of age. For children over 18, an additional deposit of $100,000 per person is required.
Other means of entering the country include a retirement non-citizen permit, and a foreign investor permit.
This has made the island country become highly sought-after by South African property buyers, some for residency purposes, but mostly for holiday/second homes, retirement and relocation.
Lending Rate
Banks in Mauritius peg their lending interest rate at 8.50 percent as of February, 2019. The average Lending Rate in Mauritius from 1998 to 2019 is 9.78 percent, meaning that lending rate in Mauritius has never gone beyond 9 percent over more than a twenty-year period and is not likely to ever go beyond that in the coming years.
Aside lending rate, the country also boasts of top-class infrastructure including an excellent banking sector, strong economic growth and a favourable investment and tax climate and is regarded as one of the easiest places to do business in.
Doing Business In Mauritius
It takes just 2 days to register a business in Mauritius. All you have to do is provide the following the information:Name of the company/commercial partnership;Company file number/Commercial partnership files number;The Business name (if any);The general nature of business and its location; Date or proposed date of commencement of business; Address of the principal place of business; Postal address; Workforce of the applicant; Telephone number, fax number and email address and pay as low as 100 Rupees ($1.43) and you are good to go.
Other business reasons of moving to Mauritius include, economic growth, good schooling, low crime rates, and is politically stable, and has an unemployment rate of 6.80%.
Taxes:
Unlike South Africa, the business environment is tax-effective. Under the Mauritian Global Business sector, a foreign company can fall in either one of two categories: GBC1 or GBC2.
A Global Business Company (GBC 2) is a company that has its office in Mauritius, but does business outside Mauritius. At all times, the company has the Management Company acting as Registered Agent in Mauritius. The GBC 2 is non-resident for tax purposes and therefore is a tax exempt entity and cannot avail itself of the relief under the Double Taxation Treaty in force in Mauritius. Thus, a GBC2 company pays no corporate tax; no withholding tax on dividends; no interest and royalties; no Capital Gains tax; and has no access to Double Taxation Avoidance Treaty.
A Global Business Company 1(GBC 1)
A Global Business Company 1(GBC 1) can be in the form of a Trust, Sociéty and Partnership. This includes small and medium scale businesses. A GBC 1 is considered to be tax resident in Mauritius and is subject to corporate tax at 15%. Tax advantages for GBC 1 in Mauritius are that there is no capital gains tax and also no withholding tax on dividends, interest and royalties paid or estate duties.
The expanding network of Double Taxation Treaties has further reinforced Mauritius as a tax efficient jurisdiction and is also one of the prime reasons explaining the growing investment in GBC 1. Activities commonly undertaken by a GBC 1 requiring no specialized license are Investment Holding, Trading and International Consultancy and it normally takes an average of 3–4 weeks to incorporate a GBC 1 with such standard activities.
Theo Pietersen, MD of South African Real Estate company, Seeff in Mauritius, gave an insight that more South Africans may be on their way to the island of Mauritius for the singular reason that the property on the island is regarded as an excellent investment and if you invest early, you can generally benefit from excellent capital growth.
Mauritius is made up of an ethnically and religiously diverse mix of people of Indians, Africans, French and Chinese heritage. The business people of Mauritius today are predominantly from Europe, South Africa, India and China.
Charles Rapulu Udoh
Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.
