MAURITIUS: An Introduction
Mauritius has firmly established itself as a unique and robust investment destination and is recognised as an International Financial Centre of choice due to its strong regulatory framework. Mauritius’s long-term commitment and investment in a regulatory environment which promotes stability, transparency of regulation, lack of corruption and market confidence continues to attract investors. In addition, its strategic geographical location in the Indian Ocean combined with its skilled labour force and multilingual population make it a gateway to both Africa and Asia.
Mauritius has maintained its leading position as the most free economy in Sub-Saharan Africa and is ranked 21st out of 180 countries with an economic freedom score of 75.1 in the 2018 Index of Economic Freedom report published annually by The Heritage Foundation. Mauritius is considered an upper-middle income country, with a gross national income (GNI) per capita of USD10,140 according to the 2017 World Bank Report, and aims to be in the high-income country category by 2025. The government reiterated its vision of making Mauritius a high-income country in its 2018-2019 budget, the key features of which are modernisation of infrastructure, social welfare and innovation. The budget also introduced an overhaul of the global business sector and a support framework for the Fintech industry. With growth forecast at 4.3% for 2019 due to augmented investment and an increase in tourism, the country’s outlook for the future is positive. Opening the economy to financial technology and positioning Mauritius as a regional hub of sound repute in the field of Fintech regulation is one of the government's priorities. The aim is to foster development of a new growth pole revolving around Artificial Intelligence (AI), blockchain technologies and Fintech picturing Mauritius as a dynamic innovation driven economy. A National Regulatory Sandbox committee has been set up and is tasked with the review of applications and approval for the issuance of licences for Fintech related endeavours by the Financial Services Commission (the “FSC”). Investments in financial products and the use of Mauritius as a platform for the development of Fintech will have full support of the government. On the infrastructure front, the government’s committed investments are underway with the development of smart cities, expanded road networks and the light rail project.
Mauritius has a hybrid legal system combining both civil and common law practices. It is governed by principles drawn from both the French Code Napoleon and English Common Law. The Supreme Court is the highest judicial authority in Mauritius and has unlimited jurisdiction to hear any criminal and civil proceedings. Mauritius has retained the Judicial Committee of the Privy Council of the United Kingdom as its final court of appeal. Mauritius has also embraced arbitration as the new model of dispute settlement through the International Arbitration Act 2008, which is based on the UNCITRAL model and offers a tailor-made option for investors for a cheaper and faster out-of-court alternative to settle commercial disputes which would safeguard confidentiality. Mauritius is known as an international arbitration centre for the region.
Recent Legal Developments
The following recent legal developments have impacted doing business in Mauritius in 2018:
• Changes to the global business regime
The Category 2 Global Business Licence (“GBL2”) has been abolished and a new concept of an “Authorised Company” has been introduced. The Authorised Company will have most of the attributes of a GBL2 except that it will need to have its place of effective management outside of Mauritius.
The Category 1 Global Business Licence (“GBL1)” will henceforth be known as a “Global Business Licence” (“GBL”) and holders of a GBL would be subject to the following additional substance requirements. They shall at all times carry out their core income-generating activities in, or from, Mauritius by:
(a) employing, either directly or indirectly, a reasonable number of suitably qualified persons to carry out the core activities; and
(b) having a minimum level of expenditure, which is proportionate to their level of activities.
The holder of a GBL1 or a GBL2 which was issued by the FSC on or before 16 October 2017 will be grandfathered until 30 June 2021. A holder of a GBL1 or a GBL2 which was issued by the FSC after 16 October 2017 will be grandfathered only until 31 December 2018. A holder of a GBL1will be deemed to be a GBL as from 1 January 2019.
The Deemed Foreign Tax Credit will be abolished as from 1 January 2019 and replaced with a partial exemption system regime that will be allowed in respect of below types of foreign source income:-
- Foreign source dividend, provided that such dividend is not allowed as a tax deductible item in the source country.
- Foreign source interest income.
- Profit attributable to a permanent establishment which a resident company has in a foreign country.
- Income derived by a Collective Investment Scheme, Closed end fund, CIS manager, CIS administrator, investment adviser or assets manager licensed or approved by the Financial Services Commission.
- Income derived by companies engaged in ship and aircraft leasing.
• Amendment to limited partnerships (LP) and limited liability partnerships (LLP).
Both structures will now have to disclose and record in their register of partners, the identities of beneficial and ultimate beneficial owners. Any partner may request the Registrar of Partnerships to remove the LP or the LLP from the Register provided that said request is accompanied by a statement of no objection from the Chief Executive of the FSC and the Director General of the Mauritius Revenue Authority.
• Amendment to the banking sector
- The Segment A and Segment B regime will be abolished effective as from the year of assessment commencing 1 July 2020. Segment A relates to all banking businesses with the exception of businesses which give rise to “foreign source income”, which is termed as Segment B.
- Banks deriving income from banking transactions with non-residents and companies holding a GBL will still be considered as foreign source income up to the year of assessment commencing 1 July 2019.
- The scope of information to be submitted in connection with application for a banking licence has been expanded to include information in relation to beneficial owners. A beneficial owner (a) means the natural person who ultimately owns or controls the applicant or the natural person on whose behalf the application is made, and (b) includes the natural person who exercises ultimate effective control over the applicant.
Doing Business in Mauritius
Doing business in Mauritius is both easy and smooth and complies with best practices in terms of transparency, good governance and ethics. Mauritius is ranked 25th globally as per the World Bank’s Doing Business 2018 report, topping all African countries as well as ranking 1st on the 2017 Mo Ibrahim Index of African Governance.
The open and business-friendly economy of Mauritius combined with its modern infrastructure makes it an attractive place for investors. A new business can be set up and be operational within 3 working days. The country’s investment regulations are in line with the WTO’s agreement on Trade Related Investment Measures.
Mauritius has an attractive fiscal regime with a flat personal and corporate tax rate of 15%. Companies qualifying as residents of Mauritius for tax purposes are entitled to a “partial exemption” regime of 80% on specified foreign source income. The country has so far concluded 44 tax treaties and is a party to 28 Investment Promotion and Protection Agreements which provide extra assurance and security for the country’s potential investors. The extensive and expanding network of these treaties confirms the genuineness of Mauritius as a tax-efficient jurisdiction for structuring investment.