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MAURITIUS: An Introduction

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MAURITIUS: An Introduction 

Overview 

Mauritius has one of the most stable and business-friendly environments in the world. The attractiveness of Mauritius as an International Financial Centre revolves around numerous factors such as a robust regulatory framework, a harmonised tax environment, a bilingual and skilled workforce, political stability, economic diversity, a strategic geographical location and compliance with international standards. The Economic and Financial Affairs Committee of the European Union (EU) has, on 10 October 2019, confirmed that Mauritius is fully compliant with all commitments on tax cooperation and EU tax good governance principles.

Economy  

Mauritius maintained its first position as a ‘mostly free’ economy in Sub-Saharan Africa and is ranked 21st out of 180 countries with an economic freedom score of 74.9 in the 2020 Index of Economic Freedom report published by The Heritage Foundation.

Mauritius remains among the Sub-Saharan Africa region’s most business-friendly countries, with solid economic policies and prudent banking practices. Its global trade and investment outreach have increased exports of goods and services and tourism, and low oil prices have kept inflation low.

Our real GDP has been increasing at an annual average rate of 3.7% since 2015 and has been on a rising trend since then. However, with the impact of COVID-19, Mauritius is expected to witness its first recession since independence with a contraction of between -10.5 and -12.5%.

The Government has embarked into a post-COVID-19 era and has presented some interesting measures presented under the recent budget. More notably, the Mauritius Investment Corporation (MIC) has been set up by the Bank of Mauritius to invest in the hospitality and pharmaceutical sectors as well as the ‘blue economy’ and other strategic sectors. The MIC will also allocate some MUR10 billion for projects in Africa.

Legal Framework 

Mauritius has a hybrid legal system which combines both civil and common law practices. It is governed by principles drawn from both the French Napoleonic Code 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 preferred model of dispute settlement through the International Arbitration Act 2008, which is based on the UNCITRAL model and offers an option for investors to opt for a more cost-efficient and faster out-of-court alternative for the settlement of commercial disputes which would safeguard confidentiality. As a venue for hearings and meetings, Mauritius, which is located at the crossroads of Asia and Africa, is an excellent destination for an international arbitration centre.

Recent Legal Developments 

The following recent and key legal developments will impact doing business in Mauritius in 2020:

Changes to Companies Act (CA) 

- The concept of “independent director” has been introduced in the CA.

- A director of a company now has a duty to act in a manner which is not oppressive, unfairly discriminatory, or unfairly prejudicial to the shareholders of the company.

- Any failure by a director to act in good faith and in the best interests of company is an offence which now constitutes a criminal liability.

Changes to the Income Tax Act 

- Tax payable by a company deriving income from life insurance business

The tax payable by a company deriving income from life insurance business shall be the normal tax payable or 10% of the relevant profit subject to other provisions.

- Additional investment allowance to companies affected by COVID-19

Where a company has during the period from 1 March 2020 to 30 June 2020 incurred capital expenditure on the acquisition of new plant and machinery, it shall, in addition to the deduction to which it may be entitled under section 63 of the ITA, be allowed a deduction of 100% of the capital expenditure so incurred by way of investment allowance in respect of the income year in which the expenditure is incurred, provided that it satisfies the Director-General of the Mauritius Revenue Authority that it has been adversely affected by COVID-19.

Changes to Workers’ Rights Act (WRA) 

- End of year bonus

The end of year bonus equivalent to one twelfth of the earnings of employees is now only applicable to employees earning a monthly basic salary of MUR100,000 or less. For those earning above the aforementioned threshold and provided that they are in employment as at 31 December, the end of year bonus is calculated on their December basic salary.

- Reduction of workforce

There are specific procedures to be followed prior to laying off employees on grounds of redundancy (for example: negotiation with trade unions, exploring the possibility of avoiding reduction of workforce or closing down). The Minister may now exempt employers who provide specific services as prescribed in the WRA from following those procedures.

An employer cannot reduce the number of employees either temporarily or permanently or terminate their employment as from 1 June 2020 unless it has applied for financial assistance schemes save for employers who provide services as prescribed under the WRA.

Doing Business in Mauritius 

Doing business in Mauritius is easy and smooth and complies with best practices in terms of transparency, good governance and ethics. Mauritius is ranked 13th out of 190 countries assessed according to the World Bank’s Doing Business Report 2020, which is based on quantitative indicators, progressing from 20th position in the 2019 Report. Mauritius further consolidates its lead position on the African continent as the best place for doing business.

Some of the key areas where Mauritius excelled are as follows: dealing with construction permits, where Mauritius ranks 8th out of 190 countries; paying taxes, where the country is ranked 5th with a score of 94% in the ease of paying taxes indicator, owing to the sustained reforms implemented by the Mauritius Revenue Authority; registering a business/incorporating a company online in less than two hours; getting electricity - reduced costs and time for a new electricity connection; registering property - enhancement of the Mauritius e-Registry System (MERS) and streamlining of procedures; and improving the legal framework for resolving insolvency.

Mauritius also ranked 1st on the 2018 Mo Ibrahim Index of African Governance and has an attractive fiscal regime with a corporate tax rate of 15%. Companies qualifying as residents for tax purposes are entitled to a “partial exemption” regime of 80% on specified foreign source income. Companies engaged in export of goods and freeport operators or private freeport developers engaged in the manufacture of goods are liable to tax at the rate of 3% on income derived from sale of goods on the local market. Regarding personal taxation, an individual having an annual net income not exceeding MUR650,000 is subject to income tax at the rate of 10% while an individual having an annual net income exceeding MUR650,000 is subject to income tax at rate of 15%.

The country has concluded 46 tax treaties and is party to 28 Investment Promotion and Protection Agreements which provide extra assurance and security for its potential investors. The extensive and expanding network of these treaties confirms the genuineness of Mauritius as a tax-efficient jurisdiction for structuring investments.