SANNE co-hosts successful Real Estate event in Tokyo
15 November 2019
This briefing note was prepared by Peter Nagle, Country Head – Mauritius and Sheena Oograh-Rajcoomarsing, Senior Tax Consultant.
The financial services sector has been highlighted in the 2019 annual budget (the “Budget”) as a vital sector of the economy in view of its sustained growth. Building up on:
several measures have been announced to consolidate, develop and further elevate this important sector of the economy.
Strengthening & Consolidation
Mauritius is ranked 20th globally and 1st in Africa in terms of ease of doing business in the jurisdiction. In an effort to improve the business environment for investors, the following measures were announced:
The following have been announced in this respect
Alignment with international best practices with the following measures
Strengthening the regulatory framework to combat fraud, corruption and financial crimes by
Mauritius is recognised internationally as a highly reputable International Finance Centre of Choice. A key feature that make Mauritius an attractive financial jurisdiction is the islands approach to doing business. Implementation of the detailed measures, which are to be formulated, should give a further boost to Mauritius’ position in terms of the ease of doing business in the jurisdiction.
Investor confidence in the jurisdiction will see a boost in the array of measures devised to protect minority investors and the new framework to combat fraud, corruption and financial crimes to further bolster Mauritius internationally. The introduction of CFCs along with the expansion and diversification of financial services products also enable Mauritius to catch-up with the other international jurisdictions bringing it closer to being the leading international financial centre of choice.
Expansion & Development of the Financial Services Sector
Expanding accessibility of financial services
Diversifying the product base of Mauritius’ International Financial Centre by introducing
Improving the framework for Fintech services by
The key to assess the impact of these progressive diversification and expansion measures for the financial services sector would depend on the detailed rules, regulations and timelines for implementation.
Other notable regulatory changes
The limit on number of shareholders for a private company is expected to increase.
Tax Residency of Companies
If a company is not centrally managed and controlled in Mauritius, it would not be considered as a tax resident in Mauritius.
This is a much awaited clarity by industry stakeholders in determining residency status.
Eight-year Tax holiday - Innovation Box Regime
Eight-year Tax holiday - Marina
An eight year tax holiday would be granted to a newly set-up company developing a marina.
Five-year tax holiday- e-Commerce
A five year tax holiday would be granted to companies setting up an e-commerce platform in Mauritius before 30 June 2025.
Five-year tax holiday – Peer to Peer Lending operations
A five year tax holiday would be granted to a Peer-to- Peer lending operator starting operation before 31 December 2020.
Four-year tax holiday- Bunkering
A four year tax holiday would be granted on income derived from bunkering of low sulphur heavy fuel oil.
100% of the annual allowance of the cost of plant and machinery may be claimed in the year of acquisition if such amount does not exceed MUR 60, 000.
A freeport operator or private freeport developer engaged in the manufacture of goods will be liable to income tax at the rate of 3% on profits derived from the sale of goods on the local market.
Existing manufacturing companies issued with a Freeport certificate will have to meet the following substance criteria:
(i) Employ a minimum of five employees; and
(ii) Incur an annual expenditure exceeding Rs 3.5 million.
Freeport Operators would also be liable to pay Corporate Social Responsibility (CSR) on sale of goods on the local market.
Carry Forward of Unrelieved Tax Losses
Currently, only entities in the manufacturing sector may carry forward their accumulated tax losses in the case of a change in beneficial owner, subject to meeting the set conditions. set out. This carry forward of tax losses would be extended to entities which are taken over by another shareholder due to financial difficulty.
Corporate Social Responsibility Assessment
The Mauritius Revenue Authority (MRA) would be empowered to raise tax assessment to entities which have not fulfilled their CSR obligations either by spending the CSR fund or by remitting same to the MRA.
Arm's Length Transaction
Provision relating to the arms length principle will be amended to remove any doubt or uncertainty about its application.
This is a welcome measure as the current legislation does not provide sufficient guidance on the arm’s length principle or transfer pricing policies. This is also of direct relevance and significance in the debt structuring space.
Our final thoughts
Measures brought in the 2018 Budget was the result of Mauritius’s willingness to show more economic substance in the country. The November 2018 OECD report clearly showed that Mauritius meet all of the international requirements of the BEPS Action 5 and the ‘partial exemption’ regime has been regarded as ‘not harmful’ as per the Report. Proper timing and implementation of these bold measures announced in the 2019 Budget should be a major sector enhancement for Mauritius’ IFC on the EU white list.
Should you have any further questions please feel free to contact Sheena Oograh-Rajcoomarsing, Senior Tax Consultant, +230 467 3000.