Insight 15 April 2020

Mauritius funds eligible for Category-I status

The government has specified foreign portfolio investors (FPIs) from Mauritius as eligible for taking up Category-I licence — a move that could boost investment from the region.

Nearly 80 per cent of FPIs coming from Mauritius are currently classified as Category-II. According to experts, all these investors may be shifted to Category I on payment of the requisite fees for the license. Despite its treaty amendment with India, Mauritius remains the second-largest source of FPI money and the move could boost investment from there.

The taxation overhang on funds investing through Mauritius is gone because no indirect transfer is applicable to Category 1. These funds will also be able to issue and subscribe to participatory notes.”

Khushboo Chopra Head of Business Development, India

This year’s Budget had clarified that Category-II FPIs would be subject to indirect transfer provisions, which were earlier applicable to unregulated funds falling under Category-III.

Being part of Category-I implies lower compliance burden, simplified know-your-customer norms and documentation requirements, and fewer investment restrictions.

“This is a major development for the Mauritius International Financial Centre (IFC). It brings the element of certainty back to Mauritius jurisdiction with respect to FPI investments. As a premier IFC, we continue to play an important role in driving quality investments into the region and emerging markets, while ensuring adherence to the best practices.

This development reaffirms the position of Mauritius as a major IFC for foreign portfolio investment, as well as the confidence of investors in our jurisdiction,” said Harvesh Seegolam, governor of the Bank of Mauritius and former chief executive of FSC Mauritius.

Last week, the Securities and Exchange Board of India (Sebi) had relaxed its guidelines for FPIs seeking a Category-I licence, allowing investors from countries, which are not Financial Action Task Force (FATF) members, to qualify for such registrations if the countries are specified by the Indian government.

The move was expected to benefit funds and investments routed through Mauritius and countries from West Asia. At present, the FATF has 39 members, including Australia, Singapore, Luxembourg, and China. Financial Services Commission officials have followed the matter closely with Sebi since October last year.

Other insights from Peter Nagle

Insight 4 February 2020
Mauritius Regulatory Update - AML/CFT Handbook issued by the Financial Services Commission
Insight 9 April 2020
Sebi tweaks rules to stem outflow of foreign funds
Insight 13 April 2020
India’s Central Government specifies Mauritius as an eligible country for “Category 1 foreign portfolio investor”