Event: Residency and Tax in Mauritius

Event: JurisTax in collaboration with Baker Tilly and the Economic Development Board – Residency and Tax in Mauritius

On 29 July 2022, JurisTax in collaboration with Baker Tilly and the Economic Development Board (EDB) of Mauritius held a presentation entitled ‘Residency and Tax in Mauritius’ in Tamarin.

The focus of the presentation was on the recent amendments introduced in the Finance (Miscellaneous Provisions) Act (the “Finance Act”) as well as a South African legislative update.

Vinay Guddye of the EDB explained the role of the organisation in representing the Mauritian Government and facilitating investment into Mauritius.

He covered topics from the introduction of tax incentives and tax holiday, setting the financial thresholds attached to investments, presenting plans to allow non-citizens to purchase immovable property and to reside in Mauritius

The presentation then focused on recent legislative amendments in Mauritius, a summary of which is set out below:

Freeport Companies

As from the 2021/2022 year of assessment, freeport operators and private freeport developers were no longer exempt from income tax and a new regime has come into operation with effect from the 2022/2023 year of assessment

Base Erosion and Profit Shifting (“BEPS”)

Once implemented into domestic law, the Global Anti-Base Erosion (GloBE) rules will provide a coordinated system to ensure that Multinational Enterprises (MNEs) with revenues above EUR 750 million pay at least a minimum level of tax at 15% on the income arising in each of the jurisdictions in which they operate.

The overall objective of the Global Minimum Tax (GMT) is essentially to:

Increase the level of direct taxation of MNEs;
Disincentivize profit shifting and help end the proliferation of tax havens;
End the practice of governments competing to create the lowest tax environment to attract MNEs.

As announced in the Budget Speech 2022/23, Mauritius will introduce the GMT of 15% for companies’ resident in Mauritius and form part of a multinational enterprise having a global revenue of EUR 750 million or more.

There is, however, uncertainty regarding whether this will affect those companies who fall within the prescribed framework but who may already benefit from a 3% tax rate or a tax holiday offered by Mauritius, thus nullifying the incentives already in existence.

Mauritian Trusts

In the Finance Act 2021, a requirement was passed that all Trusts have to be registered for income tax and obtain a Tax Account Number (TAN). Trusts that were in existence prior to 1 July 2021 were grandfathered for 3 years.

On 24 August 2021, the Mauritius Revenue Authority (MRA) issued a Statement of Practice on Trust and Foundation. In essence, a Trust will be considered to be a Resident Trust if it has its central management and control in Mauritius, i.e., if the following three conditions are met:

The Trust is administered and the majority of the Trustees must be residents in Mauritius;
The settlor of the Trust was residing in Mauritius when the Trust was settled or additional assets are bestowed on the Trust;
The majority of beneficiaries of the Trust must be residents in Mauritius.

Failing to meet any one of the conditions, the Trust may be considered as non-resident, hence, only subject to tax on its Mauritian sourced income which would be rental income if the Trust directly owns immovable property.

South African Exchange Control Regulations

There was a significant policy amendment in respect of the Exchange Control Regulations by the South African Reserve Bank (“SARB”) on 4 January 2021.

The policy removed the abolition of loop structures, i.e., South African (exchange control) residents could establish structures off-shore and reinvest into South Africa.

For example, the policy would permit Mauritian companies which are held by Trusts with South African resident beneficiaries, to hold equity in South African companies.

In April 2022, however, there has been a shift in this policy and SARB are no longer approving loop structures.

A policy update is expected to be released in October by the Parliament during the presentation of the Medium-Term Budget.