Mauritius is widely known for its Global Business Companies, Licence Category 1 (GBL1) or 2 (GBL2), and its double taxation treaties network within the framework of a well regulated International Financial Centre. This is a favoured investment route particularly in Asian jurisdictions.
The government, with a view to opening up the economy so as to better position Mauritius internationally, has brought major reforms to doing business in Mauritius through the budget 2006-2007. The aim of the government is to further open the Mauritius economy to foreign investors within the global economy, including access to real estate ownership.
Integrated Resort Scheme (IRS)
The Integrated Resort Scheme (IRS) enables high net worth non-Mauritians to acquire luxury villas of international standing with high-class amenities and facilities. Hotel and restaurant services are generally available, as well as rental at times of non-occupancy by the owner, if required. A minimum investment of US$500,000 is required, including land and construction. It will enable the acquirer as well as his or her spouse and dependants to obtain official residency if necessary. The residence status shall remain valid as long as the noncitizen holds immovable property under the scheme.
Mauritius tax laws are attractive: individual tax rates are below 22.5 per cent, repatriation of capital is not taxed and there are no capital gains nor inheritance taxes. Further tax planning is possible.
Living on the beach
The Business Facilitation Act 2006, in force since 1 October 2006, facilitates the setting up of businesses and the acquisition of properties by foreigners. Any application shall be processed within three working days. Under this Act permanent residency status for a period of 10 years will be granted after three years of ‘occupational permit’ to any non-citizen, investor, selfemployed or retired person, within the limits set by the law.
Upon obtaining the permanent resident status, they will be eligible to buy property not only under the IRS scheme but any villa, apartment or even commercial real estate in Mauritius.
The offshore sector
As a major international fi nancial services centre, the Republic of Mauritius attracts foreign investors, given its strategic location, excellent communications, political and economic stability, dual legal systems (common and civil law), its time zone between Europe and Asia and a well educated and efficient workforce. It has the necessary and modern ‘products’ with regard to the global financial business (formerly ‘offshore’), insurance and securities sectors.
Any non-resident wishing to set up a company under the laws of Mauritius but not active within the island will incorporate a ‘global business company’. It will either hold a Licence Category 1 (GBL1) or 2 (GBL2).
GBL1 benefit from the 32 double taxation agreements (DTA) Mauritius has established and which is taxed at the rate of 15 per cent. Through tax credits, the effective tax rate can be reduced to zero per cent. There is no capital gains tax nor withholding tax on dividends and interest paid to non-residents. GBL2 are not subject to any taxation. It is equivalent to the IBC or offshore type of company.
The Mauritius trust
The Trust Act 2001 applies to trusts, both for residents and non-residents. A settlor may also be a trustee, a beneficiary, a protector or an enforcer, but shall not be the sole beneficiary of a trust of which he is a settlor.
The trust may provide for the office of a protector, whose functions are to advise the trustee, with such broad powers as may be conferred, namely to remove a trustee or to appoint a new trustee. Letters or memoranda of wishes may originate from the settlor or any beneficiary under the trust. Foreign forced heirship rules do not apply to trusts set up by noncitizens.
The number of trustees shall not exceed four, of which one must be a qualified trustee in Mauritius, meaning a management company (such as AAMIL Trustees Ltd) resident in Mauritius and authorised by the Financial Services Commission to provide trusteeship services.
The terms of a trust may provide for a custodian trustee, who will in such case work under the direction of a managing trustee.
Non-resident trusts are not taxable in Mauritius. Resident trusts are taxed at 15 per cent on their income, before distributions to the beneficiaries. These can use the double taxation agreements network.
There is a very strict duty of confidentiality on trustees. There is no requirement to file accounts or annual returns with the authorities, neither are trusts registered.
The Mauritius private trust company
A Private Trust Company (PTC) is a company formed by an individual, whose purpose is to act as trustee to one or to a limited number of trusts, for the benefit of a single family, or for the benefit of different branches of a family or for distinct (but related) family groups. As opposed to a licensed ‘qualified trustee’ under Mauritius law, such a PTC can not act as trustee by way of business, ie, to the public in general. It can only act as trustee for specified high net worth families or family groups who are able to evaluate and assume the financial risks and economic consequences of their investments.
The administration, investment management services or investment advice required in connection with the trusts can be outsourced to licensed service providers. Since the activity of a PTC is generally reduced to that of an investment holding company, it will operate under the form of a Global Business Company, Licence Category 1 (GBL1) or 2 (GBL2), under Mauritius Law.
A major advantage of a Mauritius private trust company is the possible involvement of the settlor or a family member or personal advisor on the board of the trust company. This will allow a greater degree of direct control, as compared to a standard trust. Total confidentiality can be assured since there is no public register of directors and shareholders of the PTC nor mandatory registration of the individual underlying trusts.
A PTC must be incorporated through a Mauritius licensed management company such as AAMIL Ltd. The management company is accountable towards the Financial Services Commission and responsible for the PTC’s business conduct.
It is obviously strongly recommended to seek professional tax advice before incorporating a PTC.
The Securities Act 2005, which will replace the Stock Exchange Act 1988 on proclamation, provides for the establishment of a modern framework for the regulation and supervision of securities markets, market participants and selfregulatory organisations. The Act is based on international standards recommended by the International Organisation of Securities Commissions (IOSCO), of which Mauritius is a member.
Mauritius is a platform for investment funds. As of today there 300 funds with a net asset base of over US$28 billion. The bulk of these investments has been directed towards India, People’s Republic of China and South Africa. These funds can also be set up through a protected cell company.
Protected Cell Companies
The Protected Cell Companies (Amendment of Schedule) Regulations 2005 have been enacted to extend the use of PCC structures to other business activities besides collective investment scheme and insurance activities.
The qualified global business activities that qualify for a PCC are:
Also, a PCC could be used to hold specific portfolios of assets in cells for different high net worth individuals or different members of a family, possibly managed by different asset managers. However, a PCC may carry out only one of the activities listed above. One major attraction and additional advantage for any Mauritius PCC is that it can use the double taxation network which Mauritius has. Today there are 32 double taxation agreements in force.
Fully serviced industrial buildings, industrial parks and IT habitats are available for plug and play type activities, as well as lease of industrial lands on a long-term basis from the State Land Development Company (SLDC), at very attractive rates. The Ebene Cybercity, a new generation knowledge and science park, with state of the art telecommunication facilities and modern office space, spreads over 64 hectares.
Mauritius has positioned itself quite favourably in the Business Process Outsourcing (BPO) sector. While it started essentially as a provider of callcentre services, it is moving increasingly into activities with higher value-added potential.
The South African Far East (SAFE) underwater cable provides adequate broadband capacity and links Mauritius to Europe via Portugal. There is a project to launch a new cable to increase capacity and speed of data transmission.
These are some of the possibilities when using Mauritius as a global financial centre. Mauritius provides the needed stability and legal protection to ensure a sound structuring of one’s assets, even spanning over several generations… and not to forget some out of this world beaches!
Dr Ludovic C. Verbist
PhD, LLM, TEP, Managing Director