Mauritius: Carving a Niche as an International Financial Centre of Substance.

Introduction

Strategically located in the Indian Ocean, at the crossroads of international investments, throughout the last decade Mauritius has forged a strong reputation as a premier international financial centre. The Mauritian authorities have been extremely prudent in adopting worldclass law and regulations with a touch of innovation, resulting in a financial services industry that has quickly matured and embraced the highest standards of international practice. Additionally, the centre benefits from low taxation, an extensive tax treaty network, market access, innovative financial products, and a pool of skilled professionals.

It is not surprising, therefore, that financial services is the sector which has enjoyed the highest growth rate over recent years, and currently is the main pillar of the Mauritian economy, contributing around 11 per cent to the gross domestic product (GDP).

The Global Business Platform (GBC)

The Mauritius International Financial Centre offers quality services through its modern and innovative legal framework. As a global business platform, Mauritius offers investors a diverse product base for planning and optimisation of benefits. GBCs can be organised as protected cell companies (PCCs), private trust companies (PTCs), trusts and societies (partnerships) amongst others. GBC companies benefit from low to nil taxation, and an entity holding a GBC ‘category 1’ licence can benefit from the 33 Double Tax Avoidance Treaties (DTAs) that Mauritius has ratified with other countries. There are presently approximately 33,000 entities engaged in global business in Mauritius, and 514 funds licensed by the Financial Services Commission with a net asset value of US$43.04 billion (as at June 2007).

Provision of Financial Services

There is enormous growth potential for investors wishing to establish a presence in Mauritius in order to provide banking, securities, insurance, or fiduciary services. The business architecture of Mauritius has been thoroughly redesigned to offer investors a hassle-free business environment to start and operate an economic activity. The corporate tax rate for businesses operating in the domestic sector is now at the attractive rate of 15 per cent. Since 1 October, 2006, foreigners can obtain within three working days an occupation permit to work and reside in Mauritius.

Regulatory Framework

The success of Mauritius as a centre for the provision of financial services depends upon the maintenance of its reputation for probity. Mauritius prides itself on having a robust regulatory framework within a business-friendly environment. It fully supports international initiatives (such as FATF, Basel, IOSCO, IAIS) aimed at preventing the jurisdiction from being used for money laundering and terrorist financing, and it is also worth noting that Mauritius has never been blacklisted. In addition, the two regulators for the Financial Services Sector, namely the Bank of Mauritius and the Financial Services Commission, are dedicated to the supervision of the bank and non-bank financial services sector.

Other Salient Features

Mauritius is a worldwide reference for political stability, with its constitution modelled on the British parliamentary system; the highest court of appeal is the Privy Council of the United Kingdom. Mauritius offers a diligent, educated, multilingual and experienced professional labour force, and the literacy rate is currently 86 per cent. Mauritius also benefits from low cost of operations, and offers a series of attractive fiscal incentives, such as no tax on dividends, no withholding tax on interest, royalties and dividends, no estate duty, no inheritance, wealth or gift taxes, no stamp duties, and no registration duties or levies.

New Developments

It is accepted that, in this era of global competition, Mauritius needs to constantly innovate and to keep at pace, and maintain its competitive edge. Consequently, the government has recently drafted a set of new legislation and regulations to expand the scope and depth of services that may be offered:

• A new Financial Services Act has been enacted, which aims at streamlining and consolidating the entire licensing framework for various non-bank financial institutions and financial service providers. The new framework establishes a new conceptual approach to global business, and provides that global business entities may conduct any financial or non-financial service activity, provided that the ultimate purpose of the business is to provide services outside of Mauritius.
• A new securities framework is being implemented, which is intended to broaden and deepen the securities industry in Mauritius. It takes a modern approach to securities, and provides a comprehensive regulatory framework covering a wide spectrum of this industry in Mauritius. The Securities Act contains many innovative provisions designed to enhance the regulatory standards of our securities market in line with international best practice and standards, in particular with the objectives and principles of the International Organisation of Securities Commissions (IOSCO).
• Concurrently, the new Insurance Act aims at improving the soundness of the insurance market in Mauritius by enhancing the regulatory and supervisory framework for the industry, and providing greater protection to policy-holders and other beneficiaries. The Act provides for the application of the International Association of Insurance Supervisors’
• (IAIS) standards and principles, and focuses on specific regulatory issues relating to capital adequacy, solvency, corporate governance, early warning systems, and the protection of policyholders.
• Government has recently announced forthcoming legislation to introduce more innovative products within the financial services landscape. Accordingly, the appropriate banking legislation will be amended to allow for the development of alternative financial services, such as Islamic finance , which is a fast-growing, new activity, with big export potential. Legislation will also be introduced to a l low the establishment of private foundations and Real Estate Investment Trusts (REITs). The legal profession is also being liberalised to allow foreign law firms to set up in Mauritius.

Conclusion

Initiatives on the regulatory front, coupled with the measures and policies implemented by the government, and continued innovation, have contributed to making Mauritius a financial platform that cannot be overlooked by investors.

The country provides exciting opportunities to do business in a friendly and safe environment, and should certainly be considered by entrepreneurs looking at doing business in the Mauritius International Financial Centre.