Dr Verbist provides an overview of the offshore sector in Mauritius with particular emphasis on Global Business License companies, trusts and private trust companies.
The Republic of Mauritius is a sovereign democratic country with a booming economy and an impressive track record. Since its independence in 1968, it has performed remarkably and is continuing its economic growth thanks to the development of strong tourism and financial services industries.
The island is currently ranked twenty-fourth out of 181 countries in the World Bank’s Doing Business 2009 survey and is the premier African country in terms of business-friendly regulations. This bodes favourably for any foreigner interested in using Mauritius as a platform for international business or to acquire immovable property in the most exquisite locations of this paradise island.
The Offshore Sector
The offshore sector was launched in 1992 and has since known a sustained growth, while at the same time embracing the highest international standards; it has now matured to become a major pillar of the Mauritian economy. The non-banking offshore industry allows for the creation of offshore entities, such as trusts and ‘global business’ companies, which can be used by non-residents to undertake any lawful activity outside Mauritius.
The advantages of Mauritius are various:
These advantages are but a named few.
Global Business Licence Companies
Any non-resident wishing to set up a company under the Mauritius laws, but not active within the island, must incorporate a global business company. It will either hold a licence Category 1 (GBL1) or 2 (GBL2) issued by the Financial Services Commission (FSC). GBL1 and GBL2 are governed by the Companies Act 2001 and by the Financial Services Act 2007.
Below are some of the common features of GBL1 and GBL2:
A GBL1 resident in Mauritius is subject to tax and can thus benefit from the 34 DTAs Mauritius has established. It is ideally suited for investments in DTA-related countries and which are likely to generate a flow of income in future years, be it as dividends, interest, royalties or capital gains. Over the years, the GBL1 has proved to be a vehicle of choice for investment in countries such as China, India, Luxembourg or South Africa and all those with whom Mauritius has a favourable DTA.
A GBL1 can be incorporated locally or can be registered as a branch of a foreign company. Public companies, insurance companies, protected cell companies, investment funds and other ‘businesses of substance’ can be set up in Mauritius within 7–15 days as GBL1.
GBL1 are governed by the Income Tax Act, 1995, under which they are taxed at the flat rate of 15 per cent. Mauritius law allows an underlying foreign tax credit, equal to the amount of foreign taxes paid, up to the amount of tax due in Mauritius. In such a case, generally no further tax is due in Mauritius. In the absence of proof, the amount of foreign tax paid is presumed to be 80 per cent of the Mauritius tax. The effective tax rate for a GBL1 can thereby be reduced to 0 per cent, or up to a maximum of three per cent.
A GBL2 is a private company which is used to conduct business outside Mauritius. It can be set up very quickly and easily (within five days) and its subsequent administration is simple; there are few statutory and filing requirements. A GBL2 is equivalent to the International Business Company (IBC) available in other offshore jurisdictions such as the British Virgin Islands and the Seychelles.
A GBL2 is ideally suited for asset holding, trading and invoicing, international investment, e-commerce and shipping, among others. Its activities are restricted to non-residents (except for dealings with banks and professionals) and beneficial ownership details are not disclosed to the authorities.
GBL2 are not subject to any tax.
Trusts in Mauritius can be set up by residents and non-residents. The governing legislation is the Trusts Act 2001: a modern piece of legislation incorporating the most salient features of international trust law and practice, coupled with some unique features.
Mauritius trusts are usually used for: wealth and estate planning; protecting assets from creditors; to postpone the time of vesting of property; to pass on to trustees the decision of who receives the trust income or the trust capital; and to enable the settlor to choose professional persons to administer and pass on assets according to his wishes.
Different types of trusts can be set up:
Discretionary trusts have proved to be very popular with non-residents, due to the optimum flexibility they offer in the organisation of the trust property and for the distribution of income to beneficiaries.
The main advantages of a Mauritius trust are, as per the Trust Act 2001:
A non-resident trust is exempt from any tax in Mauritius. This pertains to a trust of which the settlor is a non-resident and all the beneficiaries are also non-residents, and for which a yearly declaration of non-residence is deposited with the local tax authority. Non-resident beneficiaries of a trust are exempt from tax on income in respect of income under the terms of the trust, as well as from value-added tax, whereas resident beneficiaries having received such income will be taxed at a flat rate of 15 per cent.
Mauritius resident trusts are taxed at 15 per cent on their income, meaning the gross income less expenses, but before any distribution. They are also eligible for an 80 per cent presumed foreign tax credit on foreign source income and are entitled to tax treaty benefits, under the various DTAs in force.
Private Trust Companies
Private Trust Companies (PTCs) in Mauritius can act as trustee for trusts set up by individuals for the benefit of a single family. The PTC is a highly attractive estate planning tool. It allows individuals and families to retain a larger degree of control than possible under straight trusts. A PTC cannot act as trustee by way of business, i.e. to the public in general. It can operate under the form of a GBL1 or GBL2.
The granting of a GBL2 licence to the PTC is unique in the offshore landscape in the sense that its cost of operation in the Republic of Mauritius is low, it is tax exempt, and there is no obligation to have local directors, or to file accounts.
There is no public register of directors and shareholders of the PTC, nor mandatory registration of the individual underlying trusts, so confidentiality is guaranteed.
Such PTCs are notably cheaper and easier to run than in other jurisdictions.
Purchasing Real Estate in Mauritius
The Integrated Resort Scheme
The Integrated Resort Scheme (IRS) enables non-residents to acquire a home in Mauritius – luxury villas of international standing with high-class amenities and facilities in an approved resort – and to become residents. These villas are located in cherry-picked exotic areas and have mushroomed around the island since the launch of the IRS a few years ago. For the privileged few, beachfront villas overlooking the Indian Ocean are also available.
The minimum purchase price for an IRS villa is set at US$500,000. As long as the property is held by the non-resident, either in his own name or under the name of a Mauritius company or trust, he will be granted permanent residency status in Mauritius, together with members of his family.
The Real Estate Scheme
The government of Mauritius has devised an alternative real property acquisition scheme in 2007 – the Real Estate Scheme (RES). Under this scheme, small landowners may develop villas with a price tag below the US$500,000 threshold on no more than 10 hectares of land. However, the non-resident purchasing property under the RES will not be granted resident status.
Dr Ludovic C. Verbist
PhD, LLM, TEP, Managing Director