Taxation in Mauritius
Companies holding Category 1 Global Business License pay an annual licence fee of USD 1,500 and a one-off licence application fee of USD 500 to the FSC and USD 250 on incorporation and USD 250 annually to the Registrar of Companies. Companies holding Category 1 Global Business License are resident in Mauritius for tax purposes and are not subject to capital gains taxation and there are no withholding taxes on the payment of dividends, interest or royalties from Companies of the same status. There are no stamp duties or capital taxes. Companies holding Category 1 Global Business License are liable to taxes at a rate of 15%.
||Provided that the Company holding a Category 1 Global Business License owns at least 5% of an underlying company, credit will be available on foreign tax paid on the income out of which the dividend was paid (“underlying foreign tax credit”).
When a company not resident in Mauritius, which pays a dividend has itself received a dividend from another company not resident in Mauritius (a “secondary dividend”) of which it owns either directly or indirectly at least 5% of the share capital, such dividend will be allowable as a foreign tax credit and an underlying foreign tax credit will also be available.
||Mauritius has no thin capitalisation rules.
||Interest and royalty payments paid by Companies holding Category 1 Global Business License are fully tax deductible in Mauritius.
Tax sparing credits are available - Under this regime the effective rate of taxation in Mauritius can be reduced as a long stop provision exists whereby Companies holding Category 1 Global Business License may elect not to provide written evidence to the Commissioner showing the amount of foreign tax charged and enjoy deemed taxation at 80% of the normal rate of 15%, i.e. 12%. Thus, use of this long stop provision in isolation would reduce the effective rate of taxation in Mauritius from 15% to 3%.
Double Taxation Agreements
Mauritius has an extensive double tax treaty network which includes treaties with the following countries: Belgium, Botswana, China, Cyprus, France, Germany, India, Italy, Kuwait, Luxembourg, Madagascar, Malaysia, Mozambique, Namibia, Nepal, Oman, Pakistan, Singapore, South Africa, Sri Lanka, Swaziland, Sweden, Thailand, UK and Zimbabwe.
Double Tax Avoidance Treaties
Mauritius has focused the development of its Global Business centre on the use of its growing network of double taxation treaties for structuring investment abroad. So far Mauritius has ratified over thirty treaties and is party to a series of treaties under negotiation. The treaties currently in force are with Barbados, Belgium, Botswania, Croatia, Cyprus, France, Germany, India, Italy, Kuwait, Lesotho, Luxembourg, Madagascar, Malaysia, Mozambique, Namibia, Nepal, Oman, Pakistan, People’s Republic of China, Rwanda, Senegal, Seychelles, Singapore, South Africa, Sri Lanka, Swaziland, Sweden, Thailand, Uganda, United Arab Emirates, United Kingdom and Zimbabwe.
Tax treaty benefits are only available to resident entities or persons. Accordingly, a resident entity must be liable to tax in Mauritius under its laws by reason of its domicile, residence or criterion of a similar nature. Mauritius provides a wide range of resident entities and hybrid structures including the Global Business Company, the Trust and the Société. A foreign company including the Global Business Company may benefit from the tax treaty network. It is also possible for Mauritian branch of a foreign company to access the tax treaties by satisfying the conditions of residence. These entities if wishing to avail of the benefits of a tax treaty must obtain a Tax Residence Certificate issued by the Mauritius Revenue Authority.
Scope of Double Taxation avoidance Treaties
All Mauritian double taxation avoidance treaties are based on the OECD Model Treaty of 1977. Under the post-independence treaties concluded so far, tax sparing is available. This implies that where Mauritian source dividends are exempt from tax under the tax incentive provisions, the foreign investor is entitled to credit a notional amount of Mauritian tax against the tax payable (if any) in his country, thus reducing his domestic tax liability.
If a resident of Mauritius derives income from a foreign country that has not concluded a tax treaty with Mauritius and foreign income tax is paid on the income, that tax may be credited against Mauritian income tax. The credit is limited on a source-by-source basis to the lesser of the foreign tax paid on the income concerned and the Mauritian income tax payable on the same income. In the case of foreign source dividends, no credit relief if granted for foreign corporate income tax borne on the profits out of which the dividends are paid (underlying tax).
Taxation of Expatriates on work permit
Expatriates employed in Mauritius are subject to the same regulations as local taxpayers and are assessed for income tax on income earned in Mauritius. Certain allowances and deductions cannot be claimed by expatriates in an income year during which they are not considered to be residents of Mauritius.
Residence in respect of an income year means an individual who has:
- his domicile in Mauritius unless his permanent place of abode is outside Mauritius;
- been present in Mauritius in that income year for a period of, or an aggregate period of 183 days or more;
- been present in Mauritius in that income year and the 2 preceding income years, for an aggregate period of 270 days or more
Exempt Income in Mauritius
Various type of income is exempt from income tax, including:
- Income derived by a Freeport company.
- Income derived by the registered owner of a foreign vessel.
- Income derived by the registered owner of a local vessel registered in Mauritius
(provided the income is derived from deep sea international trade only).
Capital gains on speculative or investment gains.
- A resident société.
- Dividends received and paid by a tax incentive company.
- Interest payable on accounts held by qualified corporate (offshore).
- Interest payable on specific government securities.
- Royalties payable to a non-resident by a qualified company trust or bank.
In general, expenses are deductible if they are incurred exclusively in the production of gross income and they are not of a capital or private nature. Expenses are not deductible to the extent that they are incurred in the production of exempt income. Allowable deductions comprise of:
- Annual and investment allowances on fixed assets.
- Additional investment allowance for manufacturing companies on capital expenditure incurred on the acquisition of states-of-art technology equipment.
- Marketing and promotional expenses.
- Losses incurred in the production of gross income.
- Bad debts and irrecoverable sums.
- Pre-operational expenses of tax incentive companies.
- Donations to charitable institutions.
- Contributions to superannuation fund and employees’ share scheme.
- Gains on profits derived from sale of units and securities.
- Expenses incurred in setting up social infrastructure.
- Contribution to the national ambulance services.
- Interest on bonds issued by statutory bodies and debentures issued by companies cultivating sugar cane or manufacturing sugar.
Other Fiscal Incentives
- No withholding tax on the remittance of branch profits.
- No capital gains tax in Mauritius except on property development gains.
- No limit on the carry forward of tax losses.
- Royalties, interests and service fees payable to foreign affiliates are allowed as expenses provided they are reasonable and correspond to actual expenses incurred.
- Interest paid on deposits in Bank holding Category 2 banking licences are tax exempt.
- 100% accelerated depreciation rate in the first year for aircraft companies.
- Investment fax credit of 10% for capital expenditure.
- Dividends paid are tax exempt.
- No withholding tax on interest, royalties and dividends.
- Royalties paid to non-residents are tax exempt.
- GBL1 companies are liable to tax at the incentive rate of 15%.
- Generous mechanism for foreign tax credit on foreign source income.
- No estate duty, inheritance, wealth or gift taxes.
- No stamp duties, registration duties, levy.
- Zero rated Value Added Tax for qualified business transactions.
- Duty concessions on office equipment, furniture and motor vehicles.
Requirements to obtain a Tax Residence Certificate
- The company must have at least two resident directors of appropriate calibre to exercise independence of mind and judgement.
- The company secretary must be resident in Mauritius.
- The registered office must be in Mauritius.
- Banking transactions must be channelled through a bank account in Mauritius.
- Accounting records must be maintained in Mauritius in accordance with the Companies Act.
- Board meetings must be held in or chaired from Mauritius.
- All statutory records, such as minutes and members' register, must be kept at the registered office.
- Auditors must be Mauritian residents.
- For Investment Funds, there must be a local custodian of Mauritian assets and the Net Asset Value must be calculated in Mauritius.