Taxation & Tax Treaties

Fiscal regime

Overview

  • Mauritius runs a self-assessment system based on the residence concept. A person resident in Mauritius is liable to tax on the worldwide income derived by that person. A non-resident is taxed on income derived from sources in Mauritius.
  • The fiscal year runs from 1 January to 31 December.
  • For an individual working less than 183 days in Mauritius, no tax is to be paid on his income.
  • No capital gains tax, and no withholding tax on payment of dividends, interests or royalties.
  • No stamp duties or capital taxes.
  • No inheritance tax.
  • Companies holding a category 1 global business licence

A GBL1 company is liable to Mauritian income tax at the rate of 15% which may be reduced to 0% after application of the provisions on foreign tax credit

Alternatively, a GBL1 company can claim, against the nominal tax payable, credits for actual taxes suffered. These are generally of three types, namely:

  • withholding taxes which have been retained in the source country
  • where the income consists of dividends received from a foreign investment, credit can also be claimed for underlying taxes which have been paid in the source country on the corporate profits out of which the dividends have been declared
  • tax sparing - although tax may not have been paid in the source country, credit can be claimed in Mauritius if the tax has been spared in the source country (i.e. lower or zero tax rate for the promotion of industrial, commercial, scientific, educational or other development in the source country). It should be noted that the tax sparing clause is embodied in the local tax legislation and this is granted on income flows into Mauritius regardless of the ambit of a specific treaty.

Residual tax is often nil since corporate tax rates in most countries are above 15%.

In such a situation, a GBL1 company may even have surplus tax credits which can go to waste. However, the entity is allowed to claim the credits against any nominal taxes payable on any type of income (interest, royalties, business profits, etc), from any source country. This makes full use of all available credits. This can be particularly attractive for holding entities which derive income from many source countries, and of different nature.

The claim for underlying tax credits is available provided the GBL1 company holds at least 5% in the foreign company paying the dividends. However, it is also available if the dividends come through a chain of intermediate holding companies before reaching the GBL1, provided the shareholding at each stage is at least 5%.

Tax residency

A global business category 1 company wishing to benefit from tax relief under the double taxation agreements (DTAs) (see below) requires a tax residence certificate (TRC), which is issued by the Commissioner of Income Tax in Mauritius. To be tax resident, the company must demonstrate that the 'effective management and control' is in Mauritius. To satisfy this test the applicant company is required to:

  • have at least two resident directors in Mauritius
  • chair and initiate board meetings from within Mauritius
  • maintain an account with a local bank through which funds must flow
  • maintain its registered office and all statutory records in Mauritius
  • have a local qualified company secretary
  • have a local auditor.

Investors should ensure that the above relevant conditions are also satisfied in the country of investment to guarantee eligibility of DTA benefits.

The attractive concessions provided by those treaties include:

  • elimination of double taxation through tax credit equivalent to Mauritian tax
  • reduction in withholding taxes on dividends, interest and royalties
  • exemption from capital gains
  • possible exemption on interest payments on loans
  • Companies holding a category 2 global business licence

WA GBL2 company is not considered to be resident in Mauritius and is not liable to tax. As a non-resident company, it doesn't have access to any of the double taxation agreements concluded by Mauritius.

  • Domestic companies

The tax rates on the chargeable income of domestic companies is 15%.

  • Foundations

Every foundation shall be liable to income tax on its chargeable income at the rate of 15%.

A foundation of which

  • the founder is a non-resident or hold a category 1 global business license; and
  • All the beneficiaries appointed under the terms of the charter are, throughout the income tax year, non-resident or hold a category 1 global business licence shall be exempted from income tax in respect of that year.
  • Trusts

Resident trust

Such trust is resident in Mauritius and is taxable at a rate of 15% on its chargeable income, meaning gross income les expenses and distributions.

However, if it holds a GBC1 license, it will be entitled to tax credit of the higher tax suffered or 80% of its chargeable income.

To be tax resident, a trust has to apply for a Tax Residence Certificate with the Commissioner of Income Tax, which is delivered under the following conditions:

  • at least one trustee is resident in Mauritius
  • a bank account is maintained in Mauritius, through which all cash movements are routed
  • all accounting records are kept with the local trustee.
Non-resident trust
  • Such trust is tax exempt provided the settlor and beneficiaries are non-residents of Mauritius.
  • Limited Partnerships

  • Profit and losses are attributed to the partners themselves who will be taxed according to their proportionate share of such profits and losses
  • A LP holding a GBL 1 license may choose to be taxed as a company, in which case it will be taxed at the effective rate of 3% or less on its foreign sourced income
  • A LP holding a GBL 2 license may choose to be taxed as a company, in which case it will be tax exempt