Mauritian 2018 Budget Changes Announced

2018/2019 Mauritian budget changes

Significant changes were announced in last week’s Mauritian budget speech, with Mauritius demonstrating its intention to adhere to best tax practices in line with EU and OECD requirements, whilst retaining a competitive regime.

Key developments include:

  • The deemed foreign tax credit regime available to GBC1 companies will be abolished from 31 December 2018;
  • A new harmonised foreign income exemption of 80% will be available to both domestic and GBC companies on certain foreign income streams such as dividends, interest, royalties, profits of a permanent establishment and certain financial services;
  • Global trading activities of companies should, therefore, remain subject to an effective 3% corporate tax rate;
  • GBC2 licences will no longer be issued from 1 January 2019 and a grandfathering provision will apply to existing GBC2 companies;
  • Enhanced substance requirement will apply to entities holding a Global Business Licence (i.e. GBC licence);
  • The tax treatment of captive insurance companies and freeport companies will also be amended to address OECD’s concerns;
  • Tax Deduction at Source (TDS) will include “commission payment” at a rate of 3%. The rate on rent paid to a non-resident will be increased from 5% to 10%. TDS will not apply to director fees. Other changes include:
  • Penalties will be imposed on a person who fails to furnish information needed for automatic exchange of information with other countries;
  • All local entities whose majority shareholdings/parts are non-resident and which conduct business mostly outside Mauritius will be required to seek a Global Business Licence or FSC authorisation; • Mauritius is aiming to attract “Fintech and Innovation” through a new licencing committee and other policies for Sandbox, FinTech, cryptocurrency and digital assets;
  • Relaxation of rules to attract high net-worth individuals by issuing citizenship and passports subject to minimum contributions into the Sovereign Fund (initial contribution of USD1 million and USD500 000 respectively).

How can we help?

How you structure your business is a critical question as you expand globally.  The right structure will protect your assets, improve your currency position, support your business operations, facilitate future business expansion and changes, and optimise your overall tax rate. Trying to unscramble a sub-optimal structure entered into in haste or without full consideration of relevant facts is complex and expensive, so it’s important to plan upfront.

Structuring an international business is both a science and an art – this is our specialist area of expertise. Regan van Rooy is an international tax and structuring advisory firm focussing on Africa. We have offices in South Africa, Mauritius and Ireland and we can help you with any international tax or structuring query.