Positive developments in Mauritius

Good news for Mauritian companies that do business in China or Kenya, or those that want to.

Mauritius-China Free Trade Agreement (FTA) is now in force

A recent Mauritian tax development is the Mauritius-China FTA, China’s first ever FTA with an African nation, came into force on 1 January 2021. Under the FTA Mauritius benefits from duty-free access to the Chinese market for 8,547 products, representing 96% of Chinese tariff lines. The duties applicable to 88% of these tariff lines were eliminated immediately. The remaining duties are being phased out over five to seven years. In addition, Mauritian service providers have improved access to more than 40 service sectors, including financial services, telecommunications, information and communications technology, professional services, construction, and health.

The FTA presents unrivalled investment opportunities for Mauritian companies to target China’s massive market of 1.4 billion people. A greater win still is the potential for the FTA to position Mauritius as a platform for Chinese exports into mainland Africa.

Mauritius-Kenya Double Tax Avoidance Agreement (DTA) almost in force

After much anticipation, Mauritius and Kenya have both finally gazetted the long awaited DTA. The DTA will come into force when both countries have ratified the DTA to be read alongside domestic legislation. The road to this DTA has been a bumpy one; the Kenyan High Court nullified an earlier DTA with Mauritius in 2019. A summary of the reduction in withholding tax rates of the forthcoming DTA are as follows:

The capital gains article provides that Mauritius will have sole taxing rights on gains on the sale of shares in a Kenyan resident entity except where Mauritian residents hold directly or indirectly at least 50% of the capital of the Kenyan entity or the shares derive more than 50% of their value directly or indirectly from immovable property in Kenya.

Consistent with the OECD BEPS Action Plan 6 – Prevent Treaty Abuse, a treaty abuse article is included. This means that benefits under the DTA and Protocol may be denied if one of the principal purposes of an arrangement or transaction is to obtain benefits under the DTA.

The DTA presents abundant opportunities for Mauritian companies and individuals seeking to expand or invest in Kenya.

New Anti-Money Laundering (AML) legislation: A step towards Mauritius being removed from the European Commission’s watchlist

For global companies conducting business in Mauritius, things got more complicated in May 2020 when the European Commission (EC) added Mauritius to its list of high-risk countries with weak anti-money laundering regimes. The Mauritian Government responded swiftly and enacted the Anti-Money Laundering and Combatting the Financing of Terrorism (Miscellaneous Provisions) Act 2020 (AML Act).

The AML Act amends 19 existing laws to strengthen the Mauritian framework against money laundering and the financing of terrorism, and to align Mauritius with the recommendations of the EC’s Financial Action Task Force. Key aspects of the AML Act include:

• Beneficial ownership information: companies, limited partnerships, limited liability partnerships, and foundations must provide beneficial ownership information to the Registrar of Companies upon incorporation/registration and subsequently when making certain mandatory filings. Existing entities must also provide this information when requested by a competent authority.
• Reporting of suspicious transactions: multiple sectors, including government agencies and parastatal organisations, must file a Suspicious Transaction Report with the Financial Intelligence Unit within five days of discovering a suspicious transaction, or forming a reasonable belief that a suspicious transaction has been made.
• Regulators: regulators of financial institutions have broader supervisory and investigatory powers.
• Penalties for non-compliance: fines of up to MUR 10 million may be imposed for non-compliance and breaches of the AML Act, as well as up to five-year prison sentences for serious offences.

This is one step in the right direction towards Mauritius achieving a strong legal and regulatory framework on anti-money laundering and combatting the financing of terrorism. Let’s hope its inclusion in the EC’s anti-money laundering watchlist is short-lived.

Want to know more?

Let us know what you think about these new opportunities in the comments below. Hear Regan Van Rooy’s Caoilfhionn van der Walt outline how Mauritius is a relevant and evolving jurisdiction in this December 2020 webinar. If you would like to discuss how Regan Van Rooy could help your company explore these opportunities, please contact us.

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.