So this week the Mauritian Minister of Finance presented his Budget for 2022/2023, with the theme ‘With the People, for the People’. What do we need to know?

Well one exciting development for tax fundis, is around the global minimum tax. Mauritius is first out of the blocks in terms of actually implementing legislation around the OECD Pillar II initiatives, in particular the global minimum tax rate that was the big global accord of 2021. It was announced in the budget that a domestic minimum top-up tax will be introduced to ensure that Mauritian resident companies which form part of large groups (with consolidated group revenue of Euros 750 million) will be taxed at a minimum rate of 15 percent.  Thus if any underlying subsidiaries are getting a tax break or earning revenues in a low-tax jurisdiction, Mauritius will levy a top-up.

This step is further proof that Mauritius is committed to staying on the right side of the various “grey lists” and similar sanctions, and is determined to remain a legitimate and respectable option for foreign investments.

New tax holidays announced

As we all know, a global food and fuel crisis is looming as a result of the trade barriers and sanctions that have followed the Russia/Ukraine conflict. With this in mind, the Minister attempted to bring some relief, including a number of new tax holidays to invigorate local agricultural activities and to encourage local investment in small companies, briefly summarised below:

Eight-year tax holiday for agriculture

  • To encourage local food production in Mauritius, an eight-year tax holiday has been introduced for agricultural companies engaged in sustainable and innovative agricultural practices, together with the provision of certain grants and subsidies.

Additional deduction to large manufacturers – Procurement from Small Enterprises 

  • A large manufacturing company with a turnover in excess of Rs 100 million will be entitled to an increased allowable deduction of 25% (as opposed to the standard 10%) on the amount purchased for any locally manufactured products from a small enterprise.

Income Tax Holiday for Freeport Companies

  • An eight-year tax holiday for newly incorporated freeport operators or developers (who start operations on or after 1 July 2022) which make an investment in Mauritius of at least Rs 50 million, and of course comply with the relevant substance requirements.

Additional tax measures

Additional tax measures were announced which include:

  • An increase in the tax deducted at source (“TDS”) rate for services provided by professionals to 5% (from 3%); on rent paid by a Mauritian resident to 7,5% (from 5%);
  • A widening of the TDS to include consultancy fees, security and cleaning services, pest management services, and payment of fees made by insurance companies to motor surveyors and mechanics for repairs of motor vehicles of policy holders. A rate of 3% will apply;
  • A reintroduction of the Tax Arrears Settlement Scheme (“TASS”) under which penalties and interests will be waived if the tax is paid before 31 March 2023;
  • A reduction in the current requirement for high-net-worth individuals and families will be reviewed to a minimum portfolio of USD 5 million per management family office;
  • The provision of work and residence permits for five executives and their dependants for holders of Global Headquarters Administration licence.

The Minister also clarified that the foreign employer of a holder of a Premium Visa will not create a taxable presence, i.e. a permanent establishment, in Mauritius, and the employee will have no obligations under the Social Contribution and Social Benefits Act.  This is good news and makes Mauritius very attractive for remote workers, see our previous newsletter on this (Can remote working policies reduce employee taxes?).

More good news is that there will apparently be no regulatory costs involved in incorporating a company in Mauritius. In addition, The Bank of Mauritius will also ensure that a bank account can be opened within one week for individuals and businesses alike.  Some good investor-friendly initiatives.

It was also announced that the Mauritian Government will adapt its legislative framework to converge the domestic and the global business regime. Time will tell what this will entail.

A potential benefit for middle-earning individuals

The Minister also attempted to provide some relief for individual taxpayers in his budget speech, with the inclusion of a midline tax rate of 12,5% for taxable income of between Rs 700 000 and Rs 950 000.

So that’s a wrap, no real bad news, and some tentatively good news.  All in all, it appears that Mauritius is making great strides in maintaining its stance as an attractive investment vehicle into Africa, as well as to incentivise local investments in Mauritius.

Please contact us if you would like to discuss how any of the new budget announcements could be beneficial to you or your business.

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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.

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