A Judgment That Restores Common Sense
The Supreme Court of Mauritius has finally delivered a clear and principled judgment on a question that has troubled practitioners and taxpayers for over a decade. On 16 April 2026, in UPL Corporation Ltd v The Revenue Tribunal & Anor (2026 SCJ 161), the Court answered a critical question: under the pooling method for foreign tax credit, can a taxpayer combine actual foreign tax suffered with the 80% presumed foreign tax across different sources of income?
The answer is yes. And in doing so, the Supreme Court explicitly rejected the notion of a “second option” that the Assessment Review Committee (“the ARC”), now the Revenue Tribunal had read into the Income Tax (Foreign Tax Credit) Regulations 1996 (the “FTC Regulations”).
The dispute
The taxpayer, UPL Corporation Ltd, held a Category 1 Global Business Licence and derived both dividend and non-dividend foreign income. For Years of Assessment 2013 and 2016/17, it applied the pooling method under regulation 6(3)(a) of the FTC Regulations. It aggregated actual foreign tax (supported by written evidence) on its dividend income with the 80% presumed foreign tax (where evidence was not available) on its non-dividend income, subject to the cap of Mauritius tax payable.
The ARC rejected this approach and upheld the Mauritius Revenue Authority’s (the “MRA”) position. The ARC reasoned that once a taxpayer opts for the pooling basis, all foreign source income becomes a single, indistinguishable pool. The taxpayer must then choose between proved tax or presumed tax for the entire pool. This became known as the “second option”.
The taxpayer appealed by way of case stated to the Supreme Court.
The Supreme Court’s analysis
The Supreme Court held that the ARC’s reasoning is a fallacy. There is no basis in the regulations for a second option.
The Court examined regulation 6(1)(a) of the FTC Regulations, which provides that the amount of foreign tax credit allowed shall be “the amount of foreign tax proved or presumed in accordance with these regulations to have been charged on that income”. It read this together with regulation 6(3)(a), which allows the taxpayer to compute the credit by reference to all foreign source income derived by him – the pooling method. The alternative source-by-source method is set out in regulation 6(3)(b).
The Supreme Court then considered regulation 8. Regulation 8(1) and (2) provide the general rule that no credit is allowed unless written evidence of foreign tax charged is presented. Regulation 8(3) creates an exception for qualified corporations: where written evidence is not presented, the foreign tax is conclusively presumed to be 80% of the Mauritius tax chargeable on that income.
The Supreme Court found that regulation 8 is evidentiary. It does not create a standalone election between proved and presumed tax. The phrase “proved or presumed” in regulation 6(1)(a) simply reflects the taxpayer’s evidentiary position: where proof exists, you use the actual tax; where it does not, the presumption applies. The word “or” does not signal a mutually exclusive choice.
Under the pooling method in regulation 6(3)(a), “all foreign source income” naturally includes streams where proof is available and streams where it is not. There is no requirement that the pool be uniform in its evidentiary treatment.
The Court also observed that the FTC Regulations are “not a model of clarity”. Where ambiguity exists, it must be resolved in favour of the taxpayer – a principle the ARC appears to have overlooked, citing Cape Brandy Syndicate v Commissioners of Inland Revenue [1921] 2 KB 403.
The Court allowed the appeal, quashed the finding of the ARC, and referred the matter back to the Revenue Tribunal for determination in accordance with the judgment.
Why these matters
The purpose of foreign tax credit is to eliminate double taxation. An interpretation that artificially restricts the availability of credit – by forcing a choice between actual and presumed tax that does not exist in the text – undermines that purpose. The Supreme Court has now confirmed that the distinction between proved and presumed tax is evidentiary, not substantive.
A necessary note on the current law
The 80% presumed foreign tax credit under regulation 8(3) has since been repealed and is no longer available under the current tax regime. However, this judgment remains highly relevant for ongoing tax audits and disputes relating to prior years of assessment. Taxpayers with open assessments for years preceding the repeal should carefully review their FTC positions. What was previously challenged by the MRA or the ARC may now be sustainable in light of this binding authority.
Conclusion
This judgment is a welcome clarification of the FTC Regulations as they stood at the material time. For practitioners who have long argued that the “second option” had no textual foundation, this is a principled reading of the law.
The case also serves as a reminder of two important principles. First, ambiguity in tax legislation must be resolved in favour of the taxpayer – this is not a loophole but a recognition that tax statutes, particularly complex ones, must be clear. Second, evidentiary provisions like regulation 8 do not create substantive elections or restrict the pooling mechanism unless the text explicitly says so.
The judgment does not change the current law, but it provides binding authority for prior years. It remains to be seen whether the MRA will apply the reasoning of this judgment consistently in other pending cases and audits involving the same provisions.
If you would like to assess the impact of this decision on your prior year filings, review ongoing disputes, or strengthen your position in relation to foreign tax credit claims, our team would be pleased to assist. Get in touch with us.
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