Company formation in Mauritius

A gateway to Africa

Africa’s services sector holds tremendous economic promise. It contributes to almost half of the continent’s output, and a number of African countries have emerged as services-oriented economies.
The services economy in Africa is a vital source of income and employment. In some countries, as much as two thirds of the workforce is engaged in services. The rising continent of Africa as a whole will continue to see resilient economic growth and development in 2015.

As many African countries take steps to break the cycle of corruption and poverty by moving towards political stability and economic openness, this will result in economic and social advancement as well as an unprecedented inflow of foreign direct investment (FDI).

Industries such as mining and energy are attracting massive FDI, a large chunk of which is coming through private equity investments. Mauritius can play an important role in channelling those investments in a tax efficient manner and is increasingly being used as the preferred domicile for structuring acquisitions and new business opportunities in Africa.

Why? Firstly, Mauritius is the only financial services centre which is a member of all the major African regional organizations, such as the African Union, Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA) and Indian Ocean Commission (IOC).In fact, its neighbours consider it simply as an African country rather than a so called tax haven, and this makes it the preferred, recognized and tax efficient route for investments into Africa. In fact, all the funds co-invested by the IFC and sovereign funds are structured through Mauritius entities.

The membership of Mauritius in the various regional African trading blocs gives access to a considerable range of consumers, creating a regional market worth of over US$350 billion. Thus, Mauritius opens doors to huge opportunities for trade and services in all fields and investments, making it a natural gateway to African countries.

Secondly, Mauritius combines the traditional advantages of an international financial centre (no capital gains tax, no withholding tax, no capital duty on issued capital, confidentiality of information, no exchange controls and free repatriation of profits and capital) with the distinct advantages of it being a treaty-based jurisdiction, with a substantial network of Double Taxation Avoidance Agreements with over 40 countries including 13 with SADC and COMESA members namely Botswana, Lesotho, Madagascar, Mozambique , Namibia, Rwanda, Senegal, Seychelles, South Africa, Swaziland, Uganda, Zimbabwe and Congo. Under these treaties, there will be no capital gains tax implication in the African states irrespective of the introduction of any eventual capital gains tax if the recipient of the gains is a Mauritius company.

Furthermore, almost all African nations impose some withholding tax on dividend paid to non-residents, the rate of such imposition ranging generally between 10 to 20%. All Mauritius tax treaties limit the withholding tax on dividend. The treaty rates are generally 0% or 5% or 10%, thereby creating a potential tax savings of 5% to 20% depending on the country. As for capital gains tax, the treaties guarantee the maximum effective withholding tax rate in the face of potential changes in fiscal policy in the investee countries.

Thirdly, Mauritius has signed an IPPA with some 15 African member states. The main purpose of an IPPA is to protect foreign investments from government interference with property rights in the form of expropriation, nationalization and compulsory purchase without proper compensation.

An international financial centre – advantages

Mauritius combines almost all the characteristics for an ideal offshore location. It is an independent sovereign State with an economy of substance. It is politically stable and is equipped with the state of the art telecommunication technologies. It has a pool of bilingual professionals trained in Europe and the US. The country has a dynamic banking system with only internationally renowned banks operating in an exchange control free environment. Mauritius has an expanding network of double taxation which allow for efficient tax planning.
The Mauritius IFC is now a well-established jurisdiction in the international tax planning landscape. Indeed, it has been used for structuring several high-profile investments into Europe as well as emerging markets in Asia (particularly China and India), Africa and the Far East.

Following the recent amendment and consolidation of the main legislative instruments – the Companies Act 2001, the Trusts Act 2001, and the Financial Services Development Act 2001, this legal framework around the IFC has now reached the highest standards desired by operators in the global financial services market. Moreover, the enactment of laws such as the Financial Intelligence and Anti Money Laundering Act gives to investors and their business partners the confidence of operating in a safe and properly regulated environment.

The tax framework is stable, clear, and very conducive for business operations. Thus, there is no withholding tax on dividends or interests paid by Mauritian companies to non-resident beneficiaries, no capital gains tax and no inheritance tax.

The key IFC for global business operations

The most frequently used vehicles in the Mauritius IFC are entities holding either a Global Business License category 1 (GBL1) or a Global Business License category 2 (GBL2) issued by the Financial Services Commission, the regulatory body.
The principal characteristics of a company holding GBC2 are:

The company is allowed to carry out “qualified global business activities” which include consultancy services, employment services, financial services, insurance, licensing and franchising, investment holding, asset management, aircraft financing and leasing, pension funds; trading amongst others;

As a tax incentive company, it is entitled to a nominal tax rate of 15%;
The tax payable can be offset by an extremely generous scheme of tax credits regarding income derived from outside Mauritius, including the possibility of claiming a “deemed tax credit” equal to 80% of the income tax that would otherwise be payable on such income, reducing the payable tax rate to 3%;
Subject to the company having its “effective management” in Mauritius, it can benefit from the wide network of very favourable double taxation avoidance treaties in place with tax territories in Europe (France, United Kingdom, Belgium, Luxembourg, etc.), Asia (China, India, Singapore, etc), and Africa (Botswana, Mozambique South Africa, etc.);

A GBC2 vehicle is not considered as being tax resident in Mauritius; the company is therefore not subject to Mauritian tax laws but, on the other hand, it cannot benefit from the network of tax treaties. Thus, such vehicle is generally used for transactions such as trading, and collection of royalties derived from intellectual property rights.

Mauritius offers various benefits and tax advantages

No withholding tax on interest, royalties and dividends.

No capital gains tax.

Interest paid on deposits in Offshore Banks are tax exempt.

Dividend paid are tax exempt.

Royalties paid to non-resident are tax exempt.

No estate duty, inheritance, wealth or gift tax.

No stamp duties, registration duties, levy.

Zero rated Value Added Tax for offshore business transactions.

Duty concessions on office equipment, furniture and motor vehicles and raw material and machines for Freeport, Offshore and tax incentive Companies.

No exchange control and free repatriation of profits.

Tax incentives Companies are taxed at 15%.

Foreign tax credit of 8% on Offshore Companies.

Global Business Category 2 Companies, Freeport Company and non-resident trusts are tax exempt.

Relief of 50% on personal income for expatriates.

Tax holiday up to 2008 for specialized ICT operators.

10 year tax holiday for Regional Headquarters Companies on foreign sourced income.

Grant of a permanent residence status for professional with possibility to acquire immovable property in the Financial and ICT sector (SAPES).

Member of the COMESA, an east African free trade zone grouping a status.

Signatory member of the Africa growth and opportunity Act which allow export to the United States of America free of duties and quota.

Grant of permanent residence scheme for non-citizens investing a minimum of USD 500,000 in a specific project or in Permanent Residence Investment Fund.

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