Taxation in Mauritius General:

Income tax is charged at a flat rate of 15% for corporates and individuals. There is no capital gains or inheritance tax in Mauritius. There is no withholding tax on the payment of dividends, interest or royalties by Mauritius companies.

Consequently, such payments may be made to a person located in another jurisdiction without any withholding tax being levied in Mauritius.

There is no stamp duty in Mauritius and no capital duty is levied on the issue of share capital.

The key to international taxation in Mauritius is the global business company. A global business company incorporated in Mauritius will have either a category 1 global business licence (a GBL1 company) or a category 2 global business licence (a GBL2 company). While a GBL2 company is not taxable in Mauritius, a GBL1 company is liable to tax on its income at a flat rate of 15%. However, a GBL1 company is entitled to a deemed foreign tax credit of 80% on its foreign source income. This effectively reduces the tax liability of a GBL1 company to a maximum of 3%. In other words, a GBL1 company is deemed to have paid 80% of the 15% tax liability on its foreign source income resulting in an effective maximum tax rate of 3%. Further, this resulting tax liability may be reduced to less than 3% and possibly nil depending on other allowable tax deductions. A GBL1 company A GBL1 company can be considered resident in Mauritius and benefits from the network of Mauritius tax treaties. To benefit from the tax treaty network, a GBL1 company should demonstrate that it is being managed and controlled from Mauritius and obtain a Tax Resident Certificate from the Mauritius Revenue Authority. Under the Financial Services Act 2007, a GBL1 company must:

have at least two resident directors in Mauritius; hold its board meetings with at least two directors from Mauritius; maintain its principal bank account in Mauritius; maintain its accounting records at its registered office in Mauritius; have its financial statements prepared and audited in Mauritius.

A GBL1 company must file its audited financial statements annually with the Commission. A GBL2 company A GBL2 company is not tax resident in Mauritius. Therefore, it does not benefit from the network of tax treaties. It is not subject to tax in Mauritius. A GBL2 company must conduct business only with non-residents of Mauritius and in a currency other than the Mauritian rupee. A GBL2 company must have at least one director. This may be a corporate director. There is no

requirement that the director(s) of a GBL2 company must be resident in Mauritius. There is no requirement that board meetings of a GBL2 company must include directors from Mauritius. The accounts of a GBL2 company do not have to be audited. However, a GBL2 company must maintain financial statements to reflect its financial position and a summary of the accounts must be filed with the Commission. Trusts Different types of trust can be established and administered under the laws of Mauritius. The Trusts Act 2001 makes provision for discretionary trusts, charitable trusts, purpose trusts, asset protection trusts and fixed trusts. It also allows the appointment of a protector or an enforcer, and there is no requirement for trusts to be registered in Mauritius. The discretionary trust is the most commonly used offshore trust in Mauritius. It provides enhanced confidentiality and is used mainly for wealth protection and tax planning purposes. There being no forced heirship rule in Mauritius, a trust can be established for the purposes of succession planning. The potential uses of a trust include the following:

accumulation and preservation of wealth; succession planning; asset protection; tax planning; off-balance sheet transactions; corporate finance/asset financing; and securitisation/capital market transactions.

Aspects of Income Tax in Mauritius Income Tax The taxation of income of both companies and individuals is governed by the Income Tax Act 1995 which is substantially based on UK tax law. Mauritius has a global system of taxation as opposed to a schedular system. Under this system, income from all sources is added up and the appropriate tax rate or rates are applied after reckoning all allowable deductions and exemptions. Taxable Income Taxable income of a person comprises the gross income from different sources less allowable deductions. Taxable income of an individual includes salaries and benefits derived from employment. No tax is levied on capital gains. Profits from the sale of securities and units are exempt from tax. There is no withholding tax on dividends. Tax Year The year of assessment runs from July 1 to June 30 and tax is levied on income derived during the preceding year. Every tax payer should furnish a return of income and pay tax due not later than September 30 every year. A corporation whose accounting year ends on June 30 has seven months to file its tax return: otherwise it has between 4 and 14 months to do so. Personal Tax Rates The chargeable income of individuals are taxed at the following rates: Tax Rate : 15% Personal deductions and reliefs are detailed in Third Schedule of the Income Tax Act 1995 Expatriates Expatriates employed in Mauritius are subject to the same regulations as local taxpayers and are assessed for income tax on income earned in Mauritius. Certain allowances and deductions cannot be claimed by expatriates in an income year during which they are not considered to be residents of Mauritius. Residence in respect of an income year means an individual who has:

. his domicile in Mauritius unless his permanent place of abode is outside Mauritius; . been present in Mauritius in that income year for a period of, or an aggregate period of 183
days or more;

. been present in Mauritius in that income year and the 2 preceding income years, for an
aggregate period of 270 days or more

Scope of Corporation Tax

Corporate Income Tax Rates The rate of corporate income tax in Mauritius is 15% on chargeable income. However varying rates apply to other companies depending on their status as follows:

List of tax incentive companies include; companies holding categories 1 and 2 Business Licence, banks holding a Category 2 Banking Licence; companies involved in financial services such as investment trusts, mutual funds, venture capital fund, lease financing companies holding a Regional Development Certificate and so forth. Corporate Income For income tax purposes, a company is defined as a corporate body (except a local authority), whether incorporated in Mauritius or abroad. A company is regarded as a separate taxable entity distinct from its shareholders. Income included in gross income for a company includes income derived from any business, rents, royalties, premium, income derived from property, dividends, interests, etc. Definition of Residence The Income Tax Act 1995 defines a resident company as one which is incorporated in Mauritius, or if it has its central management and control in Mauritius. The place where central management and control is located would be determined by such factors as where the board meetings are held and hence where decisions are taken and orders given. A resident company is taxed on its worldwide income excluding exempt income, which includes foreign-source income. A non-resident company is liable to income tax only on its income arising or deemed to arise in Mauritius, i.e. source income. A partnership or societe having its seat in Mauritius with at least one partner or associate being resident in Mauritius, is resident in Mauritius. A trust of which a settlor is non-resident or all the beneficiaries hold either Category 1 or Category 2 Global business licence can elect to be non-resident by filing a declaration to that effect, otherwise it is a resident trust for tax purposes. Income derived from Mauritius includes:

. Income derived from any business carried or any contract wholly or partly performed in
Mauritius.

. Emoluments derived from any office or employment, the duties of which are performed wholly
or mainly in Mauritius, whether such emoluments are received in Mauritius or not.

. Income derived from outside Mauritius by a resident of Mauritius. . Income derived from investment in shares, debentures or other securities in Mauritius. . Income derived by a person from money lent by him outside Mauritius
Where the source of any income is not exclusively in Mauritius, that income shall be apportioned between its source in Mauritius and its source elsewhere in such a manner as the Commissioner of Income Tax thinks fit.

Exempt Income
Various type of income are exempt from income tax, including:

. Income derived by a Freeport company. . Income derived by the registered owner of a foreign vessel. . Income derived by the registered owner of a local vessel registered in Mauritius (provided the
income is derived from deep sea international trade only). Capital gains on investment gains. speculative or

. A resident societe. . Dividends received and paid by a tax incentive company. . Interests payable on accounts held by qualified corporate (offshore). . Interest payable on specific government securities. . Royalties payable to a non-resident by a qualified company trust or bank.
All exempt incomes are specifically stated in the Second Schedule of the ITA 1995. Allowable Deductions In general, expenses are deductible if they are incurred exclusively in the production of gross income and they are not of a capital or private nature. Expenses are not deductible to the extent that they are incurred in the production of exempt income. Allowable deductions comprise of:

. Annual and investment allowances on fixed assets. . Additional investment allowance for manufacturing companies on capital expenditure incurred
on the acquisition of states-of-art technology equipment.

. Marketing and promotional expenses. . Losses incurred in the production of gross income. . Bad debts and irrecoverable sums. . Pre-operational expenses of tax incentive companies. . Donations to charitable institutions. . Contributions to superannuation fund and employee's share scheme. . Gains on profits derived from sale of units and securities. . Expenses incurred in setting up social infrastructure. . Contribution to the national ambulance services. . Interest on bonds issued by statutory bodies and debentures issued by
companies cultivating sugar cane or manufacturing sugar. Losses Losses incurred in the production of gross income in a specific income year may not be deducted from or set off against the gross income for that income year. However, the loss may be carried

forward and set off against the gross income in the following income year and in the succeeding years. With regards to the quantum of losses available for set off or carry forward, the Commissioner of Income Tax determines the relevant quantum. Annual & Investment Allowances Capital allowances are based on expenditure actually incurred, i.e. after deducting any subsidies received or exchange gains on foreign loans to purchase plant and machinery - exchange losses on foreign loans are added to the capital cost of the plant and machinery. Annual allowances are allowed on capital expenditure relating to acquisition of plant and machinery, construction or extension of industrial premises including hotels, agricultural improvement on agricultural land and scientific research. The rates are as follows: Annual Allowance Investment (%) Allowance (%) 5 25 100 10 10 10 20 33.33 33.33 20 25 25 25 25 25 25

Industrial Premises Plant and Equipment: Up to Rs10,000 Above Rs10,000 Furniture and Fittings Motor Vehicles ( including lorries) Electronic & high precision machinery or equipment Computer Hardware Software & peripherals Buses (with seating capacity of not less than 30)

Note: Capital expenditure incurred by a manufacturing company on the acquisition of state of the art technological equipment and an ICT Company on the acquisition of new plant and machinery, computer software qualifies for a maximum investment allowance of 50% of the expenditure. A tax payer incurring capital expenditure in relation to the construction of industrial premises, acquisition of new plant and machinery, or acquisition of computer software, is allowed an investment allowance of 25% of the capital expenditure in respect of the income year in which the expenditure is incurred. Investment Tax Credit A company that subscribed to the share capital of a tax incentive company listed on the Stock Exchange is allowed a tax credit (by way of deduction from its income tax payable) equal to 10% of the amount actually paid in cash. The credit is spread equally over two income years, but

may not exceed Rs. 300,000 in any one income year. Taxation of Branches and Subsidiaries In general, the taxable income of a branch of a foreign company is computed in the same way as that of a resident company. However, a branch may not claim a deduction for interest and royalties paid to its foreign head office. Payments of interest and royalties by a Mauritian subsidiary to its foreign parent, on the other hand, are deductible, although the payments will constitute Mauritian source income subject to Mauritian income tax in the hands of the parent. A branch may deduct management expenses changed to it by a foreign head office provided the charge is reasonable having regard to the nature and extent of the management services rendered. From http://www.mauritiusoffshorecompanies.com/index.php/aspects-of-mauritius-tax

DOING BUSINESS IN MAURITIUS

Mauritius Business Services Overview About Mauritius Setting up a Business in Mauritius Taxation Living & Working in Mauritius HOW TO PROCEED

TAXATION IN MAURITIUS
Companies holding Category 1 Global Business License pay a fixed annual licence fee of USD 1,750 and a one-off licence application fee of USD 500 to the FSC and USD 250 on incorporation and USD 250 annually to the Registrar of Companies. Companies holding Category 1 Global Business License are resident in Mauritius for tax purposes and are not subject to capital gains taxation and there are no withholding taxes on the payment of dividends, interest or royalties from Companies of the same status. There are no stamp duties or capital taxes. Companies holding Category 1 Global Business License are liable to taxes at a rate of 15%.

Tax Situation

Provided that the Company holding a Category 1 Global Business License owns at least 5% of an underlying company, credit will be available on foreign tax paid on the income out of which the dividend was paid (underlying foreign tax credit). When a company not resident in Mauritius, which pays a dividend has itself received a dividend from another company not resident in Mauritius (a secondary dividend) of which it owns either directly or indirectly at least 5% of the share capital, such dividend will be allowable as a foreign tax credit and an underlying foreign tax credit will also be available. Mauritius has no thin capitalisation rules. Interest and royalty payments paid by Companies holding Category 1 Global Business License are fully tax deductible in Mauritius. Tax sparing credits are available Under this regime the effective rate of taxation in Mauritius can be reduced as a long stop provision exists whereby Companies holding Category 1 Global Business License may elect not to provide written evidence to the Commissioner showing the amount of foreign tax charged and enjoy deemed taxation at 80% of the normal rate of 15%, i.e. 12%. Thus, use of this long stop provision in isolation would reduce the effective rate of taxation in Mauritius from 15% to 3%.

Double Tax Avoidance Treaties

Mauritius has focused the development of its Global Business centre on the use of its growing network of double taxation treaties for structuring investment abroad. So far Mauritius has ratified thirty six treaties and is party to a series of treaties under negotiation. The treaties currently in force are with Barbados, Belgium, Botswana, Croatia, Cyprus, Democratic Socialist Republic of Sri Lanka, France, Germany, India, Italy, Kuwait, Lesotho, Luxembourg, Madagascar, Malaysia, Mozambique, Namibia, Nepal, Oman, Pakistan, Peoples Republic of Bangladesh, Peoples Republic of China, Rwanda, Senegal, Seychelles, Singapore, South Africa, State of Qatar, Swaziland, Sweden, Thailand, Tunisia, Uganda, United Arab Emirates, United Kingdom and Zimbabwe.

Eligible Entities
Tax treaty benefits are only available to resident entities or persons. Accordingly, a resident entity must be liable to tax in Mauritius under its laws by reason of its domicile, residence or

criterion of a similar nature. Mauritius provides a wide range of resident entities and hybrid structures including the Global Business Company, the Trust and the Socit. A foreign company including the Global Business Company may benefit from the tax treaty network. It is also possible for Mauritian branch of a foreign company to access the tax treaties by satisfying the conditions of residence. These entities if wishing to avail of the benefits of a tax treaty must obtain a Tax Residence Certificate issued by the Mauritius Revenue Authority.

Scope of Double Taxation avoidance Treaties

All Mauritian double taxation avoidance treaties are based on the OECD Model Treaty of 1977. Under the post-independence treaties concluded so far, tax sparing is available. This implies that where Mauritian source dividends are exempt from tax under the tax incentive provisions, the foreign investor is entitled to credit a notional amount of Mauritian tax against the tax payable (if any) in his country, thus reducing his domestic tax liability.

Unilateral Relief
If a resident of Mauritius derives income from a foreign country that has not concluded a tax treaty with Mauritius and foreign income tax is paid on the income, that tax may be credited against Mauritian income tax. The credit is limited on a source-by-source basis to the lesser of the foreign tax paid on the income concerned and the Mauritian income tax payable on the same income. In the case of foreign source dividends, no credit relief if granted for foreign corporate income tax borne on the profits out of which the dividends are paid (underlying tax).

Taxation of Expatriates on work permit

Expatriates employed in Mauritius are subject to the same regulations as local taxpayers and are assessed for income tax on income earned in Mauritius. Certain allowances and deductions cannot be claimed by expatriates in an income year during which they are not considered to be residents of Mauritius. Residence in respect of an income year means an individual who has:

His domicile in Mauritius unless his permanent place of abode is outside Mauritius. Been present in Mauritius in that income year for a period of, or an aggregate period of 183 days or more. Been present in Mauritius in that income year and the 2 preceding income years, for an aggregate period of 270 days or more.

Exempt Income in Mauritius

Various type of income is exempt from income tax, including:

Income derived by a Freeport company. Income derived by the registered owner of a foreign vessel. Income derived by the registered owner of a local vessel registered in Mauritius (provided the income is derived from deep sea international trade only). Capital gains on speculative or investment gains. A resident socit. Dividends received and paid by a tax incentive company.

Interest payable on accounts held by qualified corporate (offshore). Interest payable on specific government securities. Royalties payable to a non-resident by a qualified company trust or bank.

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Allowance Deductions
In general, expenses are deductible if they are incurred exclusively in the production of gross income and they are not of a capital or private nature. Expenses are not deductible to the extent that they are incurred in the production of exempt income. Allowable deductions comprise of:

Annual and investment allowances on fixed assets. Additional investment allowance for manufacturing companies on capital expenditure incurred on the acquisition of states-of-art technology equipment. Marketing and promotional expenses. Losses incurred in the production of gross income. Bad debts and irrecoverable sums. Pre-operational expenses of tax incentive companies. Donations to charitable institutions. Contributions to superannuation fund and employees share scheme. Gains on profits derived from sale of units and securities. Expenses incurred in setting up social infrastructure. Contribution to the national ambulance services. Interest on bonds issued by statutory bodies and debentures issued by companies cultivating sugar cane or manufacturing sugar.

Other Fiscal Incentives

No withholding tax on the remittance of branch profits. No capital gains tax in Mauritius except on property development gains. No limit on the carry forward of tax losses. Royalties, interests and service fees payable to foreign affiliates are allowed as expenses provided they are reasonable and correspond to actual expenses incurred. Interest paid on deposits in Bank holding Category 2 banking licences are tax exempt. 100% accelerated depreciation rate in the first year for aircraft companies. Investment tax credit of 10% for capital expenditure. Dividends paid are tax exempt. No withholding tax on interest, royalties and dividends. Royalties paid to non-residents are tax exempt. GBC 1 companies are liable to tax at the incentive rate of 15%. Generous mechanism for foreign tax credit on foreign source income. No estate duty, inheritance, wealth or gift taxes. No stamp duties, registration duties, levy. Zero rated Value Added Tax for qualified business transactions.

From http://www.ocra.com/solutions/taxation_mauritius.asp