Thanks to our Mauritius based attorney Roobesh Ramanjooloo, we are pleased to provide the following overview of the legal framework in Mauritius.

 

Presentation of the Mauritian jurisdiction

Mauritius is an island located off the coast of Africa. The Dutch, who were the first settlers, arrived in 1598. Then the French came to Mauritius in 1723 and occupied the island till 1810. It was the French who introduced a legal system based on the French civil and criminal law. In 1810, the British took over from the French and governed Mauritius until 12 March 1968 on which date the island was granted its independence. Mauritius became a republic on 12March 1992.

Company law in Mauritius

The main legislation dealing with the administration of companies in Mauritius is the Companies Act 2001, modelled on the New Zealand Companies Act 1993. It has been introduced as part of the Government’s policy to integrate offshore and onshore corporate entities in a bid to avoid ring-fencing, following the commitments given to the Organisation for Economic Co-operation Development (‘OECD’) as a result of its report on harmful tax competition.

The Companies Act 2001 has simplified incorporation procedures. A company does not require a memorandum of association and articles of association. The latter concept has been abolished and the concept of ‘constitution of a company’ has been introduced instead. A company may be incorporated with or without a constitution as set out in a single document. Under the Companies Act 2001, companies in Mauritius may be incorporated as companies limited with shares, limited by guarantee, limited by both shares and guarantee (hybrid companies) or as unlimited companies. Shares in a domestic company must be issued at no par value. A company may be set up as a small private company, a private company or a public company.

The Act makes a distinction between domestic companies, companies holding Category 1 global business licences (‘GBC 1’) and companies holding Category 2 global business licences (‘GBC 2’). A GBC 1 may be incorporated as a private or public company. No capital requirement is required to set up any such companies.

A major practical business advantage conferred by the Act is the flexibility to carry out corporate finance and structured finance. The Act allows any company registered in Mauritius to reduce its capital, to purchase its own shares, to acquire or redeem its own shares, to hold its own shares (treasury shares), to reissue shares in itself that the company holds, to give financial assistance and re-purchase its own shares provided that the company satisfies the solvency test. A company may also provide for ‘minority buy-out rights’ in respect of shares, to allow a shareholder to sell its shares in the company.

Under the Income Tax Act 1995 all domestic companies are categorised as one group for tax purposes, and pay tax at a rate of 15 per cent for the year ending on 30 June. The Finance Act 2007 has harmonised corporate tax at a single lower rate of 15 per cent.

 

Mauritius as a global financial centre

 

Mauritius is a strategic global business centre and is one of the most open and financially sound economies in sub-Saharan Africa. Mauritius is located between Asia and Africa, and the success of its economy is a direct result of its political and socio-economic stability, coupled with good governance and a wide range of incentives to boost investment.

 

The country’s adoption of international best business practices and sustainable development policies has been acknowledged by international agencies such as the Organisation for Economic Cooperation and Development (OECD), the Financial Action Task Force (FATF) and the World Bank.

 

The country has embarked upon a new reform program with the objective of becoming the financial hub of the African region and an ideal stepping stone for investment and doing business in Africa, Middle East and Asia.

 

There are many other reasons to invest through Mauritius:

 

• White-listed jurisdiction recognised by OECD

• 36 active Double Taxation Avoidance Treaties (DTAs)

• No exchange controls. Attractive fiscal policies. An effective banking system.

• A stock exchange opened to foreign investors

• Reliable and modern infrastructure

• Favourable time zone (GMT+4)

• Efficient telecommunications system

• Availability of qualified labour force

• Occupation / residence permits granted in three days

• Integrated Resort Scheme/Real Estate Scheme (allowing foreigners to acquire property in Mauritius)

 

GBC 1 Companies

GBC 1 companies are one of the most popular offshore products in Mauritius.

At present more than 10,000 GBL 1 companies have been incorporated in Mauritius. Most of them have been incorporated to take advantage of the Mauritian network of double tax treaties. An application for incorporation of GBC 1 companies must be channelled through the FSC through a management company.

A GBC 1 company may be set up by direct incorporation either with or without a constitution, or by registration of a branch of a foreign company or by way of continuation if the law in the country of origin allows continuation following deregistration.

There is no capital requirement for setting up a GBC 1 company.

A GBC 1 company incorporated in Mauritius may elect to be resident in Mauritius and may take advantage of the wide network of double tax treaties. A GBC1 can be structured as a Collective Investment Scheme, Global Fund, Protected Cell Company or an investment holding company. A Trust can also qualify for a GBC1 licence. In addition to the benefits available to a GBC1 from the expanding network of Double Taxation Agreements, a GBC1 also offers investors the following advantages:

 

• Low tax rate

• Generous tax credits

• No withholding tax on dividends, interest and royalties paid

• No capital gains tax

• Free repatriation of profits, capital and interest

• No estate duty, inheritance, wealth or gift tax

• Protection of assets

 

GBC 2 Companies

A GBC 2 company provides for greater confidentiality and is suited for holding and managing private assets. A GBC 2 is a non-resident company and therefore is exempt from tax in Mauritius. It cannot take advantage of tax treaties or operate in the free-port sector. A GBC 2 may be registered by way of direct incorporation, with or without a constitution, by way of continuation from its country of origin or by way of conversion from a GBC 1 company status into a GBC 2 status.

The Companies Act 2001 allows a GBC 2, just as other companies, to be structured as a company limited by shares, limited by guarantee or an unlimited company. It may be incorporated as a private company. There is no capital requirement for a GBC 2. A GBC 2 must have a registered agent, who may be a management company or person approved by the FSC and a registered office at all times in Mauritius, where all statutory books and records must be kept. Registered agents must submit an application for registration to the Registrar of Companies together with the forms duly completed and signed and the constitution if the company is to have one.

Shareholders’ or directors’ meetings may be held in or outside Mauritius as may be determined by the constitution of the company. Meetings may also be held by telephone or other electronic means and shareholders may be represented by proxy. The management of the company must be carried out by the board of directors consisting of at least one director who may be an individual or a body corporate. A GBC 2 is not resident in Mauritius, and therefore there is no need for directors to be ordinarily resident in Mauritius.

 

A GBC2 can conduct any business activities other than the following: banking, financial services, carrying out the business of holding or managing or otherwise dealing with a collective investment fund or scheme as a professional functionary, providing of registered office facilities, nominee services, directorship services, secretarial services or other services for corporations, providing trusteeship services by way of business.

 

Protected cell companies

A Protected Cell Company (‘PCC’) has the same status as a GBC 1 company and may be used for only two types of global business activities: insurance business and investment funds. A PCC is a single legal person with different cells which are not separate legal persons.

The purpose of creating PCCs is to segregate and protect cellular assets. Each cell is separate and distinct from the other cells, and the assets and liabilities of each cell are separate from the other cells. A creditor of one cell cannot have access to the assets of another cell of a PCC. In addition, the losses of one cell cannot be written off against the profits of another cell.

Funds

GBC 1 companies incorporated in Mauritius have also been set up for structuring investment funds. Investment funds are structured as single-tier, two-tier or even branches or subsidiaries of foreign companies. The parents are normally registered in other jurisdictions such as the United Kingdom, the USA, Singapore, Luxembourg, Ireland, the Bahamas or the Cayman Islands with a branch or subsidiary in Mauritius. Investment funds in Mauritius are used for a wide range of investment products such as portfolio management, private equity and debt instrument investments in India, China and Africa. Funds are currently structured as open-ended or close-ended, as a unit trust or limited partnership (société en commandite simple).

The law in Mauritius provides for two main categories of investment companies – ‘funds’:

(a)     open-ended fund, also known as a Collective Investment Schemes (‘CIS’); and

(b)     closed-end fund, commonly known as the Private Equity Fund.

 

Trusts

Although much of the Mauritian legal system is derived from the French Civil Code which, of course, does not recognise the concept of trusts, Mauritius has introduced trust law for the benefit of both residents and offshore settlors. Trusts are legal structures used for wealth management purposes. The settlor of the trust transfers property or assets to the trustees, as per the terms laid out in a trust deed, for the trustees to hold and administer for and on behalf of specified beneficiaries. The essence of the concept is the separation of legal and beneficial ownership, i.e., the property is legally owned by the trustees but is held and administered for the benefit of the beneficiaries.

 

 

 

Taxation

An offshore entity is subject to a more attractive tax regime than a domestic entity. GBC 2 and free-port companies are exempt from tax in Mauritius. GBC 2 companies are not resident in Mauritius and therefore cannot take advantage of double taxation treaties.

A GBC 1 company incorporated in Mauritius pays tax at the rate of 15 per cent, but is entitled to a foreign tax credit on its foreign source income if it qualifies under either of the following:

(a)     if the GBC 1 company can prove that it has paid foreign tax on its foreign income, it is entitled to a full 15 per cent tax credit and the end result is that the company is not liable to tax at all;

(b)     if the GBC 1 company has not paid any foreign tax on its foreign income, then it is presumed to have paid foreign tax. In this case the company is entitled to a foreign tax credit of 90 per cent of the 15 per cent tax to be paid in Mauritius, and in fact pays only 3 per cent tax.

 

A trust is liable to income tax on its chargeable income. A trust is liable to tax at a rate of 15 per cent but is entitled to foreign tax credit on any foreign source income if it has paid foreign tax on its foreign income. It would seem under the Trusts Act 2001 that a trust created under the new Act which has not actually paid foreign tax could benefit from the presumed foreign tax credit. However, non-resident trusts and non-resident beneficiaries are tax exempt in respect of income from the trust.

Also:

  • Dividends derived from Mauritius and paid to non-residents of Mauritius are exempt from tax.
  • There is no withholding tax on interest paid by a GBC 1 or GBC 2 company.
  • Royalties derived from Mauritius and paid to non-residents are tax free.
  • The countries which have signed double taxation treaties with Mauritius are listed below.

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, People’s Republic of Bangladesh, People’s Republic of China, Rwanda, Senegal, Seychelles, Singapore, South Africa, State of Qatar, Swaziland, Sweden, Thailand, Tunisia, Uganda, United Arab Emirates, United Kingdom, Zimbabwe.

 

–    Three treaties await ratification: Russia, Congo and Zambia.

–    Five treaties await signature with Egypt, Kenya, Malawi, Nigeria and Ghana.

–    Ten treaties are being negotiated with: Algeria, Burkina Faso, Canada, Czech Republic, Greece, Portugal, Republic of Iran, Saudi Arabia, Vietnam and Yemen.

Benoît LAFOURCADE

Co-Founder, Partner & Solicitor -
International Corporate Law & Litigation

Benoît, Delcade’s co-founder, is a Paris Bar lawyer and UK Solicitor (London).

Advisor for various embassies, working closely with the firm's team, Benoît offers his services to French and foreign companies requiring cross-cutting strategic and legal support in business law.

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