Mauritius: More Than Just White Sandy Beaches…

By Ludovic C Verbist, PhD, TEP, Group Managing Director, AAMIL Ltd (09/06/2015)

Well-known as a leisure destination, this article shows a different facet of Mauritius in the field of financial services which very few jurisdictions can rival. Having a dynamic legal framework, the country is able to offer an appealing repertoire of structures suitable for all types of business activities, estate or succession planning. Ranked first in Africa and 28th worldwide for World Bank Doing Business 2015, Mauritius positions itself as the jurisdiction of choice for international clients. The characteristics of the most widely used structures are discussed hereafter.


Global Business Companies


The Financial Services Act 2007 was enacted to replace the Mauritius Offshore Business Activities Act 1992 and to comply with international norms and practices in this industry. Offshore business activities have been categorised in two types namely Global Business Licence Category 1 Company (GBL1) or Global Business Category 2 Company (GBL2). A GBL1 company is a tax resident company that can take advantage of Double Taxation Agreements (DTA) that Mauritius has signed with 42 countries so far. It is ideally suited for example for all investments to third countries, with which Mauritius has signed a DTA, which are likely to generate a flow of income in future years such as dividends, interest, royalties or capital gains.


Currently, GBL1 companies are being widely used for activities like insurance, fund management, holding and asset management. With a corporate tax of 15 per cent, GBL1 benefit from an underlying foreign tax credit, equal to the amount of foreign taxes paid, up to the amount of tax due in Mauritius. In the absence of proof, the amount of foreign tax paid is presumed to be 80 per cent of the Mauritius tax. The effective tax rate can thereby be reduced to a maximum of three per cent. It is worth highlighting that there is no capital gains tax, nor withholding tax on dividends and interest paid to non-residents.


GBL1 satisfy international standards in terms of transparency and substance requirements. Yearly audited financial statements have to be filed with the authorities. The Board of directors should comprise of at least two directors who are resident in Mauritius and the GBL1 is required to have its principal bank account in Mauritius. In addition to these conditions, as from 1 January 2015, additional substance requirements have come into force. A GBL1 needs to satisfy at least one of the following conditions: the GBL1 has office premises in Mauritius; or the GBL1 employs or shall employ at least one full time employee resident in Mauritius; or the constitution of the GBL1 provides for all disputes arising out of the constitution to be resolved by way of arbitration in Mauritius; or the GBL1 holds assets worth at least US$100,000 in Mauritius; or the shares of the GBL1 are listed on a Mauritius stock exchange; or the GBL1 has incurred yearly expenditure in Mauritius that can reasonably be expected from a similar corporation controlled and managed from Mauritius.


On the other hand, GBL2 companies are international companies which are not subject to taxation in Mauritius. They are mainly used for trading purposes, invoicing, international contracts or holding of assets. With a simple administration and low cost of setting up and operation, GBL2 offer a wide range of flexibility. They do not have access to DTA and do not need to satisfy any specific conditions as required for a GBL1. However, full disclosure is required for the identity of the ultimate beneficial owner and an annual financial summary should also be filed with the authorities.





Collective Investment Schemes


Collective Investment Schemes (CIS), more commonly known as investment funds, have been widely used by investors for channelling their investments mainly into India. CIS business consists of investing its funds mainly in securities with the aim of spreading investment risks and giving members of the CIS the benefit of the results of the management of its funds. Under Mauritius law, a CIS is licensed as a GBL1 and may be constituted primarily as a public or private company limited by shares or a trust. The structure of a CIS can take several forms: closed-ended company with fixed share capital, open-ended company with variable share capital, private equity fund and mutual fund. Setting up a CIS in Mauritius provides the advantage of being present in an OECD and FATF white listed jurisdiction. Other benefits include low administration and annual costs, as well as access to a wide network of DTA.


Protected Cell Companies


Protected Cell Companies (PCCs) were introduced in Mauritius by the Protected Cell Companies Act of 1999. Initially thought to be a suitable structure for the business of insurance, it also worked out to become a versatile vehicle for investment funds and for asset holding. A PCC is a company limited by shares which consists of a core and an indefinite number of cells which are kept legally separate from each other. This structure allows for the segregation of risks, assets/liabilities of different individuals and/or corporate entities under a shared structure.


A PCC in Mauritius takes the form of a GBL1; it can thus have access to DTA. The taxation it will suffer is also limited, up to a maximum rate of three per cent per annum, as for all GBL1.




The Mauritius Trust is another attractive structure which can be used for diverse purposes. Under the Trust Act 2001 a settlor can set up the following types of trusts: protective or spendthrift trust, maintenance and accumulation trust, interest in possession trust, discretionary trust, purpose trusts, charitable trust, commercial and trading trust. A trust set up in Mauritius provides many advantages like possibility of avoiding forced heirship rules, provision of the office of Protector and Enforcer, confidentiality as no registration with authorities is required and a favourable tax regime.


Mauritius resident trusts are taxed at 15 per cent on their chargeable income. They are also eligible for an 80 per cent presumed foreign tax credit on foreign source income and entitled to tax treaty benefits. Whereas a trust of which the settlor is a non-resident and of which all the beneficiaries are also non-residents, will be exempt from income tax in Mauritius, where it has deposited a yearly declaration of non-residence with the local tax authority.


Private Trust Companies


A Private Trust Company (PTC) is an alternative, which can be considered by settlors who want to retain a certain degree of control in a Trust. The PTC is a company formed to act as trustee to a limited number of trusts for the benefit of a single family.


A PTC can be structured as a GBL2 company and there is no requirement for a licence to act as trustee. It offers a flexible solution to a family with more efficiency in the decision making process. The settlor or a family member can be involved on the board of directors, which will allow a close monitoring of the affairs of the trust.





The Foundation Act 2012 was passed to bring Foundations as a substitute to Trusts for clients coming mainly from civil law countries. Notwithstanding similar aspects to corporate entities, the Mauritius Foundation has no members or shareholders. It has a distinct feature in that its recognition and importance in structuring the ownership of family and corporate assets is more prominent across the globe where the use of trusts is not generally recognised. The Foundation, inter alia, may be set up to achieve both charitable and non-charitable objects and can be either to benefit a person or a class of persons.


Like Trusts, Foundations are widely used for succession, estate and asset protection planning. A non-charitable foundation whose founder and beneficiaries are both non-residents will be exempt from income tax in respect of that year for which a declaration of non-residence is deposited with the Mauritius Revenue Authority. A foundation can also apply for a GBL1 licence and be subject to an effective tax rate of three per cent. This will allow it to benefit from tax treaties as well.


Limited Partnership


Limited Partnership (LP) was introduced under Mauritian law in 2011 to enhance the global offering of the jurisdiction. LP is commonly used for investment purposes such as private funds and joint ventures. The main advantage of this structure is that it limits the risks of investors up to the amount of their investment. Limited partners will bear no responsibility for the debts or liabilities of the LP.


The principal attraction of the limited partnership for the partners is its tax transparency. Profits and losses are attributed to the partners themselves who will be taxed according to their proportionate share of such profits and losses. An LP can also apply for a GBL 1 licence and elect to be taxed as a company, in which case it will be liable to tax at the maximum effective rate of three per cent on its foreign sourced income. It will also be able to benefit from DTA.


Gateway for Investment in Asia and Africa


Mauritius continues to be the preferred route for FDI in India with US$5.21 billion investment from April to November 2014. The deferral of the General Anti-Avoidance Rules (GAAR) by another two years provides additional comfort to investors. Besides, the current Prime Minister of India Mr Narendra Modi has clearly assured Mauritius that India will do nothing which will harm the Mauritius financial services industry.


With its traditional market consolidated, Mauritius has now turned to Africa to be the platform for investment into the region. So far, thirteen DTA have been concluded with African countries and more are under negotiation. Mauritius represents the best choice for penetrating Africa both in terms of structuring possibilities and in terms of facilities offered. Ranked first in the Sub-Saharan region by World Bank Ease of Doing Business 2015, Mauritius is reputed for its robust financial and regulatory institutions.


Undeniably, with such a diverse and robust product offering, Mauritius is now the rational choice for conducting your business activities.