Article

MAURITIUS: Island to green light offshore funds in 60 days.


Added on 10/07/2019

As published on internationalinvestment.net, Thursday 4th July, 2019.

 

The Mauritius government's has given indicative timelines for clearing applications of offshore funds and advisory services,  after its proposal to amend tax residency rules for companies is created fear among foreign funds operating from the tax haven.

Mauritius has recently announced that it is amending rules for determining tax residency for companies so that a company will not be considered tax resident in the country if it is centrally managed and controlled outside Mauritius.

The small island has stepped up scrutiny of offshore fund structures, as the country tries to shed its image as a quasi-tax haven and showcase its compliance with all major international tax norms.

If the authorities find that it is not in Mauritius, then the entity is not a tax resident at all, and if it’s not a tax resident, then the treaty benefits it gets with other countries will not be available to it"

The country's financial services regulator Financial Services Commission (FSC) has said it would process all applications within two months, provided the applicants fulfil all legislative obligations that include meeting know-your-customer (KYC), anti-money laundering, counter-terrorist financing, and substance requirements, among other things, Business Standard reports.

Many of the Mauritius structures may get challenged in Mauritius itself and several existing structures will be forced to increase the substance requirements within Mauritius for them to continue getting the tax benefits, experts said.

"It is a significant change and the way they look at it will be different and may have new test to figure out whether these companies are complying with the new norms. It needs to figured out what are the tests they are going to lay out," Suresh Swamy, Partner, PwC told Asian Age.

"If the authorities find that it is not in Mauritius, then the entity is not a tax resident at all, and if it's not a tax resident, then the treaty benefits it gets with other countries will not be available to it," experts said.

The fallout of this move will be that many of the structures currently set up in Mauritius and claiming treaty benefits on the basis that they have tax residency certificates may now have to relook at the structures.

"FSC is emboldening its commitment to be a progressive and transparent regulator by fixing a shorter time frame for its own internal processes," said Neha Malviya, director, Wilson Financial Services.