• Introduction
• Business Environment
• Economic Environment
• Offshore Environment
• Taxation
• Corporate Legislation
• Banking

Introduction

Mauritius lies in the southern Indian Ocean to the east of Madagascar; it became a republic in 1992 and comprises four islands: Mauritius, Rodrigues, Saint Brandon, and Agalega.

With the exception of its coral reefs and beaches, the land area of 710 square miles (1,865 sq km.) is of volcanic origin. The other islands comprise another 67 square miles (175 sq km.) of land area. About 90% of the cultivated land area is devoted to sugar cane.

The time zone is 4 hours ahead of GMT, 9 hours ahead of EST. Mauritius is served by SSR International Airport at Plaisance, which is 45 kilometers south east from the capital Port Louis; ten international airlines operate from here. Port Louis, the capital, is the only port and is served by 25 international shipping lines.

The population of Mauritius is 1,275,000 (July 2008 est.), of which around 150,000 live in Port Louis. The official language is English, although Creole, French, Hindi, Urdu, Hakka and Bojpoori are also spoken. Ethnically, about two-thirds of the population is Indo-Mauritian, and most of the remainder are Creole. About half of the population is Hindu, with 28% Christian and 17% Muslim.

Mauritius gained independence from Britain in 1968 and with it lost the Diego Garcia Archipelago; this is still a source of dispute. Tourist numbers have steadily increased from 150,000 in 1985 to around 825,000 in 2006, heralding a boom in hotel building. Mauritius is a member of the Association of Francophone Countries, The British Commonwealth, and the UN.

Political System

Mauritius is a sovereign state within the British Commonwealth. The head of state is the President of the Republic who is elected by the National Assembly. The Prime Minister is the leader of the winning party after elections for the National Assembly, which are held every 5 years, and is appointed by the President. The Council of Ministers is appointed by the President on the Prime Minister’s recommendation. The leader of the opposition is also appointed by the President and is normally the leader of the main opposition party. There are 62 members of the National Assembly who represent the 21 constituencies; a further 8 members are nominated as best losers in an attempt to give fair representation to ethnic groups and minority parties.

The Prime Minister is Navinchandra Ramgoolam.

Mauritius’s legal system is a mixture of English Common Law and French Civil Law. Company and procedural law is based on English law. Substantive law is in the main modeled on the Napoleonic code. The Supreme Court of Mauritius is the highest court in the republic; final appeal is to the Privy Council in England.

Economy

Ever since gaining independence from Britain in 1968 the economy of Mauritius has grown steadily at around 5% annually. Growth slackened off in 2002 at about 2.2%, but rose again in 2003 to 4.1%, dipping to 3.1% in 2005. In 2006, it was estimated at 4.3% and in 2007, 5.7%. Growth is forcast at 6.2% in 2008. Sugar was and is a dominant crop, and still accounts for more than a third of export earnings. There are growing industrial, services, and tourist sectors. An export processing zone set up in 1970 has been successful, particularly in garment manufacture. The financial services industry has been a more recent Government-inspired initiative, but is now developing strongly.

GDP per head of $13,500 (2006 est.) is in a middle range, and unemployment at 8.8% (2007 est.) is on the high side.

The Mauritian currency is the rupee (MR). Exchange controls were dismantled in stages between 1984 and 1994. Currently (2008) USD1 = about MR28. Investors are still required to demonstrate the source of funds to be repatriated, and must be up to date with local taxation.

Business Environment

Mauritius is well served by business and communications infrastructure and is a dynamic economy; the government actively encourages foreign investment and offshore activity through the Board of Investment.

There is a very clear distinction between the ‘onshore’ and ‘offshore’ sectors. Foreigners need specific permission from the Prime Minister’s office before they can own shares in an onshore company, while Mauritians are barred from taking part in offshore activities.

2001 saw a comprehensive modernisation of the country’s legal structure, partly just to catch up with competitors, partly to give expression to the decision to eschew ‘offshore’ status as such, and partly as a follow-up to the decision to sign a Commitment Letter to the OECD in order to avoid ‘blacklisting’.

In this context the Mauritius Offshore Business Activities Authority (MOBAA), which had been a ‘one-stop-shop’ for the offshore sector, and had been the licensing and supervisory authority for offshore companies (except banks) since 1992 had clearly outlived its usefulness, as had the various pieces of legislation which explicitly recognised offshore companies and structures. All this was swept away, and new legislation came into effect in October of that year.

To some extent, the changes were cosmetic rather than substantive, although there is no doubt that the new supervisory regime is a lot tougher than the old one. The Financial Services Development Act 2001 is a particularly complex piece of legislation, giving very extensive powers to the new Financial Services Commission which effectively replaced MOBAA as well as taking on some of the functions of the Central Bank. As the FSC gradually introduced its new supervisory regime in 2002 and 2003 there were complaints from the offshore sector that it was being heavy-handed. However, the total number of ‘Global Business Companies’, as the old Offshore and International companies are now known, had reached over 25,560 by May 2005, up more than 2,000 in the previous year.

There is a wide range of investment incentives for inward investment. Free Trade Zones and a Freeport were established in 1992 enabling up to 100% foreign owned enterprises. Money laundering is discouraged by the government, as is any trade in guns or drugs.

The island republic has a good labour relations record and productivity has shown a 5% annual increase since 1994. Training and service quality are regarded as important; many Mauritian firms have adopted ISO 9000. Financial and professional services are well represented and a successful stock exchange was opened in 1989.

Free Zones

The Mauritius Export Processing Zone (EPZ) was set up in 1970, and has become one of the country’s biggest centres of employment, particularly in the garment manufacuring trade. The EPZ is meant for manufacturers and food processors who export 100% of their output, although permission is sometimes available for 10-20% of output to be sold locally.
In order to set up in the EPZ, an Export Enterprise Certificate must be obtained from the Ministry of Industry and Technology, involving a certain amount of bureaucracy. Once established in the EPZ, the following incentives apply:

• No customs duties or sales taxes payable on raw materials and equipment;
• No corporate taxes payable and no withholding tax on dividends;
• No capital gains tax;
• Free repatriation of dividends, profits and capital;
• 60% remission of customs duties on buses for personnel transport;
• 50% reduction in registration fees payable on land and buildings;
• Relief on personal income tax for two expatriate staff.

Companies in the EPZ have access to the African Preferential Trade Area and quota-free access to the European Union.
There is also an Export Services Zone, providing benefits comparable to those of the EPZ to companies offering support services to exporters in the EPZ.

The Mauritian government announced plans in 2001 to create an IT free-trade zone on the island. Prime Minister at the time, Anerood Jugnauth, stated that: ‘The year 2001 will be marked by the relaunch of the Mauritian economy. We want to make Mauritius an information technology free trade zone with digital parks.’The digital parks will offer all the latest available technological facilities to meet the needs of IT business, and the government aims to provide a series of fiscal incentives to both domestic and foreign businesses operating in Mauritius, including a 5-year tax holiday.

Jugnauth also announced the launch of an official body to promote the IT sector in Mauritius as a major centre for foreign businesses. The government hoped to emulate the success of its Export Processing Zone (EPZ). In 2002 the government allocated US$100m to the development of its ‘cyber-city’.

As of early 2006, the Ebene Cyber City was in operation, and had attracted 25 operators.
Freeport facilities were established at the port and airport under the Freeport Act 1992 (now repealed and re-enacted as the Freeport Act 2001). Although numerous licenses were issued under the Act, lack of storage facilities limited take-up of the benefits for some years. The incentives offered are broadly similar to those available in the EPZ, see above, and in addition there are reductions in port handling charges for re-exports.

The Mauritius Freeport (free-trade zone) was established in 1992 as a customs-free zone for goods destined for re-export. The government’s objective is to promote the country as a regional warehousing, distribution, marketing, and logistics center for Eastern and Southern Africa and the Indian Ocean rim. Through its membership in the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC), and the Indian Ocean Commission (IOC), Mauritius offers preferential access to a market of 380 million consumers, representing an import potential of USD 90 billion.

Situated in 52 hectares of land adjacent to port facilities and a modern container terminal, the Freeport offers 120,000 square meters of world-class infrastructure, including cold rooms, dry storage, an international trade exhibition center, processing units, and office
space for transshipment, consolidation, storage, and processing activities. Freeport facilities are also available at the airport. Port Louis is increasingly used by major shipping lines (i.e. Maersk/Sealand, P&O Nedloyd, and MSC) as a regional container transshipment hub.
Activities that can be carried out in the Freeport include warehousing and storage, breaking bulk, sorting, grading, cleaning and mixing, labeling, packing and re- packing, minor processing, transshipment, cash & carry sales, export-oriented port based activities, export- oriented airport based activities, freight forwarding, express courier services, mail order, simple assembly, reshipment, and quality control and inspection services.

About 450 Freeport companies are engaged in activities such as re-export, transshipment, minor processing, and assembly. In 2006, the Freeport imported USD 447 million and re-exported USD 551 million worth of goods. Main products re-exported include:

machinery and electronic equipment (56 percent); apparel and accessories (11 percent); seafood (10 percent); textile yarns and fabrics (5 percent); chemical and pharmaceutical products (3 percent); and jewelry and precious stones (2 percent).

In 2006, the principal export markets for the Freeport were the United Arab Emirates, Madagascar, France, the United States, and Reunion Island.
The Freeport sources its imports from a wide range of countries. In 2006, the major suppliers included Hungary, China, India, Finland, Taiwan, France, Spain and South Africa. The main products imported include foodstuffs, chemicals and pharmaceuticals, telecommunication equipment, textile fabrics and accessories, ready-made garments, electrical goods, and general consumer goods.

The Freeport facilities for warehousing, breaking bulk, and re-export should be of particular interest to American companies. These services enable businesses to ship containerized goods to Mauritius, warehouse them in secure, low-cost facilities, then break bulk and re-export them in an efficient and timely manner to African and Indian Ocean rim destinations. Modern computerized warehouse/logistics facilities, including cold rooms and processing centers, are provided by the private developers. These include Freeport Operations (Mauritius) Ltd (http://www.freeport-mauritius.com), Mauritius Freeport Development Co. Ltd (http://www.mfd.mu), and Froid Des Mascareignes (http://www.seafoodhub.com).

Goods can also be assembled in the Freeport for export to the African and Indian Ocean markets. Current assembly and processing activities in the Freeport include: jewelry and precious stones, PET plastic bottles, transformation of fish into fillets, aluminum frames and fittings, and re-packaging of pharmaceuticals.

Three U.S. companies are present in the Mauritius Freeport. Expeditors International (Mauritius) Ltd, a subsidiary of Expeditors International of Washington Inc., is a freight logistics company providing freight forwarding services, supplier consolidation, and quality control. Boxmore Plastics (Mauritius) Ltd., which started operations in Mauritius in 2002, is 100 percent owned by Chesapeake Corporation, headquartered in Richmond, VA.

It manufactures PET (polyethylene teraphthalate) performs for the soft drink bottling companies in Mauritius, Reunion, Madagascar, and Seychelles. Casamar (Mauritius) Ltd., a subsidiary of U.S.-based Casamar Holdings, Inc., which specializes in the assembly and repair of nylon-braided tuna purse seine nets, opened an office in Mauritius which provides marketing support for its fishing net repair and assembly operations in Seychelles.

The GOM, in collaboration with the private sector, is actively promoting the Freeport as a seafood hub, in particular focusing on the transshipment, processing, storage, distribution, and re-exportation of high value-added seafood products using the modern port and Freeport facilities and logistics. A one-stop shop was established in August 2004 in the port area to help facilitate administrative clearances related to the seafood industry. In June 2005, a leading Mauritian company in partnership with Spanish investors opened a tuna loin processing plant (Thon des Mascareignes Ltd.), with a daily processing capacity of 300 tons for export to Europe and the U.S. for final processing and packaging. U.S. company Bumble Bee Foods has a tuna supply and processing agreement with Thon des Mascareignes Ltd.

The Board of Investment, in collaboration with Airports of Mauritius Ltd., plans to develop an air cargo terminal and a dedicated air cargo logistics center at the airport. The main activities targeted include re-export of high value/low volume products, light assembly operations, warehousing, labeling and repackaging, sea-air/air-sea and transshipment cargo, express courier, and freight forwarding services.

Investment Incentives

Government incentives for investment include: a low corporate tax rate of 15 percent; exemption from customs and excise duties on imports of equipment and raw materials; exemption from tax on dividends and capital gains; a low rate of 5 percent registration duty for notarial deeds; free repatriation of profits, dividends, and capital; and reduced tariffs for electricity and water.
Moreover, the government has set up the Integrated Resorts Scheme (IRS) to attract high net worth non-citizens desiring to acquire an immoveable property of not less than USD 500,000 in Mauritius (within a resort approved by the BOI) for personal residence. The investor and his/her spouse and dependents are granted resident permits to live in Mauritius.

Incentive schemes for a number of sectors were set up by the Industrial Expansion Act 1993. Companies benefiting from such schemes are often known as ‘incentive’ companies; in many cases, Mauritian companies which invest in ‘incentive’ companies can treat part of their investment as an expense against tax. Some of the more important schemes have traditionally been as follows:

Pioneer Status Enterprise: This is aimed at ‘activities involving technology and skills above the average existing in Mauritius and likely to enhance industrial and technological development’. Incentives include 15% corporate tax, exemption from customs duty and sales tax, and exemption from withholding tax.

Modernisation and Expansion Scheme: The scheme aims to accelerate the modernisation of existing enterprises; incentives include exemption from customs duty and enhanced tax credits on purchase of new equipment, particularly anti-pollution equipment.

Industrial Building Scheme: The scheme encourages the construction of industrial buildings for letting with incentives that include a 15% corporate tax rate, exemption from withholding tax, 50% exemption from land purchase dues, and the disapplication of rent controls.

Hotel Development Certificate: Incentives include 5% corporate tax, exemption from withholding tax for 10 years, exemption from customs duties, and loans at preferential rates.

The inward investment process in Mauritius can be bureaucratic, and after promising a ‘one-stop-shop’ for inward investors for some years, the administration finally created an integrated agency for inward investment in 2001.

Economic Reform

The government which took office in July 2005 embarked on a bold economic reform program aimed at moving Mauritius from a reliance on trade preferences to global competitiveness. The reform strategy, outlined in the budget for fiscal year 2006-07 (July-June), was designed not only to remedy fiscal weaknesses but also to open up the economy, facilitate business, improve the investment climate, mobilize foreign direct investment and expertise, and introduce structural reforms to support sustainable growth.

The results of the economic reforms have been swift and tangible. The economy was turned around and grew by 5 percent in 2006, up from 2.2 percent in 2005. GDP growth in 2007 is estimated at 5.8 percent. Foreign Direct Investment (FDI) in 2006 amounted to USD 229 million, more than the cumulative total for the previous four years. In 2007, FDI is estimated at USD 313 million. It is expected to rise to USD 469 million in 2008. Encouraged by the signs of economic revival, the government’s second budget (July 2007-June 2008) continued along the path of liberal economic reforms. In this budget, the government introduced a 15 percent uniform rate of corporate and personal income tax, thus making Mauritius one of the lowest tax jurisdictions in the world.

GOM’s policy since 2005 has been to open the economy and streamline administrative procedures for people to come, work, and live in Mauritius. The Business Facilitation Act 2006 abolished trade licenses and allowed businesses to start operations within three days of incorporation. Also, residence permits and work permits for foreign investors, self-employed, and professionals have been combined into an occupation permit, which is now processed within three working days. Individuals holding an occupation permit can be eligible for permanent residence after three years. A new residence permit allows non-citizens to retire in the country. Foreign nationals can acquire property for business purposes.

Investment in Mauritius is governed by the Investment Promotion Act of 2000 and the Business Facilitation Act of 2006. Investment regulations are consistent with the WTO’s Agreement on Trade Related Investment Measures (TRIMS). The GOM does not discriminate between local and foreign investment. Foreigners are allowed to own 100 percent equity in a local company.

Investment Oppurtunities

Mauritius has realized a remarkable economic transformation from a mono-crop economy based on sugar production to a diversified economy resting on export-oriented manufacturing, tourism, and financial and business services sectors. In recent years, Information and Communication Technology, Hospitality and Property Development, the Seafood and Marine Industry, and the Biomedical Industry have emerged, attracting substantial investment from both local and foreign investors. In addition, thanks to strong support from the GOM, a number of projects in the following sectors are expected to be implemented in the next few years: (i) Land-Based Oceanic Industry, (ii) Knowledge Industry, (iii) Renewable Energy, (iv) Agro-processing and biotechnology, and (v) Logistics and Distribution.

The location of Mauritius, situated in the Indian Ocean between Africa, Asia, and Australia, offers a successful business base for both regional and international trade. U.S. companies can use Mauritius as a platform to tap regional markets through Mauritius’ membership in the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA), which offer preferential access to a market of 380 million consumers. U.S. businesses will also be able to use Mauritius to get preferential access to the Indian market through the Comprehensive Economic Cooperation and Partnership Agreement expected to be signed in early 2008 between Mauritius and India.

Foreign Investment

Mauritius is among the most competitive and successful economies in Africa and actively seeks foreign investment. The World Bank’s 2008 Doing Business report ranks Mauritius first in Africa and 27th in the world for ease of doing business. Also, the Foreign Direct Investment magazine published by The Financial Times, put Mauritius first on the list of business-friendly countries in Africa. The Government of Mauritius’ (GOM) objective is for Mauritius to rank among the top ten most investment- and business-friendly locations in the world.

Right to Private Ownership and Establishment

Under the Non-Citizens (Property Restriction) Act, a non-citizen investor may acquire property in Mauritius with the prior approval of the Prime Minister. However, the Prime Minister’s approval is not required when the property is acquired (i) under a lease agreement not exceeding 20 years, (ii) under the Integrated Resort Scheme for the purchase of a villa, or (iii) when the investor has obtained approval from the Board of Investment (BOI) to acquire property for use in his/her business. Any foreign investor engaged in an economic activity generating an annual turnover exceeding Rs 3 million (approx. USD 94,000) may obtain BOI’s approval to acquire immoveable property in the name of his/her business.

Protection of Property Rights

Property rights are respected. Mauritius maintains a sophisticated and impartial legal system based on both Napoleonic code and British common law. The system protects all tangible property. Intellectual property rights are protected by the Copyrights Act of 1997 and the Patents, Industrial Designs and Trade Marks Act of 2002, which are in line with international norms. Mauritius is a member of the World Intellectual Property Organization (WIPO) and party to the Paris and Bern conventions for the protection of industrial property and the Universal Copyright Convention.

The Patents, Industrial Designs and Trade Marks Act of 2002 was introduced by the government, in part, as a response to the rise in the production and trade of counterfeit goods, such as Ralph Lauren shirts. In 2004, Polo Ralph Lauren (PRL) successfully sued local manufacturers and retailers of PRL counterfeit products in Mauritian courts, which resulted in the closure of the counterfeit operations.
The new trademark and patent laws comply with the WTO’s Trade Related Aspects of Industrial Property Rights (TRIPS) agreement and protects designs, brands, and technological inventions. Also, the law dictates that well-known international trademarks are protected, whether they are registered in Mauritius or not. A trademark is initially registered for 10 years and may be renewed for successive periods of 10 years. A patent is granted for 20 years and cannot be renewed.

However, while copyrights are being effectively enforced by the Police and Customs authorities, trademark enforcement is reportedly weak. According to a leading IPR law firm, the Police are not taking action against trademark infringements because it has been advised by the State Law Office that trademark enforcement is not within their scope of work, despite the fact that trademark infringement is by law a criminal offence. Furthermore, the GOM’s Industrial Property Office (IPO), which also has power to enforce trademarks, has no enforcement unit and therefore has not carried out any enforcement since its creation. Only in cases where the trademark owner has a commercial representative in Mauritius is enforcement possible under the Prevention of Unfair Practices (Industrial Property) Act 2002, based on unfair competition instead of trademark infringement.

Transparency of the Regulatory System

Mauritius has built its success on a free market economy. According to the U.S.-based Heritage Foundation-Wall Street Journal annual survey of 157 countries worldwide, Mauritius leads Sub-Saharan Africa in economic freedom. Mauritius also has a long-standing tradition of government and private sector dialogue which allows the private sector to effectively voice its views on the development strategy of the country. The Joint Economic Council is a key vehicle in this regard.
During the last two years, the government has brought radical reforms to trade, investment, tariff, and income tax regulations to simplify the framework for doing business. Trade licenses and many other bureaucratic hurdles have been abolished.
Companies in Mauritius are regulated by the Companies Act of 2001, which incorporates international best practices and promotes accountability, openness, and fairness. In order to combat money laundering and terrorist financing, the government also enacted the Prevention of Corruption Act, the Prevention of Terrorism Act, and the Financial Intelligence and Anti-Money Laundering Act.

In December 2006, the National Assembly adopted a new and more transparent Public Procurement Bill, which is scheduled to become effective on January 17, 2008. The objective of the bill, which repeals and replaces the Central Tender Board Act, is to establish a Central Procurement Board to cater for all forms of procurement by public bodies. This World Bank-approved bill provides for the establishment of a Procurement Policy Office responsible for formulating policies and issue directives for the operation of a transparent and efficient public procurement system. Provision is also made to enable a bidder or potential bidder to challenge the procurement proceedings of a public body at any stage and request the Chief Executive Officer of the public body to consider his complaint and, where appropriate, take remedial action. The bill also establishes an Independent Review Panel to which appeals against decisions of a Chief Executive Officer may be brought. Thus, a simplified two-tier process is available to unsatisfied persons to seek remedy.

A Competition Bill was adopted in Parliament in December 2007 to promote competition, prevent monopolistic pricing, and restrict collusion in consumer markets. Monopoly, and more generally, collusion between suppliers are prevalent in the domestic economy. The government’s 2007-08 budget has already earmarked funds for the setting up of the Competition Commission, which will administer the competition regime.

Political Violence

Mauritius has a long tradition of political and social stability and is internationally recognized for its well-established democracy. However, inter-ethnic tensions led to four days of rioting in February 1999, following the death in police custody of a popular minority singer. Governments since then have sought to calm ethnic tensions and stress national unity.
Civil unrest and political violence are uncommon. Three political activists were murdered in 1996. The leader and several members of a small political party were arrested in December 2000 and charged with this crime. One of them was found guilty and sentenced to 21 years imprisonment. General elections in 2000 and 2005 brought a change in government in each case and passed off without incident.
Corruption
Mauritius is one of Africa’s least corrupt countries. In 2002, the government adopted the Prevention of Corruption Act, which led to the setting up of an Independent Commission Against Corruption (ICAC) a few months later. ICAC has the power to detect and investigate corruption and money laundering offenses and can also forfeit the proceeds of corruption and money laundering.
After a registering a significant improvement in perceived levels of corruption in the 2006 Corruption Perceptions Index of Transparency International, Mauritius’ performance in 2007 was disappointing. It fell from second to fourth position in sub-Saharan Africa. The index examines perceptions of public-sector corruption in 180 countries. It scores countries from zero, which indicates the highest level of perceived corruption to ten, the lowest level. Mauritius’ score slipped from 5.1 in 2006 to 4.7 in 2007. However, corruption is not seen as an obstacle to foreign direct investment.

Mauritius achieved the highest ranking in sub-Saharan Africa in the recent survey of standards of national governance. The 2007 Ibrahim Index of African Governance compiled by the Kennedy School of Government at Harvard University, ranked Mauritius the best-run country in Africa.

Economic Environment

Mauritius has witnessed a massive development in the last decades. From a monocrop economy, depending mainly on sugar, it has diversified its economic activities into, textile and apparel industry, tourism and financial services.

The country is equipped with a highly skilled labour force and a very good infrastructure thereby attracting Foreign Direct Investment. The average economic growth was 5.6% over the last 3 years. The income per Capita has reached 4000 US Dollars. As a result the standard of living has gone up. The country has now a life expectancy rate of 71.4yrs, an adult literacy rate of 83%.

To face globalisation and a new economic environment, the Government has taken several steps. High value-added, capital intensive and knowledge-based activities are on the priority list. The Information Technology sector is undergoing rapid changes so as to be fit for the next millennium. The aim is to make Mauritius a centre for high-tech and software services, which can be exported.

The other sectors namely Tourism, Textile, Agriculture and Financial services are also undergoing changes in a positive direction.

Economy Facts:

GDP (purchasing power parity):
$14.9 billion (2007 est.)

GDP (official exchange rate):
$7.757 billion (2007 est.)

GDP – real growth rate:
5.5% (2007 est.)

GDP – per capita (PPP):
$11,900 (2007 est.)

GDP – composition by sector:
agriculture: 4.8%

Industry:
25% services: 70.1% (2007 est.)

Labor force:
550,000 (2007 est.)

Labor force – by occupation:
agriculture and fishing 14%, construction and industry 36%, transportation and communication 7%, trade, restaurants, hotels 16%, finance 3%, other services 24% (1995)

Unemployment rate:
9.2% (2007 est.)

Population below poverty line:
10% (2001 est.)

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Distribution of Family Income – Gini index:
37 (1987 est.)

Inflation rate (consumer prices):
9.1% (2007 est.)

Investment (gross fixed):
23.4% of GDP (2007 est.)

Budget:
revenues: $1.34 billion
expenditures: $1.642 billion; including capital expenditures of $NA (2007 est.)

Public debt:
59.9% of GDP (2007 est.)

Agriculture – products:
sugarcane, tea, corn, potatoes, bananas, pulses; cattle, goats; fish

Industries:
food processing (largely sugar milling), textiles, clothing, mining, chemicals, metal products, transport equipment, nonelectrical machinery, tourism

Industrial production growth rate:
4.7% (2007 est.)

As of September 2007, Mauritius had a total labor force of 552,600, including 354,600 males and 198,000 females. Total employment stood at 507,500, including 21,000 foreign workers, mainly from China, India, Madagascar, Sri Lanka, Bangladesh, and South Africa, and mostly employed in textile factories but also in construction, tuna canning, and hotel and catering sectors. The unemployment rate, which reached 9.8 percent in June 2006, dropped to 8.8 percent in 2007, representing about 48,000 unemployed.
The GOM administratively establishes minimum wages, which vary according to the sector of employment, through the National Remuneration Board (NRB), and it mandates minimum wage increases annually based on inflation. However, most trade unions negotiate wages higher than those set by the NRB. The NRB issues Remuneration Orders for more than 90 percent of the workforce in the private sector.

In 2007, the government moved ahead with some significant labor market reforms. In April, the government set up the National Pay Council (NPC) in replacement of the traditional tripartite committee that used to meet once yearly to determine the annual wage compensation based on the inflation rate. Henceforth the NPC will ensure that the level of compensation reflects not only the rise in cost of living but also other economic conditions such as productivity and the capacity to pay.

In September 2007, the Minister of Labor, Industrial Relations, and Employment published the draft Employment Rights Bill and the Employment Relations Bill for public debate before their introduction in Parliament. The new bills’ main objectives are to revise the existing labor laws and liberalize the labor market. The ILO is assisting the government in the review of these bills. In December 2007, the Ministry of Labor launched the Labor Market Information System which provides an online skill-based matching service for both employers and job seekers.
Wages are low by Western standards but high by most Asian and African standards. Factory workers in the Export Processing Zone generally earn between USD 200-USD 250 per month. Middle managers earn between USD 700 and USD 1,000 per month. Fringe benefits, including transport and meal allowances, paid leave, and bonuses, represent about 25 to 30 percent of the basic wages of employees.

While Mauritius has an active trade union movement, labor-management relations are generally good. Unionized workers, which account for less than 25 percent of the workforce, act responsibly and rarely disrupt business. There has not been a major strike since 1979. Under the Industrial Relations Act, unions have the legal right to strike. However, the government seeks to preempt strikes through a system which promotes settlement through negotiation or arbitration by the Permanent Arbitration Tribunal and the National Remuneration Board.
Workers’ rights are protected under the Mauritius Labor Act of 1975. Mauritius participates actively in the annual ILO conference in Geneva and adheres to ILO conventions protecting worker rights.

Foreign Direct Investment

After several years of decline, foreign direct investment (FDI) picked up strongly in 2006, as a result of radical economic reform measures taken by the government to open up the economy, facilitate business, and improve the investment climate. From USD 229 million in 2006, FDI increased to USD 313 million in 2007 and is expected to reach USD 469 million in 2008.

Offshore Environment

History

Until 1998, the Offshore Company and the International Company (equivalent to an IBC) allowed zero taxation across a range of offshore activities including banking, shipping, insurance and fund management, as well as in the free trade zones. Since a raft of new legislation in 2001 these two types of company are known as Global Business Companies Categories 1 and 2 (GBC1 and GBC2). Mauritius has decided to be a ‘respectable’ IOFC and there is now a flat tax rate of 15% in almost all areas. Some dilution of the foreign tax credit applied from 2003. However, Mauritius has tax treaties with more than 30 countries, and they can be combined with the offshore regime to give a good result, especially for trade and investment in India. Mauritius was one of six offshore jurisdictions which wrote ‘commitment letters’ to the OECD in May 2000 in order to avoid being included on the OECD’s list of jurisdictions offering ‘unfair’ tax competition
The domestic and offshore sectors have traditionally been quite firmly separated, although recent legislation, particularly in the banking sector, has begun to remove the distinction between ‘onshore’ and ‘offshore.’ Export-oriented domestic manufacturers and service providers get favoured treatment. Until the introduction of the 15% ‘flat tax’ domestic income tax rates were moderately high, and property transactions are expensive in tax terms.

There used to be one main source of ‘offshore’ regimes in Mauritius, the Mauritius Offshore Business Activities Authority (MOBAA) constituted under the Mauritius Offshore Business Activities Act 1992 (MOBA Act 1992), which supervised almost all types of offshore entity other than banks, including the Free Port, and the Export Processing Zone. In May 2000 Mauritius wrote a ‘commitment letter’ to the OECD in order to avoid inclusion on the OECD’s list of jurisdictions which offer ‘unfair’ tax competition.

Partly as a result of this commitment, the Government passed a range of replacement legislation in 2001 including the Financial Services Development Act 2001, which set up a Financial Services Commission to replace MOBAA.
Most existing offshore legislation has been ‘grandfathered’ into the new regime.
In August 2007, the Mauritius National Assembly adopted new Financial Services legislation, establishing the independence of the Financial Services Commission and liberalizing the international ‘global business companies’ regime. Introducing the Bill to Parliament, the Deputy Prime Minister and Minister of Finance and Economic Development, Mr Rama Sithanen said: “in line with our philosophy to simplify processes and procedures, to remove hurdles to investment, to facilitate delivery of services, and to achieve international standards in every activity so as to be globally competitive, we are improving and modernising the legal framework that govern the non-bank financial services sector.”

The bill became the Financial Services Act 2007 and provides a common framework for licensing and supervision of all financial services other than banking and for the global business sector.
The new law specifically provides for the independence of the Financial Services Commission as a regulatory body.
The Financial Services Act redefines the concept of global business. Under the new provisions, all resident companies conducting business outside Mauritius may opt for an alternative legal regime. The former restrictions on activities conducted by Category 1 Global Business Companies are being removed. The Act also provides for the designation of industry associations in all financial services sectors as Self Regulatory Organisations. Two other bills were also approved by the assembly at this time; The Securities (Amendment) Bill and the Insurance (Amendment) Bill. The Securities (Amendment) Bill extends the scope of “securities” and “exchanges”, thus enabling the Commission to approve the trading of a wider range of instruments and license Commodity and other exchanges. The Insurance (Amendment) Bill removes certain administrative obligations on branches of foreign insurers operating in Mauritius and provides for greater flexibility in exceptional circumstances.
The Financial Services Act 2007, the Securities Act 2005 and the Insurance Act 2005 came into force on 28 September 2007.

Mauritius Forms of Offshore Operation

Offshore operations may take place within the following forms:

• GBC Category 1 (old Offshore Company)
• GBC Category 2 (old International Company)
• Limited Life Offshore Company
• General Partnership
• Limited Partnership
• Offshore Trust

In addition, the Free Port, the Export Processing Zone and the Export Service Zone, whose occupants don’t have to have offshore status as such, offer benefits broadly similar to those available to offshore companies; see Free Trade Zones for details.
The various forms of offshore entity in Mauritius are limited as regards the trading they can do in the jurisdiction, but not as regards the running of their businesses from Mauritius
The business of an offshore company must be conducted in foreign currency other than for day-to-day transactions; and offshore companies must not do business in Mauritius, other than to take professional advice, employ local labour, and to rent property.

Incentives/Regimes

Mauritius Investment Fund Management

Mauritius did not, until recently, legislate specifically for collective investment schemes. MOBAA developed a set of regulatory practices to accommodate investment fund managers, which were ‘grandfathered’ into the Financial Services Development Act 2001 (as amended). This has however, been replaced by the Financial Services Act 2007, which has codified the framework for collective investment schemes in Mauritius.
Funds are normally incorporated as public companies under the Companies Act 1984 (now the Companies Act 2001), and are referred to as Investment Companies. Bearer shares, shares of no par value and debentures are not permitted.
A new Securities Bill was passed by the National Assembly in March, 2005.
The 2005 Securities Act establishes a framework for the regulation of securities markets, market participants, self-regulatory organisations, and the offering and trading of securities to ensure fair, efficient and transparent securities market. It aims at striking an appropriate balance between the protection of investors, the interest of market makers and market participants and the financial system in general.

280 fund management companies were operating at the end of 2003, with a total NAV of more than US$9bn, up 50% on the previous year. The number of investment funds had increased to 331 in May, 2005, with $16bn under management.
An Investment Company can be closed-ended or open-ended. Closed-ended Investment Companies can be listed on the Mauritius Stock Exchange. Closed-ended Investment Companies used to be formed as Limited Life Companies under the MOBA (Companies) Regulations 1995 (this was the format that would be preferred in most cases by a US investment partnership). Limited Life Companies can now be formed under the Companies Act 2001.
Either type of Investment Company can function as an umbrella fund, and an Investment Company can be a member of an umbrella fund established elsewhere.

MOBAA (now the Financial Services Commission) requires a substantial amount of information about a proposed Investment Company during the licensing process, including its investment policy, the antecedents of the investment manager and the promoters, its adherence to marketing and investment regulatory regimes in other countries, etc. Normally, MOBAA (the FSC) has a number of administrative requirements:

• An Offshore Fund must have a local administrator, custodian (usually a bank) and auditor;
• Accounts and accounting documents are kept in Mauritius;
• The share register is kept in Mauritius;
• Issues and redemptions of shares are carried out in Mauritius;
• Calculation of the NAV is carried out in Mauritius.

While this sounds restrictive, in practice the FSC permits part or all of these functions to be performed elsewhere as long as the arrangements are clearly transparent and available to Mauritian supervisors.

Funds operating from Mauritius must produce a prospectus whose content is governed by a set of FSC rules. Funds must file full financial statements with the FSC half-yearly (unaudited) and annually (audited). Abbreviated quarterly asset statements are also required. The FSC has a continuing right of inspection over Investment Company’s records.
Investment Companies have access to Mauritius’ Double Tax Treaties; for details of their tax treatment generally, see Offshore Legal and Tax Regimes. Fees payable are a $500 (at the time of writing) licensing processing fee and a $1,500 annual license fee.

The Stock Exchange Act 1988 established a small but thriving exchange which is run by the Stock Exchange of Mauritius Ltd (SEM), a private limited company. The Act also established the Stock Exchange Commission (SEC), which controls and supervises stock exchange operations.
At the time of launch, two markets operated: the Official List and the Over-The-Counter Market (for unlisted shares). The Development & Enterprise Market (DEM), which was launched in August 2006, replaced the OTC market and provided a listing facility for small companies and start-ups.

The SEMDEX – the all shares index – reflects capitalisation based on each listed stock which is weighted according to its shares in the total market.
The Official Market started its operations in 1989 with five listed companies and a market capitalisation of nearly US$92 million. The market capitalization of the Stock Exchange of Mauritius at the end of 2002 was Rs40bn. At the end of 2005, there were 41 companies listed on the Official Market, representing a market capitalisation of almost US$2.6 bn.
An additional index, known as the Total Return Index, or SEMTRI, was subsequently launched to provide a performance measurement tool for the local market.
The stock market was opened to foreign investors following the lifting of exchange control in 1994.

In September, 2005, the Mauritius Stock Market unveiled its plans for its alternative market, the Development & Enterprise Market (DEM), designed for companies previously quoted on the Over-The-Counter (OTC) Market, Small and Medium-sized Enterprises (SME’s) and newly set-up companies which possess a sound business plan and demonstrate a good growth potential.
It is meant for companies seeking an organised and regulated market to raise capital to fund their future growth, improve liquidity in their shares, obtain an objective market valuation of their shares and enhance their overall corporate image. The rules governing the DEM are less stringent than those of the Official Market, and the market is open to foreign investors.
With the implementation of the DEM, the OTC Market was phased out in January 2007.
In November, 2005, SEM announced that it had been admitted to membership of the World Federation of Exchanges (WFE) during its November general assembly.
The exchange is only the second bourse in sub-Saharan Africa after Johannesburg to join the group, which sets standards for stock exchanges around the world.

Mauritius Ship Management and Maritime Operations

Registration in the Mauritius Open Ship Registry is regulated by the Mauritius Merchant Shipping Act 1986 and the Mauritius Shipping (Amendment) Act 1992, which are modelled on the English Merchant Shipping Act. Administration of the Registry is in the hands of the Director of Shipping, Ministry of Trade and Shipping.
Port Louis is the Home Port of the Registry and houses its Head Office. Provisional Certificates of Registry can also be issued by Mauritian Embassies, Consulates and Honorary Consuls worldwide.
The following categories of person can own and register ships or bareboat charters lasting a minimum of 12 months:

• Citizens of Mauritius;
• Mauritian-registered companies controlled by Mauritian citizens;
• Other companies whether or not Mauritian, subject to approval;
• Mauritian GBC1 and GBC2 (old Offshore Companies and International Companies)

Provided that their activities are confined to the registering of ships under the Mauritian flag and that their shipping activities are carried out exclusively outside Mauritius.
Ships to be registered must be not more than 15 years old and class must be maintained with one of the classification societies approved by the Director of Shipping. Third party insurance must be evidenced, also compliance with the major international maritime conventions.
The actual registration process is carried out through the Financial Services Commission and involves the incorporation of an Offshore Company or an International Company if one does not already own the ship. Provisional registration is good for six months. A normal range of documentation is required during the registration process.

Mortgage rules are in line with the British System of Mortgages. Mortgages, which can apply during provisional registration, and their discharge, are registered with the Director of Shipping.
Mauritius also operates an International Aircraft Registry under the MOBA Act 1992 (now the Financial Services Development Act 2001, as amended). This Registry is administered by the Financial Services Commission, while the licensing, certification and regulation of aircraft and their operations is carried out by the Department of Civil Aviation.

Mauritius Insurance

Captive Insurers in Mauritius used to governed by the Offshore Insurance Regulations 1992, issued under the MOBA Act 1992. MOBAA also issued a set of ‘Guidelines on the Regulation and Supervision of Captive Insurance Business in Mauritius’.
The Financial Services Development Act 2001 brought the insurance sector under the new Financial Services Commission.
The Mauritius Financial Services Commission announced in April, 2005, that a new Insurance Bill had been passed by the National Assembly. The Insurance Act 2005 provides for the implementation of the International Association of Insurance Supervisors’ (IAIS) Standards and Core Principles and focuses on specific regulatory issues relating to capital adequacy, solvency, corporate governance, early warning systems and the protection of policyholders and the financial system at large.

Applications for captive status in Mauritius are normally made through a local Captive Management company, which effectively has delegated powers from the Financial Services Commission. Applications will include notarised company documents, a certificate of compliance with local laws from a Mauritius lawyer, actuarial information, a business plan, and the name of a Principal Representative who is accountable to the FSC. A licensed captive may need to retain the services of a Captive Management company on an ongoing basis.
Captive Insurers, like Offshore Companies in general, can be formed as companies under the Companies Act 1984 (now the Companies Act 2001), or as branches. Both private (single-company) and public (3rd party) captives are allowed; there is provision for both rent-a-captives and for protected cell companies (see below).

The license fee for formation of a captive at the time of writing is $500, and the ongoing annual registration fee is $1,500. Annual filing required by the FSC includes audited financial statements, solvency certificates and actuarial valuations.
The minimum paid-up capital required for a captive is $100,000 for a general insurer, $250,000 for a long-term insurer, and $350,000 for a combined company. Long-term liabilities must not exceed the value of the fund; for general business admitted assets must amount to at least 75% of admitted liabilities; and assets must exceed liabilities by $100,000 or 15% of net premium income, whichever is higher.
23 insurance companies were registered in Mauritius as of June 2006.

Offshore Banking Units

Mauritius has adopted a cautious attitude towards banking development, having admitted only in the region of ten ‘Offshore Banking Units’ (OBUs). In any case, the distinction between ‘onshore’ and ‘offshore’ banks has since been removed.
The legal and supervisory regime for OBUs is to be found in the Banking Act 1988, with amendments in the MOBA Act 1992, the Foreign Dealers Act 1994, the Finance Act 1998 and the Financial Services Development Act 2001 (since superceded by the Financial Services Act 2007). The Bank of Mauritius (the Central Bank) is responsible for licensing, regulation and supervision of the banking sector.
Offshore Banking means banking and investment banking business conducted in currencies other than the Mauritius rupee. OBUs may engage in fund administration and portfolio management, and offer treasury, custody and trust services.
OBUs, like Offshore Companies in general, can be formed as companies under the Companies Act 1984 (now the Companies Act 2001), or as branches. The application process is fairly rigorous, and includes provision of audited financial statements for the past 5 years. The licensing processing fee is $3,000 (at the time of writing), and the annual license fee is currently $20,000. Updated regulations, in the form of the Banking (Processing and Licence Fees) Regulations 2007 have recently been introduced.

In March, 2005, the Mauritius National Assembly passed two bills – the Bank of Mauritius Bill and the Banking Bill – designed to give the Central Bank more autonomy and to remove differences between the offshore and onshore banking regimes.
Then Prime Minister Paul Berenger said it was the government’s decision to give the Bank of Mauritius real independence. He also made a point of mentioning the statutory basis for banking confidentiality incorporated in the new legislation. Requests for information in future would have to be authorised by a judge of the Supreme Court.
Although the opposition had some criticisms of some aspects of the corporate governance regime set up for the central bank, and of the bank’s supervisory procedures, these weren’t sufficient to prevent a unanimous vote in favour of the bills.
Under the new law, the Bank of Mauritius offers only one type of banking licence as opposed to the two (onshore and offshore) previously available. The Banking Act clarifies the division of responsibilities for the financial; sector between the central bank and the Financial Services Commission. The Act also annulled the existing Foreign Exchange Dealers Act; in future, such dealers will fall under the aegis of the central bank.
The existing rule that 40% of a bank’s directors should be independent, currently forming part of the Rules on Corporate Governance issued in 2001, forms part of the new law. The definition of independent director is: ‘having no relationship with, or interest in, whether past and present, the financial institution or its affiliates, which could reasonably be perceived to materially affect the exercise of his judgment in the best interest of the financial institution’.
The minimum capital requirement for a bank was increased from Rs 100m to Rs 200m, but banks were allowed to increase their capital in two stages, from Rs 100m to Rs 150m by 1st July, 2005, and then to Rs 200m by 1st July, 2006.

The new law gives the central bank power to appoint a ‘Conservator’ to protect the assets of a bank’s depositors if ‘the financial institution has, or its directors have (i) engaged in practices detrimental to the interests of its depositors, (ii) knowingly and negligently permitted its chief executive officer, any of its managers, officers or employees to violate any provision of the banking laws, any enactment relating to anti-money laundering or prevention of terrorism or guidelines and instructions issued by the Central Bank. The law also enables the central bank to establish a deposit insurance scheme as a protection ‘against the loss of part of all of deposits in a bank that will contribute to the stability of the financial system in Mauritius and minimize the exposure to loss’.
Other provisions included a strengthening of KYC rules, laying down that ‘every financial institution shall only open accounts for deposits of money and securities, and rent out safe deposit boxes, where it is satisfied that it has established the true identity of the person in whose name the funds or securities are to be credited or deposited’. Banks will also have to rotate their auditors at least once every five years.

Taxation

General

The taxation of resident Mauritian companies is governed by the Income Tax Act 1995, which is substantially based on UK tax law. However, there are many special taxation regimes applying to particular types of company: for companies operating offshore under the Mauritian Offshore Business Activities Act 1992 (MOBA Act 1992) and supervised by MOBAA (but from 2001 under the Financial Services Development Act 2001, itself replaced by the Financial Services Act 2007, supervised by the Financial Services Commission), for companies holding various types of certificate under the Industrial Expansion Act 1993.
A company is treated as resident in Mauritius if it is incorporated in Mauritius or if it is managed and controlled from Mauritius. A resident company is taxed on its worldwide income, which includes foreign-source income.

The 2005 budget introduced an ‘alternative minimum tax’ to be applied to distributions by companies which pay no tax, at a rate of 5%. However, see below for changes to this.
Taxable income includes rents, dividends, royalties and interest; however, dividends paid by ‘tax incentive’ companies, companies listed on the stock exchange, and companies which pay the full tax rate are exempt from tax in the hands of the receiving shareholder, whether resident or not. There is no capital gains tax, except on gains arising from the parcelling out of land. Other capital gains are not included in taxable income.
Deputy Prime Minister and Minister of Finance and Economic Development, Rama Sithanen announced in the 2007 budget that the introduction of a flat corporate income tax would be brought forward by two years to 1 July, 2007. The flat rate also applies to personal incomes.

Taxable Income and rates

The rate of corporate income tax in Mauritius is currently 15% on chargeable income, having been reduced from 25% as of 1st July, 2007.
Key changes to the domestic corporate tax regime introduced in the 2006-07 budget included:

• All items of income exemptions, except those relating to dividends, the global business sector and non-profit institutions are to be removed.
• Tax on interests, royalties, fees for technical services, rental income and payments to contractors and sub-contractors is to be deducted at source, above a threshold (for interest) of Rs 120,000 in a year.
• The rate of Alternative Minimum Tax (AMT) was raised from 5% to 7.5%.

The 2007/8 budget introduced a Special Levy on the banking sector, to apply only to profitable banks. It is computed at 0.5% of the turnover and 1.7% of the profits made. For the first year of application of the levy i.e. in 2007/08 the amount payable was to be 30% of the formula.
The 2007/8 budget also introduced an Advance Payment System (APS) for companies, whereby they would be required to effect quarterly provisional tax payment on basis of the chargeable income of the preceding tax return. Final reconciliation of tax liability will be done when the annual tax return for that year is submitted.

To avoid double tax payment in the first year the tax due for the previous year would be allowed to be spread over 3 years, in equal installments. The first quarterly payment was required from large companies (turnover of more than Rs 100M) as from financial year starting 1st July 2008, and for small and medium companies, as from 1st July 2009.
Under another change in the 2007/8 budget, all companies with an annual turnover of above R30 million or having more than 50 employees are required to submit their income tax and VAT returns electronically.

In the 2008 budget it was announced that appropriate amendments would be made to legislation so that traditional banking and Islamic banking are taxed in the same way.

Mauritius Branch or Subsidiary

Branches and resident subsidiary companies pay tax in Mauritius on the same basis; dividends (for the subsidiary) and net profits (for the branch) can both be remitted abroad without deduction of withholding tax. However, taxable profits are calculated somewhat differently: a subsidiary can deduct interest and royalties paid to its parent but cannot make an allowance for head office expenses, whereas a branch can deduct reasonable head office expenses but cannot deduct interest and royalties paid over.

Mauritius Calculation of Taxable Base

Expenditure and losses are generally allowable in the year in which they are incurred to the extent that they are incurred in the production of gross taxable income. The following are some particular types of deduction that are permitted in addition:

• Capital and investment allowances based on actual cost at varying rates depending on the type of asset;
• Interest costs;
• Exchange losses from trading;
• Reasonable directors’ remuneration;
• Bad and irrecoverable debts;
• Approved pension contributions;
• Royalties;
• Past trading losses;
• Rent premiums;
• 200% of overseas marketing costs for tourist or export businesses;
• Local taxes.

The following are some particular types of deduction that are not permitted:

• Depreciation;
• Exchange losses on capital assets (added to cost base);
• Debenture interest, when the debentures are issued in proportion to shareholdings (treated as distributions);
• Excessive fees paid to directors or their families (treated as distributions);
• Corporate income and capital gains (morcellement) taxes; land transfer tax;
• Provisions;
• Entertainment expenses;
• Carried back losses.

There is group relief only to the extent that an ‘incentive’ company can transfer losses to its parent; and there are some special arrangements in the sugar industry.

Mauritius Filing Requirements and Payment of Tax

The tax year is from 1st July to 30th June. There is a self-assessment system, on a previous year basis; a company must submit its tax return by the following 31st January along with full payment of tax due. Companies with an accounting reference date other than 30th June must file and pay by the 30th September following the end of their year.
The Commissioner of Income Tax may issue an assessment of his own if he disagrees with the company’s assessment. There is an appeal process, winding up eventually at the Supreme Court.
The 2007/8 budget introduced an Advance Payment System (APS) for companies, whereby they are required to effect quarterly provisional tax payment on the basis of the chargeable income of the preceding tax return. Final reconciliation of tax liability will be done when the annual tax return for that year is submitted.

Mauritius Withholding Tax

There are no formal withholding taxes as such in Mauritius. Dividends, royalties and interest are chargeable to tax in the hands of resident companies and individuals. Recipients of dividends that have been paid out of full rate-taxed income will not be taxed again. However, anyone making payments outside Mauritius is deemed to be the agent of the recipient, and is responsible for paying over tax that would be due on the payment, which has the effect of a withholding tax.
Dividends from certain types of company (‘incentive’ companies, listed companies, offshore or international companies, and freeport companies) have various degrees of freedom from taxation. Interest payments to non-residents are subject to preferential rates of tax under Double Tax Treaties. In practice, tax is generally withheld on interest payments to non-residents, although not to residents.

Mauritius Tax Treatment of Offshore Operations

GBC1 (old Offshore Company)

A GBC1 (old Offshore Company) pays corporate income tax at 15% (0% if it was incorporated before 1st July 1998). In fact until 2003 it could opt to pay tax at any rate it chooses between 15% (or zero) and the top corporate tax rate, and normally made this choice according to the rules governing ‘controlled foreign corporations’ in the country where its major shareholder is based. Legislation enacted in 2000 removed the facility to choose tax rates from 2003.
GBC1 Companies are also exempt from stamp duty, land transfer tax, and capital gains (morcellement) tax. The expatriate staff of offshore companies pay half the normal rate of personal income tax; two of them per company can import cars and household equipment free of customs duty.

There are no withholding taxes or equivalent deductions on dividends or other payments made by GBC1 companies to non-resident shareholders (residents aren’t normally allowed to hold the shares of such companies).

GBC1 Companies are regarded as being resident, and are therefore able to take advantage of Mauritian Double Tax Treaties. The tax treaty with India is particularly favourable, and Mauritius is a favoured location for holding companies for those trading with or investing in India.
GBC1 Companies can also utilise the unilateral foreign tax credit which is 80% of the Mauritian tax rate (leaving a residual liability of 20% of the Mauritian tax rate = 3%); the credit used to be at the rate of 90% and it is possible that there will be further reductions.
Offshore Banking Units (since abolished), Captive Insurers and Offshore Investment Funds, all of which have the GBC1 Company as their basis, are taxed as for GBC1 Companies in general. The same applies to GBC1 Companies holding ships on the Mauritian Open Registry (this is the mandatory structure), but additionally, earnings from shipping operations are exempt from tax, the crew of the ships are exempt from payroll taxes, and materials, fuel, equipment etc for the ship are all free of customs and excise duties.

GBC2 (old International Company)

A GBC2 (old International Company), – officially an exempt-status GBC1 Company – has the same tax benefits as a GBC1 Company; however, it is considered as non-resident, and cannot make use of Mauritian Double Tax Treaties.

Partnerships

Both General Partnerships and Limited Partnerships can acquire offshore status under the Code de Commerce Amendment Act 1995; and under the Finance Act 1996 they are given access to Mauritian Double Tax Treaties. Offshore partnerships would normally have non-resident partners, and they are treated as companies for tax purposes, in a way that is analogous to the treatment of GBC1 and GBC2 Companies.

Offshore trusts

Offshore trusts are taxed in the same way as GBC1 and GBC2 Companies, see above. However, chargeable income is defined as the difference between (a) the net income derived by the trust; and (b) the aggregate amount distributed to the beneficiaries under the terms of the trust deed. Moreover, any amount distributed to non-resident beneficiaries is exempt from Income Tax.

An offshore trust is allowed a credit for foreign tax on its foreign-source income. If no written evidence is presented to the Mauritius Commissioner of Income Tax showing the amount of foreign tax charged, the amount of foreign tax shall nevertheless be conclusively presumed to be equal to 80 per cent of the Mauritius tax chargeable with respect to that income.
An offshore trust may opt by written notice to the Mauritius Commissioner of Income Tax to be treated as non-resident in Mauritius for tax purposes, in which case it will not be subject to any income tax in Mauritius. However, being non resident, the offshore trust may not benefit from Mauritius’ extensive network of double taxation agreements.

Mauritius Offshore Activities

The various forms of offshore entity in Mauritius are limited as regards the trading they can do in the jurisdiction, but not as regards the running of their businesses from Mauritius
The business of an offshore company must be conducted in foreign currency other than for day-to-day transactions; and offshore companies must not do business in Mauritius, other than to take professional advice, employ local labour, and to rent property.
Companies in the Export Processing Zone and the Export Services Zone are allowed, with permission, to conduct 10-20% of their trading domestically; but profits raised in this way will be taxed according to the normal domestic regime.

Corporate legislation

General

Until 2001, companies in Mauritius were formed under the Companies Act 1984, which was modelled on the English Companies Act 1948.

The new Companies Act 2001 replaced most of the Companies Act of 1984, other than sections dealing with insolvency and public companies, which remained in force until new legislation was brought forward in separate bills in 2004.

The Government’s starting point for the new law was New Zealand company law, which is widely regarded among English-speaking jurists as representing the best available compromise between the various modern trends in corporate legislation, now that English law has been so influenced by EU law as to be no longer satisfactory as a model for common law jurisdictions.

The incorporation and management of Offshore Companies and International Companies, which were previously constituted under the separate International Business Companies Act 1994, have been brought under the Companies Act 2001, and the two types of company are now known as Global Business Company 1 (GBC1) and Global Business Company 2 (GBC2).

Some key features of the new legislation are as follows:

• The Act introduced a simple form of incorporation enabling a company to be incorporated on the filing of a single application together with the necessary consents from the proposed directors and secretary and a notice of reservation of the proposed company name. It is not necessary to submit a constitution at the time of incorporation. If a company wants to depart from the standard requirements set out in the Act, then, either on incorporation or subsequently, it needs to file a separate constitution setting out the departures from the standard form. The new legislation also recognises the reality of ‘nominee’ shareholders by allowing companies to operate with just one shareholder.
• The Act does away with the need for a separate objects clause, and provides that a company has the rights, powers and privileges of a natural person; this incidentally removes the remains of the one-time ultra vires doctrine. This would not preclude a company from stating specific objects in its constitution if it wished to limit the capacity of a company in this way.
• The Act replaces the Memorandum and Articles of Association by a single constitution, which is no longer required to be notarised.
• Private companies continue to be prohibited from offering shares or debentures to the public, and are able to dispense with the holding of company meetings by passing resolutions by means of entry in the company minute book. Exempt private companies will not be required to appoint a qualified auditor or a qualified secretary and will be entitled to file only a summary statement of accounts with the Registrar.
• The proposed legislation retains the distinction between exempt and non-exempt private companies in the same form as in the existing legislation.
• The Act introduces no par value shares and permits a company to issue shares which are not designated with any monetary value.
• The Act incorporates the new procedure of self-purchase and holding of treasury shares introduced by the Finance Act 1999.
• The new legislation makes provision for a company to provide in its constitution for the company to have power to indemnify or insure its directors, secretary or employees in accordance with the limitations provided by the Act.
• The Act contains a requirement that public companies and non-exempt private companies are required to prepare and present their accounts in accordance with international accounting standards and that exempt private companies are required to present their accounts in accordance with accounting practices and principles that are reasonable in the circumstances and having regard to any requirements set out in regulations made under the Act.
• The old Companies Act required all companies to appoint an auditor but relieved exempt private companies from the requirement to appoint a qualified auditor. The new Act allows an exempt private company not to appoint an auditor (whether qualified or unqualified).
• New provisions allow for the continuation in Mauritius of companies which are incorporated elsewhere and also provides for the incorporation of limited life companies.
• Legislation introduced by the Financial Services Act 2007 has redefined the concept of global business in Mauritius. Under the new provisions, all resident companies conducting business outside Mauritius may opt for an alternative legal regime. In addition, the former restrictions on activities conducted by Category 1 Global Business Companies are being removed.
• The Bill also provides for the designation of industry associations in all financial services sectors as Self Regulatory Organisations.

Mauritius Legal Forms:

Mauritius Private Company Limited by Shares

A private company is one which says it is private in its constitution and which restricts the transfer of its shares, which cannot be offered to the public; there is a minimum of 1 and a maximum of 25 members.

A private company can be exempt or non-exempt: exempt companies are those which have issued share capital and reserves below MR 1m and turnover below MR 2m. Exempt private companies are required to present their accounts in accordance with accounting practices and principles that are reasonable in the circumstances and having regard to any requirements set out in regulations made under the Companies Act. (Exempt status is not available to offshore companies other than through the GBC2 – old International Company – form).

Mauritius Company Limited by Guarantee

The Company Limited by Guarantee (the hybrid Company Limited by Guarantee and Having Shares is no longer permitted), may be used only for a non-profit organisation. The liability of the members is limited to the amount they have undertaken to contribute to the company; there must be a minimum of MR 5,000 of guarantees.

Mauritius Public Company Limited by Shares

A public company is defined as one which is not a private company and which has at the end of its name the words ‘Public Limited Company’ or ‘P.L.C.’. A public company must have a minimum of two members.

Mauritius Foreign Company

A company incorporated outside Mauritius can register itself in Mauritius and will then be treated for most purposes as a Mauritius-incorporated company. Under the old legislation its status was properly that of a branch, but the new Companies Act provides for continuation under Mauritian law. The following documents need to be provided to the Registrar:

• Notarised Certificate of Incorporation and Constitution (Memorandum and Articles of Incorporation);
• List of directors and details of the powers of local directors;
• Particulars of registered office in Mauritius;
• Names of two resident persons authorised to act on the company’s behalf in Mauritius, and their declaration.
• Financial accounts have to be lodged with the Registrar within 3 months of the company’s annual general meeting.

Direct ownership by foreigners of an onshore Mauritian company, or part of it, requires permission from the Prime Minister’s Office, which is not automatic if the activity to be carried on is one which is in competition with Mauritian-owned companies.

Mauritius GBC1 Company (Offshore Company)

The Global Business Company Category 1 (GBC1) replaced the old Offshore Company under the Companies Act 2001.

A company incorporated under the previous Companies Act 1984, or a registered branch of an overseas company, used to be able to apply for Offshore Company status under the Offshore Business Activities Act 1992, which varied some of the terms of the 1984 Act and set up the MOBAA (Mauritius Offshore Business Activities Authority) to supervise the offshore sector. The 1992 Act listed the activities which MOBAA would approve:

Aircraft leasing and financing;
Authority approved activities;
International consultancy services;
International employment services;
International financial services;
International franchising and licencing
International management of assets;
International technology services including data processing;
International trading;
Offshore banking operations;
Offshore management of funds including pension funds;
Offshore insurance operations;
Shipping operations including ship management;
The operation of a headquarters.
MOBAA has now been abolished and replaced under the Financial Services Development Act 2001 by a Financial Services Commission; the existing legislation was largely ‘grandfathered’ into the new regime.

In terms of the Financial Services Development Act 2001, a GBC1 is defined as a company engaged in qualified global business and which is carried on from within Mauritius with persons all of whom are resident outside Mauritius and where business is conducted in a currency other than the Mauritian Rupee. A GBC1 may be locally incorporated or may be registered as a branch of a foreign company. The business of an GBC1 Company must be conducted in foreign currency other than for day-to-day transactions; and GBC1 companies must not do business in Mauritius, other than to take professional advice, employ local labour, and to rent property.

A GBC1 Company is treated as resident, and has access to Mauritius’ double tax treaties, subject to possession of a Tax Residency Certificate. See Offshore Legal and Tax Regimes for further details of the taxation regime for offshore companies. They pay a relatively high annual registration fee. Annual accounts must be filed, but the GBC1 company is exempted from the need to file an annual return.

GBC1 companies are suited to public financial operations such as fund management; for holding private assets, a GBC2 (International) Company or an Offshore Trust (see below) is more suitable.

Mauritius GBC2 (International Company)

The Global Business Company Category 2 (GBC2) replaced the old International Company under the Companies Act 2001. The International Company (IC) is the Mauritian equivalent of the International Business Company found in many offshore jurisdictions. It was established by the International Companies Act 1994, but is now constituted under the Companies Act 2001. The GBC2 is ideal for international trading, invoicing, licensing, international consultancy business and is often used to hold investments or other assets.

An GBC2 can take any of the forms permitted under the Companies Act 1984 (now the Companies Act 2001). Unlike the Offshore Company, the IC used to be able to issue bearer shares, but this is no longer permitted – however, in other respects the share structure can be flexible:

• There is no minimum capital requirement although at least one share must be issued and paid up;
• Registered shares and a variety of shares such as preferred, redeemable, and fractional are allowed;
• Shares may be issued with or without par value;
• Redeemable preference shares may be issued;
• Only one shareholder and one director are required.

However, a GBC2 is treated as non-resident, cannot get the benefit of Mauritius’ double tax treaties, and cannot operate in the Free Port. Mauritian citizens are not permitted to own shares in a GBC2. There are a number of other restrictions on GBC2s; they may not:

• Raise capital by public subscription;
• Carry on banking or insurance business;
• Own real property in Mauritius;
• Own or manage a collective investment fund;
• Provide nominee services, or provide trustee services to more than three trusts.
• GBC2 companies are not required to file annual accounts, and confidentiality may be preserved through the use of nominee directors and shareholders.

Mauritius Limited Life Company

The Limited Life Company (LLC) was introduced by the Offshore Business Activities (Companies) Regulations 1995. This form is not available to onshore companies, but only to GBC 1 and 2 Companies.

The LLC allows the dissolution of the company on the occurrence of specified events, and has the nature of a partnership under US tax law. It is often used for private fund management or investment purposes.

The Companies Act 2001 provides for LLCs, unlike the 1984 Act.

A Global Business Company may apply to the Registrar of Companies either at the time of incorporation, continuation or after to be designated as an LLC.

Mauritius General Partnership

The general partnership in Mauritius is governed by the Code de Commerce and is known as the Societe en Nom Collectif. Partners may be individuals or companies. In a general partnership, a partner’s liability is unlimited. Under the Code de Commerce Amendment Act 1985, general partnerships can acquire offshore status.

The Finance Act 1996 further improved the situation of offshore partnerships, allowing them the benefit of Mauritius’ double tax treaties.

Mauritius Limited Partnership

The limited partnership in Mauritius is governed by the Code de Commerce and is known as the Societe en Commandite Simple. Partners may be individuals or companies. A limited partnership consists of one or more general partners with unlimited liability, and one or more limited partners, who are liable only to the extent of their capital contributions. Under the Code de Commerce Amendment Act 1985, limited partnerships can acquire offshore status.

The Finance Act 1996 further improved the situation of offshore partnerships, allowing them the benefit of Mauritius’ double tax treaties.

Mauritius Sole Proprietorship

The status of sole trader is widely used in Mauritius, and is governed by the Code de Commerce. The business name of a sole trader, who has unlimited responsibility for his liabilities, must be registered with the Registrar of Companies, if it is other than the name of the sole trader. An annual return must be submitted to the Commissioner of Income Tax.

Mauritius Trusts

Mauritius Offshore Trusts are set up under the Trusts Act 2001 (they used to fall under the Offshore Trusts Act 1992); the regime for trusts is based on English common law. Offshore trusts are subject to the following conditions:

• The settlor must not at any time be a resident of Mauritius, although an offshore company can be a settlor;
• At least one trustee must be resident in Mauritius; offshore companies (which are deemed to be resident) can be trustees if authorised by MOBAA;
• Trust property must not include real property situated in Mauritius.
• Trusts pay a one-time registration fee; there are no disclosure or annual reporting requirements.

The Trusts Act 2001 incorporated a thorough modernisation of Mauritian trust law which is fully described in Offshore Law

Protected Cell Companies (PCC)

The Protected Cell Company (PCC) Act 1999 provides for a company incorporated for the purposes of carrying out a global business activity under the Financial Services Development Act to create cells within its capital for the purposes of segregating the assets within that cell from claims related to the other assets. A PCC is governed by the PCC Act 1999 (as amended), and the Companies Act 2001.
A PCC may be directly incorporated under the Companies Act 2001. A PCC may be registered as a foreign company by way of continuation as a PCC, provided that the incorporation and registration requirements prescribed in the Companies Act 2001 are satisfied. An existing company may be converted into a PCC.
The incorporation procedures for a PCC is similar to that of a GBC 1 and therefore the application is channeled through the Financial Services Commission.
In terms of the payment of dividends and, generally, taxation, each protected cell is treated independently.
The Protected Cell Companies (Amendment of Schedule) Regulations 2005, were enacted in July, 2005, following various representations made by the industry to extend the use of the PCC structure to other business activities besides CIS and insurance businesses. The new list of qualified global business activities for a PCC is as follows:

• Asset holding;
• Collective investment schemes;
• Insurance business;
• Specialised collective investment schemes; and
• Structured finance businesses.

Banking

The Bank of Mauritius is the Central Bank of the country. It regulates and supervises the activities of banks to make sure that the banking system functions properly. The Bank also plays a major role in creating a conducive environment to enhance economic expansion.

The Development Bank of Mauritius Limited provides long term finance to companies involved in industry, tourism, agriculture and other economic sectors. There is also a network of commercial banks which provide a range of services in the financial sector. International transactions are carried out very fast given the fact that the banks are connected to the SWIFT system.

Largest banks in Mauritius:

• Bank of Baroda – Offer a variety of banking services through our international network, which varies from country to country.

• Bank of Mauritius – The Central Bank of Mauritius.

• Barclays Mauritius – Provide comprehensive support to businesses with regional operations who may be seeking to co-ordinate their banking arrangements throughout Africa and beyond.

• Deutsche Bank – Emphasis on prudently regulated offshore banking services, a rapidly growing network of double taxation agreements that spans the globe, a stable political and economic environment, good infrastructure and a well educated, multilingual workforce.

• Standard Chartered Bank – The Bank offers a full range of services in all major currencies and has recently been licensed to transact in the local currency, the Mauritian Rupee.

• State Bank Of Mauritius – The second largest bank in Mauritius with a market share of about 25% of domestic banking assets.