Global Business Tax Planning - Mauritius

Mauritius as Tax Heaven

(10 May2023)

 Mauritian Financial Services Minister Mahen Kumar Seeruttun has told the nation's Parliament that Hindenburg Research's allegations of the presence of 'shell' companies in the Island nation are 'false and baseless' and that Mauritius was in compliance with OECD-mandated tax rules.

Listing out the requirements for companies registering in Mauritius, the minister said they first have to carry out their core income-generating activities in or from the country. They must be managed and controlled from Mauritius, have at least two directors resident in Mauritius, maintain at all times their principal bank account in the country, keep and maintain at all times their accounting records at their registered office in Mauritius and prepare their statutory financial statements and cause those financial statements to be audited in Mauritius.

With respect to the allegation of Mauritius being a tax haven, I wish to inform the House that Mauritius strictly complies with the international best practices and has been rated as compliant with the Organisation for Economic Cooperation and Development OECD standards," the Mauritian minister told the Parliament.

Since 2018, Mauritius has reformed its global business framework and tax regime with a view to removing harmful tax practices. "As per the peer review conducted by the OECD is satisfied that Mauritius does not have any harmful features in its tax regimes, thus recognizing Mauritius as a well-regulated, transparent and compliant jurisdiction," he said.

As from 01 July 2021, grandfathered companies holding Category 1 Global Business Licences will be converted into Global Business Licence companies (GBL) and companies holding Category 2 Global Business Licences will cease to exist. Prior to 01 July 2021, grandfathered GBC 2 companies can either be converted into GBL or Authorised Companies. 

In order to maintain their GBL licences, GBL companies will have to adhere to the new substance requirements such as carrying out their core income generating activities (“CIGA”) in or from Mauritius. 

The deemed 80% foreign tax credit will no longer be available. An 80% exemption on specific types of income including foreign dividend and interest, subject to meeting prescribed conditions, is now available. Other types of income, e.g. management fees and service fees will now be taxable at 15%. 

Post the grandfathering period, income flows between GBL companies will no longer be considered as foreign source income. Therefore, income which were previously exempt from tax may now become taxable in Mauritius.  

Erstwhile Structure of GBC 1 and GBC 2 

Global Business Category 1

Mauritius as one of the leading International Financial Services Centre offers two most common types of companies to international clients, namely the Category One Global Business companies and the Category Two Global Business companies. The choice between the two types of companies will depend on a number of factors, some of which being the proposed activities and the geographical area of operation.GBC 1 structures are most efficient to those clients wishing to benefit from the various Double Taxation Avoidance Agreements which Mauritius has with other jurisdictions. This is because a GBC 1 company is considered, for tax purposes, to be resident in Mauritius. A company holding a GBC1 license can engage in any activity ranging from simple investment holding, fund management, insurance to other non-banking financial services.
A GBC 1 benefits from a deemed tax credit so that it will end up paying a maximum effective tax rate of 3% on its tradable profits;

• There is no capital gains tax and no withholding tax on dividends, interest and royalties paid by a GBC 1 company;
• As soon as a GBC 1 is qualified as tax resident in Mauritius, it will benefit from the tax treaty network;
• There is no minimum capital requirement for a GBC 1 and the stated capital can be denominated in any currency except Mauritian Rupee;
• It is to be noted that it is possible to apply for occupational permit for expatriates who are employees of the GBC 1 company;
Main characteristics of a GBC 1:-
• A GBC 1 must have a minimum of two (2) Resident Directors in order to avail of treaty benefits, with board meetings held in Mauritius. It is to be noted that the concept of Corporate Director is not applicable in case of a GBC 1;
• A GBC 1 must at all times have a Resident Secretary and a Registered Office in Mauritius;
• In addition, a GBC 1 must have a local auditor and a local bank account;
• A GBC 1 must file an annual tax return with the Mauritius Revenue Authority (MRA);
• A GBC 1 must also file its audited financials prepared in accordance with internationally acceptable accounting standards, not later than 6 months after its financial year end;
• The shareholders of a GBC 1 must hold an Annual Meeting in every calendar year and within 6
months of the company’s balance sheet date;
• It is to be noted that the names of shareholders and beneficial owners coupled with their corresponding due diligence documents must be disclosed to the FSC. However, such information, in addition to any filing and return of the GBC 1 with the Registrar of Companies, are not available for public inspection;
• Accounting records and statutory records such as register of members, register of directors, minutes of all directors’ and shareholders’ meetings and resolutions, amongst others, must be kept at all times at the registered office of the GBC 1.
• Conversion of a GBC 1 into a GBC 2 is permissible.
A company having a GBC 1 status is given the highest degree of confidentiality under Mauritius law and no information regarding its shareholding, accounts or activities are publicly accessible.
 Global Business Category 2 /GBC 2
A GBC 2 company applies to tax exempt entities, with no access to the network of Double Taxation Agreements of Mauritius, and which are mainly used for international business transactions, consultancy services or for private investment holdings where treaty benefits are not required. Such a structure provides for greater flexibility and is a suitable vehicle for holding and managing private assets.
A GBC 2 cannot carry out business of company formation, banking, insurance, administration and management or provide professional nominee or trusteeship services. It is furthermore prohibited from raising capital from the public and offer financial services or other services to any investment fund or collective investment scheme.
Benefits of a GBC 2:-
• A GBC 2 is exempt from paying any stamp or estate duty as well as any tax on its worldwide profits to Mauritius. In addition, there is no income, withholding or capital gains tax levied on such a structure;
• There is no minimum or maximum capital requirement for a GBC 2 and the stated capital can be denominated in any convertible currency;
• A GBC 2 is not subject to any exchange control requirement;
• A GBC 2 is allowed to have either par value (which may be stated in more than one currency) or no par value shares. The shares can be in the form of registered shares, preference shares, redeemable shares and fractional shares. Bearer shares are not permissible in the case of a GBC 2;
• Both individual and corporate bodies are allowed to be shareholders of a GBC 2. The latter is required to have at least one shareholder at all times;
• The law in Mauritius does not impose on a GBC 2 the requirement to hold annual general meetings. These are solely on the discretion of the entity’s shareholder;
• A GBC 2 is allowed to have only a minimum of one director, preferably resident in Mauritius, but who can be either an individual or a body corporate;
• There is no requirement for a GBC 2 to have a company secretary in Mauritius. However, if appointed, the company secretary can be either an individual or a body corporate;
• There is no statutory requirement for the meetings of the shareholders and directors of a GBC 2 to be held in Mauritius, same may even be held outside Mauritius;
• There is no statutory requirement for a GBC 2 to have a constitution. In the absence of the latter, the company will be governed by the provisions under the Companies Act 2001. The shareholders of the GBC 2 may adopt a constitution at any time through a special resolution;
• A GBC 2 is not required to have its financial statements audited
Main characteristics of a GBC 2:-
• A GBC 2 must, at all times, have a Registered Office & a Resident Agent in Mauritius;
• A GBC 2 needs to file an annual financial summary with the Financial Services Commission (FSC) within 6 months of its balance sheet date;
• Details of the Ultimate Beneficial Owner of the GBC 2 should be provided to the FSC;
• It is to be noted that application for occupational permit for expatriates who are employees of the GBC 2 company are not allowed;
• A GBC 2 can be converted into a GBC 1 and may also transfer its registered office to another jurisdiction;

solvency test - duty cast on directors before declaring dividends in Mauritius

Section 61 of Mauritius Companies Act:
Board may authorise distributions

          (1)        A company shall not make any distribution to any shareholder unless that distribution -

(a)        has been authorized by the Board under subsection (2); and

(b)        subject to the constitution, has been approved by the shareholders by ordinary resolution.

(2)        The Board may authorize a distribution at such time and of such amount as it thinks fit, if it is that the company shall, upon the distribution being made, satisfy the solvency test. 

(3)        The directors who vote in favour of a distribution shall sign a certificate stating that, in their opinion, the company shall, upon the distribution being made, satisfy the solvency test.

(4)        Where, after a distribution is authorized and before it is made, the Board ceases to be satisfied that the company shall, upon the distribution being made, satisfy the solvency test, any distribution made by the company shall be deemed not to have been authorised.

What is solvency Test : Section 6

Meaning of "solvency test"
(1)        For the purposes of this Act, a company shall satisfy the solvency test where -

(a)        the company is able to pay its debts as they become due in the normal course of business; and

(b)        the value of the company's assets is greater than the sum of -                        

                        (i)         the value of its liabilities; and
                        (ii)        the company's stated capital.

(2)        For the purposes of this Act, other than sections 246 and 247, in

determining whether the value of a company's assets is greater than the value of its liabilities, the Board may take into account -

(a)        in the case of a public company or a private company other than a small private company, the most recent financial statements of the company prepared in accordance with International Accounting Standards;

(b)        in the case of a small private company, the most recent financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances; and

(c)        a valuation of assets or estimates of liabilities that are reasonable in the circumstances.