Mauritius Budget Brief 2021-2022
Mauritius Budget Brief: Tax, Investment and Legislative Insights
On 11 June, the budget speech for 2021/2022 was presented by the Minister of Finance, Economic Planning and Development, Hon. Renganaden Padayachy.
Unsurprisingly, the Covid-19 pandemic has been detrimental to the Mauritian economy, resulting in a contraction of the GDP by 14.9% in 2020. However, contrary to the general opinion of the public prior to the budget being read, the Government did not take any drastic fiscal measures to counter this. As a result, Mauritius remains very attractive to investors and expatriates looking to choose the island as their investment base and place of residence.
In addition to a high-level summary of the key points from the budget speech below, you may wish to listen to our Invest Africa podcast with Shianee Calcutteea, partner at Bowmans Mauritius, Rudolf Pretorius, Director of Adansonia Holdings, and Zain Madarun, Managing Director of Adansonia Management Services Limited. The key budget points are discussed, in particular the intention of the government to modernise and increase the competitiveness of the financial services sector of Mauritius.
Another focal point of Padayachy’s speech was the reaffirmation of the Mauritian government’s commitment to enhancing its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework, through various legislative measures, and by granting additional powers to the authorities.
Largely, the general fiscal measures announced in the budget were a continuation of the previous budget, and focus on the following aspects:
- Giving an exceptional boost to investment;
- Shaping a new economic architecture;
- Restoring confidence.
We are pleased to provide you with a summary of the measures that we believe are going to be important in consolidating the global business sector, and a summary of individual tax reforms that may be of relevance.
Note that further clarity and details will be provided when the Finance (Miscellaneous Provisions) Bill 2021 is implemented.
Financial Services and Banking
- A new regulatory framework will be introduced to further facilitate banking institutions that want to set up centres in Mauritius for shared services in the region. These include, amongst others, asset management and treasury management activities.
- There will not be any need to apply for a Global Business Licence for the purpose of setting up a family office.
- Requests for Certificate of Good Standing from the Registrar for Global Business Companies will be extended to cover legal advisors and accounting firms.
- The Bank of Mauritius (BOM) and the Financial Services Commission (FSC) will issue Regulatory Sandbox Licenses for activities falling under their respective purviews; set up a common platform for fitness and propriety of investors and professionals operating in the sector; revamp the existing framework for investment banking activities; and set up a single desk for all fintech-related applications.
- The Protected Cell Companies Act will be amended to extend the use of the Protected Cell structure to domestic companies and to include such other activities as may be prescribed.
- A notice-based registry for movable collaterals will be created and the legal framework to facilitate access to finance through movable assets will be reviewed.
- The Financial Services Act will be amended to cater for the following:
- Establishing a framework to apply for Regulatory Sandbox Authorisation.
- Authorising the FSC to set up fintech innovation hubs, as well as “finnovation” and digital labs for the non-banking financial services sector.
- Allowing the issue of shares of less than 5% in a licensee, without the approval of the FSC, unless such issue results in a change in control in the licensee.
- Extending the possibility to request a Certificate of Good Standing from the FSC for all relevant licensees, and to legal practitioners and accounting firms with the consent of the licensee.
Structural and Other Legal Reforms
- A Securitisation Bill will be introduced, as well as a new Securities Bill and new legislation for Virtual Assets.
- The Stock Exchange of Mauritius will issue rules for the establishment of Special Purpose Acquisition Companies (SPACs).
- The registration duty payable on the sale of IRS or RES residential property will be levied at the rate of 5% or US$70 000, whichever is lower.
- The Business Registration Act will be amended to cater for an electronic business registration card.
- The Limited Partnership Act and the Limited Liability Partnership Act will be amended to allow the Registrar to remove a limited partnership and a limited liability partnership from the register, if appropriate beneficial ownership information has not been provided to the Registrar.
- The Companies Act will be amended to allow for the following:
- Removal of the requirement for a company to include certain information in relation to its subsidiaries in its annual report, in line with the Code of Good Governance where disclosure is only for holding companies.
- Provision for a public company with no more than 50 members to be converted into a private company.
- Removal of the restriction on companies limited by guarantee, to not have more than 50 members.
- The Act will also be amended to comply with requirements of the Financial Action Task Force (FATF) regarding the protection of companies from terrorist financing abuse. Grounds will be introduced on which the Registrar may: refuse registration of a company or serve notice of intention to remove a company from the Register; monitor company service providers and report suspicious transactions; share information with law enforcement agencies and institutions involved in the prevention of money laundering, combating of terrorism financing, and proliferation financing in Mauritius and abroad; conduct outreach and educational programs; ensure effective supervision of all entities through the application of proportionate and dissuasive sanctions; issue guidelines; conduct examinations and investigations; and provide for sanctions for non-compliance and offences committed under the Companies Act.
Occupation and Residency Permits
- The following measures will be implemented to provide more flexibility and certainty to investors, professionals and retirees:
- A Premium Visa Scheme was introduced with the objective to encourage eligible foreigners to come for long stays in Mauritius, for a period of at least one year with the possibility of renewal. To make this scheme more attractive, changes will be made to the Income Tax Act, with effect from 1 November 2020, so that the holder of a premium visa, spending more than 183 days or more in Mauritius, will only pay taxes on Mauritian-sourced income, and income brought and deposited into a bank account in Mauritius, except if a declaration is made that the required tax has been paid in his or her country of origin or residence.
- The Economic Development Board (EDB) will partner with an international firm with expertise in residency planning to promote and attract more high net worth individuals to Mauritius, including investors, professionals and retirees. Some of the measures include:
- A dedicated concierge service will be set up at the airport to provide a seamless experience for investors and retirees entering Mauritius.
- A smart card will replace the current paper-based Occupation Permit (OP).
- The validity of the OP for Professionals will be extended from 3 to 10 years for investors, self-employed and retired non-citizens.
- Non–citizens holding an OP for professionals will be given the flexibility to switch jobs without having to submit a new application, provided the minimum criteria are met.
- Non-citizens holding an OP as self-employed will be allowed to incorporate a one-man company and employ administrative staff.
- The criteria for a Young Professional OP will be reviewed, and the list of qualifying activities will be removed.
- Spouses of OP holders willing to invest or work in Mauritius will be exempted from having to apply for an OP or Work Permit themselves.
- The maximum age limit of 24 years for dependent children will be waived.
- The monthly salary applicable for an OP for professionals in financial services will be brought down to MUR 30 000. However, this will be limited to funds, accounting and compliance services, by a company holding a license from the FSC, and the professional will need to have at least three years’ relevant work experience.
- The permit requirement will be waived for OP applicants arriving in Mauritius on a business visa. A non-citizen will be eligible for an OP irrespective of his or her visa category.
- A non-citizen who purchases or otherwise acquires an apartment as a residence, in a building of at least two floors above ground floor, provided the purchase price is not less than US$375 000, will be issued with a residence permit, including for his or her dependents, and exempted from the requirement of a Work or Occupation Permit.
- Holders of a 10-year Permanent Residency Permit will have the validity automatically extended to 20 years.
- The Work Permit will be extended, allowing Mauritians and non-citizen residents to bring foreign carers and maids to work in Mauritius.
- Companies Tax
- The arm’s length test, as provided for in the Income Tax Act, will become applicable to Global Business companies. Basically, this implies that the Mauritius Revenue Authority will have the authority to increase tax payable by certain Global Business companies on the basis that their commercial and financial transactions and relations have not been wholly at arm’s length.
- The scope of the partial exemption tax regime will be broadened to cover investment dealers and activities relating to the lease of locomotives and trains, including rail leasing.
- Tax Holidays
- The tax holiday for Fund and Asset Managers will be extended from 5 to 10 years. The threshold of US$100 million, in respect of asset base managed by an asset or fund manager, will be reduced to US$50 million.
- The tax holiday for family offices will be extended from 5 to 10 years.
- Other Changes
- The Income Tax Act will be amended to ensure that foundations and trusts benefitting from a preferential tax regime comply with the Organisation for Economic Co-operation and Development (OECD) standards, including substantial activity requirements.
- The method for computing tax liability of companies under the Advance Payment System will be amended to cater for companies that are subject to corporate tax at a lower rate than the 15% standard rate.
These are all relevant and timely policy amendments, and they will certainly encourage investment in Mauritius and the greater region. If you would like to discuss any of the points in further detail, please don’t hesitate to contact us.