Adansonia Mauritius – Mauritius Budget Brief 2022-2023
The opening line of the Budget speech 2022-2023, as presented on the 7th June 2022 by the Minister of Finance, Economic Planning and Development, Hon. Renganaden Padayachy, was “With the People, for the People”.
Mauritius suffered a, never imagined, contraction of its GDP by 15% in 2020 due to COVID-19 and its related effects. The population is now facing the effects of price increases resulting from supply chain disruptions, as a result of the war in Ukraine and recent lockdowns in China.
In light of all these factors, the broad-based measures announced in the budget focus on the following themes:
- Strengthening Mauritian Economic Growth and Resilience to Future Shocks;
- Accelerating the Transition of the Mauritian Economy to a Sustainable and Inclusive Development Model; and
- Investing in the People.
We are pleased to provide you with a summary of the various initiatives, which may be of relevance to you. The initiatives contained in the budget will be implemented through the promulgation of the Finance (Miscellaneous Provisions) Bill 2022; however may be subject to amendment through this process
We set out salient details of the Budget below:
Consolidating the position of Mauritius as an International Financial Centre and Promoting “Ease of Doing Business” in Mauritius
- The current NAV requirement for high-net worth individuals and families, will be reviewed to a minimum of USD 5 million per management family office.
- Holders of Global Headquarter Administration licence will be provided work and residence permits for 5 executives and their dependents.
- The Bank of Mauritius Act will be amended to increase the functionalities of the Central Know Your Client (“KYC”) system and the Central Accounts Registry established by the Bank Of Mauritius, with a view to facilitating collection, verification, validation and extraction of KYC records.
- The Financial Intelligence and Anti-Money Laundering Act will be amended to harmonise provisions of the Act by including combatting of proliferation financing under its scope, in line with Financial Action Task Force (“FATF”) requirements.
- The Financial Services Act will be amended to provide for the following:
- Removal of “Global Headquarter Administration”, “Global Shared services” and “Global treasury activities” from the scope of “financial services” under the Financial Services Act and to create a separate section for regulation of global activities in line with FATF requirements;
- Enable the Financial Services Commission (“FSC”) to initiate regulatory actions against individuals who have in effect been performing the functions of an officer, despite having not been formally approved to do so, by the FSC;
- Provide for the setting up of a Settlement Committee for the purpose of assessing the possibility for early resolution of disciplinary matters with a licensee; and
- Review provisions on global shared services and compliance services for them to be regulated under the relevant section.
- The removal of regulatory costs involved in starting a business and incorporating a company in Mauritius.
- The Bank of Mauritius will ensure that a bank account can be opened within 1 week for individuals and businesses alike.
- The introduction of a National Payment Card.
- The Government will adapt its legislative framework to converge the domestic and the global business regime.
- The FSC will revamp its framework to enable re-insurance companies to set up operations in Mauritius.
- To expedite the issuance of work permits, a Work Permit Committee to be chaired by the Prime Minister will be set up.
- An e-register of skills for workers in the manufacturing and construction sectors will be launched to facilitate job search and recruitment of these registered workers.
- Angel investors providing seed equity financing to SMEs will benefit from a tax allowance on their investment.
- With a view to facilitating investment in the pharmaceutical industry, the Ministry of Health and Wellness will introduce the Medical and Healthcare Products Bill to facilitate the setting up of pharmaceutical manufacturing plants.
Taxation / Benefits / Applicable changes for Individuals
- As from 2022-2023, the tax rate of an individual will be as follows:
Annual Net Earnings
Up to MUR 700,000
Above MUR 700,000 and not exceeding MUR 975,000
Above MUR 975,000
15% plus Solidarity Levy (as applicable)
- Residents will also benefit from other exemptions and reliefs such as (a) additional deduction for tertiary education (deduction in respect of a dependent child who is pursuing tertiary studies will be raised from MUR 225,000 to MUR 500,000 and covers both undergraduate and postgraduate courses; (b) relief for medical and health insurance premium (deduction increased from MUR 20,000 to MUR 25,000 for an individual and his first dependent and from MUR 15,000 to MUR 20,000 for every other dependent); (c) contribution to personal pension scheme (deduction will be increased from MUR 30,000 to MUR 50,000); (d) donation to approved charitable institution (deduction increased from MUR 30,000 to MUR 50,000); (e) deduction in terms of spouse as bedridden next of kin.
- The maximum allowable deduction for petrol or travelling allowance paid to an eligible employee using his private car for the performance of his duties will be increased from MUR 11,500 to MUR 20,000 per month.
- Other Benefits / Applicable Changes
- Amendment of the Worker’s Rights Act so that Employers provide a 10% increase in petrol allowance to a maximum of MUR 2,000 per month.
- The Home Ownership Scheme, which allowed an eligible person buying a house, an apartment or bare land to construct his residence to benefit from a refund of 5% of the cost of the property up to a maximum of MUR 500,000, will be extended for another year, i.e. up to 30 June 2023.
- The Home Loan Payment Scheme, which allowed an eligible person contracting a secured housing loan to construct his residence benefit from a refund of 5 % of the loan amount up to a maximum of MUR 500,000, will be extended for another year, i.e. up to 30 June 2023.
- An individual liable to the Solidarity Levy and deriving pension or director’s fees will be given the option to request the person responsible for the payment to deduct the Pay As You Earn (“PAYE”) for the Solidarity Levy at the rate of 10%.
Taxation / Benefits / Applicable changes for Corporates
- Global Minimum Tax
- Introduction of a domestic minimum top-up tax to resident companies of large multinationals having a global annual revenue of more than EUR 750m to ensure that they are taxed at minimum of 15%.
- Tax Deduction at Source
- The rate of tax deduction at source (“TDS”) on (a) services provided by professionals will be increased from 3% to 5%; and (b) rent paid to a resident will be increased from 5% to 7.5%.
- The scope of TDS will be broadened to include 3% on Consultancy fees, Security Services and Cleaning Services, Pest Management Services and Payment of fees made by insurance companies to motor surveyors and mechanics for repairs of motor vehicles of policy holders.
- Freeport Companies
- 8-year tax holiday granted to newly set up freeport operators or developers with an investment of at least MUR 50million provided that the companies start operations on or after 1st July 2022; and conform with the substance requirements which are in line with the Organisation for Economic Co-operation and Development (“OECD”) standards.
- Tax Arrears Payment Scheme
- The Tax Arrears Payment Scheme will be re-introduced. The Scheme provides for full waiver of penalties and interest where tax arrears, outstanding under the Income Tax Act, the Value Added Tax Act and the Gambling Regulatory Authority Act, are paid in full by 31 March 2023 and provided that the taxpayer registers himself under the Scheme by 31 December 2022.
Extension of the Powers of the Mauritius Revenue Authority (“MRA”)
- The MRA shall have the power to request for the following information / reports:
- From the Central Depository and Settlement Company Ltd – An annual statement of financial transaction on individuals and companies that have purchased shares in listed companies exceeding (a) MUR 250,000 in one transaction in the case of an individual; and (b) MUR 500,000 in one transaction in the case of a company
- From the Banks – information (a) as provided for in the Income Tax Act pertaining to a bank account held jointly by a taxpayer in a similar manner as for an individual account; and (b) pertaining to persons who have been convicted of money laundering or financing of terrorism offences.
- From Foundations and Trusts – information to enable the MRA to (a) make an assessment; (b) collect tax; or (c) comply with any request for the exchange of information under a Double Taxation Avoidance Agreement.
- The MRA will be allowed to publish the name of a company which has not filed its income tax return on the website of the MRA instead of publishing same in the newspapers.
- The Income Tax Act will be amended to allow Mauritius to enter into international arrangements for (a) alternative dispute resolution with a view to resolving cross border tax disputes; and (b) implementing the internationally agreed standards to prevent base erosion and profit shifting.
- Where a person is required by law or MRA directs him to be compulsorily VAT registered but he fails to do so, MRA will be empowered to register him compulsorily. A list of all VAT-registered persons will be published on the website of MRA to avoid fraudulent practices. The list will be updated on a quarterly basis.
- Where a taxable person fails to submit a return, MRA will be empowered to publish electronically, 3 months after the due date, the name and address of the taxable person and his directors and the taxable period in respect of which the return has not been submitted. However, the taxable person will be notified prior to the publication.
Property Acquisition in Mauritius
- The Non-Citizens (Property Restriction) Act will be amended to mitigate the risk that a non-citizen becomes owner of residential premises for which he is not entitled through acquisition of shares in a company.
- A residential property acquired by more than one non-citizen under ‘fractional ownership’ will be eligible to apply for the status of residency provided that the investment by each non-citizen exceeds USD 375,000.
- Presently, transfer of shares in a company holding immovable property is subject to registration duty. Land transfer tax is also leviable the transfer of shares lead to a change in control of that company. The relevant legislations will be amended to clarify that a share buyback, i.e. acquisition by a company of its own shares, will be subject to registration duty and tax in the same manner as for a transfer of shares.
- A non-citizen will be required to produce a certified copy of the certificate under the Non-Citizens (Property Restriction) Act not only on the acquisition of shares in a partnership, societe or a company but also on the disposal of such shares.
- Holders of Residence Permits will be given the opportunity, upon applications, to acquire a residential property of a minimum of USD 350,000 outside the existing schemes, subject to a 10 percent contribution made to the Solidarity Fund.