Adansonia Mauritius - Mauritius Budget Brief 2020-2021
The Budget speech 2020-2021 was presented on the 4th June 2020 by the Minister of Finance, Economic Planning and Development, Hon. Renganaden Padayachy.
The effect of Covid-19 has been particularly detrimental to the Mauritian economy and the latest forecasts point to a GDP contraction of up to 11 percent for the year, the worst GDP contraction in history. The Government has taken cognisance of what is required to turn Mauritius around, and the broad-based measures announced in the budget focus on the following themes:
- Rolling out the ‘Plan de Relance de l’investissement et de l’économie’;
- Engaging in Major Structural Reforms; and
- Securing Sustainable and Inclusive Development
We are pleased to provide you with a summary of the various initiatives that we believe are going to be important in enhancing substance and consolidating the Global Business Sector, as well as individual tax reforms, which may bare some relevance to you. The initiatives contained in the budget will be implemented through the promulgation of the Finance (Miscellaneous Provisions) Bill 2020.
It is interesting to note that in our recently published article,“Post COVID-19 Mauritius: The start of a marathon recovery, not a sprint”, which can be accessed at https://adansoniaholdings.com/report.php, the requirements that we stated that had to be addressed to modernize the Financial Services Sector in Mauritius such as an enhanced regulatory framework for banks and offshore service providers, improved regulatory oversight, and making it easier for foreigners to relocate, live and work in Mauritius, has largely been met by this Budget.
We set out salient details of the Budget below:
- Enhanced compliance framework
- Measures will be taken to continue ensuring compliance of Mauritius with recommended international best practices and norms and in this respect, the following will be implemented:
- Risk-based supervisions in accordance with the recommendations of the Financial Action Task Force (“FATF”);
- Targeted outreach programmes to promote clear understanding of money-laundering and terrorist financing risks;
- Increased reporting of suspicious transactions;
- Targeted financial sanctions in cases of terrorist financing;
- Timely access to beneficial ownership information;
- Introduction of a new AML/CFT (Miscellaneous Provisions) Bill to complement existing legislative framework;
- Set up of a dedicated and specialised Financial Offences.
- Diversification of the financial services sector
- The financial services sector will be diversified and made more competitive through the introduction of the following new products in line with the recommendations of the 10-year blueprint:
- The Central Bank digital currency;
- An Insurance Wrapper;
- Variable Capital Companies;
- An inaugural Sukuk issuance by the Bank of Mauritius;
- Green and Blue Bond frameworks by the Bank of Mauritius.
- The Bank of Mauritius will also come up with new frameworks for digital banking, private banking and wealth management by banks and a dedicated Venture Capital Market will be set up by the Stock Exchange of Mauritius for start-ups and SMEs.
- The following measures will be implemented to provide more certainty to investors, professionals and retirees:
- The Work Permit and Residence Permit will be combined into one single permit and the validity of an Occupation Permit (“OP”) and a Residence Permit for retirees to 10 years renewable;
- The minimum investment amount for obtaining an OP will be reduced from USD 100,000 to USD 50,000;
- The minimum turnover and investment requirement for Innovator OP are being removed;
- The spouse of an OP holder will not need a permit to invest or work in Mauritius and OP holders will also be allowed to bring their parents to live in Mauritius;
- The Economic Development Board (“EDB”) will be the only agency responsible to determine and recommend applications for the OP;
- Professionals with an OP and foreign retirees with a Residence Permit will be able to invest in other ventures without any shareholding restriction;
- Non-citizens who have a residence permit under the various real estate schemes will no longer require an Occupation or Work Permit to invest and work in Mauritius;
- The Permanent Residence Permit will be extended from 10 to 20 years and OP and Residence Permit holders will be eligible to apply for a Permanent Residence Permit if they have held the permit for three consecutive years;
- The minimum investment amount for an investor to obtain the status of Permanent Resident or a holder of an immovable property under an existing scheme to obtain the status of Resident will be reduced from USD 500,000 to USD 375,000;
- Non-citizens holders of Residence Permit, OP or Permanent Residence Permit will be allowed to acquire one plot of serviced land not exceeding 2,100 m2 for residential purposes within smart cities. This measure will be open for a period of 2 years ending 30th June 2022. The non-citizens will have to complete the construction of a residential building within a period of 5 years. The total area of all plots of serviced land for sale should not exceed 25% of the land area planned for the construction of residential properties.
Our “Post COVID-19 Mauritius: The start of a marathon recovery, not a sprint”, article highlighted the immediate threat of a potential European Union (“EU”) blacklisting of Mauritius by October 2020, which had recently been publicised. It is clear from the Budget that this has received the highest level of attention, with the Prime Minister releasing a specific and credible response, details of which can be read by accessing the link below:
We set out below the other specific highlights of the Budget, which we believe are relevant:
- The Financial Services Act will be amended to:
- provide for the definition of ‘peer to peer’ lending;
- provide that in the absence of an appointed Chief Executive, the Board may appoint such employee to exercise the powers set out under Part VIII, relating to powers of the Financial Services Commission (“FSC”);
- empower the FSC to collect information on a conglomerate group, including unregulated entities, which would impact on the safety and soundness of the financial group;
- provide for prior notice to be given when a licensee wishes to surrender its licence and to provide a timeframe to licensees for a proper transfer of business operations to the transferee;
- give a flexibility regarding the filing of annual financial statements during a curfew period or situation of emergency or natural disasters;
- cater for exemptions for filing of annual financial statements where the FSC is of the opinion that it is not applicable;
- provide that the Enforcement Committee shall consist of not more than 4 employees designated by the Board;
- provide for the duties of auditors of all licensees of the FSC to include the reporting of irregularities to the FSC.
- Change in the Pension System:
- A contributory, participative and collective system, the Contribution Sociale Généralisée (“CSG”) will be introduced as from 1st September 2020 whereby employees earning up to Rs 50,000 monthly, will contribute 1.5% and their employers 3% on monthly salary. For employees earning more than Rs 50,000 monthly, the contribution will be 3% and that of employers 6% of monthly salary.
- Improving the Doing Business Environment:
- The process for setting up a company, operating a business, hire talents, export to the world and resolve commercial disputes will be made easier through the following e-services:
- An Integrated Single Window for Trade will be developed to connect all stakeholders within the port community;
- A Maritime Single Window will be introduced by the Mauritius Ports Authority to facilitate vessel clearances and reduce administrative bottlenecks at the port;
- The Corporate and Business Registration Department (“CBRD”) will become the central repository for all business information and licences through a digital platform;
- All deeds for registration of property shall be submitted through the Mauritius e-Registry System;
- The implementation of the Centralised-KYC project by the Bank of Mauritius will be expedited;
- The Bank of Mauritius will also upgrade the Mauritius Credit Information Bureau (“MCIB”) to provide credit score of potential borrowers;
- The fees for re-instating companies will be reviewed downwards from Rs 15,000 to Rs 5,000 and the requirements for giving notice shall be done online;
- Registration of Ultimate Beneficial Owners as well as VAT registration will be done at time of business registration and company incorporation.
- Proposed change to the Companies Act:
- To increase shareholder’s protection, the Companies Act will be amended to:
- define conducts deemed prejudicial to shareholders and engage Director’s liability for prejudicial conduct;
- provide that Board of Directors of entities listed on the Stock Exchange of Mauritius should comprise at least 2 independent and non-executive directors.
- Personal Income Tax:
- The solidarity levy of 5 percent on the chargeable income plus dividends of resident citizens in excess of MUR 3.5 million will be increased to 25 percent and applicable as from Rs 3 Million annually. The solidarity levy will be payable on a Pay As You Earn (“PAYE”) basis. We are seeking clarity on whether the term “resident citizens” used in the Budget speech will include non-citizen expats working in Mauritius;
- The thresholds for the income year 2020-2021 are being increased as follows with effect from the income year starting 1st July 2020:
|Individual with no dependent
|Individual with one dependent
|Individual with two dependents
|Individual with three dependents
|Individual with four or more dependents
|Retired/disabled person with no dependent
|Retired/disabled person with dependents
- Corporate Tax
- Capital expenditure incurred on electronic, high precision machinery or equipment and automated equipment will be allowed as a deduction in the year in which it is incurred instead of being amortised over more than two years;
- Companies (excluding global business companies and companies operating in the tourism sector) having gross income exceeding Rs 500 million in an accounting year or a group of companies (excluding global business companies and companies operating in the tourism sector) where the gross income of the group exceeds Rs 500 million will be subject to a levy on the annual gross income at the rate of:
- 0.3% for insurance companies, financial institutions, service providers and property holding companies;
- 0.1% for other companies.
- Tax Holidays
- An 8-year income tax holiday will be granted to a company engaged in the manufacture of nutraceutical products provided it starts its operations on or after 4th June 2020;
- The 8-year income tax holiday granted to a company engaged in the manufacturing of pharmaceutical products, medical devices or high-tech products will apply to a company which has started or starts its operation on or after 8th June 2017;
- Tax holiday for the first eight years of operation and exemption of tax on IT and IT related materials and equipment for the purpose of online education to educational institutions with an aim to encourage the top 500 institutions worldwide to set up branch campuses in Mauritius.
- Value Added Tax (“VAT”)
- Digital and electronic services provided through internet by non-residents for consumption in Mauritius will be subject to VAT.