Reforms to Global Business Sector announce at the Mauritius National Budget Speech 2018/2019
During the 2018/2019 Mauritius National Budget Speech presented by the Hon. Pravind Kumar Jugnauth Prime Minister, Minister of Home Affairs, External Communications and National Development Unit Minister of Finance and Economic Development, it was announced that there will be changes to the Global Business sector. Below you can find the key changes.
Key changes relating to the Global Business sector
Deemed Foreign Tax Credit: The Deemed Foreign Tax Credit regime available to companies holding a Category 1 Global Business Licence will be abolished as from 31st December 2018. This means that companies will cease to benefit from an automatic effective tax rate of 3% on their foreign source income.
– Partial Exemption Regime: A partial exemption regime will be introduced whereby 80% of specified income will be exempted from income tax. The exemption will be granted to all companies in Mauritius, except banks, and shall apply to the following income:
- foreign source dividends and profits attributable to a foreign permanent establishment
- interest and royalties; and
- income from provision of specified financial services.
– Global Trading Activities: The corporate tax rate of 3% applied on profits derived by any company from the export of goods will be extended to global trading activities effected by companies.
– Enhanced Substance requirements: Companies licensed by the FSC and claiming the partial exemption will have to satisfy pre-defined substantial activities requirements of the FSC.
– Credit Regime: The existing credit system for relief of double taxation will continue to apply where partial exemption is not available.
– GBC2: New GBC2 licenses will cease to be issued as from January 2019 and the Income Tax Act provisions applicable to that regime will be reviewed accordingly.
– Grandfathering: The current business regime will continue to apply until 30th June 2021 for companies which have been issued a licence prior to 16th October 2017.
Attracting High Net Worth individuals
The Economic Development Board (EDB) will manage two schemes to attract High Net Worth individuals who satisfy defined criteria subject to relevant due diligence:
- The first scheme will offer foreigners the opportunity to obtain Mauritian citizenship provided they make a non-refundable contribution of USD 1 million to the Mauritius Sovereign Fund. For their spouse and dependents, an additional contribution of USD 100,000 per member of family will be required.
- The second scheme will offer foreigners the opportunity to obtain a Mauritian passport provided they make a contribution of USD 500,000 to the Mauritius Sovereign Fund. For their spouse and dependents, they will have to make an additional contribution of USD 50,000 per passport.The government will also offer a new package of fiscal and non-fiscal incentives to attract foreign retirees. Besides the right to acquire an apartment (in a Ground + 2 complex and for a minimum of MUR 6 million), they will be exempted from payment of custom duties on the import of personal effects up to a value of MUR 2 million.
Review of the Freeport Regime
The Freeport Regime will be amended, with the main changes as follows:
- The corporate tax exemption granted to freeport operators and private freeport developers on export of goods will be removed;
- The current tax regime will continue to apply until 30th June 2021 to companies which have been issued with a freeport certificate before 14th June 2018;
- Repair and maintenance of heavy duty equipment will be introduced as a freeport activity;
- An exhibition area being used for the purpose of vault activities will be authorised;
- The 50% cap imposed on sales of goods on the local market will no longer apply; and
- Manufacturing activities will not be allowed in the freeport. A transitional period will be granted to existing manufacturing companies.
Following the amendments, we expect that companies under the Freeport Regime will be subject to corporate tax at 3% on the profits derived from the export of goods.
Making Headway on the Africa Strategy
- A 5-year tax holiday to be introduced for Mauritian companies collaborating with the Mauritius Africa Fund for the development of infrastructure in the Special Economic Zones (SEZ) in Africa. The tax holiday will cover investments in SEZ infrastructure development and will benefit project developers and project financing institutions;
- A loan guarantee facility to be set up in collaboration with the EU to support cross border investment; and
SBM and Mauritius Africa Fund have set up an Africa Infrastructure and Industrialisation Fund to assist
- Mauritian investors to execute projects in the SEZ on the African continent.
For more information about how these changes may affect your Global Business, please do not hesitate to contact us.
You can view the full Budget Speech 2018/2019 HERE.