The Mauritius Trusts Act 2001 (TA 01), supported by recent legislative updates, positions Mauritius as a premier jurisdiction for establishing and managing trusts. Trusts in Mauritius provide a flexible, tax-efficient, and confidential approach to asset management, offering advantages over traditional succession processes. These trusts cater to individuals and corporations, ensuring compliance with local laws while maximizing asset protection, wealth management, and estate planning.
Key Features of Mauritian Trusts
Mauritian law, particularly the TA 01, provides a variety of trust structures (such as Discretionary, Employee Benefit, Special Purpose and Charitable) tailored to different estate planning and asset protection needs.
Trusts vs. Succession: Key Advantages
Flexibility in Asset Distribution
Trusts provide flexibility in asset distribution, particularly for non-residents or for movable property that may not be bound by forced heirship rules. However, when forced heirship laws apply, such as for immovable property or residents in certain jurisdictions, contributor of trust assets and trusts must still comply with those laws, and asset distribution must respect the rights of protected heirs.
However, when forced heirship rules apply, such as for immovable property or Mauritian residents, contributor of trust assets and trusts must still comply with those laws and asset distribution must respect the rights of protected heirs.
Succession: Mauritian succession law requires specific portions of the estate to be reserved for heirs (which applies equally to Mauritian citizens and foreigners provided they are entitled to inherit in Mauritius). For instance, 50% of the estate must go to one child, 66% for two children, and 75% for three or more children. These restrictions limit the ability to customize asset distribution according to personal preferences.
Confidentiality and Privacy
Trusts: Trusts in Mauritius maintain privacy, with information on beneficiaries and assets protected from public disclosure. Disclosure is only required under specific legal circumstances, such as anti-money laundering (AML) investigations, making trusts attractive to individuals and corporations seeking confidentiality.
Succession: The probate process is public, exposing personal and financial details. This lack of privacy can be undesirable, especially when dealing with cross-border assets or complex family dynamics.
Creditor Protection
Trusts: Assets held in a trust are protected from creditors’ claims, unless the trust was established with fraudulent intent. This protection ensures that trust assets are secure and distributed according to the settlor’s intentions.
Succession: Assets in succession are part of the deceased’s estate and can be vulnerable to creditor claims, reducing the value passed on to beneficiaries.
Avoidance of Probate
Trusts: Trusts bypass the probate process, allowing faster and more efficient asset distribution. This is especially beneficial in cross-border estate planning, where probate can be complex, time-consuming, and costly.
Succession: Probate is often required, especially for immovable property, leading to delays and additional costs. This can be challenging when dealing with assets across multiple jurisdictions.
Tax Efficiency of Mauritian Trusts
A significant advantage of Mauritian trusts is their tax efficiency, particularly for non-resident settlors and beneficiaries.
Holding Corporate Shares in Trusts
The complexities of inheriting company shares remain a relevant issue in 2024. Shares in a company, such as those in a Global Business Corporation, are considered movable property under Mauritian law.
However, the transfer of shares upon death can be cumbersome due to probate, legal formalities, and cross-border requirements. Holding shares through a discretionary family trust bypasses these complexities, ensuring smoother asset management and inheritance. The trust allows for the seamless transfer of shares, avoiding probate and maintaining privacy.
In certain jurisdictions, particularly for movable property or non-residents, trusts can offer greater flexibility in distributing shares according to the settlor’s wishes.
However, when forced heirship rules apply to immovable property or residents, asset distribution may still be subject to statutory requirements.
Movable and Immovable Property in Trusts
Movable Property: Non-citizens can structure Mauritian trusts for movable property, potentially avoiding forced heirship rules from their home country.
However, the application of these rules may vary depending on the jurisdiction and the nature of the assets being placed in the trust. Movable property in a trust is not subject to probate, allowing for smoother and faster transfers to beneficiaries.
Immovable Property: While immovable property located in Mauritius is subject to local law, placing such assets in a trust provides greater flexibility in administration and distribution. Foreigners holding immovable property must comply with the Non-Citizens (Property Restrictions) Act, but once assets are placed in trust, they benefit from the legal protections and flexibility offered by Mauritian trust law.
Legal and Regulatory Compliance
Trusts in Mauritius are governed by stringent AML and combating the financing of terrorism (CFT) regulations under the Financial Intelligence and Anti-Money Laundering Act (FIAMLA) and the Financial Services Act (FSA). Trustees are required to conduct customer due diligence (CDD) and report suspicious transactions, ensuring compliance with international financial standards. Trusts must also adhere to tax filing requirements, with both resident and non-resident trusts expected to file annual returns.
A trust must always have, at least one qualified trustee (a management company licenced by the Financial Services Commission (FSC) or such other person resident in Mauritius as may be authorised by the FSC to provide trusteeship services). A qualified trustee will also make sure that the legal and fiduciary responsibilities of a Mauritius trust are fulfilled, while also guaranteeing compliance with local and international regulations
In 2024, trusts in Mauritius continue to offer a flexible, tax-efficient, and secure method of managing assets for both individual and corporate clients. By potentially avoiding the restrictions of forced heirship (there are however several factors which may affect the application of forced heirship rules and we highly recommend the appointment of a lawyer and local notary for any such queries to ensure thorough review and ringfencing of trust assets), offering significant creditor protection, and bypassing probate, trusts remain a superior alternative to traditional succession processes.
The favourable tax regime, along with strong legal and regulatory compliance, makes Mauritius a top jurisdiction for international estate planning.
For both Mauritian residents and non-residents, trusts offer unparalleled advantages in asset protection, wealth management, and estate planning, making them an essential tool in today’s global financial landscape.
