There are specific advantages for setting up and administering an Investment Vehicles in Mauritius for investment in Africa:
Capital gains tax minimization
Capital gains tax, where imposed in Africa, are generally levied at a rate ranging from 30-35%. However, the Double Taxation Agreements (“DTA”) in force in Mauritius restricts taxing rights of capital gains to the country of residence of the seller of the assets. Since there are no capital gains tax in Mauritius, the potential tax savings for the Mauritius registered Fund are significant.Although some African states do not currently impose capital gains tax, for those that do, the only protection against changes in domestic tax law in the country of investment is the use of the DTA.
Minimising dividend withholding tax
The majority of African states impose some withholding tax on dividends paid out to non-residents. These vary between 10% an 20%. The DTAs in force in Mauritius limit withholding tax on dividends. The treaty rates are generally 0%, 5% or 10% thereby creating potential tax savings of 5% to 20% depending on the investee country. With respect to capital gains tax, the DTAs guarantee the maximum effective withholding tax rate should changes occur in the fiscal policy in the countries on investment.Investment Promotion and Protection Agreements (“IPPA”)
Mauritius has signed IPPAs with 15 African member states. The IPPA with South Africa is already in force.IPPA typically offers the following guarantees to investors from the contracting states:
- free repatriation of investment capital and returns;
- guarantee against expropriation;
- most favoured nation rule with respect to the treatment of investment, compensation for losses in case of war or armed conflict or riot etc;
- arrangement for settlement of disputes between investors and the contracting states.
Member of the African Union, Southern African Development Community (“SADC”), Common Market for Eastern and Southern Africa (“COMESA”) and Indian Ocean Rim – Association Regional Cooperation (IOR – ARC).
Mauritius is the only international financial services centre being a member of all the major African regional organizations such as the SADC, COMESA and IOR-ARC. Mauritius is also a signatory to more than 15 multilateral conventions relating to Africa.
Its membership in these regional organizations, and being a signatory to all the major African conventions, can make Mauritius the best offshore financial service centre for establishing any Africa Fund or Holding Company, especially having regard to treatment of the investments.
On the other hand, while fully belonging to Africa, Mauritius is not a continental nation. This ideal geopolitical situation eliminates spillover from the potential for neighboring conflicts, etc.
