Foreign Tax Credits
GBC1 companies are liable to taxes at the rate of 15% but provided that the GBC1 owns at least 5% of an underlying company, credit will be available on foreign tax paid on the income out of which the dividend was paid (‘underlying foreign tax credit’).
When a company not resident in Mauritius, which pays a dividend, has itself received a dividend from another company not resident in Mauritius (a ‘secondary dividend’) of which it owns either directly or indirectly at least 5% of the share capital, such dividend will be allowable as foreign tax credit and an underlying foreign tax credit will also be available.
Tax sparing credits are available – Under this regime the effective rate of taxation in Mauritius can be reduced, as a long stop provision exists whereby GBC1 companies may elect not to provide written evidence to the Commissioner of Income Tax showing the amount of foreign tax charged and enjoy a deemed taxation at 80% of the normal tax rate of 15%. Thus, the use of this long stop provision in isolation would reduce the effective rate of tax in Mauritius from 15% to 3%.