June 2019

The Prime Minister and Minister of Finance and Economic Development, Pravind Jugnauth yesterday presented the 2019 -2020 budget speech entitled “Embracing a brighter future together as a nation”.

The Prime Minister and Minister of Finance and Economic Development, Pravind Jugnauth yesterday presented the 2019 -2020 budget speech entitled “Embracing a brighter future together as a nation”.
 
The world is caught up in the midst of a potential trade war and other geopolitical events, the outcome of which is not easy to predict. Brexit is an example. Mauritius’ economy has defied the odds with its Real GDP growth estimated at 3.9% in FY 2018/19 ahead of the IMF projections of 3.3% for the global economy for the same period. The Minister stated that the global economic trends can have far reaching implications for Mauritius and the Government must therefore remain vigilant and put in place measures geared at laying the foundations for a stronger, innovation-driven and more inclusive economy.
 
The product proposition of the Mauritius Financial Services sector will be enhanced by:

• Establishment of a new framework for fund administration and fund management;
• Revamping the existing Special Purpose Fund regime to ease access to new markets;
• FSC entering into an agreement with the Gujarat International Finance Tec-City to recognise Mauritian licensed funds and management companies as qualified to operate in the Gujarat jurisdiction
• The introduction of an “umbrella licence” for wealth management activities;
• The creation of a Mid-Market Enterprise company category as well as an exchange for SMEs on the Stock Exchange of Mauritius
• The development of the Real Estate Investment Trusts (REITs);
• The creation of a Mid-Market Enterprise company category as well as an exchange for SMEs on the Stock Exchange of Mauritius
• The use of e-signatures and e-licences and a new Business Facilitation Bill to promote an even more business-friendly environment.

 

CREATING NEW OPPORTUNITIES

With a view to further develop the financial services sector and to strengthen the Mauritius International Financial Centre, the Honourable Prime Minister proposed a series of measures in his budget:

i. To expand accessibility of our financial products across the globe.

To this end, he emphasised on the following:

• The establishment of a new framework for fund administration and fund management;
• The revamping of the existing Special Purpose Fund regime to ease access to new markets; and
• FSC entering into an agreement with the Gujarat International Finance Tec-City to recognize Mauritian licensed funds and management companies as qualified to operate in the Gujarat jurisdiction as well.

ii. To diversify the product base of our IFC with the introduction of:

• new rules and an attractive tax regime to promote the development of Real Estate Investment Trusts (REITs);
• an ‘umbrella licence’ for wealth management activities;
• a scheme for headquartering of ‘e-commerce’ activities;  
• a framework for Green Finance in line with the ‘Marrakech Pledge’ – a continental coalition of African Capital Markets Regulators and Exchanges committed to foster green financing on the continent; and
• a new trading platform at the Stock Exchange of Mauritius to allow medium sized profitable enterprises that do not qualify for listing on the official and DEM markets to raise capital and trade their shares.

iii. To facilitate conduct of business in the sector by setting up a ‘single-window system’ at the FSC which will allow submission of documents for financial services and global business applications.

The Prime Minister also proclaimed the following in order to develop the Financial Services Sector:

• The FSC will explore the convergence of Private Banking and Wealth Management licences.
• The Financial Services Act will be amended to introduce a scheme for the Head Quartering of E-Commerce activities in Mauritius.

BUSINESS ENVIRONMENT

i. Increasing Protection to Minority Investors

To improve the safety net for minority investors, as recommended by the World Bank, the following measures will be undertaken:

1. the Securities Act will be amended to ensure immediate disclosure to the public if the transaction has a value of at least 10% of the Company’s assets;
2. the Companies Act will be amended such that individual compensation of directors are disclosed in the annual report;
3. the Companies Act will be amended such that dividend declared by the Board is paid within a maximum period of 15 months subject to solvency test;
4. the Companies Act will also allow disqualification of a director upon a successful claim by shareholders; and
5. the Listing Rules will be reviewed to provide for the requirement of obtaining shareholders’ approval for Related Party Transactions, where the percentage ratios as specified in the Rules, represent 10% or more.

ii. Resolving Insolvency

The Insolvency Act will be amended to allow an administrator to call separate meetings for different classes of creditors. The Creditors shall vote separately, and the Administrator shall ensure equal treatment for each class. The Administrator shall also ensure that creditors are not worse off than they would have been in a liquidation.
 

iii. Sharing of Information to Expedite Doing Business

The Electronic Transactions Act will be amended to:

1. include the possibility of sharing information electronically between public sector agencies and between public agencies and authorised institutions listed in the schedule to the Act; and
2. use InfoHighway for the sharing of company information with all licensed commercial banks to facilitate due diligence requirements.

The Civil Status Act will be amended to expand the nature of information which can be shared.
 

iv. Introducing RIA for Business-Related Rule Making  

A Regulatory Impact Assessment (RIA) framework for evidenced-based business related rule making will be established in collaboration with the Organisation for Economic Co-operation and Development (OECD) for a cost of Euro 500,000 funded by the European Union (EU). The project is scheduled to start in September 2019.


 v. Expediting Dispute Resolutions  

The Income Tax Act will be amended such that parties attempting a mediation or a conciliation or an arbitration be allowed a deduction from taxable income of an amount equivalent to 150% of the case filing fee.



FINTECH

In line with the Government’s aspirations to position Mauritius as a Fintech hub in the region, the following measures will be implemented by the Financial Services Commission (FSC):

• Establishment of a regime for Robotics and AI-enabled financial §advisory services;
• Introduction of a new licence for Fintech Service providers;
• Encouraging self-regulation for Fintech activities in consultation with the United Nations Office on Drugs and Crime;
• Introduction of the use of e-signatures and e-licences on a pilot basis; and
• Creation of Crowd Funding as a new licensable activity.

To boost investors’ confidence in our financial services sector, the regulatory framework will be reinforced along these lines:

• Establishment of a Financial Crime Commission to act as an apex body to ensure greater coordination and coherence among the relevant investigative bodies in dealing with financial crimes;
• FSC will develop a financial data handling code of conduct to address cyber risks; and
• The Bank of Mauritius, FIU and FSC will introduce industry-wide Practice Notes with respect to handling clients’ requests.

 
Sandbox Licence, Blockchain and Crypto Currency

Pursuing the intention to develop Mauritius as an online betting platform for foreigners, the Economic Development Board (EDB) would be issuing a “Sandbox Licence” to enable interested parties to develop a licensing program that would include the elaboration of an appropriate legal framework, the choice of latest software solutions for real-time tax deduction at source for every online betting transaction and exploring risk-assessed Blockchain and Crypto Currency initiatives.
 
Moreover, the EDB will consult the United Nations Office on Drugs and Crime (UNODC) and relevant stakeholders with a view to propose appropriate amendments to the Economic Development Board Act to upgrade the Regulatory Sandbox Licensing Framework for Fintech Activities.

 


TAX RESIDENCE

To ensure compliance with International Best Practices and international standards, the following measures were announced, and substantial amendments will be made to Section 71 of the Financial Services Act, where applicable:

i. Tax Residency of Companies  

The Income Tax Act will be amended to implement the recommendation of industry stakeholders regarding the determination of tax residency for companies. Thus, if a company is centrally managed and controlled outside Mauritius, it shall not be considered as tax resident in Mauritius.

ii. Reforms to the Tax Regime of Global Business Companies

a. Broadening of the Partial Exemption Regime:

The Income Tax Regulations 1996 will be amended to: 

• define the detailed substance requirements that must be met in order for a taxpayer to enjoy the partial exemption benefit; and 
• lay down the conditions that must be satisfied where a company outsources its core income generating activities, namely: 

1. the company must be able to demonstrate adequate monitoring of the outsourced activities;
2. the outsourced activities must be conducted in Mauritius; and 
3. the economic substance of service providers must not be counted multiple times by multiple companies when evidencing their own substance in Mauritius. 

The partial exemption regime will be extended to cover companies engaged in:

1. leasing and provision of international fibre capacity; 
2. reinsurance and reinsurance brokering; 
3. sale, financing arrangement and asset management of aircraft and its spare parts, including aviation related advisory services.

b. Anti-abuse rule The Income Tax Act will be amended to set out rules on controlled foreign company (CFC).





CORPORATE TAX

TAX HOLIDAYS

Innovation Box Regime

Companies engaged in innovation-driven activities will now benefit from a tax holiday of 8 years on income derived from their intellectual property assets developed in Mauritius subject to the fulfilment of pre-defined substantial activities conditions in line with BEPS requirements.
 

E-Commerce Platform

Companies incorporated in Mauritius before 30th June 2025 with a view to operate an e-commerce platform will be granted a 5 year tax holiday.
 

Peer-to-Peer Lending

Following the publication of the Peer-to-Peer Lending Rules by the FSC last year, it is now contemplated that Peer-to-Peer lending operators will benefit from a 5-year tax holiday subject to the former being operational before 31st December 2020.
 

Newly set up company developing a Marina

An 8-year income tax holiday will be granted to a newly set-up company developing a marina.
 

Bunkering of low Sulphur Heavy Fuel Oil

A 4- year tax holiday will be granted on income derived from bunkering of low Sulphur Heavy Fuel Oil.
 
 
CARRY FORWARD OF UNRELIEVED TAX LOSSES

A company will not be able to carry forward its accumulated losses if there is a change in the ownership of the company. However, it is contemplated that in the case of a manufacturing company, the latter may be allowed to carry forward its accumulated losses if the Minister deems it to be in the public interest to do so and subject to the fulfilment of conditions relating to safeguard of employment. This amendment will be deemed to be effective as from 1st July 2018.



VALUE ADDED TAX

VAT Administration

Provisions of the VAT Act are being clarified as follows:

• Where a local company supplies services to a foreign company (based outside of Mauritius), these services will be zero-rated provided that the foreign company does not supply these same services back to another local company.
• Where there is splitting of a business entity into different entities to avoid VAT registration, each entity will be compulsorily required to register for VAT.
• The management of insurance schemes is exempt from VAT.
• Where a VAT invoice is issued to a non VAT-registered person in business, his name, business address and BRN will have to be stated on the invoice.
• Currently, a VAT-registered person may claim input VAT on capital goods such as plant, building, machinery and equipment. Provision is being made to extend this to include input VAT on goodwill on acquisition of a business and on the acquisition of intangible assets (i.e. software, patents or franchise agreements).
• All VAT returns to be filed and VAT liabilities to be paid electronically as from 1 March 2020.

VOLUNTARY DISCLOSURE OF INCOME SCHEME
 
Foreign Assets

• Introduction of a scheme for taxpayers to voluntarily disclose previously undeclared income held in overseas bank account or used to purchase foreign assets.
• Disclosure made on or before 31 March 2020 will be subject to tax at the rate of 15% on the chargeable income. No penalties and interests will be applicable.

SMEs

• Small and medium enterprises, whose turnover does not exceed MUR50 Million will be able to regularize any undeclared or under-declared income with the MRA free from penalties and interests.
• Payment of tax arrears as at 10 June 2019 will be exempted from penalties and interests provided the payment to the MRA is made on or before 31 March 2020.
   

FILING OF STATEMENT OF CASE TO ASSESSMENT REVIEW COMMITTEE (ARC)

• Where the taxpayer is not satisfied with the determination of an objection, a written representation along with the statement of case may be lodged with the ARC within 28 days of the date of the determination.
• However, the ARC will now grant sufficient time to the taxpayer to file his statement of case and the Chairperson will proceed with the hearing provided that he is satisfied that failure to submit the required statement of case was due to a reasonable cause.

BUSINESS FACILITATION

In the latest publication of the WorldBank’s Ease of Doing Business report, Mauritius was ranked 20th globally and 1st in Africa. A new Business Facilitation Bill which will amend 26 legislations, will be implemented to further improve the business environment.
 
These amendments will, amongst others:

• expedite the start of businesses;
• eliminate unnecessary licences and permits;
• expedite clearances at the port and airport; and
• align with international best practices regarding protection of minority investors and sharing of information.

LISTING: NEW TRADING PLATFORM

To facilitate business of medium sized profitable enterprises, a new trading platform at the Stock Exchange of Mauritius (“SEM”) will be introduced for those who do not qualify for listing on the official and Development & Enterprise Market (“DEM”) to raise capital and trade their shares.



OCCUPATION PERMIT & RESIDENCE PERMIT

Procedures, Criteria and Guidelines

The Non-Citizens (Employment Restriction) Act will be amended to introduce strict timelines for assessment of completeness of application, obtaining clearances from other authorities and determination of an application. The process for issuing Occupation Permit will be reviewed making provisions for clearly defined eligibility criteria and introduction of guidelines.
 

Significant Employers Scheme

A Significant Employers Scheme will be introduced by the EDB to support businesses operating in fields where local talents are scarce. A foreign worker, employed by the company under this scheme, will obtain an entry permit at arrival, valid for a period not exceeding 3 months, allowing the employee to work while the employer completes the Occupation Permit Procedure.
 
 
Retired non-citizen Residence Permit

The monthly transfer required for retired non-citizens will be lowered from USD 2,500 to USD 1,500.
 

Investor: Innovator Occupation Permit

The capital outlay requirement of USD 40,000 under the innovator Occupation Permit for Start-ups, who will be mentored by an accredited incubator will be waived.




COMPANIES ACT

The Companies Act will be amended to:

1. provide that a small private company is a company which, amongst others, is not qualified as a ‘Public Interest Entity’ under the Financial Reporting Act;
2. align the definition of beneficial owner with the requirements of the OECD;
3. require the applicant bear the publication cost of the notice for the vesting of the property of a company; and
4. provide that the board of a public company shall consist of at least one woman director. The limit on the number of shareholders permitted for private companies incorporated under the Companies Act, currently no more than 25 shareholders, will be reviewed.

 

INSOLVENCY ACT
 
The Insolvency Act will be amended to:

1. provide that an insolvency practitioner shall ordinarily be a Mauritian resident;
2. provide that a body corporate shall not be appointed or act as a liquidator;
3. provide for remuneration of the liquidator to be prescribed;
4. allow the administrator to call separate meetings for each class of creditors who shall vote separately;
5. provide that the administrator shall determine and state whether any creditors interests’ would be prejudiced before calling a watershed meeting rather than proceeding with a liquidation;
6. require leave from the Court, the Court of Civil Appeal or the Appellate Jurisdiction of the Supreme Court prior in order to appeal against an order by the Court under the Act; and
7. clarify the rules governing the insolvency of global business companies incorporated in Mauritius.

 

LIMITED LIABILITY PARTNERSHIPS ACT AND LIMITED PARTNERSHIPS ACT
 
The Limited Liability Partnerships Act and the Limited Partnerships Act will be amended to align the definition of beneficial owner with the OECD’s requirements.
 


SECURITIES ACT
 
The Securities Act will be amended to:

1. clarify that an acquisition is significant when the value of the asset is at least 10% of the net assets of the reporting issuer;
2. allow for an investigation to be conducted under Section 44A of the Financial Services Act with respect to Special Investigations;
3. provide for the authorisation of agents of investment dealers; and
4. provide for the authorisation and supervision of Real Estate Investment Trusts.

 

FINANCIAL SERVICES ACT
 
The Financial Services Act will be amended to, inter alia, provide for the following:

1. allow the FSC to carry out investigations and take measures to suppress financial crime;
2. enable the FSC to appoint an administrator where it considers that the conditions of a licence are no longer met; and
3. cater for the independence of the Financial Services Review Panel such that an application for review no longer has to be in a form and manner approved by the FSC.