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Mauritius - A Jurisdiction In Transition?

By Lowtax Editorial
15 January, 2018

Located in the Indian Ocean, Mauritius has long been a successful hub for business and finance, connecting investors from the developed world to key developing economies such as India and countries in sub-Saharan Africa. Now, the jurisdiction is attempting to reinvent itself in a post-BEPS world.

Introduction to Mauritius

Mauritius lies in the southern Indian Ocean to the east of Madagascar. The country comprises four islands: Mauritius, Rodrigues, Saint Brandon, and Agalega. With the exception of its coral reefs and beaches, the land area is 710 square miles. The time zone is 4 hours ahead of GMT, 9 hours ahead of EST.

In 2017, the population of Mauritius was estimated at approximately 1.35m, of which around 150,000 live in the capital, Port Louis. The official language is English, and it is spoken by approximately three-quarters of the population. The use of French is also widespread, especially in business. The most widely-used language is Creole, spoken by about 85 percent of the population. Hindi, Urdu, Hakka and Bojpoori are also spoken.

Government and Legal System

The island was colonized for the first time by the Dutch in the 17th century; in the latter half of that century there was a wave of French immigrants who brought their African slaves with them. Britain took over Mauritius in 1810, abolishing slavery in 1835. Mauritius gained independence from Britain in 1968 and with it lost the Diego Garcia Archipelago; this is still a source of dispute. The head of state is the President of the Republic who is elected by the National Assembly every five years. The Prime Minister is the leader of the winning party after elections for the National Assembly and is appointed by the President.

Mauritius's legal system is a mixture of English Common Law and French Civil Law. Company and procedural law is based on English law. Substantive law is in the main modeled on the Napoleonic code. The Supreme Court of Mauritius is the highest court in the republic; final appeal is to the Privy Council in England. Mauritius is a member of the Association of Francophone Countries, The British Commonwealth, and the UN.

Economy and Business Environment

The economy rests on sugar, tourism, textiles and apparel, and financial services, and is expanding into fish processing, information and communications technology, along with hospitality and property development.

Mauritius has attracted more than 32,000 offshore entities, many aimed at commerce in India, South Africa, and China. Investment in the banking sector alone has reached over USD1bn. Mauritius, with its strong textile sector, has been well poised to take advantage of the United States' Africa Growth and Opportunity Act, a preferential trade program that allows duty free access to the US market, with Mauritian exports to the US growing by 40 percent from 2000 to 2014. Tourist numbers steadily increased from 150,000 in 1985 to over 1m by 2013.

Mauritius's sound economic policies and prudent banking practices helped to mitigate negative effects of the global financial crisis in 2008-09. GDP grew in the 3-4 percent per year range in 2010-14, and the country continues to expand its trade and investment outreach around the globe.

The Mauritian currency is the rupee (MUR). At the time of writing, USD1 was worth approximately MUR33.50. Exchange controls were dismantled in stages between 1984 and 1994. The 2005 budget swept away most import duties with the aim of boosting the domestic economy.

Business Environment

Mauritius is well served by business and communications infrastructure and the Government actively encourages foreign investment and offshore activity through the Board of Investment.

There are a number of investment incentives for inward investment, including the Freeport (see below) which offers substantial tax reductions and up to 100 per cent foreign owned enterprises. The island republic has a good labor relations record and financial and professional services are well represented in the labor market. A successful stock exchange was opened in 1989.

Mauritius is served by SSR International Airport at Plaisance, which is 45 kilometers south east from Port Louis. Direct flights are operated to several destinations in Europe, Africa, Asia and Australasia.

Port Louis is the only port and is served by numerous international shipping lines.

Offshore Introduction

In 2001, under the Financial Services Development Act 2001, the government established a Financial Services Commission (FSC). The FSC monitors the country's stock exchange, offshore business activities and the insurance industry. It also supervises non-regulated or partly-regulated non-banking activities such as fund management, pension schemes and management, collective investment schemes, investment advisory services and leasing.

Due to its network of double tax treaties with most of the significant economies in its region, Mauritius is often chosen as a base by firms needing to set up an offshore holding or investment company, or trading subsidiary.

In August 2007, the Mauritius National Assembly adopted three financial services bills, establishing the independence of the Financial Services Commission and liberalizing the international global business companies regime (see below).


Mauritius adopted a cautious attitude towards banking development. Until November 2004, banks were required to have separate licenses for operating "domestic" and "offshore" banking activities. The distinction between the two was lifted when the Banking Act 2004 came into effect in November of that year.

The legal and supervisory regime for banks is to be found in the Banking Act 2004, the Finance Act 2004 and the Financial Services Act 2007. The Bank of Mauritius (the Central Bank) is responsible for licensing, regulation and supervision of the banking sector.

Banks are free to conduct business in all currencies.


Under the Insurance Act, the FSC licenses insurance/reinsurance companies as well as insurance service providers (Insurance Broker, Insurance Agent (company /individual), Insurance Manager, Insurance Salesperson and Claims Professional) to conduct insurance business activities.

The Insurance Act is aligned with the International Association of Insurance Supervisors' standards and principles and focuses on specific regulatory issues relating to capital adequacy, solvency, corporate governance, early warning systems and the protection of policyholders.

Captive insurance companies can be formed under the Captive Insurance Act 2015. A captive company is formed and owned by a parent company to underwrite the insurance needs of the parent and other companies in the group. Just like a commercial insurance company, a captive issues policies, collects premiums, and pays claims, but generally it does not offer insurance to the public. The types of risks that a captive insurance company may insure against include worker compensation, environmental liability, and product liability. Generally, these are types of risk that traditional commercial insurance companies won't touch.


A new Securities Bill was passed by the National Assembly in March, 2005. The 2005 Securities Act establishes a framework for the regulation of securities markets, market participants, self-regulatory organizations, and the offering and trading of securities to ensure fair, efficient and transparent securities market. It aims at striking an appropriate balance between the protection of investors, the interest of market makers and market participants and the financial system in general.

An Investment Company can be closed-ended or open-ended. Closed-ended Investment Companies can be listed on the Mauritius Stock Exchange. Either type of Investment Company can function as an umbrella fund, and an Investment Company can be a member of an umbrella fund established elsewhere.

The FSC requires a substantial amount of information about a proposed Investment Company during the licensing process, including its investment policy, the antecedents of the investment manager and the promoters, its adherence to marketing and investment regulatory regimes in other countries, etc.

While this sounds restrictive, in practice the FSC permits part or all of these functions to be performed elsewhere as long as the arrangements are clearly transparent and available to Mauritian supervisors.

Investment Companies have access to Mauritius's Double Tax Treaties (see below).


Registration in the Mauritius Open Ship Registry is regulated by the Mauritius Merchant Shipping Act 2007. Administration of the Registry is in the hands of the Director of Shipping, Ministry of Trade and Shipping.

Mauritius is a member of the International Maritime Organization (IMO) and has acceded to all the key international maritime conventions.

Port Louis is the Home Port of the Registry and houses its Head Office. Provisional Certificates of Registry can also be issued by Mauritian Embassies, Consulates and Honorary Consuls worldwide.

The maritime sector in Mauritius enjoys a number of tax advantages. Mauritius registered vessels are exempt from tax on freight earnings, and dividends paid from a Mauritius shipping company are free of withholding tax. In addition, no capital gains tax is payable upon the sale or transfer of a ship or of the shares in a shipping company, and no estate duty is payable on the inheritance of shares in a shipping company. Furthermore, ship's stores, consumables, spare parts and bunkers are exempted from customs and excise duties.

There are no restrictions on the nationality of the crew and work permits are not required.

Mauritian GBC1 and GBC2 (old Offshore Companies and International Companies) can own and register ships or bareboat charters provided that their activities are confined to the registering of ships under the Mauritian flag and that their shipping activities are carried out exclusively outside Mauritius.

Offshore Companies Introduction

In May 2000 Mauritius wrote a "commitment letter" to the OECD in order to avoid inclusion on the OECD's list of jurisdictions which offer "unfair" tax competition.

Partly as a result of this commitment, the Government passed a range of replacement legislation in 2001 including the Financial Services Development Act 2001, which set up a Financial Services Commission.

Most existing offshore legislation has been "grandfathered" into the new regime.

In August 2007, the Mauritius National Assembly adopted new Financial Services legislation, establishing the independence of the Financial Services Commission and liberalizing the international global business companies regime.

The bill became the Financial Services Act 2007 and provides a common framework for licensing and supervision of all financial services other than banking and for the global business sector.

The Financial Services Act redefines the concept of global business. Under the new provisions, all resident companies conducting business outside Mauritius may opt for an alternative legal regime. The former restrictions on activities conducted by Category 1 Global Business Companies have been removed.

GBC1 (Offshore) Company

A GBC1 is defined as a company engaged in qualified global business and which is carried on from within Mauritius with persons all of whom are resident outside Mauritius and where business is conducted in a currency other than the Mauritian Rupee. A GBC1 may be locally incorporated or may be registered as a branch of a foreign company. The business of a GBC1 Company must be conducted in foreign currency other than for day-to-day transactions; and GBC1 companies must not do business in Mauritius, other than to take professional advice, employ local labor, and to rent property.

A GBC1 Company is treated as resident, and has access to Mauritius' double tax treaties, subject to possession of a Tax Residency Certificate. Traditionally, the tax treaty with India has been particularly favorable, with Mauritius a favored location for holding companies for those trading with or investing in India. However, India has insisted on certain changes to the Indo-Mauritius tax treaty in order to prevent the avoidance of Indian taxation on investment routed through Mauritius to India (see below).

A GBC1 Company pays corporate income tax at 15 percent (0 percent if it was incorporated before 1st July 1998).

GBC1 Companies are also exempt from stamp duty, land transfer tax, and capital gains (morcellement) tax. The expatriate staff of offshore companies pay half the normal rate of personal income tax.

There are no withholding taxes or equivalent deductions on dividends or other payments made by GBC1 companies to non-resident shareholders (residents aren't normally allowed to hold the shares of such companies).

GBC1 Companies can also utilize the unilateral foreign tax credit which is 80 percent of the Mauritian tax rate (leaving a residual liability of 20 percent of the Mauritian tax rate, or 3 percent); the credit used to be at the rate of 90 percent and it is possible that there will be further reductions.

Traditionally, most GBC1 companies have operated in the field of investment holding. Other activities of GBC1 companies include: collective investment schemes, financial business activities, trading, consultancy, closed-ended funds, ICT and intellectual property.

GBC2 (International) Company

A GBC2 can take any of the forms permitted under the Companies Act 2001. Unlike the Offshore Company, the IC used to be able to issue bearer shares, but this is no longer permitted. However, in other respects the share structure can be flexible:

  • There is no minimum capital requirement although at least one share must be issued and paid up;
  • Registered shares and a variety of shares such as preferred, redeemable, and fractional are allowed;
  • Shares may be issued with or without par value;
  • Redeemable preference shares may be issued;
  • Only one shareholder and one director are required.

A GBC2 is treated as non-resident, cannot get the benefit of Mauritius' double tax treaties, and cannot operate in the Free Port. However, in most other ways, a GBC2 receives the same tax treatment as a GBC1.

Mauritian citizens are not permitted to own shares in a GBC2. There are a number of other restrictions on GBC2s; they may not:

  • Raise capital by public subscription;
  • Carry on banking or insurance business;
  • Own real property in Mauritius;
  • Own or manage a collective investment fund;
  • Provide nominee services, or provide trustee services to more than three trusts.

GBC2 companies are not required to file annual accounts, and confidentiality may be preserved through the use of nominee directors and shareholders.

Offshore Trusts

Offshore trusts are taxed in the same way as GBC1 and GBC2 Companies (see above). However, chargeable income is defined as the difference between (a) the net income derived by the trust; and (b) the aggregate amount distributed to the beneficiaries under the terms of the trust deed. Moreover, any amount distributed to non-resident beneficiaries is exempt from Income Tax.

An offshore trust is allowed a credit for foreign tax on its foreign-source income. If no written evidence is presented to the Mauritius Commissioner of Income Tax showing the amount of foreign tax charged, the amount of foreign tax shall nevertheless be conclusively presumed to be equal to 80 percent of the Mauritius tax chargeable with respect to that income.

An offshore trust may opt by written notice to the Mauritius Commissioner of Income Tax to be treated as non-resident in Mauritius for tax purposes, in which case it will not be subject to any income tax in Mauritius. However, being non-resident, the offshore trust may not benefit from Mauritius's extensive network of double taxation agreements.

Free Trade Zones

Freeport facilities were established at the port and airport under the Freeport Act 2001. The Freeport legislation provides for a comprehensive package of liberal incentives for companies looking for a cost-effective storage, assembly and redistribution platform. Freeport companies in Mauritius benefit from:

  • Duty free and VAT free goods and equipment
  • Exemption from Corporate Tax
  • 100 percent foreign ownership
  • Free repatriation of profits
  • 50 percent of reduction on port handling charges
  • 50 percent of turnover can be realized from local market sales
  • Access to offshore banking facilities

Tax Incentives

Mauritius is continuing to expand its range of tax incentives as it seeks to improve its standing as a global business hub, with an emphasis placed on encouraging small businesses, especially those investing in hi-tech manufacturing and services, and activities generating export income.

In December 2016, the Government launched the SME Development Scheme provides eligible small and medium-sized enterprises with generous tax incentives, among other benefits.In addition to providing a subsidized interest rate on credit, SMEs within the Scheme obtain tax exemptions for the first eight years of their operations, together with value-added tax and import duty exemptions on purchases of productive equipment.

The government announced several improvements to Mauritius's range of tax incentives in the 2016/17 Budget. As a result, the existing eight-year tax holiday for SMEs was extended to new enterprises set up by individuals or co-operative societies and registered with the Small and Medium Enterprise Development Authority (SMEDA) as engaged in approved activities, such as ICT, manufacturing, bio-farming and other value-added agri-business activities, and renewable and green energy.

Existing enterprises registered with SMEDA with a turnover of less than MUR10m and engaged in qualifying activities under the same scheme were given a four-year business income tax holiday.

To modernize the manufacturing sector, the 2016/17 Budget also introduced changes to the existing investment tax credit whereby a manufacturing company is able to offset five percent of its investment in new plant and machinery over three years (i.e. 15 percent in total) against its income tax liability.

The minimum eligibility requirement of a MUR100m investment was removed to allow more businesses to benefit from the credit. Furthermore, the tax credit was increased from 5 to 15 percent for manufacturers of textiles and wearing apparel, ships and boats, computers, and pharmaceuticals, and for film production (i.e. 45 percent in total).

To diversify manufacturing in Mauritius, value-added tax (VAT) was removed from 3D printers. In addition, photovoltaic inverters and batteries were made VAT-exempt. Also customs duty exemptions were provided on materials used in the manufacture of medical devices.

To create additional jobs, seafarers employed on vessels registered in Mauritius or on foreign vessels are now exempted from the payment of income tax, and industrial fishing companies operating from Mauritius and contributing to the development of its seafood industry have been given an eight-year tax holiday.

The refund on qualifying production expenditure under the Film Rebate Scheme was increased to a maximum of 40 percent, with the production of films for export zero-rated for VAT purposes. The importation of lighting equipment for use in film-making was made exempt from customs duty.

To provide a new impetus to the development of the financial services sector in Mauritius, the 2016/17 Budget provided various tax incentives. For example, companies holding a Global Headquarters Administration License issued by the FSC, and which meet minimum employment and substance requirements,have been granted an eight-year corporate tax holiday.

Five-year tax holidays were provided to companies holding a Treasury Management Center License; to individual holders of an Asset and Fund Managers License, who manage a minimum asset base of USD100m; to international law firms with a Global Legal Advisory Services License; and to holders of Investment Banking and Corporate Advisory Licenses.

Finally, five-year personal and corporate income tax holidays were made available to foreign high-net-worth individuals investing a minimum of USD25m in Mauritius, subject to certain conditions.

Further tax incentives were announced in the 2017/18 Budget, including a three percent concessionary tax rate on the profits derived by any company from exportation of goods, which was set to apply from 2018.

The Government also announced an eight-year tax holiday for companies engaged in the manufacture of pharmaceutical products, medical devices, and high-tech products that incorporated in Mauritius after June 8, 2017. In addition, qualifying hi-tech manufacturing activities were granted an exemption from registration duty and land transfer tax on the transfer of a building or of land for construction of a building.

Under a new research and development tax incentive scheme, a company investing or spending on innovation, improvement, or development of a process, product, or service is eligible for accelerated depreciation of 50 percent in respect of capital expenditure incurred on R&D, and a double deduction in respect of qualifying expenditure on R&D directly related to the entity's trade or business, provided the R&D is carried out in Mauritius.

This double deduction will be granted up to the income year 2021-2022 and qualifying expenditures include staff costs, consumable items, computer software directly used in R&D, and subcontracted R&D. Where such expenditures are not related to an entity's existing trade or business they will be allowed as an expense, provided the R&D is carried out in Mauritius.

Tax Treaties

Mauritius has entered into a considerable number of double-tax treaties (over 40) including with countries in Europe, North America, Africa and Asia. Generally speaking, the treaty benefits are available to all Mauritian companies other than International Companies.

The treaty with India has underpinned the emergence of Mauritius as the dominant channel for FDI into India; out of the total FDI equity inflows of USD217.6bn into India since from 2000 to 2014, Mauritius has supplied 36 percent, or USD78.5bn.

However, the Indian Government spent more than a decade trying to change the terms of the treaty, citing alleged abuses by Indian resident investors through what is known as "round-tripping". In particular, concern was expressed regarding the capital gains clauses that permit both resident Indian and foreign investors to route investment into India via Mauritius, and take tax-free gains.

On May 10, 2016, a protocol to the Indo-Mauritius tax treaty was signed in a bid to limit abuse of the arrangement. The protocol, which was ratified by the Indian Government in 2016, provides India with the right to tax capital gains arising from the alienation of shares acquired on or after April 1, 2017, in an Indian company with effect from the 2017/18 financial year. The protocol provides that in respect of capital gains arising during the transition period from April 1, 2017, to March 31, 2019, the tax rate will be limited to 50 percent of the Indian domestic tax rate (subject to the limitation of benefits clause).

Under the limitation of benefits clause, the reduced tax rate during the transition period will not apply if the Mauritian resident (including a shell or conduit company) fails to satisfy a"main purpose" test and a "bona fide business" test. The protocol notes that a resident is deemed to be a shell or conduit company if its total expenditure on Mauritian-based operations is less than INR2.7m (approx. USD42,650 at the time of writing) in the immediately preceding 12 months.

The protocol also updated Article 26 of the tax treaty, on exchange of information, and introduced a new Article 26A in the treaty to facilitate collection of taxes.

Announcing the changes to the tax treaty, India's Central Board of Direct Taxation (CBDT) said: "The protocol will tackle the long-pending issues of treaty abuse and round-tripping of funds attributed to the India-Mauritius treaty, curb revenue loss, prevent double non-taxation, streamline the flow of investment, and stimulate the flow of exchange of information between India and Mauritius."

It added: "It will improve transparency in tax matters and will help curb tax evasion and tax avoidance. At the same time, existing investments, i.e. investments made before April 1, 2017, have been grandfathered and will not be subject to capital gains tax in India."

In September 2017, Mauritius's Ministry of Finance denied that there are plans for a renegotiation of the jurisdiction's double tax agreement with India in the near future.


On July 5, 2017, Mauritius signed the OECD's Multilateral BEPS Convention to implement the tax treaty-related base erosion and profit shifting (BEPS) recommendations.

The Convention, developed under Action 15 of the BEPS project, transposes BEPS recommendations into over 1,000 tax treaties worldwide. The Convention seeks to strengthen provisions to resolve treaty disputes and prevent treaty shopping. It includes an option for jurisdictions to opt-in to providing mandatory binding arbitration.

According to the Mauritian Finance Ministry, Mauritius will include 23 of its existing bilateral tax treaties as being "covered" by the Convention. For the remaining treaties, Mauritius will enter into discussions bilaterally with the respective treaty partners to implement the BEPS minimum standards at latest by the end of 2018.

Mauritius has also signed the BEPS Inclusive Framework, which commits signatories to implementing the minimum standards put forward by the OECD on BEPS. These are on: harmful tax practices, tax treaty abuse, country-by-country reporting, and dispute resolution mechanisms.

Transparency And Information Exchange

In August 2014, Mauritius announced that it will implement the Common Reporting Standard CRS for automatic exchange of tax information between territories, based on the standards drawn up by the OECD. Guidance Notes for the implementation of the CRS were subsequently published by the Mauritius Revenue Authority in April 2016, with the first exchanges of information under the Standard to take place from September 2018.

Mauritius became the first African country to implement a framework to facilitate compliance with the United States' Foreign Account Tax Compliance Act, on December 27, 2013.

In Summary

In common with many of its peer jurisdictions, Mauritius is currently walking something of a tightrope between offering the sort of fiscal advantages that will continue to attract global investors while remaining "respectable" in the eyes of the OECD. Having signed up to the latest transparency initiatives while retaining its investment appeal, it has largely succeeded in maintaining an appropriate balance between these two often competing objectives. And while Mauritius might be falling out of favor as the preferred conduit for investment into India, growing interesting among global investors in Africa's largely untapped economic potential represents the jurisdiction's next big opportunity.


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