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Mauritius: Country and Foreign Investment

Executive Summary

Mauritius is well positioned between Africa, India and Southwest Asia

Arab traders were the first to land on Mauritius during the 14th and 15th centuries, however, they deemed the island too far off their trade routes to be worth settling; Portugese explorers, who followed them, thought the same.

The island of Maurtius was first colonised by the Dutch in the 17th century; then in the latter half of that century came a wave of French immigrants who brought their African slaves with them. Britain took over Mauritius in 1810 and abolished slavery in 1835. To replace slave labour, indentured labour was introduced, until this too was stopped in 1922. After this, immigrants continued to arrive, mostly from South Asia, though not in the same numbers as during the indentured years.

Mauritius gained independence from Britain in 1968, though the UK retained governance of the Chagos Archipelago; this is still a source of dispute between the two countries. At the request of the USA, the Chagossians were evicted wholesale from their island homes from 1968 to 1973 – one of the West’s less edifying actions. Though Mauritius became a republic in 1992, it has remained a member of the Commonwealth; it is also a member of the Association of Francophone Countries and the United Nations.

The official language is English, the dominant ethnic group is Indo-Mauritian (that is, mostly of Indian extraction) and the most popular religion is Hinduism. The Government is presidential in style, with a single elected National Assembly and a Council of Ministers headed by a Prime Minister. The legal system reflects the country’s mixed French and British ancestry, and administration can be bureaucratic in the French style.

. . . and its economic future is dependent on exports.

At present, about 37% of Mauritian land is arable; sugar remains the dominant crop and accounts for a third of exports. Apart from encouraging tourism, the Government has tried hard to create a manufacturing sector with a range of investment incentives, free trade zones and a freeport, although these are being phased out as part of simplifying tax reforms. Garment manufacture has been a particular success. More recently, a financial services sector has developed, including a stock exchange, to take advantage of Mauritius' location offshore from India and Africa. The Government is enthusiastic about e-commerce and has built a 'Cyber City'.

The offshore sector is plotting a middle course . . . .

Until 1998, the Offshore Company and International Company (equivalent to an IBC) allowed zero taxation across a range of offshore activities including banking, shipping, insurance and fund management, as well as in the free trade zones. These two types of company are known as Global Business Companies Categories 1 and 2 (GBC1 and GBC2).

Mauritius has decided to be a 'respectable' IOFC and there is now a flat tax rate of 15% in almost all areas. Some dilution of the foreign tax credit applied from 2003. However, Mauritius has signed tax treaties with more than 40 countries, and they can be combined with the offshore regime to give a good result, especially for trade and investment in India. Mauritius was one of six offshore jurisdictions which wrote 'commitment letters' to the OECD in May 2000 in order to avoid being included on the OECD's list of jurisdictions offering 'unfair' tax competition. In 2009, Mauritius committed to the OECD's new tax standard (12 TIEAs).

As is the domestic sector. . . .

The domestic and offshore sectors have traditionally been quite firmly separated, although recent legislation, particularly in the banking sector, has begun to remove the distinction between 'onshore' and 'offshore.' Export-oriented domestic manufacturers and service providers get favoured treatment. Until the introduction of the 15% 'flat tax' domestic income tax, rates were moderately high, and property transactions are expensive in tax terms.



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