THE FINANCE ACT 2018

Following the presentation of the national Budget Speech by The Honourable Pravind Kumar Jugnauth, Prime Minister, Minister of Finance and Economic Development on the 15th of June 2018, key budgetary measures have been put forward to transform the Mauritian Financial Services Sector, and more specifically the Global Business Sector.

Numerous legislative amendments touching the Global Business Sector have been introduced by the Finance (Miscellaneous Provisions) Act (the “Finance Act”), that comes into force as from the 1st August 2018, to give legal force and effect to the announced budgetary measures aiming to revamp and further modernize the Mauritian Global Business Sector.

In light of the above, We, at Tri-Pro Administrators Ltd, have prepared this brief to highlight the salient features of the legislative amendments and developments which are relevant to our clients and stakeholders within the Global Business Sector.

Changes to Global Business Category 1 Licence

The Financial Services Act (“FSA”) has renamed the Global Business Category 1 Licence (“GBL1”), which shall now be known as the Global Business Licence (“GBL”).

Any corporation which proposes to conduct or conducts business principally outside of Mauritius, and of which the majority of shares or voting or legal/beneficial interest are held/controlled by a non Mauritian citizen, will need to apply for a GBL from the Financial Services Commission (“FSC”) and be incorporated as a Global Business Corporation (“GBC”) under the Companies Act 2001.

A GBC holding a GBL must, at all times, satisfy certain substance requirements as provided for in the FSA, which includes:

  • Carrying out its core income generating activities in, or from Mauritius by employing directly or indirectly a reasonable number of qualified persons to carry out the core activities.
  • Having a minimum level of expenditure proportionate to its level of activities.
  • Being administered by a management company licensed by the FSC.
  • Being managed and controlled from Mauritius.

The FSC shall look at the below to determine whether a GBC passes the “managed and controlled” test:

  • It has at least 2 directors resident in Mauritius of sufficient calibre;
  • It maintains, at all times, its principle bank account in Mauritius;
  • It keeps and maintains, at all times, its accounting records at its registered office in Mauritius;
  • It prepares financial statements audited in Mauritius; and
  • It provides for meetings of directors to include at least the 2 directors from Mauritius.

There is however a transitional period available to GBL1 companies, as follows:

GBL1 Issue Date Grandfathering Period
On or before 16 October 2017 Up to 30 June 2021
After 16 October 2017 Up to 31 December 2018

 

Changes to Global Business Category 2 Licence

The Global Business Category 2 Licence (“GBL2”) is being phased out and will be abolished as from 1st January 2019. A new regime known as the “Authorised Company” is being introduced.

As such, any corporation which proposes to conduct or conducts business principally outside Mauritius, which has its place of effective management outside Mauritius, and of which the majority of the shares or voting rights or legal/beneficial interest being held and controlled by a non Mauritian citizen must apply for an authorization from the FSC, through a management company (in its capacity as Registered Agent), to conduct business as an Authorised Company.

The Authorised Company is treated as a non-resident for tax purposes in Mauritius, and is required to file a return of income to the Mauritius Revenue Authority (“MRA”) within 6 months of its year end.

The registered agent shall be responsible for providing all services that the Authorised Company may require in Mauritius, which includes the filing of returns under tax legislations, receiving and sending communications with relevant regulatory bodies, keeping records on the Authorised Company and undertaking measures to combat money laundering and terrorist financing.

Again, a transitional period will also be available for GBL2 companies, as follows:

GBL2 Issue Date Grandfathering Period
On or before 16 October 2017 Up to 30 June 2021
After 16 October 2017 Up to 31 December 2018

 

Changes to Taxation Regime

Effective from the 1st January 2019, the Deemed Foreign Tax Credit (“DFTC”) will be abolished and a new “Partial Exemption Regime” will be introduced.

Under the Partial Exemption Regime, an 80% exemption shall be applied to the following types of income, provided that pre-defined substance requirements* are met:

  • Foreign sourced dividends, that have not been allowed as a deduction in the source country;
  • Foreign sourced interest income;
  • Profits attributable to a permanent establishment of the resident GBC in a foreign country;
  • Income derived from the leasing of ships and aircrafts; and
  • Foreign sourced income derived by a collective investment scheme (“CIS”), closed end fund, CIS manager, CIS administrator, investment adviser or asset manager, licensed or approved by the FSC.

The Partial Exemption Regime shall apply to all companies incorporated in Mauritius.

* We are still awaiting for further guidelines from the FSC in respect of the pre-defined substance requirements to be met to benefit from the Partial Exemption Regime.

Additionally, a reduced tax rate of 3 % has been introduced for trading companies engaged in the export of goods, extended to include the international buying and selling of goods where the goods are being shipped directly from the exporting country to the importing country.

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