Mauritius: a tried, tested and trusted International Financial Centre
Following the leaks from the Panama office of the law firm Mossack Fonseca, and the investigation by the International Consortium of Investigative Journalists (ICIJ), confidential financial records were made public, provoking a global outcry of accusations of crime and corruption, even though ICIJ itself made it clear that simply holding offshore entities is not illegal.
International Financial Centres (IFC) have always existed and will continue to play a key role in the conduct of global business. IFC, particularly small island economies, provide tax neutral platforms for global business and investment, thereby stimulating trade and contributing to capital market liquidity and job creation in the global economy.
In light of concerns raised in the aftermath of the Panama Papers report, it is important to emphasise that Mauritius, unlike some IFC, doesn’t over-rely on global business as part of its economy. Mauritius has a broad, resilient, dynamic and fully diversified economy with financial services accounting for only 10.5% of total GDP.
Mauritius is not a tax haven; it is a low-tax jurisdiction that also offers a low taxation platform for international business. Over the years it has continuously revised its legal and institutional framework with a view to reinforcing financial supervision, enhancing transparency and strengthening the regime to fight financing of terrorism, money laundering, round-tripping, corruption and other financial crimes. The BAA1 status granted to Mauritius by Moody’s is a testament to the economic resilience and diversification of the Mauritian economy.
Mauritius regulation and legislation are in compliance with international norms and standards, and the jurisdiction is fully committed to complying with other Governments and authorities to ensure effective, collaborative, transparent and timely exchange of information.
The Mauritian Government has taken numerous proactive actions to ensure the soundness and good repute of its financial services sector, including the following:
- MEASURES TO ENSURE TRANSPARENCY
In line with the Organisation for Economic Cooperation and Development (OECD) recommendations, Mauritius has integrated the principles of transparency and openness in exchange of information in the operation of its financial services sector.
OECD specifically requires jurisdictions:
(i) not to entertain secret tax rulings or allow negotiation of the tax rate;
(ii) to have financial accounts audited and filed;
(iii) to allow government authorities to have access to beneficial ownership and bank information; and
(iv) to provide for a legal mechanism to allow exchange of information.
- COMPETITIVE TAXATION PLATFORM
The Mauritian taxation law does not allow the negotiation of tax rates. Category 1 Global Business Companies are subject to a uniform tax rate of 15%, with foreign tax credit available for foreign source income.
- EXCHANGE OF INFORMATION
Mauritius remains dedicated to enhancing collaboration and exchange of information at all levels, namely:
- Unilaterally within established institutions in Mauritius
- Bilaterally between Mauritius and other nations, where Mauritius has signed a number of Tax Information Exchange Agreements and is continuously upgrading its exchange of information provisions
- Regionally by being a member of initiates like the Egmont Group, Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG)
- Globally by supporting international initiatives for promoting greater convergence in the global financial standards and combating money laundering and the financing of terrorism, such as the Financial Action Task Force (FATF), Basel, the International Organisation of Securities Commission (IOSCO). Mauritius is a signatory to the MMOU of the IOSCO.
Mauritius has also signed exchange of information agreements with respect to fiscal matters with countries where tax treaties are not in place. For example, Mauritius was among the first African State to sign up to FATCA, as well as to committing itself to the Common Reporting Standards.
- ACCESS BY GOVERNMENT AUTHORITIES TO INFORMATION REGARDING BENEFICIAL OWNERSHIP
With a view to ensuring that beneficial ownership information is available on all local entities, bearer shares were abolished in 1994, and the lodging of updated Registers of Members and Directors with the Registrar of Companies was introduced in 2001.
Mauritian law requires the maintenance of beneficial ownership information on Global Business companies. The Financial Services Commission (FSC) as the sole regulator of these entities and the Mauritius Revenue Authority (MRA), the national tax authority, have access to the information.
- ACCESS BY GOVERNMENT AUTHORITIES TO BANK INFORMATION
New banking legislation was introduced in 2004, namely the Bank of Mauritius Act 2004 and the Banking Act 2004. These laws provide the necessary mechanisms for the Central Bank to access and share banking information with public sector agencies, law enforcement agencies and foreign regulatory agencies.
- INTERNATIONAL CO-OPERATION
Mauritius has accepted and subscribed to the ongoing assessment program by the IMF/World Bank and has satisfactorily completed two assessments under the Financial Sector Assessment Programme (FSAP). The IMF/WB FSAP team commended the rigorous standards of financial sector regulation practised by Mauritius, in keeping with international best practice.
- ENHANCED SUBSTANCE REQUIREMENTS
The Financial Services Act has been amended to make it mandatory for companies to enhance their control and management, thereby enhancing substance in Mauritius.
- ULTIMATE COURT OF APPEAL
Mauritius is part of the British Commonwealth. Appeals against legal decisions taken in Mauritius can be heard by the Privy Council in London, as a last resort.
Following the concerns raised after the circulation of the Panama Papers report, we are seeing increased interest from institutional clients regarding re-domiciliation of existing structures based in other jurisdictions to Mauritius. Mauritius offers possibility for re-domiciliation as long as the company satisfies the solvency test. A Company incorporated under the laws of any country other than Mauritius, may, where it is so authorized by the law of that country, apply to the Registrar to be registered as, and continue as, a company in Mauritius as if it had been incorporated in Mauritius. Once re-domiciled, the company is treated as a company ordinarily resident and domiciled in Mauritius. As company structure options, re-domiciliation to Mauritius can be in the form of a Category 1 Global Business Company or a Category 2 Global Business Company. Two of the main re-domiciliation requirements are that firstly the company is authorised to transfer its incorporation under the law of the country in which it is incorporated and secondly the company has complied with the requirements of that law in relation to the transfer of its incorporation.
As one the leading administrators in Mauritius, Cim Global Business would be happy to assist you in the process and should you need any additional information you can contact:
Head of Business Development
Cim Global Business
Head of Structuring
Cim Tax Services