Benefits and problems of Mauritius business registry
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Benefits and problems
Benefits of doing business in Mauritius
Ease of setting up a business in Mauritius
- Registering a Mauritius offshore company can be completed within two weeks, with a minimum of one shareholder and one director of any nationality, who both can be residing elsewhere than Mauritius. The minimum paid-up capital is US$1, you will be able to register a new business in Mauritius without travelling to the island;
- Entrepreneurs investing in Mauritius can take advantage of several incentives available in Mauritius Export Processing Zones: their resident company can get an exemption from corporate tax for up to 10 years and custom duties on capital goods and selected raw materials;
- Registering a Captive Insurance Savings company can offer several benefits including:
- Direct access to the wholesale reinsurance market which has more lucrative commissions and profits compared to retail reinsurance;
- A CIS license company is a lot less bureaucratic than a traditional insurance carrier.
Favorable legal and tax environment
- Mauritius offers the highest degree of confidentiality, along with free repatriation of capital, no control on foreign exchange, and a sound banking framework;
- In July 2019, Mauritius was removed from the OECD report on harmful tax practices by abolishing the Global Business Licence 1 (GBL1) and GBL2 company regime. However, the Mauritian Partial Exemption Regime (PER), which replaces the GBL companies, is subject to economic substance requirements, including i) carrying out its core income generating activities (CIGA) in, or from, Mauritius ii) employing local staff to carry out CIGA and iii) incurring expenditure proportional to its activities;
- The OECD has recognised Mauritius as a fully tax compliant jurisdiction and has positively rated it over UK, Luxembourg and the USA. Further, the country has recently signed the BEPS multi-lateral agreement and has adopted the CRS promoting the exchange of information between countries;
- Mauritius Global Business Companies (formerly GBC1) allows their founders to legally minimize taxation on their global earnings because:
- Mauritius GBC companies are considered as resident companies for tax purposes but benefit from a low corporate tax at an attractive rate of 3% on their global earnings;
- Interest and dividends remitted to a GBC are legally exempted from withholding tax. As such companies have access to Mauritius’ 44 double tax avoidance agreements signed with countries including i) Germany ii) Italy iii) the UK iv) China v) France vi) India vii) Malaysia viii) Singapore and ix) the United Arab Emirates;
- Mauritius GBC does not have to pay withholding tax in Mauritius on interest earned and dividends remitted abroad to both corporate and individual owners;
- Mauritius GBC is allowed to conduct business with local customers and to provide financial and insurance services, provided they obtain the relevant license with the Mauritius Financial Services Commission;
- A wide range of industries are entitled to enjoy numerous tax incentives in Mauritius, including:
- An exemption from corporate taxes for a period of 8 years on profits derived from innovation activities for the development of intellectual property assets. This incentive is applicable only to companies that have been incorporated after July 2017;
- All businesses working towards development of a Marina are entitled to an exemption from corporate taxes for a period of 8 years;
- A 5-year tax relief for all P2P lending businesses (approved by FSC) and EDB certified e-commerce businesses.
- Mauritius is the ideal investment gateway to Africa, as it has a conducive business environment, low tax rates, low levels of corruption and bureaucracy as compared to its neighbors;
- Mauritius offshore company formation is relatively easier to set up as compared to other jurisdictions.
Attractive location for e-commerce business
- Mauritius has been actively working towards promoting the country as the headquarters for e-commerce activities in Africa and developing a centre for Green Finance through its increased efforts in developing i) a Textile City in Madagascar; ii) an Industrial and Development Park in Naivasha, Kenya and iii) initiatives in the SEZs of Senegal, Cote d’Ivoire and Ghana.
Problems with Mauritius company formation
- A Mauritius company is not a good option to conduct global business. It is not possible to open a corporate bank account for a Mauritius company outside Mauritius;
- From 1 January 2019 onwards, the Mauritius Government has replaced the GBC2 entity with an Authorised Company entity;
- Effective 1 July 2019, the Mauritius Government issued the Income Tax (Amendment No. 2) Regulations 2019, requiring all Mauritius entities to fulfil economic substance requirements by i) employing local staff ii) leasing a physical office and iii) conducting core income-generating activity in the country and iv) incurring a minimum expenditure proportionate to its level of activiites;
- From February 2020, Mauritius has been included on the Financial Action Task Force (FATF) grey list. As a result, all companies incorporated in Mauritius are subject to greater scrutiny, as per international standards;
- Thereafter the entity will need to be converted into either a GBC (subject to 3% corporate tax rate) or an Authorized Company;
- Mauritius companies suffer from the island’s tax haven reputation. Clients establishing a Mauritius offshore company can attract additional scrutiny from tax authorities and banks;
- The tourism industry is partially closed to foreign investors looking for a business registration in Mauritius. For instance, foreigners cannot have a majority stake in a hotel with less than 100 rooms. They also need to make an initial investment of at least US$300,000 to open a restaurant in Mauritius;
- Additional registrations required for trade license and data protection office will delay the engagement by 6 weeks;
Vulnerability to external shocks
- The island country is extremely dependent on tourism for its economic well-being, which makes it more vulnerable to external changes and shocks;
- While labor is easily available, it is difficult to get professionals in Mauritius, which is why there is a lot of untapped potential which can delay the speed of development and growth in the country;
- The legally tax-exempt Mauritius GBC2 license was abolished on January 1, 2019. An authorized company license will be given out instead.
Best uses for a Mauritius business registry
- Mauritius is a great location to form a holding company, especially for businessmen running businesses in Africa as they will then be able to make use of the numerous double taxation avoidance agreements signed between Mauritius and this part of the world. Those interested by the same should then opt to form a GBC;
- Mauritius is an emerging hub for Business Process Outsourcing units and call centers, thanks to low labor costs and a multilingual workforce, fluent in French, English and also often able to communicate in Hindi and Tamil.
Disclaimer: Healy Consultants Group PLC neither has an office nor staff in Mauritius nor is it licenced as a management company under Section 77(1) of the Financial Services Act of 2007 or in any other way by the Financial Services Commission.