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Mauritius the 'Singapore of Africa'

Jul 07 2017 20:44

Cape Town - Mauritius is a highly attractive jurisdiction in which to do business, and certainly one that facilitates expansion into Africa, and likewise, from Africa into the rest of the world, according to Coreen van der Merwe, managing director of Sovereign Trust in South Africa.

The island has long been held as the jurisdiction of choice for firms wanting to expand their business into Africa, with some even calling it "Africa’s Singapore".

For starters, Mauritius has an enviable democratic history, which is underpinned by the rule of law formulated by an elected legislature, and administered by an independent judiciary with the ultimate appellant body being the Queen’s Privy Council.

According to Van der Merwe, this is a unique asset and provides essential comfort to investors and economic operators.

“Further, the commercial, civil and criminal law codes are well developed and are, by and large, based on and inspired from the French code and English law. This has ensured clarity in, and acceptance of, the outcome of the litigation process.” Mauritius also has a strong banking regulator in the Bank of Mauritius (the island’s Reserve Bank equivalent)," explains Van der Merwe.

Its payment system operates on a real-time basis through the Mauritius Automated Clearing and Settlement System (MACSS) and is linked to SWIFT, an efficient and reliable international payment system infrastructure.
 
However, there is no foreign exchange control, meaning that funds generated by a Mauritian company can be easily withdrawn without prior approval from the Bank of Mauritius. Adding to this, Mauritius does not levy any taxes on the distribution of dividends or charge a withholding tax on dividends to foreign owners, allowing for dividends to be declared to overseas holding companies and other shareholders without being taxed locally.

Two main corporate forms

Mauritius offers two main corporate forms, each of which has advantages from on off-shore investment point of view, and which can be amended as your business evolves.

Mauritius is one of few jurisdictions that allows an existing trading or holding company to amend its tax base from an offshore entity (a GBC 2 company, which pays no tax in Mauritius) to a company that is a tax resident (a GBC 1 company) in order to gain access to the network of 43 double tax avoidance agreements (DTAAs) that Mauritius is signatory to, and which are useful in reducing Withholding Taxes from remitting states.
The headline tax rate for a GBC 1 company is 15% for trade within the island and around 3% for revenues outside of the republic.
 
A GBC 2 company is not a tax resident of Mauritius. As such, it cannot trade in the republic, but the upshot is that Mauritius does not levy tax on the worldwide profits of GBC 2 companies.

Van der Merwe says that the choice between setting up a GBC 1 or GBC 2 company often comes down to the type of revenues you expect to receive. However, she cautions, the volume of revenues could also have a bearing: “A GBC 1 company will cost more to set up and run, and many fledgling ventures might not see the full benefit of Withholding Tax reductions until trade volumes pick up.”
 
Detractors say that the exchange of information between Mauritius and South Africa is so high that it would negate any benefit accruing from setting up a Mauritian entity. Mauritius is one of the just-on 100 signatory states that have committed to the automatic exchange of information (AEOI), but, says van der Merwe, with the advent of Common Reporting Standards (CRS), there are not many countries that will not begin reporting accounts held to other signatory states.

Off-shore corporate structures
 
“With this in mind, it is now more important than ever to ensure that your off-shore corporate structures, wherever they are, are established legitimately and in a way that is compliant with the laws of your home tax residency jurisdiction. Any overseas structure, whether it be a company, trust, fund, pension, or a bank or investment account, which depends solely on confidentiality will no doubt provide problematic outcomes, and likely also a hefty tax bill, if not possible incarceration.”
 
Van der Merwe says Mauritius has an efficient banking system, with a choice of 22 banks – both local and international. Accounts can be held in various hard currencies, including the dollar, pound and euro, along with many African and Asian currencies. And, there are more than 100 professional audit and accounting firms on the island.
 
This infrastructure led to Mauritius being ranked number one among the African economies in the World Bank’s 2016 Ease of Doing Business Report - a title that it has held for eight consecutive years.

Van der Merwe notes that Mauritius also offers great options for those wanting to attain residency: “In its drive to become a high-income economy, the Mauritian government has developed a number of programmes that are specifically designed to attract foreign talent, know-how and investment. Foreign nationals wishing to work, live or retire in Mauritius can do so through the Occupation Permit, the Residence Permit or the Permanent Residence Permit. Successful applicants are also eligible to acquire property in Mauritius under prescribed conditions.”

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mauritius  |  offshore investment  |  investments  |  money

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