Pre-Reform Regulatory & Tax Landscape in Mauritius | WTS Tax Consulting

1. WTS Tax Consulting WTS Mauritius Tax | Structuring | Consulting GLOBAL BUSINESS: TAX & REGULATORY CHANGES Your Trusted Tax Partner

2. Pre-Reform Regulatory and Tax Landscape

3. PRE-REFORM REGULATORY LANDSCAPE • Application for GBL 1 or GBL 2 Licence under Section 71(1) of FSA: • “A resident corporation which proposes to conduct business outside Mauritius may apply to the Commission for a Category 1 Global Business Licence or a Category 2 Global Business Licence” Footer

4. PRE-REFORM REGULATORY LANDSCAPE Footer

5. PRE-REFORM TAX LANDSCAPE Footer

6. OECD’s Main Concerns Footer

7. SNAPSHOT OF THE CHANGES Footer

8. TRANSITIONAL PROVISIONS Licensed On or Before 16 October Licensed after Footer

9. Category 1 Global Business Licence deemed to be a Global Business Licence (Effective 1 January 2019 for GBL1s licensed post 16 October 2017) Category 2 Global Business Licence issued post 16 October 2017 has lapsed on 31 December 2018, before which it could have been: • Converted into a GBL • Converted into an Authorised Company • Wound up Transitional Provisions with regard to Deemed Foreign Tax Credit and Tax Exemptions available to GBC2s NOT applicable to: • Intellectual Property Assets acquired from a related party after 16 October 2017 • Intellectual Property Assets acquired from an unrelated party or New IP asset created after 30 June 2018 • Income derived from specific IP assets acquired or projects started after 31 December 2018 TRANSITIONAL PROVISIONS & EXCEPTIONS Footer

10. Post-Reform Regulatory and Tax Landscape

11. Section 71 (1) of the FSA “Where the majority of shares or voting rights or the legal or beneficial interest in a resident corporation ………are held or controlled, as the case may be, by a person who is not a citizen of Mauritius and such corporation proposes to conduct business principally outside Mauritiusor with such category of persons as may be specified in FSC Rules, it shall apply to the Commission for a Global Business licence.” • Section 71 (6) of the FSA “Resident Corporation” means a companyincorporated or registered under the Companies Act, a Société or partnership registered in Mauritius, a trustor any other body of persons established under the laws of Mauritius • Conducting business without holding a GBL (or an Authorisation) constitute an offence, with a fine not exceeding Rs 1 million FSA CONDITIONS: GLOBAL BUSINESS LICENCE Footer

12. EXEMPTION FROM GLOBAL BUSINESS LICENCE • Financial Services (Global Business Corporation) Rules 2019 • A Resident Corporation set-up on or before 31 December 2018 (and which did not hold a either GBL1 or a GBL2 previously) • A Resident Corporation set-up after 31 December 2018 and having amongst its investors / proposed investors: • Development Financial Institutions; • Multilateral Agencies; or • Sovereign Funds (Provided FSC approval obtained) • Trusts • Foundations Footer

13. GLOBAL BUSINESS LICENCE: FSA REQUIREMENTS Footer

14. CORE INCOME GENERATING ACTIVITIESFSC Circular Letter 15 October 2018 Footer

15. MINIMUM EXPENDITURE & EMPLOYMENTFSC Circular Letter 12 October 2018 Footer

16. AUTHORISED COMPANY: FSA REQUIREMENTS Footer

17. An Authorised Company held to be conducting business outside Mauritius notwithstanding: • Investment in listed securities in Mauritius • Opening bank account in Mauritius • Dealing with a GBL, GBC1 or GBC2 licensed prior to 16 October 2017 • Relationship with Management Company, Law Practitioner or Auditor • Restriction on Activities (Fourth Schedule to the FSA): • Banking activities; • Financial services activities; • Carrying out the business of holding or managing or otherwise dealing with a collective investment fund or scheme as a professional functionary; • Providing of registered office facilities, nominee services, director services, secretarial services or other services for corporations; and • Providing trusteeship services by way of business. AUTHORISED COMPANY: FSA REQUIREMENTS Footer

18. FSA CONDITIONS: AUTHORISED COMPANY • Have a Management Company as Registered Agent • File Financial Summary with FSC • Responsibilities of Registered Agent: • Filing of all returns and documents under Companies Act, Financial Services Act and Income Tax Act • Receiving and forwarding of communications to and from Registrar of Companies, FSC and MRA • Undertake measures regarding AML/CFT • Keeping of records, including Board minutes, resolutions, transaction records etc Footer

19. Under Section 73 (1) (b), a company is a tax resident of Mauritius if: • It is incorporated in Mauritius; or • It’s central management and control is in Mauritius. Section 73A (Effective 1 October 2018): • Notwithstanding Section 73, a company which is incorporated in Mauritius shall be treated as non-resident if its place of effective management is situated outside Mauritius. POEM defined by MRA through Statement of Practice Initially meant to cater for Authorised Companies, however as currently drafted, applies to all companies, including domestic and GBLs NEW TAX RESIDENCY RULES Footer

20. A company deemed to have its POEM in Mauritius if: (a) Strategic decisions relating to its core income generating activities are taken in or from Mauritius; AND (b) Either of the following two conditions are met: (i) The majority of its Board meetings are held in Mauritius; OR (ii) Its executive management is regularly exercised in Mauritius. A company incorporated in Mauritius which does not meet the above-mentioned conditions shall be deemed to have its POEM situated outside Mauritius and therefore treated as non-resident PLACE OF EFFECTIVE MANAGEMENT:MRA Statement of Practice 28 November 2018 Footer

21. TAXATION OF AUTHORISED COMPANIES Section 5 of ITA • As a non-tax resident of Mauritius, Authorised Company: • Not Taxed on Foreign Source Income • Taxed on Income Derived from Mauritius at 15% • Subject to CSR of 2% on Chargeable Income • Required to File APS (where applicable) and Annual Tax Return • Contrast with GBL2 company which is tax resident in Mauritius by virtue of incorporation but exempted from income tax and therefore not required to file tax returns. Footer

22. Companies still taxed at the standard income tax rate of 15% Effective 1 January 2019: • Income Tax Exemption available to GBC2s withdrawn (30 June 2021 for GBC2s licensed on or before 16 Oct 2017, subject to IP-related exceptions) • 80% deemed foreign tax credit regime for GBC1s abolished (30 June 2021 for GBC1s licensed on or before 16 Oct 2017) Introduction of 80% partial exemption regime on specified income of all companies, including domestic companies and GBCs. All other income taxed at 15% Actual foreign tax credit system still available under Income Tax (Foreign Tax Credit) Regulations 1996 Credit for actual foreign tax suffered cannot be claimed if partial exemption method chosen by taxpayer in a particular income year. TAXATION OF RESIDENT COMPANIES Footer

23. Specified income covered under 80% partial exemption regime: • Foreign Dividend, provided that: • The dividend has not been treated as a deduction in the source country • The Company complies with its filing obligations under CA or FSA • The Company has adequate resources for holding and managing equity holding participations • The Company satisfies substance conditions as prescribed • Interest Income, provided that: • The Company carries out its core income generating activities in Mauritius (including agreeing funding terms and duration of any financing, monitoring and revising any agreements and managing any risks) • Employs directly or indirectly adequate number of persons to carry out the core income generating activities • Incurs minimum expenditure proportionate to its level of activities PARTIAL EXEMPTION REGIME Footer

24. Ship and Aircraft Leasing, provided that: • The Company carries out its core income generating activities in Mauritius (including agreeing funding terms, identifying and acquiring assets to be leased, setting the terms and duration of any leasing, monitoring and revising any agreements, and managing any risks). • Employs directly or indirectly adequate number of persons to carry out the core income generating activities • Incurs minimum expenditure proportionate to its level of activities • Income derived by a CIS, CEF, CIS Manager, CIS Administrator, Investment Adviser and Asset Manager, provided that substance conditions as may be prescribed by FSC met • Profits attributable to a Permanent Establishment which a resident company has in a foreign country TAXATION OF RESIDENT COMPANIES Footer

25. DELETED: Dividends or other distributions paid by a company holding a GBL to another company holding a GBL Dividend paid by a company resident in Mauritius [Still Exempt, ACs non-resident] DELETED: Interest payable on call and deposit accounts held with any bank by a company holding a GBL Interest paid to a non-resident by a GBL holder out of foreign source income [Exempt] Royalty payable to a non-resident by a company out of foreign source income [Exempt] Gains or profits derived from the sale of units, securities or obligations by a person [Exempt] Gains or profits derived from the sale of gold, silver or platinum held by a person for a continuous period of 6 months [Exempt] REVISED 2nd SCHEDULE TO INCOME TAX ACT:Tax Exemptions Footer

26. DEFINITION OF FOREIGN SOURCE INCOME GBCs still exempted from CSR but ACs subject to CSR on chargeable income Excess actual foreign tax suffered cannot be utilised to offset CSR obligation CORPORATE SOCIAL RESPONSIBILITY • Prior to the Finance Act 2018, Foreign Source Income defined as: • income which is not derived from Mauritius; and b) includes in the case of a corporation holding a Category 1 Global Business Licence under the Financial Services Act, income derived from its transactions with non-residents or corporations holding a Global Business Licence under the Financial Services Act ; • Effective 1 January 2019, Foreign Source income is simply defined as “Income which is not derived from Mauritius” • Distinction between Income derived from Mauritius & Foreign Source Income critical in determining taxability of non-tax residents including ACs. Footer

27. ‘Exports of Goods’ definition extended in ITA to include: “international buying and selling of goods by an entity in its own name, whereby the shipment of such goods is made directly by the shipper in the original exporting country to the final importer in the importing country, without the goods being physically landed in Mauritius”. Taxation of International Trading Companies: 3%, subject to satisfaction of substance conditions if GBC Reduced tax rate applies only to cross-border trades. REVISED DEFINITION OF EXPORTS:APPLICATION TO INTERNATIONAL TRADING

28. IMPACT OF REFORM: TRUSTS & FOUNDATIONS

29. EU Concerns: Mauritius Global Business and Tax Regime Footer

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