Is Mauritius a Tax Haven? Offshore Jurisdiction Review

Last updated on 22 September 2024. Written by Offshore Protection.

Mauritius, a small island nation in the Indian Ocean, has gained significant attention in the global financial landscape as a tax haven. This tropical paradise offers more than just pristine beaches and luxury resorts; it has become a magnet for international corporations and wealthy individuals seeking to optimize their tax strategies. Mauritius provides a low-tax environment, extensive double taxation treaties, and a stable political system, making it an attractive destination for offshore financial activities.

The country's emergence as a tax haven has not been without controversy. Critics argue that Mauritius's tax policies divert much-needed revenue from developing countries, particularly in Africa. Leaked documents have exposed the extent of tax avoidance strategies facilitated by the island nation, raising concerns about global wealth inequality and the ethics of offshore finance.

Despite facing international scrutiny, Mauritius has taken steps to enhance its reputation and comply with global financial standards. The government has implemented reforms to address transparency issues and strengthen its regulatory framework. These efforts aim to strike a balance between maintaining the country's attractiveness as a financial center and meeting international expectations for responsible tax practices.

Key Takeaways

Mauritius offers low tax rates and favorable treaties for offshore financial activities
The country's tax haven status has faced criticism for potentially harming developing economies
Mauritius is implementing reforms to improve transparency and comply with global standards

Overview of Mauritius as a Tax Haven

Mauritius, a small island nation in the Indian Ocean, has emerged as a prominent tax haven and offshore financial center. The country offers significant tax benefits to attract foreign investment and companies.

Mauritius boasts a low corporate tax rate of 15%, considerably lower than many African nations where rates typically range from 25-35%. This competitive rate has made it an attractive destination for multinational corporations seeking to minimize their tax liabilities.

The country's stable democracy and strategic location have further enhanced its appeal as a tax haven. Mauritius has positioned itself as a gateway for investments into Africa and Asia, leveraging its network of double taxation avoidance agreements.

Financial services play a crucial role in the Mauritian economy. The government has actively promoted the offshore sector through favorable legislation and regulatory frameworks.

Despite its popularity among businesses, Mauritius has faced scrutiny from international organizations. The European Union included Mauritius in its top 30 tax blacklist nations in 2015, while Oxfam listed it as one of the world's worst tax havens in 2016.

The Mauritius Leaks investigation revealed how multinational companies use the country to avoid paying taxes in various regions, including Africa, Asia, the Middle East, and the United States. As global attitudes towards tax havens shift, Mauritius faces pressure to reform its financial practices and improve transparency in its offshore sector.

Mauritius Financial Services Commission

The Mauritius Financial Services Commission (FSC) oversees non-banking financial services and global business activities. Established in 2001, the FSC licenses, regulates, and supervises financial institutions operating in Mauritius.

The FSC enforces strict anti-money laundering and counter-terrorism financing measures. It conducts regular inspections and requires financial institutions to implement rigorous know-your-customer procedures.

To enhance its global standing, the FSC actively participates in international regulatory forums and collaborates with foreign supervisory authorities.

Banking Legislation

The Bank of Mauritius Act and the Banking Act form the foundation of Mauritius' banking regulations. These laws outline licensing requirements, capital adequacy standards, and risk management practices for banks operating in the country.

Mauritius has implemented Basel III standards to strengthen its banking sector's resilience. This includes enhanced capital requirements and improved liquidity management guidelines.

The country's banking legislation also addresses digital banking and fintech innovations, allowing for controlled experimentation through regulatory sandboxes.

Offshore Sector Regulations

Mauritius' offshore sector operates under a comprehensive legal framework designed to attract foreign investment while maintaining regulatory compliance.

The Financial Services Act governs global business companies, providing a structure for offshore entities to operate in Mauritius. These companies benefit from tax treaties and preferential rates, subject to substance requirements.

Recent reforms have tightened regulations to address concerns about tax avoidance. Mauritius now requires offshore entities to demonstrate significant economic presence on the island.

The country has also strengthened its exchange of information agreements to improve transparency in cross-border financial activities.

Taxation Policies and Incentives

Corporate Tax Benefits

Mauritius offers a competitive corporate tax rate of 15% for most businesses. Companies engaged in global business activities can benefit from a partial exemption regime, reducing their effective tax rate to 3% on certain income streams. This regime applies to foreign-source dividends, interest, and profits from foreign permanent establishments.

The country provides tax holidays for specific sectors. Companies involved in innovation-driven activities may qualify for an 8-year tax holiday. Freeport operators and companies engaged in ship and aircraft leasing can enjoy tax exemptions on their income.

Mauritius has double taxation agreements with numerous countries, enhancing its attractiveness for international business structures.

Capital Gains Tax Policies

Mauritius does not impose capital gains tax on individuals or corporations. This policy applies to both residents and non-residents, making it particularly appealing for investors seeking to minimize their tax liabilities on asset disposals.

The absence of capital gains tax extends to profits from the sale of shares, property, and other capital assets. This policy has contributed to Mauritius' popularity as a holding company jurisdiction for international investments.

However, gains from the sale of assets held for less than six months may be subject to income tax if they are considered part of a business activity.

International Tax Avoidance Issues

Mauritius has faced scrutiny for its role in facilitating international tax avoidance. The country's tax policies have been criticized for enabling multinational corporations to reduce their tax liabilities in other jurisdictions.

In response to international pressure, Mauritius has implemented measures to enhance transparency and combat tax evasion. The country has signed the OECD's Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS).

Mauritius has also introduced substance requirements for companies seeking to benefit from its tax regime. These rules aim to ensure that companies have genuine economic activities in the country.

The government continues to balance maintaining its attractiveness as an international financial center with meeting global standards for tax transparency and fairness.

Advantages of Mauritius

Mauritius has one of the lowest tax platforms in the world. Both corporate and individual income taxes are at 15%.
Offshore businesses located in Mauritius that do not do business with Mauritians nor use Mauritian currency are exempt from Mauritian taxes.
Investors can rely on Mauritius for asset protection as the country is on the OECD 'white list' of countries deemed suitable for offshore investments. This is due in large part to a number of reforms initiated by the government and financial sectors in past years.
Investment and Protection Agreements are in force between Mauritius and 18 other countries; 16 additional agreements are awaiting ratification.
Proactive in its intent on being a wealth management center for sub-Sahara Africa and the Indian Ocean region, the Mauritius offshore jurisdiction is on a par with Liechtenstein, Jersey, Panama, and similar offshore jurisdictions as being a good place to do business.
Mauritius enjoys preferential access to developed and emerging markets including the EU and USA.
Foreign nationals who have resided in Mauritius for at least 3 years and are drawing a salary above a certain minimum can obtain permanent residency. A permanent resident can purchase property on the island.

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A 2012 report issued by the International Monetary Fund indicates the growth outlook for the country is broadly positive and that the Mauritian monetary and exchange rate policies are appropriate. Net international reserves are seen to be adequate.
Among the advantages of Mauritius offshore company formation is the high level of privacy protection made possible by the way that a company's shareholding structure can be defined.
The Mauritius offshore financial center is supported by the HSBC Group. The HSBC Group is one of the world's largest banking and financial services organizations and operates 11 full-service branches in the country along with a locally owned subsidiary dedicated to offshore banking.
The democratically elected government, based on the Westminster model, has enjoyed stability since the country's independence. The law is rooted in French civil and English common law.
Opportunities of having access to Mauritius offshore banks and offshore bank accounts that can be paired with a Mauritius company. You can open an offshore bank remotely, without have to physically visit the bank or the country.
Mauritius is a volcanic island surrounded by coral reefs. As a result there are countless lagoons on its tropical beaches. The World Health Organizations has ranked the air quality index on the island as the 2nd best on the planet. Inland, on the central plateau, the forested higher elevations offer a somewhat cooler climate.

Strategic Considerations for Corporations

Mauritius offers attractive investment regimes for corporations seeking to optimize their global tax strategies. The country's low corporate tax rate of 15% stands out compared to many African nations, where rates typically range from 25-35%.

Companies can leverage Mauritius' extensive network of Double Taxation Avoidance Agreements (DTAAs). This allows firms to structure investments through Mauritius to benefit from reduced withholding taxes on dividends, interest, and royalties.

The Global Business Company (GBC) structure is a key tool for international firms. GBC1 companies are considered tax resident in Mauritius and can access DTAA benefits. This makes Mauritius an appealing jurisdiction for equity and investment funds.

Corporations should consider:

Establishing a GBC1 entity for cross-border investments
Utilizing Mauritius as a holding company location
Exploring opportunities in the offshore sector

While Mauritius has faced scrutiny as a tax haven, it continues to attract companies with its business-friendly environment. Firms must balance tax optimization with reputational risks and evolving international tax regulations.

Comparisons to other financial hubs like Singapore may be relevant when evaluating Mauritius as part of a global tax strategy. Both offer low tax rates and strategic locations for accessing regional markets.

Background Information

Location

The Republic of Mauritius consists of a group of islands in the Indian Ocean located 2,000 miles east of Africa's southeast coastline and to the east of the island of Madagascar. The bulk of inhabitants of Mauritius live on the largest of these islands, Mauritius, which has an area of 787 square miles.

The capital and largest city is Port Louis. The second largest island in Mauritius, and the only other island having major economic significance, is Rodrigues. The largest island in the vicinity of the Republic of Mauritius is Reunion, which lies 141 miles to the west of Port Louis and is an overseas department of France.

Political Structure

With the possible exception of a few Arab traders, Mauritius was uninhabited until well into the 17^th century. Portuguese explorers visited the islands but did not settle there. The Dutch tried to establish settlements on several occasions, but eventually abandoned them. The French arrived in 1715 and colonized Mauritius. Mauritius was ceded to Great Britain by the Treaty of Paris in 1810. The British ruled Mauritius until its independence in 1968, but the French influence has remained strong.

Mauritius became an independent Commonwealth realm in 1968 and became a republic within the British Commonwealth in 1992. The government of Mauritius is based on the Westminster model. Mauritius has a President, who serves as the chief of state, and a Prime Minister who serves as the head of government.

The President and Vice President are elected by the unicameral National Assembly upon a motion by the Prime Minister and by a majority of members of the Assembly. Both the President's term in office and the Vice President's term of office is 5 years and both are eligible for re-election. Members of the Council of Ministers are appointed by the President upon recommendation of the Prime Minister.

Rodrigues, the second largest island, has its own regional assembly. The powers of the Rodrigues Regional Assembly and its officers are prescribed in the Constitution and are subservient to the powers of the National Assembly. The Parliament of Mauritius consists of the National Assembly together with the Executive Branch as headed by the President and Vice-President. The government also has a judicial branch which is headed by the Supreme Court of Mauritius. Justices serve until their retirement upon reaching age 62.

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Economy and Infrastructure

The GDP for Mauritius was estimated at US$19.98 billion for 2012, with a growth rate for the year of 3.3% and a per capita GDP of US$15,400, one of the highest in Africa. Mauritius' economy has grown steadily over the past decade. The country ranks 18^th in the world in gross national savings with respect to the country's GNP.

At one time the economy of Mauritius was heavily dependent on the sugar industry. That industry is slowly and purposefully being phased out although it still dominates the agricultural sector of the economy and remains an important contributor to the economy as a whole.

The primary industries driving the economy are agriculture, food processing, textiles, mining, metal products, tourism, and financial intermediation. Slightly more than half of the country's exports are to the UK, France, the US, and South Africa. The leading import partners are India, China, France, and South Africa. A significant amount of effort is presently being put into further development of the tourism sector of the economy with new luxury villas and a number of conference centers constructed or being constructed.

The banking system in Mauritius is considered to be one of the most sophisticated in Africa. This is due, in part, to the strong banking system the country inherited when becoming independent and also to a variety of legislative reforms that have been passed down since that time. The two largest banks on Mauritius have investment grade ratings.

Even with a downturn in GDP experienced due to problems in the EU, which accounts for 60% of the country's exports, the banks managed to maintain reasonable profit levels while keeping the number of non-performing assets to a minimum. The largest Mauritian bank is Mauritius Commercial Bank, while the second largest is the State Bank of Mauritius. A number of international banks have branches in Mauritius including Barclay, Deutsche Bank, HSBC Bank, and South Africa's Standard Bank.

Population, Language and Culture

A citizen of Mauritius is called a Mauritian. The Mauritian population is comprised of a blend of Hindu, European, Muslim, Chinese, and Creole peoples, resulting in an extremely cosmopolitan culture. The estimated population in the country in 2013 was 1,322,000.

Mauritius does not have an official language, although English is the official language in the country's parliament. English is spoken along with French and Mauritian Creole. Creole is the day-to-day language used by over 80% of the population but nearly all of the island's inhabitants speak either English or French when conducting business or in a tourist setting. Many Mauritians speak both languages fluently.

The diversity of the Mauritian population's culture and religious beliefs can be seen in its many festivals. Approximately half of the population subscribes to the Hindu religion and another 23% are Roman Catholic, with Muslims and other Christian denominations making up the bulk of the remainder.

Mauritius has its own specific dance form, the sega, which is based upon a combination of African rhythms, Creole lyrics, and locally-inspired musical themes. In general, Mauritian music is a blending of European, Asian, and African sounds and rhythms which have been passed down through the generations. The Indian dances are especially elegant and among the most popular of the dances are the Chinese dragon dances. Rock, jazz, hip-hop, waltzes, and ballroom dancing music have also found their way into the culture.

One of the more prominent symbols on the coat of arms of Mauritius is the Dodo bird. Mauritius was the only home to this now-extinct species.

Exchange Control

The national currency is the Mauritian Rupee. Although exchange controls have been abolished, the government of Mauritius still requires that profits from and repatriation of foreign investment is subject to proof of the monetary origin. In certain circumstances profits gained may be subject to payment of any outstanding Mauritian taxes due.

The Financial Services Commission, first set up in 2001, became an independent regulatory body in 2007, at which time various restrictions on resident business companies that conduct business activities outside of Mauritius were removed.

Type of Law

The governing laws in Mauritius are based on French civil and English common law. Offshore business laws are under the jurisdiction of the Mauritius Financial Services Commission (FSC). The FSC has been both diligent and prudent in adopting safeguards for investment that follow best international practices. Mauritian law in this respect provides protection to the offshore investor, and the government authorities take all necessary steps to prevent misuse of Mauritius' role as an offshore jurisdiction.

Principal Corporate Legislation

The Companies Act, No. 57 of 1984 established the rules under which Offshore Companies can operate. The International Companies Act 1994 established the rules under which International companies can operate in Mauritius.

An update of the Act, the Companies Act 2001 was modeled after a corresponding law in New Zealand. The Companies Act 2001 stipulates, among other things, that offshore companies are allowed to do business in Mauritius, while international companies and corporations are not. Additionally, the Financial Services Act of 2007 also regulates Mauritius companies.