Setting Up a Discretionary Trust in Mauritius
A Comprehensive Guide
Setting up a discretionary trust in Mauritius can be an excellent strategy for wealth preservation, tax efficiency, and ensuring a smooth transition of assets to future generations. Here, we will guide you through the steps of establishing a discretionary trust in Mauritius, highlight its benefits, and address frequently asked questions to provide a thorough understanding of the process.
Why Choose Mauritius for a Discretionary Trust?
Mauritius is a popular destination for setting up trusts due to its favourable legal and tax environment. Key benefits include:
- Tax Efficiency:
- Tax Exemption for Non-Resident Trusts
Mauritius provides significant tax exemptions for discretionary trusts where both the settlor and the beneficiaries are non-residents. By filing a declaration of non-residence, such trusts can be exempt from income tax in Mauritius. Additionally, non-resident beneficiaries do not pay taxes in Mauritius on the income they receive from the trust. - No Capital Gains Tax
Mauritius does not levy capital gains tax, which means that any profits realised from the sale of assets within the trust are not subject to taxation. This is particularly beneficial for trusts that hold investment portfolios or other appreciating assets. - Exemption from Estate Duty and Inheritance Tax
There are no estate or inheritance taxes in Mauritius. This ensures that the transfer of assets to beneficiaries upon the settlor’s death does not incur any additional tax liabilities, making Mauritius an ideal jurisdiction for estate planning. - Flexible Income Distribution
Trusts in Mauritius can opt to be considered non-resident for tax purposes if the settlor, trustees (except for the qualified trustee) and beneficiaries are non-residents. This allows the trust to distribute income without being subject to local taxation, thus providing efficient tax planning opportunities. - Double Taxation Treaties
Mauritius has established numerous double taxation avoidance agreements (DTAAs) with various countries. A trust with a Global Business Licence (GBL) can benefit from these treaties, which can reduce withholding taxes on cross-border income such as dividends, interest, and royalties. This significantly enhances the tax efficiency of the trust’s investments and distributions. - Tax Exemption
If a trust owns a Global Business Licence (GBL) company, it can benefit from an effective tax rate as low as 3%.
- Tax Exemption for Non-Resident Trusts
- Confidentiality and Asset Protection
The terms of a trust deed in Mauritius do not require registration, ensuring the confidentiality of the trust’s provisions and the identities of the beneficiaries. Furthermore, assets held in a Mauritian trust are protected from creditors, adding an extra layer of security for the beneficiaries’ assets. - Flexibility
Discretionary trusts allow trustees the flexibility to decide how income and capital are distributed among beneficiaries.
Steps to Set Up a Discretionary Trust in Mauritius
- Choose a Qualified Trustee
Select a licensed and regulated trustee, such as Blue Azurite, to set up and manage the trust. Trustees in Mauritius are regulated by the Financial Services Commission (FSC), ensuring they adhere to high standards of integrity and professionalism. - Draft the Trust Deed
The legal team at Blue Azurite draft a comprehensive trust deed. This document outlines the terms of the trust, including:- The trustee’s powers and duties
- The beneficiaries’ rights
- The distribution of income and capital
- The role of the protector (if any)
- Appoint a Protector
Consider appointing a protector to oversee the trustee’s actions. The protector has the authority to appoint or remove trustees, ensuring the trust is managed according to the settlor’s intentions. However, the protector does not interfere with the day-to-day management of the trust. - Transfer Assets to the Trust
Transfer ownership of assets to the trust. This can include shares in companies, real estate, and other valuable assets. Ensure all legal documentation is properly completed to establish the trust’s ownership of these assets. - Define Beneficiaries
Identify the beneficiaries of the trust. A discretionary trust allows the trustee to have the flexibility to distribute income and capital among beneficiaries according to their needs and circumstances. - Establish Funding
An initial amount (e.g., USD 100) can be vested into the trust by an unrelated party acting as the settlor. This legally establishes the trust and allows the trustee to begin managing the assets. - Manage and Distribute Assets
The trustee, endowed with discretionary powers, manages the trust’s assets and determines income distribution. This dynamic approach allows for adaptability in responding to market conditions and beneficiaries’ needs.
FAQs Discretionary Trusts Mauritius
Setting up a discretionary trust in Mauritius can be a complex process, but it offers substantial benefits for wealth management and estate planning. To help you navigate this topic, we have compiled a list of frequently asked questions (FAQs) that cover the essentials of establishing and managing a discretionary trust in Mauritius. These FAQs provide clear and concise answers to common queries, ensuring you have the information needed to make informed decisions and maximise the advantages of a Mauritian discretionary trust.
At least one trustee must be a qualified trustee resident in Mauritius. Qualified trustees are licensed entity, such as Blue Azurite, regulated by the Financial Services Commission (FSC) in Mauritius.
A protector oversees the trustee's actions and has the authority to appoint or remove trustees. The protector ensures the trust is managed according to the settlor's wishes.
Assets are transferred to the trust through legal documentation and registration, ensuring the trust becomes the owner of the assets.
Yes, a discretionary trust can be modified to adapt to changing circumstances, ensuring it remains aligned with the settlor's intentions and beneficiaries' needs.
Yes, the settlor can be a beneficiary of the trust. However, the settlor cannot be the sole beneficiary of the trust to maintain the trust's validity under Mauritian law.
Yes, a Mauritian discretionary trust can hold assets located both within and outside Mauritius, providing flexibility in asset management and diversification.
The trust continues to exist and operate according to the terms set out in the trust deed. The trustees will manage the trust assets and distribute them to the beneficiaries as per the settlor's wishes, without the need for probate.
Trusts must maintain proper records, file annual returns, and ensure that the trustee(s) acts in accordance with the trust deed and Mauritian law. Regular reviews and professional advice are recommended to ensure ongoing compliance.
