Mauritius: why is it an offshore heaven in Africa?
“Mauritius is a gem in the Indian Ocean”. This has been advanced by many experts in the financial sector. The country is striving to become an International financial centre of excellence in the region and to join the league of high-income countries. It has already undergone through several improvements and its per-capita income of $10,500 is already way ahead of the region’s average of $4,000. The “tax heaven” Mauritius has branded itself as a ‘tax heaven’ for quite some time. However, following the ‘Mauritius Leaks’ article, the country has decided to overhaul its tax regime and rebrand itself. As such, it revised several rules around both corporate and personal tax rates, indirect taxes and tax administration. For instance, now, an income-tax holiday supports companies setting up e-commerce platforms and peer-to-peer lending operators. Moreover, rules are aligned with global best practices, including attribution of income according to the “arm’s length” principle. These changes have had immediate results: The Organization for Economic Co-operation and Development has stated that Mauritius’s tax regime doesn’t permit or encourage harmful practices and International Monetary Fund (IMF) named it among the 10 countries holding 40% of global phantom FDI. A growing economy It is predicted that the country’s Gross Domestic Product (GDP) will be 4.1% in 2020. Additionally, the government expects that there will be more Foreign Direct Investment (FDI) in the coming years, especially considering the fact that it has moved to the 13th position (up by seven places) in the World Bank’s Ease of Doing Business 2020 ranking, against an overall “weak performance” across Sub-Saharan Africa. Additionally, it is now at the second position in the Absa Africa Financial Markets Index which measures the continent’s most advanced financial markets. Opportunities for foreign investment To make things easier for foreign development and attract more investors, Mauritius has been creating more opportunities for growth. For instance, it is keen on revitalizing tourism, developing the ocean economy, increasing output of renewable energy, enhancing the deployment and adoption of modern technology and building smart cities. It has enacted the Business Facilitation Act, amending 26 legislations designed to spur private investments. This expedites new business launches, eliminates unnecessary license and permit requirements and streamlines customs processes. Additionally, it wishes to capitalize on the African Continental Free Trade Area (AfCFTA). This aims to provide incentives for foreign investors targeting the continent’s market of 1.2 billion consumers. As such, it is presenting itself as a manufacturing and financial hub and will also help the island deepen its ties with mainland Africa, especially for its banks. According to the SBM, one of the largest banks in the country, “Mauritius has successfully tapped into new sectors for sustainable growth”. Developments in its fiscal regime has attracted a new breed of investors. In 2018, France was the biggest source of direct investment in the island with inflows amounting to $74.2 million. It was followed by South Africa at $58.4 million and China with $48.1 million. The UK is also gradually increasing its inflows with $25.3 million.
Mauritius: a safe haven to establish an offshore bank account even during Covid-19 crisis
Mauritius has proven to be a reliable and popular jurisdiction for foreign companies to establish a business. It boasts several attractive factors that encourage people to build a start-up, to expand their business or simply to live here. For instance, residents can benefit from a modern and state-of-the-art infrastructure coupled with natural landscapes, mountains and sunny beaches. Besides being a safe environment, several regulations have been established to ensure that those wishing to start a company in the island is protected and can benefit from various advantages. They can also benefit from a highly educated workforce which is both fluent in English and in French. What about impact of the Covid-19 pandemic? However, what about the Covid-19 situation? What impact does it have on new businesses? Despite the fact that the virus is contained on the island, the economic ramifications of a global shutdown should not be underestimated. Nonetheless, even if the containment has not been lifted, foreign investors can still set up a bank account in Mauritius without setting foot in the island. It offers a stable and welcoming environment to do business even during the Covid-19 turmoil. In fact, now people has much more time on their hands to focus on things that they have been meaning to for a long time and they can trust that Mauritius has something to offer. It could be a trust to protect one’s estate, an investment in property that gives a permanent residence backup for the buyer and their family, personal banking moved to a stable jurisdiction for ease or to mitigate tax or establishment of an offshore bank account. What is needed to set up an offshore bank account in Mauritius? First of all, it should be noted that each bank has their own set of procedures to open an account. In all cases, there is the usual verification of individuals for their personal accounts, as there are for directors, shareholders and UBOs of companies. This requires certified copies of a passport and a recent utility bill. Reference letters from a current bank or substitute documents such as 6 months of current bank statements and a signed form allowing the Mauritian bank to contact the current bank are also needed. The key focus is going to be on the funds that will be coming in the bank account. It must be shown where the money is coming from, none of it is from illegal activities and that the bank account or the company is not going to be used to launder money. As demonstrated by its OECD and EU status, Money Laundering obligations are taken very seriously in the island. As such, the business plan for any company account will be looked into in detail. Unlike certain jurisdictions, there are no exchange-controls in Mauritius and the hard thing is to bring money into the island. However, once it is here, it is easy to move it around. As such, it is a great banking jurisdiction for a trading company.
Establishment of offshore companies in Mauritius: non-double taxation agreements
Since launching its international business sector in 1992, Mauritius has signed 43 tax agreements (non – double taxation agreements as well as Double Taxation Agreements – DTAs) with various countries and others are in the process of being negotiated. The island is definitely a commercially attractive destination for investors. Since then, the country has developed its expertise in the field of taxation, becoming one of the local, regional and international leaders in business and trade. What is the purpose of the tax treaty? The tax treaty is not only used to negate double taxation for individuals and businesses alike. In addition to covering income taxes, VAT or other taxes, it also serves the purpose of: Reducing taxes for residents of one of the two signatory countries Eliminating double taxation in favour of a tax credit equivalent to Mauritian tax, Reducing the withholding taxes on dividends, interest and royalties, Exempting capital gains, Conditionally exempting interest payments on loans, Removing exchange controls In addition, non-double taxation agreements (DTAs) provide tax planning opportunities, thus strengthening the image of the jurisdiction as a tax planning centre, allowing control over tax evasion as well as improving the efficiency of cross-border trade. List of Mauritius’ non-double taxation agreements Africa Agreements signed Botswana, Egypt, Lesotho, Madagascar, Mozambique, Namibia, Republic of the Congo, Rwanda, Senegal, Seychelles, South Africa, Swaziland, Tunisia, Uganda, Zambia, Zimbabwe Pending ratification Gabon, Ghana, Kenya, Morocco, Nigeria To be signed by the country Burkina Faso, Cape Verde, Côte d’Ivoire Under negotiation Algeria, Malawi, North Sudan, Tanzania Asia Agreements signed Bangladesh, China, India, Malaysia, Nepal, Pakistan, Singapore, Sri Lanka, Thailand Pending ratification Russia Under negotiation Hong Kong, Vietnam Europe Agreements signed Belgium, Croatia, Cyprus, France, Germany, Italy, Luxembourg, Malta, Sweden, United Kingdom Under negotiation Czech Republic, Greece, Montenegro, Portugal, Spain Middle East Agreements signed Kuwait, Oman, Qatar, United Arab Emirates Under negotiation Iran, Saudi Arabia, Yemen North America Under negotiation Canada West Indies Agreements signed Barbados Under negotiation Saint Kitts and Nevis Other Agreements signed Australia (partial), Guernsey, Monaco To be signed by the country Jersey Under negotiation Gibraltar
