Setting up a unit trust in Mauritius offers numerous benefits. Investors pool their funds to gain access to a diversified portfolio managed by professionals, thereby spreading both risks and benefits. Unit trusts democratise stock market access, allowing even modest investors to partake in quality shares.
The simplicity of unit trust structures, coupled with a qualified trustee overseeing the management of your unit trust and steering through financial regulations ensuring that everything operates smoothly and within the bounds of law.
The trustee holds legal title to the assets of the unit trust on behalf of the investors. This legal oversight ensures that the assets are protected and managed in accordance with the trust deed and regulatory requirements, providing investors with a sense of security.
Moreover, in the event of disputes or conflicts of interest within the unit trust, the trustee acts as an impartial mediator to resolve issues in the best interests of the investors. This impartiality fosters trust and confidence among investors, knowing that their concerns will be addressed fairly.
In Mauritius, a unit trust operates under the supervision of the Financial Services Commission (FSC). Key stakeholders include investors, the CIS manager, trustee, custodian, administrator, and auditor, each playing a vital role in ensuring regulatory compliance and transparency.
- Investors: Investors are individuals or institutions who contribute capital to the unit trust in exchange for units or shares in the fund.
- CIS/Fund Manager: The CIS manager is responsible for managing the unit trust’s portfolio of investment. Their duties include conducting research on investment opportunities, making trading decisions and ensuring that the objectives of the fund are met. The goal of the fund manager is to achieve the best possible returns for the investors while managing risks.
- Trustee: The trustee as mentioned above, is a key component in the unit trust as it brings a high level of comfort to investors as it is appointed to oversee the management of the fund and ensure that it operates in accordance with the regulatory requirements and the trust deed.
- Custodian: The custodian is responsible for holding and safeguarding the assets of the unit trust.
- Administrator: The administrator such as Blue Azurite, is responsible for the day-to-day administration of the unit trust, including processing investors transactions, calculating the NAV of the unit trust, and preparing financial reports. Blue Azurite ensures that the unit trust operates smoothly and transparently.
- Auditor: An independent auditor registered with the Financial Reporting Council of Mauritius is appointed to audit the financial statements of the unit trust and provide assurance to investors that the fund’s financial reports are accurate and reliable.
Another convenient feature which is often taken as granted by unit trust investors is the facility of creating a contractual saving through a debit order facility where an investor is allowed to invest a fixed amount every month through a debit order.
Return on Investment
Investors receive returns from their investment in the unit trust through two primary channels: capital appreciation and income generation. The income stems mainly from two sources which are dividends and interest.
Distributions
Investors in unit trusts can usually elect to either have the income paid to them on a periodic basis, or to have the income automatically reinvested. Note that not all CIS allows for automatic reinvestment, e.g. property unit trust and some CIS absorb income into the portfolio and do not offer distribution of income to unit holders.
When income is automatically reinvested, the CIS Manager applies the distribution due to a unit holder to the purchase of more units. Capital gains, in other words means an increase in the unit price, while the reinvestment of distributions means more units in the investor’s account.
Capital Gains Tax – CGT
Under the Income Tax Act of Mauritius, there is no capital gains tax in Mauritius. Hence, the CIS is exempt from CGT in Mauritius in respect of the income categorised as capital gains, therefore allowing the CIS Manager to buy and sell shares within the portfolio without being liable for CGT.
Corporate Income Tax
Since the unit trust will be classified as an investment fund, it will benefit from an 80% exemption from foreign-source income derived in its capacity as a CIS or CEF.
Furthermore, an exemption of 95% of the interest income earned is applied if the CIS or CEF meets the corresponding substance requirements. A credit for actual tax suffered is also possible provided that no exemption has been claimed.
