Mauritius is one of the wealthiest countries in Africa and a famous offshore jurisdiction. Individuals and corporates consider investing here for numerous reasons, and the best is tax incentives being a tax haven. However, before you rush to Mauritius expecting to evade taxes, get to understand the facts detailed below.
While Mauritius has numerous tax benefits and incentives to individuals and corporates, it is not a tax-free nation. Regardless of their nationality, every person who derives income from Mauritius is obliged to pay taxes on the income earned. It doesn’t matter whether these individuals are residents or not as long as income is derived from Mauritius’s. This also applies to employment income as long as the employment duties are carried out in the country.
On the 1stof July 2018, Mauritius announced the reduction of taxes from 15% to 10% based on individual incomes every year. This is subjected to individuals who earn 650,000 Rupees and below, while those who surpass the threshold get taxed at 15%.
Corporate taxes also stand at a 15% rate. An offshore corporation that does not associate with Mauritius and does not use its currency is excluded from taxes. The Island has no capital gains and withhold taxes on its individuals. The government does not levy taxes on interest payments from outside the country. The tax credit is offered for global business at 3%.
Is Mauritius a Tax Haven Country?
Mauritius is among the leading tax haven countries in sub-Sahara Africa despite being a small island. Offshore companies get to enjoy promising tax laws, a robust banking system, confidentiality, asset protection, and an open economy.
The country offers incentives to offshore incorporations, which has enhanced establishing a network of bilateral tax treaties with other countries.
Mauritius Prime Minister Duval empathized that his country is not a tax haven country because there is no secrecy involved in taxation. It is impossible to open a bank account in Mauritius without your full details. He also added that they are glad to share tax information with their partners. Mauritius has stood strong to curb tax evasion in the name of enjoying a tax haven country.
Advantages of Mauritius as a tax haven country
- Mauritius tax framework is one of the lowest across the globe for individual and corporate income taxes. It stands at 15%.
- Offshore businesses are excluded from taxes as long as they don’t do any business with Mauritius
- Investors enjoy asset protection benefits being one of the nations included in the OECD white list
- Mauritius has easy access to emerging and developed markets in Europe and the united states, giving leeway to investors
- It is possible to open an offshore bank account without having to visit the bank or the country physically
- A foreigner can invest in real estate after staying in the country for more than three years, and if the salary range allows it
- Offshore companies formed in Mauritius get to enjoy a high level of asset protection
Income Tax Act in Mauritius
The body responsible for collecting, administering, and regulating taxes in Mauritius is the Mauritius Revenue Authority. The laws governing taxation in Mauritius are income tax regulations in 1996 and the income tax Act 1995.
The main derivatives from these acts are that every resident is required to pay tax on incomes derived in and outside the country. A non-resident person will be taxed on income earned from Mauritius.
Income taxes that are charged include:
- Individual taxation: An individual emolument that is PAYE (pay as you earn) consists of salary earned, pensions, wages, and all incomes derived from any form of employment.
Any form of business income from a self-employed individual getting income from renting, trading, and professionalism are included as a source of income. Other individual chargeable earnings are royalty, foreign dividends, and annuity.
- Corporate taxation is derived from interest income, foreign dividends, profits, rent, and royalty.
- Business income; section 10(3) of the income tax act states that total taxable income derived from any form of business will include;
- Any amount of money derived from carrying out a scheme to make a profit
- Any benefit derived from the extraction or removal of natural minerals and resources
- Any amount of money derived from selling immovable property bought in the course of business intending to sell it
- Any growth in trading stock either when selling it or during a company reconstruction
- Any amount of subsidy earned in the course of doing your business
Note that all expenses and losses incurred in generating gross must be deducted. Also, a loss incurred in a current year can be carried forward and set off against incomes earned in the next five years only.
However, some deductions are not allowed, and these include:
- Any loss or expenditure that is capital in nature
- If loss or expenditure was incurred from generating an exempted income for tax
- It is a provision allowance
- If the expenditure is recoverable in the future under indemnity or insurance contract
- If the loss or expenditure is related to company entertainment or gifts
- If it is a foreign tax or income tax
- If the loss or expenditure is related to private use
- Value Added Tax (VAT): VAT is governed by Value Added Tax Regulations 1998 and Value Added Tax Act 1998. It applies to all taxable supplies produced in Mauritius by a taxable individual in carrying out his business.
When it comes to exports, goods, and services supplied are VAT chargeable whether the person importing is taxable or not. The rate stands at 15 percent against the value of the supplies.
Mauritius Tax Guide
Understanding your tax obligations can be complicated in any country. However, Mauritius Revenue Authority (MRA) has made it easy for everyone to understand their tax liability through their website or by visiting their offices. You can also consult a qualified accountant or financial expert to ensure that you pay the right taxes and submit returns at the end of every financial year.
- As a new employee, you should provide your employer with your duly completed Employee Declaration Form (EDF). The employer will use this information to consider the employee’s Income Exemption Threshold (IET) to calculate the amount of PAYE to withhold from the total employment income.
- As a new employer, you should expect the MRA to provide you with an Employer Registration Number if your business plans to hire employees as indicated during the incorporation stage. You will also get a password to help you file monthly returns.
That said, an employer must pay NSF contributions and PAYE for their taxable employees as per the Social Contributions and Social Benefits Act 2021.
In a recent development on enacting workers’ rights regulations 2020, an employer must also submit a monthly PRGF (Portable Retirement Gratuity Fund) return and pay the respective contributions starting January 2022.
- As a new company, apart from withholding social and PAYE contributions as an employer, you will have more responsibilities concerning taxation. Whether you have taxable income or not, you must submit annual returns within six months after your company’s financial year closure.
Companies are expected to pay and submit all their tax returns electronically. This includes corporate taxes, VAT, monthly TDS returns, annual employee returns, and dividend paid returns.
Every company must maintain proper records and books of accounts, including receipts, registers, and invoices, for the purpose of computing allowable deductions and gross income.
- If you are a self-employed person, you must acquire a Business Registration Number (BRN) from the Mauritian Companies and Business Registration Department. All your invoices and receipts must carry this number.
A self-employed person must submit a statement of the Current Payment System (CPS) declaring their business income from rentals, profession, occupation, or vocation. This applies to those who earn at least Rs 4 million annually and whose tax payable is more than Rs 500. The tax rate is also 15 percent.
If a taxable person fails to pay taxes under CPS or submits their income statement late, penalties and interest are applicable. Late submission attracts a penalty of Rs 2,000 per month as long as it is not more than Rs 6,000 for each statement.
On the other hand, late payment attracts a 5 percent penalty on the unpaid tax and a 0.5 percent interest every month until the tax is paid. The submission and payment date is always on September 30 unless the date falls on a Sunday or public holiday. The next working day acts as the due date.
- This is just but a snippet of tax guidelines in Mauritius for your basic knowledge. Visit the nearest MRA offices to learn more if need be.
Mauritius Tax Avoidance
As a tax haven, Mauritius has been seen gateway for avoiding taxes whereby multinational companies are believed to evade tax by establishing shell companies. It is said to be diverting money from poor countries to rich individuals and multi-companies.
These companies are winning, while the countries that signed treaties with Mauritius are losing huge revenues every year. However, Mauritius has denied being a facilitator in tax evasion, harming the economy of other African countries.
For instance, Zambia and Senegal tore their treaties with the country, terming them as unfair. Lesotho also demanded a new treaty with Mauritius in 2021 to ensure that the shell companies were not enjoying the low tax rates on the island, intending to evade tax.
With the new treaty, Lesotho can acquire all the information they need on revenues and taxation of companies that has any operation in Lesotho. It also allows them to charge fees to these companies for the technical services rendered.
These are just but a few changes that Mauritius is embracing to ensure that as much as they remain a tax haven, they are not enabling tax avoidance. Numerous countries are considering renewing their treaties to curb tax evasion and improve revenue for all the nations involved.
The MRA is also committed to fighting money laundering and tax evasion through its Fiscal Investigations Department (FID). They conduct an extensive investigation in tax evasion cases, gather reliable evidence, plan assessments, and decide on the best prosecution for the offenders.
The investigations include visiting a person or business premise, accessing the book of records, including bank statements, and making copies of these documents to ascertain the tax liability. From here, they will make an informed judgment on whether a taxable individual or business is complying with their tax payment and disclosure duties.
Mauritius Dividend Tax
All companies in Mauritius are not liable to pay tax on dividends earned from resident companies. This is for both resident and non-resident companies. However, if the dividend is received from foreign operations of a company resident in the country, this income is subject to 15 percent tax.
In this case, a company can apply for exemption up to 80 percent or deduction for any tax withheld in the foreign country as long they produce documentary evidence. This leaves an effective 3 percent tax rate on these dividends earned abroad.