‘Pursuing our Transformative Journey’ · 2018-06-19 · Edited June 2018 Shamima Mallam-Hassam Country Executive Mauritius The Prime Minister and Minister of Finance and Economic

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2018 -2019 MAURITIUS NATIONAL BUDGET‘Pursuing our Transformative Journey’

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Disclaimer: Please note that this Update is not intended as a complete study on all applicable legislation nor has it been written with a view to providing legal advice on any matter. Edited June 2018 Shamima Mallam-Hassam

Country Executive Mauritius

The Prime Minister and Minister of Finance and Economic Development Honourable Pravind Kumar Jugnauth presented on Thursday 14 June the 2018/19 Budget themed ‘Pursuing our Transformative Journey’. The Budget identifies 7 key areas of action for this transformative journey, namely:

• youth• innovation• import substitution industry and revival of export-led production• strategic and modern infrastructure• protection and enhancement of our environment• standard and quality of life of the population• an inclusive and caring society

This year’s budget announces details of the much awaited reforms for the Global Business sector with considerable new measures to be implemented that will transform the face of the whole financial services industry. The reforms aim at harmonizing the fiscal regime for domestic companies and Global Business companies as well as introducing enhanced substance requirements. These measures will ensure that Mauritius continues to adhere to the best practices and standards in tax matters in line with EU and OECD requirements whilst retaining a competitive fiscal regime. The major change consist of the abolition of the Deemed Foreign Tax credit system available to GBC 1 companies and the introduction of a partial exemption system for certain specified income such as income from foreign dividends, interests, royalties, specified financial services activities or global trading activities. GBC 1 that derives such income will continue to benefit from a maximum effective tax rate of 3%. However it will need to demonstrate enhanced substance in Mauritius based on criteria that will be issued by the Financial Services Commission (FSC). GBC2 companies which currently benefits from a full exemption from income tax, will be abolished and FSC will cease to issue new licenses as from January 2019. A grand fathering provision has been proposed and the current regime will continue to apply until 30 June 2021 for companies which have been issued a license prior to 16th October 2017. Overall the measures announced for the Global Business sector are welcomed and will provide for certainty and help to consolidate the jurisdiction’s reputation as an International Financial Centre of substance and at the same time alleviate the concerns raised by OECD on the jurisdiction.

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The financial services sector of Mauritius registered a growth rate of 5.5 %with a GDP contribution of 11.9 % for the year ended 2017. Today, there are 11,632 GBC1 structures, 10,154 GBC2 structures, 186 Management Companies and 989 Global Funds licensed. Asset Under Management exceed USD 85 billion.

Measures include:

1. Introduction of a new harmonized fiscal regime for domestic and Global Business Companies.(refer to point 3 below).

2. The Deemed Foreign Tax Credit regime available to companies holding a Category 1 Global Business Licence will be abolished as from 31st December 2018. Companies will therefore cease to benefit from an automatic effective tax rate of 3% on their foreign source income.

3. Introduction of a partial exemption regime whereby 80% of specified income will be exempted from income tax. The exemption will be granted to all companies in Mauritius, except banks, and shall apply to the following income:

• Foreign source dividends and profits attributable to a foreign permanent establishment;• Interest and royalties; and• Income from provision of specified financial services

Companies licensed by the FSC, claiming the partial exemption, will have to satisfy pre-defined substantial activities requirement.

The existing credit system for relief of double taxation will continue to apply where partial exemption is not available.

4. Global Trading Activities: Extension of the 3% corporate tax rate applied on profits derived by any company from export of goods to global trading activities effected by companies.

5. GBC 2: The FSC will cease to issue Category 2 Global Business Companies licences as from January 2019; grandfathering is being catered for existing companies.

6. Establishment of a new framework to govern and improve the oversight of Management Companies.

MEASURES WITH RESPECT TO THE GLOBAL BUSINESS SECTOR

Amendments to the Financial Services Act will be brought to provide that all resident companies and partnerships incorporated/registered under the laws of Mauritius whose majority shareholdings/parts are held by non-resident and which conduct business mostly outside Mauritius will be required to seek a Global Business Licence or an authorisation from the FSC, through a duly appointed Management Company.

AMENDMENTS TO THE FINANCIAL SERVICES ACT

ATTRACTING HIGH-NET-WORTH INDIVIDUALS

Two schemes have been announced to attract High Net Worth Individuals:

1. Acquisition of Mauritian citizenship subject to making a non-refundable contribution of USD 1 million to the Mauritius Sovereign Fund. Additional contribution of USD 100,000 required per dependent.

2. Acquisition of Mauritian passport subject to contribution of USD 500,000 to the Mauritius Sovereign Fund. Additional contribution of USD 50,000 required per dependent.

Mauritius is keen to leverage on new technologies, and, in this context,the Government of Mauritius is committed to positioning Mauritius as a Fintech Hub forAfrica with the setting-up of a ‘Fintech and Innovation-driven FinancialServices Regulatory Committee’.

National Regulatory Sandbox License Committee

The Government will implement a National Regulatory Sandbox License Committee for activities relating to Sandbox.

Licensing for FinTech activities

The FSC will create new licenses to provide investors with a regulated environment for the safe custody of digital assets and to enable digital assets exchange.

• Creation of Custodian of Digital Assets license; and• Creation of the Digital Asset Marketplace license.

Crypto Currencies and Digital Assets

The FSC will implement guidelines on investment in crypto currency as a digital asset.

Fintech Activities

The FSC will ensure that applicants for FinTech Activities will have appropriate cyber-security and cyber-resilience policies and capacities.

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POSITIONING MAURITIUS AS A FINTECH HUB FOR AFRICA

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