Collective investment schemes: Complying with the new tax regime in Mauritius

Mauritius has undertaken major reforms since 2018 to enhance its competitiveness and transparency as a global financial centre while addressing concerns from the Organisation for Economic Co-operation and Development (OECD).

To support the OECD’s initiatives to crack down base erosion profit shifting, Mauritius has introduced a new regime that increases requirements for companies applying for tax reliefs.

The Deemed Foreign Tax Credit (DFTC) regime was abolished from January 2019 and was replaced by the Partial Exemption Regime (“PER”). This allows 80% tax exemption on certain qualifying income streams of global business corporations such as foreign-sourced dividend income and interest income among others.

Businesses created after 16 October 2017 have had to claim the PER, which is a conditional regime, as from the 2020 year of assessment. Companies set up on or before 16 October 2017 have been able to still claim the old DFTC – which was unconditional and resulted in a 3% tax rate – but this ends on 30 June 2021 when they will have to claim the PER thereafter.

A robust and expert administrator such as we can help companies navigate the complex and challenging process of claiming the PER, which requires three key conditions to be met. 

The first condition is to check if the company’s core income generating activities are being carried out from Mauritius or are outsourced.

The second is the employment test, which involves checking if the company directly or indirectly employs an adequate number of suitably qualified and experienced individuals that carry out the core income generating activities.

The third condition is the expenditure test, which requires companies to have the appropriate documentary evidence to verify local expenditure. While no limit is prescribed, it will depend on the level of activities carried out compared with other similar structures.

At Apex Group, we believe three types of income subject to PER will be relevant to our clients following a review of their corporate structures. These are foreign source dividend, interest, income derived by a Collective Investment Scheme (CIS), closed-ended fund, CIS manager, CIS adviser or CIS asset manager.

The move to the new PER regime requires an annual in-depth assessment of a company’s eligibility to qualify based on the prevailing tax regulations, guidelines issued and informal discussion with the Revenue Authority.

It is therefore important for companies to seek advice to help manage tax risks and ensure they have appropriate documentary evidence in place to support the three substance tests and the eligibility to PER.

Using a trusted and experienced provider

We can help clients comply with local tax reporting obligations such as the additional information requested on tax returns, ensure a company complies with the tax residency certificate condition, and assist with assessments raised by the Revenue Authority.

Across the MENA region, including Mauritius, we provide complementary corporate, business support services and compliance services, in addition to local ManCo solutions – and we have a team of over 500 regulatory, operational and product experts.

As a trusted service provider which has been delivering local fund services to clients in the Middle East region and Mauritius since 2006, we are well-placed to help clients comply with the tax exemption regime.