A resident corporation held or controlled by a person who is not a citizen of Mauritius and is conducting business outside Mauritius must now apply for a Global Business Licence.
Major reforms undertaken in Mauritius aim to enhance the nation's competitiveness and transparency as a global financial centre, in line with the OECD'S BEPS initiatives.
Changes announced in the Mauritius Budget Speech 2018-2019 and implemented with the enactment of the Mauritius Finance (Miscellaneous Provisions) Act 2018 (Finance Act) saw the previous regime of Global Business Category 1 and 2 (GBC1, GBC2) Licences abolished from 1 January 2019.
Let's dive into the changes in detail and what they mean for corporations in Mauritius.
Global Business Licence
Subject to grandfathering/a transitional period, the 'GBC1' is now known as a Global Business Licence (GBL). A resident corporation held or controlled by a person who is not a citizen of Mauritius, that is conducting or proposing to conduct business principally outside Mauritius, will need to apply for a GBL. The GBL is subject to the following enhanced substance requirements.
- Its core income-generating activities must be carried out in or from Mauritius, and the GBL will be required to employ directly or indirectly a reasonable number of suitably qualified persons to carry out the core activities, as well as have a minimum level of expenditure, which is proportionate to its level of activities
- It must be managed and controlled from Mauritius
- It must be administered by a management company.
In line with existing provisions, when determining management and control, the Financial Services Commission (FSC) will consider the following.
- If the GBL has at least two directors, resident in Mauritius and of sufficient calibre to exercise independence of mind and judgement
- If the GBL will maintain, at all times, its principal bank account in Mauritius
- If GBL will keep and maintain, at all times, its accounting records at its registered office in Mauritius
- If the GBL will prepare its statutory financial statements and cause such financial statements to be audited in Mauritius
- If the GBL will provide for meetings of directors to include at least two directors from Mauritius.
Enhanced substance requirements
Here are some factors that the FSC will take into consideration when assessing the enhanced substance requirements to demonstrate that the core income-generating activities of the GBL is being carried out in, or from, Mauritius.
- Employment: either directly or indirectly (eg. employment by a Management Company), of a reasonable number of suitably-qualified persons to carry out the core activities of the GBL
- The minimum expenditure which is proportionate to the level of activities of the GBL.
The FSC will consider the nature and level of core income-generating activities of a GBL when assessing the above substance requirements. Assessment of the enhanced substance requirements will be on a case-by-case basis, taking into account the specific circumstances of each GBL.
New tax regime
Previously, a GBC1 was subject to a presumption that the amount of foreign tax charged on its foreign source income was equal to 80% of the Mauritius tax chargeable with respect to that income ('Deemed Foreign Tax Credit'). The Deemed Foreign Tax Credit regime previously available to GBC1 is now abolished. A partial exemption regime is now in place whereby an income tax exemption of 80% on the following categories of income is applicable, provided that the enhanced substance requirements are met.
- Foreign source dividend provided that it has not been allowed as a deduction in the country of source
- Foreign source interest income
- Profit attributable to a permanent establishment which a resident company has in a foreign country
- Income derived by a collective investment scheme (CIS), closed end fund, CIS manager, CIS administrator, investment adviser or asset manager, as the case may be. They should be licensed or approved by the Financial Services Commission established under the Financial Services Act
- Income derived by companies engaged in ship and aircraft leasing.
GBL companies may still claim credit for actual foreign tax incurred.
The GBC2 regime has been phased out and replaced by the 'Authorised Company' regime.
The following rules were issued by the FSC on 27 September 2018 and came into force 1 October 2018 (the Rules):
- The Financial Services (Authorised Company) Rules 2018, and
- The Financial Services (Consolidated Licensing and Fees)(Amendment) Rules 2018.
A company may be established in Mauritius as an Authorised Company subject to the following conditions being met:
- To conduct business principally outside Mauritius or with such category of persons as may be specified in the FSC
- The majority of shares or voting rights or the legal or beneficial interest in the company incorporated under the Companies Act are held or controlled by a person who is not a citizen of Mauritius
- To demonstrate that its place of effective management is outside Mauritius.
An Authorised Company must at all times have a registered agent in Mauritius, which must be a management company. It is treated as a non-resident for tax purposes in Mauritius, but shall be required to file an annual tax return with the Mauritius Revenue Authority and file a financial summary with the FSC.
The Authorised Company is prohibited from conducting the following business activities:
- Financial Services
- Carrying out the business of holding or managing, or otherwise dealing with, a collective investment fund or scheme as a professional functionary
- Providing registered office facilities, nominee services, directorship services, secretarial services or other services for corporations
- Providing trusteeship services by way of business
- Any other activities that the FSC may determine as being detrimental to the good repute of Mauritius as a centre for financial services or contrary to public interest.
The fees for all new applications under the Authorised Company regime are as follows:
- Processing Fee: USD $150
- Annual Fee: USD $350
The following conditions have been put in place for existing GBC1 and GBC2 licence holders.
A GBC1 license issued on or before 16 October 2017 will remain governed under the existing provisions of the Financial Services Act 2007 until 30 June 2021, after which it will be deemed to be a GBL.
A GBC1 license issued after 16 October 2017 remained governed under the existing provisions of the Financial Services Act 2007 until 31 December 2018. It is now deemed to be a GBL.
A GBC2 license issued on or before 16 October 2017 will be governed under the existing provisions of the Financial Services Act 2007 until 30 June 2021. After this date, the GBC2 licence will lapse and a company can either apply to be an Authorised Company or a GBL - or be dissolved.
A GBC2 license issued after 16 October 2017 remained governed under the existing provisions of the Financial Services Act 2007 until 31 December 2018. Those GBC2 licences have now lapsed and a company can either apply to be an Authorised Company or a GBL - or be dissolved.
With these changes, the Government of Mauritius is removing the ring-fencing that existed between local companies and global business licence companies, to ensure no special treatment exists for global business companies.
Existing TMF Mauritius clients will either be grandfathered until 2021 or will need to meet the new substance requirements to be able to benefit from the advantages of the Global Business Licence.
Talk to us
TMF Group's expert local team can assess your business structures to ascertain whether it complies with the new requirements for the GBL, and where required, propose changes and other solutions. We can also help with reviews of current GBC2 structures to ascertain whether they are eligible to apply for Authorised Company status.
For those that are eligible, we can help collate the required documentation and submit the application for Authorised Company conversion. We can also assist with the filing of the annual tax return.
Need more information? Contact us today.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.