Mauritius: An Update On The Mauritius International Financial Centre

Last Updated: 9 August 2016
Article by Marc Hein

Mauritius has been consolidating its position as an International Financial Centre (IFC) in the last years. There is now a more elaborate regulatory framework with the Financial Services Commission (FSC) regulating non-banking financial services and the Bank of Mauritius (BOM) regulating banking financial services. We may briefly recap the products offered by the Mauritius IFC:

(i) The two most used entities are the companies holding a Category 1 or Category 2 Global Business Licence (GBL) and which are governed by the Financial Services Act 2007 and the Companies Act 2001. The Category 1 GBL Company is more sophisticated than the Category 2 GBL Company. The Category 1 GBL company is entitled to become tax resident in Mauritius and hence access the vast network of Double Taxation Avoidance Agreements (DTAAs) ratified by Mauritius. The company holding a Category 2 GBL will not be tax resident but is more user-friendly and bears resemblance to the International Business Company (IBC) available in other jurisdictions. The Category 1 GBL Company will pay corporate tax up to 3% on its corporate profits because of a deemed tax credit which it enjoys and the Category 2 GBL Company does not pay taxes in Mauritius as it is not tax resident.

(ii) Trusts may also be used and since Mauritius has a hybrid system of common law and civil law, specific legislation was enacted for trusts in the form of the Trusts Act 2001. This Act defines the responsibility of trustees, settlors, beneficiaries and also provides for protectors in the case of discretionary trusts and for enforcers in the case of purpose trusts. Trusts are now being used more commonly and the Trusts Act is proving to be a good piece of legislation.

(iii) Foundations were introduced by the Foundation Act 2012. The foundation which is essentially a civil law creature is used for wealth management and succession planning. The law contains the basics of foundations as found in other IFCs. Investors from civil law jurisdictions tend to prefer foundations whilst those from common law jurisdictions often prefer trusts.

(iv) Collective Investment Schemes (CIS) are governed by the Securities Act 2005 and are regulated by the FSC. The CIS often holds a Category 1 GBL and we now see more CIS companies being incorporated to service the African continent. An interesting feature of CIS activities concerns their listing on the Stock Exchange of Mauritius. Mauritius encourages listing on its Stock Exchange and this can be an interesting way for promoters to raise money or for already established businesses, to settle in the Mauritian jurisdiction and move ahead with a CIS licence.

(v) Limited Partnerships may now be used. We finally note that following the enactment of the Limited Partnership Act 2011, the limited partnership can hold Category 1 GBL and hence pay up to 3% corporate tax on its profits. The law regulates the relationship between the general partner and the limited partner. Limited partnerships are often used for private equity ventures.

In December 2003, Mauritius signed an Inter-Governmental Agreement (IGA) with the United States of America (USA) in relation to the US Foreign Account Tax Compliance Act (FATCA). The IGA was implemented into domestic legislation in July 2014. Mauritius was the first African jurisdiction to become FATCA-compliant. To date, the majority of banks, management companies, global business companies and other relevant financial institutions based in Mauritius have registered with the US Internal Revenue Service and have put in place the requisite due diligence and reporting systems in order to comply with the FATCA legislation. In October 2014, Mauritius was one of the 51 jurisdictions to sign the multilateral Competent Authority Agreement for the automatic exchange of information (CAA) developed by the Organization for Economic Cooperation and Development (OECD). It is inspired from FATCA and is intended to create a framework for the systematic and periodic transmission of bulk taxpayer information by the source country to the country of residence of the taxpayer. Mauritius has committed to implement the CAA by September 2017. The compliance of Mauritius with the FATCA legislation and the commitment to the OECD's CAA is an important step in further strengthening Mauritius' position as a sound, robust, transparent and clean IFC.

We finally note that Mauritius has a new government since the general elections of December 2014. This new government has provided for a new Ministry of Financial Services, Good Governance and Institutional Reforms, separate from the Ministry of Finance. This shows willingness to develop and strengthen further corporate and financial services in the country.

The African Adventure

Mauritius is a member of the African Union (AU), of the Southern African Development Community (SADC) and of the Common Market for Eastern and Southern Africa (COMESA). The membership of those three organisations by a country which is also an IFC is rather unique. Membership to SADC and COMESA brings money advantages in terms of trade, commerce and cross border transactions. SADC is an organisation covering a market of 277 million persons and COMESA covers a market of 389 million persons. Having a company incorporated in Mauritius and therefore flying the Mauritian flag gives access to those two huge markets. The island also has an impressive network of DTAAs of which 17 are with African countries. 19 have been signed and 15 have been ratified. These DTAAs open the way for entities which are registered in Mauritius and consequently tax residents of Mauritius to be able to claim benefits under the various treaties. The jurisdiction also has an interesting network of Investment Promotion and Protection Agreements (IPPAs), sometimes known as Bilateral Investment Treaties (BITs). Mauritius has 19 of such agreements signed with African states out of which 8 have been ratified. The IPPAs particularly afford protection to investments from nationalisation for those Mauritian incorporated entities in those African countries with which Mauritius has IPPAs in place. This affords additional protection which would not be available if the investor was using a special purpose vehicle incorporated in many offshore jurisdictions now commonly used by international investors. Mauritian professionals are bilingual, speaking and working in English or French and also often with knowledge of Hindi or Mandarin. This is helpful as most of the African States are either Francophone or Anglophone. Corporate, trusts or foundation documentation may be done in French or English and indeed a company's statute may also be in Mandarin. The Mauritian lawyer or accountant may with ease accompany clients towards their target destination in Africa. The island has a hybrid system of laws with a Code Civil, a Code de Procedure Civile and a Code de Commerce which are French inspired and cohabitating with English Law. This is a rather unique legal situation and due to the fact that the island was first a French colony and then a British colony before becoming independent in 1968. On top of this is the right of final appeal to the Judicial Committee of the Privy Council of Her Majesty the Queen, sitting in London for appeals from the Supreme Court of Mauritius.

Arbitration

Like many other countries, Mauritius is trying to position itself as an international arbitration centre. What is special to the jurisdiction is the setting up of the Mauritius International Arbitration Centre (MIAC) in conjunction with the London Chamber of International Arbitration (LCIA). It is a private institution known as the LCIA-MIAC and is governed by its own rules which are inspired by the rules of LCIA. The International Arbitration Act of 2008 enacts the law concerning international arbitration and is inspired by the UNCITRAL model. The Act was amended in 2013 to keep in touch with international developments. The Permanent Court of Arbitration (PCA) established at The Hague, in the Netherlands, is also based locally through the Host Country Agreement signed by the Mauritian government in 2009. This Agreement establishes the legal framework under which future PCA administered proceedings whether they are interstate or investor against state disputes can be conducted in the territory of Mauritius. The PCA has an office in Mauritius and is active in promoting the island as an arbitration hub.

Finally, the Mauritius Chamber of Commerce and Industry (MCCI), has signed an agreement with the Centre de Mediation et d'Arbitrage de Paris to develop and strengthen its arbitration services locally. This centre operates under the aegis of the Chambre de Commerce et d'Industrie de Paris.

The Mauritian government has backed those projects and is active through its support in the organisation of the 2016 Congress of the International Council for Commercial Arbitration (ICCA) on the island. It will be the first time that the ICCA congress will be held on African soil and promises to be a large gathering of arbitration experts. The Congress will certainly be a huge factor to put the island on the global map of international arbitration. It has also been the policy of government to add substance to global business companies using Mauritius as a platform to invest worldwide. New substance requirements were put into place by the FSC in the Guide to Global Business. These requirements came into effect on the 1st of January 2015. There are several options from which companies may choose to bring more nexus between their activities and the actual economy, i.e. to add economic substance. Global business companies are therefore encouraged to open up offices in Mauritius, employ residents on a full time basis, spend more money locally or if applicable to get listed on the Stock Exchange. One further innovative option which has been added is for these companies to have inbuilt in their constitution a clause that provides for disputes arising between shareholders to be settled by arbitration in Mauritius. This is specifically provided for in the International Arbitration Act 2008 and aims at attracting such companies to settle their future disputes by arbitration in Mauritius. A large number of companies have chosen the option of adding in their constitution a clause providing for arbitration locally in case of such shareholders' disputes. This is therefore an additional criterion for such companies to be deemed to be tax resident in Mauritius.

We may here look at certain new products being developed within the Mauritian IFC:

(1) Captive Insurance

A new Bill is to go through Parliament soon to enact a Captive Insurance Act to set up the regulatory framework for captive insurance. Mauritius has the capacity to be the domicile of choice for captive insurance in relation to the African Continent and indeed for other markets too. Essentially, captives are a form of self-insurance whereby the insurer is wholly owned by the insured. The captive insurance company can be a subsidiary of the parent company to provide insurance to it. They are established to meet the risk management needs of the company and once set up will act like a commercial insurer. It will not generally offer insurance to the public but only to the company which owns it.

A jurisdiction like Bermuda is well known for captive insurance business. Insurance represents 16.1% of the GDP of Bermuda and provides employment in the form of white collar jobs to Bermudians. Another jurisdiction like the Cayman Islands also has a large captive insurance industry and we will also find niche captive insurance jurisdictions like Vermont in the USA, Guernsey in the Channel Island or Anguilla in the Caribbean. Mauritius should in fact aim at becoming an insurance hub, not only for captives but also for insurance generally.

(2) Aircraft Registration

To further diversify the corporate and the financial services sector, the opportunity exists to develop aircraft registration and aircraft finance. The Civil Aviation Act 2007 is already in place and the regulations under this law became effective in 2010 to provide for the new scheme of fees related to the registration of aircraft. An aircraft registry means fees for the country when aircrafts are registered but it also means work for banks, law firms, accountancy firms and management companies. Further revenues are also generated through the annual inspection by the Department of Civil Aviation which is the regulatory body for aircraft registration. It is estimated that more than 1,200 new commercial aircraft will be bought by African countries by 2030. Ownership or leasing of aircraft also require the incorporation of special purpose vehicles, therefore also generating further revenues through licensing fees to the FSC and the Registrar of Companies (ROC), management fees to the management companies and accountancy and audit fees for accounting professionals. The experience of the Isle of Man which in a few years has more than 600 registered aircraft consisting mostly of business jets is an impressive example. Mauritius will need to ratify the Cape Town Convention and its Aircraft Protocol which defines international standards for the registration of international interests in airframe and engines in the nature of liens, leases, conditional sale contracts and further provides for remedies in case of defaults. It will also need to ratify the Montreal Convention which concerns uniformity of rules relating to the international carriage of passengers, baggage and cargo. The Montreal Convention which was adopted in 1999 amends the well known Warsaw Convention and attempts to re-establish uniformity and predictability if rules. A window of opportunity also exists at the moment because owners of aircraft today look for neutral jurisdiction like Mauritius to register their aircraft so as to avoid their aircraft being the target of terrorist activities.

(3) Shipping Registry

Just like the aircraft registry, an active shipping registry for the registration of ships is another activity to develop and diversify corporate and financial services. Shipping is governed by the Merchant Shipping Act 2007 which is itself based on the UK Merchant Shipping legislation. It is hoped that the Mauritian Ship Registry will aim at quality rather than quantity in terms of its clients. The registration procedure also needs streamlining to be more efficient and less time consuming and be adapted to the local specificities and needs.

The window of opportunity mentioned above concerning owners of vessels wishing to sail a neutral flag like Mauritius evidently applies so as to minimise chances of attacks by terrorist groups. Aircraft and shipping registration will generate activities in aircraft and shipping finance and further possibilities exist in the field of international tax planning through the use of the Mauritian jurisdiction and its extended network of DTAAs.

Conclusion

Services represent today more than 70% of the GDP of the island and there is no other alternative but to develop them to create jobs and add value to the economy. The jurisdiction continues to be the ideal platform for investments in India but as of late has shown its capacity to be the hub of reference for facilitating investments into Africa.

Published in Offshore Investment magazine (May 2015)

Offshore Investment

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.