1. Describe the current Mauritius captive industry
Although Mauritius is a well-known international financial hub, the captive industry has failed to develop as expected, especially due to a lack of effective legislation. The legislative framework for captives has been in place since 2001 when the Financial Services Development Act 2001 provided the foundation for the captive insurance industry in Mauritius. This was later followed by the Financial Services Act 2007 and the Insurance Act 2007; designed for the local insurance industry, under which captive insurance was operating.
This flashback reveals that the captives industry, a decade ago lacked a robust regulatory framework that would regulate its establishment and practice more concretely. However, in 2015, the Mauritius captive industry underwent major changes with the adoption of the Captive Insurance Act 2015. The new Act whose main purpose is to provide an efficient regulatory framework to the captive insurance industry is indeed a stepping stone for companies wishing to gear their business focus in establishing their own captives and be self-insured for the ultimate purpose of managing their risks more efficiently.
With the implementation of the new Captive Insurance Act 2015, the captive industry in Mauritius shall be more efficiently regulated by the Financial Services Commission.
2. What are the proposed changes? When is it set to come into law?
The Captive Insurance Act 2015 came into force on the 16th January 2016.
The adoption of the new law has brought changes that shall enhance the efficiency of the captive industry in Mauritius. The new Act only applies to "pure captives" meaning; the business of undertaking liability restricted to the risks of parent and affiliated corporations.
The Insurance Act 2005 which was previously governing captives has been duly amended and the enactment of the Captives Insurance Act 2015 provides for changes such as:
- The Second Schedule to the Act amends the Income Tax 1995 to provide for an attractive tax holiday for a period not exceeding ten years on income derived by captive insurers.
- The licensed captive insurer which will be a corporate resident of Mauritius will also benefit from the Double Taxation Agreements (DTA) and the Investment Protection and Promotion Agreements (IPPA's) enjoyed by Mauritius internationally.
- The Act only regulates 'first party' and not 'third party' captives for now. Captives under the Act will only be able to underwrite or reinsure general insurance business and not long term life insurance business.
3. How will the changes impact the captive insurance industry in Mauritius?
Mauritius is today a well-known international financial hub which holds high international standards and complies with the OECD rules. The adoption of the Captive Insurance Act 2015 shall bring more value and more substance to its financial and corporate services sector. These changes will definitely bring a positive impact on the Mauritian economy and will enhance its international reputation. Mauritius also has in place specific legislation allowing for protected cell companies under the Protected Cell Companies Act 1999. The protected cell legislation complements well the development of the captive industry.
4. What are the advantages of Mauritius and how are the proposed changes expected to make Mauritius more competitive?
Mauritius has positioned itself as the gateway to Africa and holds major attributes for doing business such as:
- Being an attractive, secure and competitive location for cross-border investment.
- Being a stepping stone for foreign investment in both African & Asia.
- Always been at the top of investment indices for good governance and ease of doing business in Africa.
- Offering low corporate tax and attractive fiscal policies
- Having in place a network of Double Taxation Avoidance Agreements with many countries
- Having in place 38 bilateral Investment Promotion and Protection Agreements
- Providing qualified labour force in a favourable time zone
Mauritius holds a modern, efficient and well regulated financial services centre where the rule of law, democracy and political stability prevail. Its jurisdiction guarantees confidentiality in legitimate banking and business transactions. Mauritius has a strong international presence on the international platform as being a country cooperating with international organizations such as the OECD, FATF as well as the United Nations and its agencies. Moreover, Mauritius also has a comparative advantage since there is no capital gains tax, withholding tax on outbound payments or tax on dividends.
Amongst others, the entry of the Captive Insurance Act 2015 provides a more regulated framework for the captive insurance industry, and furthermore will be a plus for the diversification of the financial services sector in Mauritius. The adoption of the Captives Insurance Act 2015 will also enhance competition within the captives industry in Mauritius.
5. Do you expect to see an increase in captives being licensed in Mauritius after the update?
There will definitely be an increase in the number of captives, especially for those aiming at the African continent. The Financial Services Commission is currently preparing an amendment to the Captive Insurance Act 2015 to allow the registration of "third party captives" and the Financial Services Promotion Agency has already started marketing Mauritius as a captive insurance hub.
In the coming years, the popularity of captive industries is expected to increase even more among stakeholders in Mauritius. In any event, we have no choice than to diversify the financial and corporate services industry of Mauritius; hence, this is a good timing for the enactment of the legislation.
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