The Minister of Finance and Economic Development delivered his Budget Speech for the fiscal year 2021/2022 on the 11th June 2021 against the backdrop of the Covid-19 pandemic which had deep effects on the economy. The Budget Speech also coincided with the much-awaited announcement of the reopening of the Mauritius borders for tourism in a phased manner, starting on the 15th of July 2021 for vaccinated travellers. The tone of the budget was:
- to restore the confidence of economic operators through a series of incentives;
- to kick start the recovery and the revival of the main economic sectors; and
- to continue investing in major infrastructure projects to stimulate job creation, growth and to provide for further resilience of the economy.
The 2021 /22 Budget Speech is a continuum of the previous budget speeches with a strong accent on the inclusiveness of the society at large, further investment in education, health care, social infrastructure and skills development and support to the most vulnerable.
A significant aspect of the speech was the measures announced to further open the economy to investors and to professionals who wish to work, live and enjoy the quality of life the island provides but also for the long-awaited extension of the measures to include their families so that they can establish themselves on a longer term. As a small open economy faced with a demographic challenge, the Government has announced as series of reforms to complement the measures announced last year:
- The validity period for an Occupation Permit ('OP'), a combined work and residence permit, for Professionals is being extended from 3 years to 10 years;
- Spouses of OP holders wishing to invest or work in Mauritius will be exempted from applying for a separate permit;
- The maximum age limit of 24 years for dependents will be waived;
- A Young Professional Occupation Permit, for a period of 10 years, for foreign students who have attended University education in Mauritius is being introduced; and
- A new 10-Year Family Occupation Permit for those contributing USD 250,000 to the COVID-19 Projects Development Fund is also being introduced.
Furthermore, a privilege club scheme will be implemented providing a range of incentives to Occupation Permit holders and retirees, ranging from privilege access to hotels, golf courses, restaurants, private medical institutions, amongst others.
To further improve the investment climate and ease of doing business in Mauritius, the Premium Investor Certificate has been announced. This scheme will allow companies investing more than MUR 500 million (approximately USD 12.5 m) in Mauritius to negotiate their incentive requirements. This is a bold measure which can attract multinational companies to set-up in Mauritius to take advantage of the five preferential trade agreements that Mauritius has recently signed namely the CECPA with India, the China FTA, the UK-ESA Agreement, the FTA with Turkey and the African Continental FTA.
Particular emphasis was put on the Biotechnological and Pharmaceutical Industry whereby the tax rate has been reduced from 15% to 3% alongside a series of additional measures such as exemption of the registration, land conversion and transfer tax and payment of VAT on construction material. Furthermore, all companies operating in the Biotechnological and Pharmaceutical Industry will be eligible for the Premium Investor Certificate. A seed capital of MUR 1 billion is being injected by the Government for the setting up of a plant for the production of Covid-19 vaccines and international players will be invited to participate in this initiative.
It was strongly pointed out in the Budget Speech that the Government is fully committed to complete the implementation of the FATF action plan the soonest possible and to ensure that Mauritius is fully compliant with the AML/CFT framework recommended by the FATF. In addition to the measures that have already been adopted, further steps will be taken for the purpose of securing Mauritius an early exit from the grey list of the FATF of jurisdictions of increased monitoring. The legal recognition of the AML/CFT Group under the AML laws, the setting up of a dedicated body for the combat of financial crimes, the revamping of banking legislations and the introduction of AML-related training programme, are all actions which are geared towards complying with internationally set standards. A sound and solid AML/CFT framework is seen as a sine-qua-non for the international business community to renew its full confidence in Mauritius as an International Financial Centre and to take advantage of the new and very attractive Special Purpose Fund regime, the innovative initiatives namely the Secure Token Offerings, the Digital Custodian license and the forthcoming Variable Capital Vehicle regime. It is to be noted that a Financial Crime Commission will be set-up to ensure that enforcement actions against financial crimes are taken swiftly and for the preservation of Mauritius as a jurisdiction of repute. Some of the key measures which have been announced for the Financial Services Sector are as follows:
- A Securitisation Bill will be introduced;
- The tax holiday for Family Offices and Fund and Asset Managers will be extended from 5 to 10 years;
- A new Securities Bill will be introduced;
- A new legislation for virtual assets will be enacted;
- The Bank of Mauritius will roll-out a Central Bank Digital Currency – The Digital Rupee – on a pilot basis;
- The Bank of Mauritius will introduce a dedicated QR Code at national level to facilitate digital payments;
- The Bank of Mauritius guidelines allowing the setting up of regional offices by international banks will be revamped in line with latest international trends;
- The Bank of Mauritius and the Financial Services Commission will set up respectively an Open-Lab for banking and payment Solutions and a FinTech Innovation Lab to encourage an entrepreneurship culture; and
- The Stock Exchange of Mauritius will introduce rules for the setting up of Special Purpose Acquisition Companies.
- A 5-year tax holiday will be granted on emoluments of an asset manager, a fund manager or asset and fund manager who manages an asset base of not less than USD 100 million and who has been issued with a certificate on or after 1 September 2016. Holders of a certificate issued on or after 1 September 2016 will be exempted from tax on their emoluments for an additional 5 years while new certificate holders will be eligible to a tax holiday of 10 years;
- The threshold of USD 100 million in respect of asset base being managed by an Asset/Fund Manager will be reduced to USD 50 million;
- The Income Tax Act will be amended to ensure that foundations and trusts benefitting from a preferential tax regime comply with the OECD standards, including substantial activity requirements;
- It is further noted that the requirement for Family Offices to have a Global licence will be eliminated; and
- The partial exemption tax regime will be extended to cover investment dealers and other type of leasing activities.
Our view of the Budget Speech is that the Government continues to lay a lot of emphasis on social coherence which is seen as a critical factor for the stability and growth of the nation. This philosophy is complemented with a willingness to further opening up for foreign talents and external capital. These are laudable initiatives which are in line with the principle of making Mauritius a trade and business hub for the region. We are also extremely pleased with the emphasis put by the Minister of Finance in his speech on the importance of being fully compliant with the FATF AML/CFT Action Plan. Mauritius is viewed by private investors and development financial institutions as a jurisdiction of choice for channelling much needed growth capital in Africa. The impact that these investments is making on the creation of wealth, decent jobs, community empowerment and environmental preservation cannot be underestimated. We therefore welcome all the measures announced to not only allow Mauritius to be white listed by the FATF and the EU but also to propose new regimes to investors with a view to ensure maximum returns whilst operating in a low risk, stable, well-regulated and fully compliant environment. The emphasis on skills development is also extremely important so that the country can transform itself into a centre for value added work. Whilst it might have been seen as a surprise to see the Government still investing in major infrastructure projects even when the Covid-19 pandemic have put very heavy constraints on the national treasury and increase Government debt level to unprecedented levels, we do understand the long-term vision associated with these development initiatives.
The measures announced to open up for foreign talents as well as their families have been well received and will further strengthen the ambition of Mauritius to be within the league of top rated International Financial Centres. However, we think that some elements of personal taxation such as the solidarity levy increased last year and the general social contribution would be deterring factors to attract much needed talents, competence and skills on the island and we would recommend that the Minister takes a fresh and pragmatic look at these measures. The personal tax exemption on private pension investment is seen as a good gesture albeit a timid one.
It is refreshing and reassuring to see that no measures announced will change or amend the current fiscal regime applicable to the Global Business Sector which brings stability and predictability for operators in the sector.
Overall, it is a positive budget speech that will boost the confidence of the business communities, further enhance social justice and nurture new and innovative economic activities.
The Senior Leadership Team
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