1 Basic framework
1.1 Is there a single tax regime or is the regime multi-level (eg, federal, state, city)?
There is a single tax regime in Mauritius.
1.2 What taxes (and rates) apply to corporate entities which are tax resident in your jurisdiction?
Corporate entities will attract income tax and value added tax (VAT), subject to any exemptions they may avail of. The imposition of VAT depends on the turnover and activities of the corporate entity. Corporate entities may also be liable to corporate social responsibility charges, subject to certain conditions.
The headline rate for income tax is 15% subject to any exemption or tax holidays that the corporate entity may avail of. For VAT, it is also 15%.
1.3 Is taxation based on revenue, profits, specific trade income, deemed profits or some other tax base?
Corporate income taxation is based on the chargeable income of a corporate entity. ‘Chargeable income' is defined as the net income of the company (ie, gross income less any allowable deductions). In some specific cases (ie, when applying the arm's-length provision or the controlled foreign corporation rules set out in the fiscal legislation), the Mauritius Revenue Authority can revise the chargeable income of a corporate entity.
1.4 Is there a different treatment based on the nature of the taxable income (eg, gains on assets as opposed to trading income or dividend income)?
Different treatment may apply in terms of the exemptions available for certain streams of income, such as foreign dividends or interest. There is no tax on capital gains in Mauritius.
1.5 Is the regime a worldwide or territorial regime, or a mixture?
Mauritius has a worldwide regime; therefore, a corporate resident in Mauritius may be taxed on its worldwide income.
1.6 Can losses be utilised and/or carried forward for tax purposes, and must these all be intra-jurisdiction (ie, foreign losses cannot be utilised domestically and vice versa)?
Unutilised tax losses may be carried forward and offset against the net income of the taxpayer for the next five income years. However, such tax losses will not be available to be carried forward where:
- there has been more than a 50% change in the shareholding of a company;
- the tax loss is attributable to annual allowance claimed on capital expenditure incurred on or after 1 July 2006; or
- the tax loss is attributable to expenditure incurred on deep ocean water air conditioning, water desalination or double deductions claimed on qualifying expenditure directly related to existing trade or business.
The Income Tax Act 1995 imposes no restrictions on the use of tax losses incurred on foreign activities against net income derived from domestic activities and vice versa, in respect of the same taxpayer.
1.7 Is there a concept of beneficial ownership of taxable income or is it only the named or legal owner of the income that is taxed?
Only the legal owner of the income is taxed, subject to certain anti-avoidance provisions.
1.8 Do the rates change depending on the income or balance-sheet size of the taxpayer?
Since 2019, small enterprises (ie, companies with an annual turnover of less than MUR 10 million and which are engaged in prescribed activities) may, by irrevocable notice, on or before the due date for the filing of their return of income, elect to pay a presumptive tax at the rate of 1% of their gross income.
1.9 Are entities other than companies subject to corporate taxes (eg, partnerships or trusts)?
Partnerships (including sociétés) are generally tax transparent.
Resident trusts are generally subject to tax in the same way as companies.
2 Special regimes
2.1 What special regimes exist (eg, for fund entities, enterprise zones, free trade zones, investment in particular sectors such as oil and gas or other natural resources, shipping, insurance, securitisation, real estate or intellectual property)?
Mauritius now provides for a partial exemption of up to 80% on certain streams of income, provided that the company satisfies certain substance requirements.
Income derived from several activities – such as aircraft leasing and acting as a collective investment scheme manager or investment manager – may benefit from the above exemption.
Several tax holidays currently exist with regard to innovation-driven activities and the manufacture of certain pharmaceutical products, among other things.
A special regime applies to banks.
The legislation also provides for certain tax-exempt vehicles (eg, special purpose funds).
2.2 Is relief available for corporate reorganisations or intra-group transfers of companies and other assets? Please include details of any participation regime.
Yes – for example, losses may be carried forward for the following year only if at least 50% of the shares were held by or on behalf of the same person.
There is no tax on capital gains.
2.3 Can a taxpayer elect for alternative taxation regimes (eg, different ways to calculate the taxable base, such as revenue-based versus profits based or cash basis versus accounts basis)?
A small enterprise (which is prescriptively defined) may apply to the Mauritius Revenue Authority for the net income of its business to be computed on a cash basis instead of an accrual basis.
2.4 What are the rules for taxing corporates with different functional or reporting currency from that of the jurisdiction in which they are resident?
The Income Tax Act 1995 provides for income to be expressed in Mauritius rupees. However certain companies may prepare their financial statements in US dollars, euros, pounds sterling, Singapore dollars, South African rands, Swiss francs or such other foreign currency as may be approved by the Mauritius Revenue Authority, and pay their taxes in that amount.
2.5 How are intangibles taxed?
Where a taxpayer incurs capital expenditure on intangible assets which are used exclusively in the production of gross income of the taxpayer and are subject to depreciation under International Financial Reporting Standards, an annual allowance can be claimed on those intangible assets.
The chargeable income of a company which consists of income from intangible assets is taxed in the same way as other income (ie, at the headline rate of 15%).
However, effective from 1 July 2020, an eight-year tax exemption is available for companies set up on or after 1 July 2017 that meet the prescribed conditions and:
- engage in innovation-driven activities involving IP assets which have been developed in Mauritius; or
- derive income from IP assets which have been developed in Mauritius on or after 10 June 2019.
If the company does not satisfy the conditions for the eight-year tax exemption, any income derived on intangibles will be subject to tax in Mauritius.
2.6 Are corporate-level deductions available for contributions to pensions?
Contributions made by employers in respect of employees are deductible when calculating the company's gross income, provided that the employer contributes to what is defined as a ‘superannuation fund'.
2.7 Are taxpayers from different sectors (eg, banking) subject to different or additional taxes or surtaxes?
- Banking: A special levy on banks is progressively applied to the income of banks.
- Telecommunications service providers: A solidarity levy is applied to the book profits of telecommunications service providers.
2.8 Are there other surtaxes (eg, solidarity surtax, education tax, corporate net wealth tax, remittance tax)?
A solidarity tax is applied to individuals only.
Some companies are also liable to make contributions to the corporate social responsibility fund.
2.9 Are there any deemed deductions against corporate tax for equity?
Only interest incurred in the production of income is deductible. The Mauritius Revenue Authority has offered guidance that distributions made in relation to certain types of shares (normally preference shares which the shareholder can redeem at any point) may be treated as interest.
3 Investment in capital assets
3.1 How is investment in capital assets treated – does tax treatment follow the accounts (eg, depreciation) or are there specific rules about the write-off for tax purposes of investment in capital assets?
Prescribed rules on capital allowances explain the rate at which certain items may be allowed.
3.2 Are there research and development credits or other tax incentives for investment?
Taxpayers can claim either of the following tax incentives with regard to expenditure on research and development (R&D):
- a double deduction for qualifying expenditure on R&D carried out in Mauritius by an existing trade or business from 1 July 2017 to 30 June 2022, for which no annual allowance has been claimed; or
- an annual allowance of 50% of R&D costs, including innovation, improvement or development of a process, product or service.
3.3 Are inventories subject to special tax or valuation rules?
There are prescribed rules on the valuation of stock. The applicable legislation provides that the value of trading stock to be taken into account shall be determined in accordance with International Accounting Standard 2 on Inventories, subject to certain conditions.
3.4 Are derivatives subject to any specific tax rules?
No, derivatives fall under the definition of ‘securities' under the Securities Act 2005 and accordingly are not subject to capital gains tax.
4 Cross-border treatment
4.1 On what basis are non-resident corporate entities subject to tax in your jurisdiction?
They are subject to income tax to the extent that they derive income generated from Mauritius, on that income only.
4.2 What withholding or excise taxes apply to payments by corporate taxpayers to non-residents?
- Interest payable by corporate taxpayers to non-residents: 15%
- Royalties payable to a non-resident: 15%
- Rent payable to a non-resident: 10%
- Payment of management fees to a non-resident: 10%
- Payment of fees for services rendered in Mauritius: 10%
This is subject to exemptions where payments of interest, dividends or royalties are made by an entity that holds a global business licence from its foreign source income. Reduced rates may also apply under double tax treaties.
4.3 Do double or multilateral tax treaties override domestic tax treatments?
When incorporated in domestic law, double and multilateral treaties override any domestic tax treatment.
4.4 In the absence of treaties, is there unilateral relief or credits for foreign taxes?
Subject to the presentation of written proof of such tax paid, companies in Mauritius can claim credit on the foreign tax paid on their income tax.
Moreover, a company that receives foreign dividends can benefit from an underlying foreign tax credit, subject to certain conditions, if it owns at least 5% directly or indirectly of an underlying company. In this case, the credit will be available on foreign tax paid on the income from which the dividend was paid.
4.5 Do inbound corporate entities obtain a step-up in asset basis for tax purposes?
An annual allowance is provided only with regard to the costs of the asset as determined under International Financial Reporting Standards or the tax written-down value. The Income Tax Act 1995 does not provide for a step-up in basis for fixed assets.
However, the regulations do provide for the valuation of trading stock at the end of every income year, using the appropriate methodology.
4.6 Are there exit taxes (for disposed-of assets or companies changing residence)?
No – there is no tax on capital gains in Mauritius.
5.1 Are there anti-avoidance rules applicable to corporate taxpayers – if so, are these case law (jurisprudence) or statutory, or both?
Several specific anti-avoidance rules apply to corporate taxpayers with regard to:
- interest on debentures issued by reference to shares;
- excessive remuneration or share of profits;
- excessive remuneration of shareholders or directors;
- benefits to shareholder;
- excessive management expenses; and
- leases for other than adequate rent.
There is no case law on the specific anti-avoidance rules.
5.2 What are the main ‘general purpose' anti-avoidance rules or regimes, based on either statute or cases?
Mauritian law also includes a main general anti-avoidance rule which seeks to prevent transactions whose sole or dominant purpose is to obtain a tax benefit, having regard to several factors, including the manner in which the transaction was entered into or carried out and the form and substance of the transaction.
The interpretation of the main general anti-avoidance rule has been the subject of case law at the Supreme Court level, which has focused on the interpretation of ‘dominant purpose'. No additional principles have been derived from case law.
5.3 What are the major anti-avoidance tax rules (eg, controlled foreign companies, transfer pricing (including thin capitalisation), anti-hybrid rules, limitations on losses or interest deductions)?
- Controlled foreign company (CFC) rules: CFC rules were introduced to the Mauritian fiscal legislation in 2019. Where a Mauritius tax-resident company carries on business through a CFC and the Mauritius Revenue Authority considers that the non-distributed income of the CFC arises from non-genuine arrangements which have been put in place for the essential purpose of obtaining a tax benefit, that income will be deemed to form part of the chargeable income of the Mauritius company.
- Transfer pricing: There is no specific transfer pricing legislation, but there is a general arm's-length provision in the fiscal legislation. There is no thin capitalisation requirement in Mauritius.
- Limitation on losses: The Mauritius Revenue Authority is empowered to revise the quantum of losses available for set-off or carried forward for a taxpayer.
- Interest deductions: The Mauritius Revenue Authority may refuse to allow a deduction on expenditure incurred as interest where it is satisfied that:
- the interest is payable to a non-resident which is not chargeable to tax on the amount of the interest; or
- the interest is not likely to be paid in cash within a reasonable time.
5.4 Is a ruling process available for specific corporate tax issues or desired domestic or cross-border tax treatments?
Yes, any person – including a corporate entity – that derives or may derive any income may apply to the Mauritius Revenue Authority for a ruling as to the application of the income tax legislation to that income. The ruling of the Mauritius Revenue Authority is binding on the latter and is published for the benefit of the public.
5.5 Is there a transfer pricing regime?
There is no specific transfer pricing legislation, but the main fiscal legislation contains a general arm's-length provision.
5.6 Are there statutory limitation periods?
The Mauritius Revenue Authority is statutorily empowered to conduct assessments on taxpayers. However, it is debarred from doing so once three years have elapsed since the year of assessment.
6.1 What are the deadlines for filing company tax returns and paying the relevant tax?
A company must submit, within six months of the end of the month in which its accounting period ends, a return declaring all income derived in the preceding year and at the same time pay any tax payable thereon. This is called the ‘annual return'.
In addition to the annual return, companies must file, under the Advance Payment System (APS), quarterly APS statements and pay tax accordingly. However, the APS does not apply to a company with an annual turnover of under MUR 10 million.
6.2 What penalties exist for non-compliance, at corporate and executive level?
In addition to penalties for late filing, a penalty of 5% of the tax due is levied in case of failure to submit certain returns.
The Mauritius Revenue Authority can also charge interest.
Agents of the company (ie, the secretary, manager or any other principal officer) have a duty to ensure that the company is tax compliant. Actions may be entered against the agents directly in relation to the tax due.
6.3 Is there a regime for reporting information at an international or other supranational level (eg, country-by-country reporting)?
Mauritius has implemented country-by-country reporting legislation and also exchanges information under the Common Reporting Standard and the US Foreign Account Tax Compliance Act. This is in addition to exchange of information obligations that apply under bilateral tax information exchange agreements.
7.1 Is tax consolidation permitted, on either a tax liability or payment basis, or both?
There is no tax consolidation in Mauritius, except in the case of a permanent establishment being consolidated at the head office level, since they are legally the same entity.
Each taxpayer should calculate its own tax liability, submit its own tax return and pay its own tax liability separately from other taxpayers (even within the same group).
8 Indirect taxes
8.1 What indirect taxes (eg, goods or service tax, consumption tax, broadcasting tax, value added tax, excise tax) could a corporate taxpayer be exposed to?
Corporate taxpayers will usually be subject to:
- value added tax, if they make taxable supplies; and
- customs and excise duty, if they engage in the export/import of goods or the manufacture of certain goods.
8.2 Are transfer or other taxes due in relation to the transfer of interests in corporate entities?
The transfer of interests in corporate entities which hold immoveable property in Mauritius may be subject to registration duty and land transfer tax. Both registration duty and land transfer tax are proportional to the value of the underlying immoveable property.
9 Trends and predictions
9.1 How would you describe the current tax landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
- The fiscal legislation has been significantly overhauled since 2018 to align Mauritius with its commitments under the Base Erosion and Profit Shifting (BEPS) action plan.
- There may be other legislative reforms, depending on the further work undertaken by the Organisation for Economic Co-operation and Development and the European Union on Pillars 1 and 2 of the BEPS project.
10 Tips and traps
10.1 What are your top tips for navigating the tax regime and what potential sticking points would you highlight?
Companies can now benefit from a partial exemption on certain streams of income if they satisfy certain substance requirements that may be monitored by the Mauritius Revenue Authority. Taxpayers wishing to do so should pay particular attention to the different limbs of the substance requirements throughout the relevant income year, particularly as the legislation is new and has not been the subject of guidance from the Mauritius Revenue Authority.
Additionally, the Mauritius Revenue Authority is increasingly questioning related party transactions and will often audit the taxpayer and ask for explanations and supporting documentations.
Finally, quite a few tax holidays (up to eight years) are available to a number of industries, ranging from captive insurance to food processing. These new tax holidays build on existing holidays available to holders of licences of global headquarters/treasury activities granted by the Financial Services Commission in Mauritius and are subject to substance requirements.
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.