Mauritius sets out Budget to ‘foster economic dynamism’

7 June 2024, Minister of Finance, Economic Planning and Development Dr Renganaden Padayachy presented the Mauritius National Budget 2024/2025 to parliament, which included a proposal for a new 2% Corporate Climate Responsibility (CCR) Levy to apply to companies with a turnover exceeding MUR50 million (c. USD1.1 million).

As the Finance Bill was adopted on 24 July , the effective tax rate for Mauritian entities has therefore  increased as follows:

• Global Business Companies claiming partial exemption from 3% to 3.4%.
• Export Companies or International Trading from 3% to 5%.
• Other Global Business Licence Companies from 15% to 17%.
• Domestic companies from 17% to 19% (including 2% Corporate Social Responsibility levy).

“Although increased taxation is not welcome news, there are motivations for Mauritius outside of increasing the fiscus,” said Vidish Jugurnauth, Client Service Director of Sovereign Trust (Mauritius).

“The government clearly values the contribution the financial services sector, which now represents around 14% of GDP but Mauritius continues to move away from being labelled a ‘tax haven’ towards being a jurisdiction of substance. This is the clear direction of travel worldwide and Mauritius remains highly attractive for Foreign Direct Investment and as a gateway to business in Africa.”

The funds raised by the new CCR levy are to be used to support national initiatives to protect, manage, invest and restore the country’s natural ecosystem and combat the effects of climate change. A Climate and Sustainability Fund will be set-up to implement this agenda.

“To foster economic dynamism, we must enhance the ease of doing business environment to sustain higher levels of investment,” said Dr Padayachy. “We must make the labour market more vibrant to enhance our productivity and competitiveness. We must strengthen sectoral development for a well-diversified economic structure. This strategy will bring us to a MUR1 trillion economy by 2030.”

The financial services sector, he said, had been the primary contributor to GDP with a growth of 4.4% in 2023. To maintain the momentum and further expand the sector, the Budget proposals included:

• Extending the Partial Exemption Regime to Payment Intermediary Services (PIS) Licence Holders.
• Reviewing the Fund and Asset Manager Certificate to include at least two qualified officers.
• Reviewing the Funds Regime to enhance its attractiveness.
• Reviewing the blueprint for the financial services sector in light of new opportunities, challenges and threats.
• Drawing up a blueprint for the development of Mauritius as a Fintech Hub in the region with the assistance of the United Nations Economic Commission for Africa.
• Extending the centralised e-KYC to the global business sector.
• Introducing a 10-year expert Occupation Permit to attract foreign talents in wealth management, family office, virtual assets and virtual tokens.
• Exploring the signing of a Strategic Partnership Agreement (SPA) with India and African countries.

Measures will be implemented to improve the business environment and foster an enabling environment for investment, trade and entrepreneurship, including:

• The FSC will streamline its licences and permits to ensure they are granted within 10 working days, subject to all requirements being met.
• The information centre of the Companies and Business Registration Department will be operational on a 24/7 basis.
• To ease the resolution of commercial disputes, the framework for alternative dispute resolution will be modernised.
• The Corporate and Business Registration Department will offer onsite e-filing facilities during working hours.
• Adopt a code of good regulatory practice to facilitate reform of the legal and institutional framework for business and investment in Mauritius.
• The FSC will implement a new mechanism to reduce the turn-around time to better respond to queries from investors and process applications for licences.
• The FSC establish a time frame for processing specific licences. Once the established time frame is nearing expiry, the application will be channelled to a fast-track sub-committee for the issuance of the licence.
• All foreign workers operating in sectors for which the current maximum period of stay is four years, will be allowed to stay up to eight years, with an optional break in between.

The Budget introduces significant amendments to the Financial Services Act 2007, aimed at fortifying regulatory oversight and bolstering the integrity of the Mauritius International Financial Centre. These include amendments to:

• Require the FSC chief executive to make appropriate annotations in the register with respect to a licensee where the licence is suspended or terminated.
• Introduce timeframes for the processing of licences regulated by the FSC.
• Impose a requirement on qualified trustees to provide information at the request of the FSC.
• Empower the FSC chief executive to appoint an investigator.
• Enable the FSC chief executive to refer, to the Enforcement Committee, past matters where licensees have carried out their businesses in a manner that threatened the integrity of the financial system of Mauritius or is contrary or detrimental to the interest of the public or in case of financial crime.
• Set a timeframe of six months after closure of a financial year for an Authorised Company to file its financial summary, accounts, financial statements or returns with the FSC.
• Allow the FSC chief executive to issue directions to Authorised Companies and corporations holding a Global Business Licence.

The Companies Act will be amended to:

• Provide for submission of a copy of the constitution as part of an application for incorporation of a company limited by guarantee.
• Clearly define the duties of a company secretary nominated by a one-person company.
• Require the Board of a company to notify the Registrar of Companies on the resignation of a director or that of the secretary from its company.
• Ensure that the administrator appointed for the winding up of a limited life company complies with provisions of the Insolvency Act.
• Obtain the prior no objection from the FSC upon request for removal of a company, holding a Global Business Licence, from the Register of Companies.
• Require that fees payable to the Registrar of Companies be paid at the time of submission of any document or at the time of a request.
• Allow a company holding a Global Business Licence or an Authorised Company to also comply with provisions of the Companies Act, relating to prejudiced shareholders and alterations to constitution, unless the constitution of the company provides otherwise.

The Financial Crimes Commission Act will also be amended to align it with recommendation 38 of the Financial Action Task Force, which requires that there be authority to take expeditious action in response to requests by foreign countries to identify property which may be subject to confiscation.

In respect of Tax Administration, the proposals included:

• An effective change in ownership of a company will be deemed to have occurred where there is a change of more than 10% in its shareholding.
• The exemption threshold on lump sum received as pension, retiring allowance or severance allowance will be raised from MUR2.5 million to MUR3 million.
• The exemption granted in respect of income derived from the sale of securities will be extended to cover sale of virtual assets and virtual tokens.
• Income derived from intellectual property assets by a manufacturing company engaged in medical, biotechnology or pharmaceutical sector will be taxed at the rate of 15% instead of 3% to comply with international norms.
• The eight-year income tax holiday granted to a captive insurer will apply as from the date the company has started its activities.
• A company holding a Robotic and Artificial Intelligence Enabled Advisory Services will be allowed to claim the 80% partial exemption on income provided it conforms with the substance requirements.
• The 80% partial exemption granted to a licensed closed-end fund will be extended to cover income from sale of money market instruments or debt instruments.
• Clarify that the 80% partial exemption granted to a licensed Collective Investment Scheme (CIS) Administrator will not apply to income derived from the provision of administrative services by a management company to a CIS licence holder.

Further significant proposals contained in the Budget include:

• The services provided by a Management Company to (i) trusts whose settlor and beneficiaries are non-residents or (ii) foundations whose founder and beneficiaries are non-residents will be made zero-rated for VAT purposes.
• The Captive Insurance Act, Financial Services Act, Insurance Act and the Private Pension Schemes Act will be amended to enable the FSC to levy fees for post-licensing processes including the appointment of officers, directors, auditors, actuaries, new controllers, beneficial owners, management companies and registered agents. The FSC will increase the processing and annual fees payable by its licensees.
• Under the Smart City Scheme, the contribution payable by a smart city company per residential property or per plot of serviced land will be increased from MUR25,000 to MUR100,000.
• The threshold for Occupation Permits for professionals will be reduced from MUR30,000 to MUR22,500.
• Professionals with a minimum of 10 years’ experience will receive a temporary Occupation Permit of three months allowing them to work pending approval.
• To speed up recruitment of foreign workers, quotas on foreign labour will be removed in the manufacturing, jewellery, freeport and information and communications technology (ICT) and business process outsourcing (BPO) sectors.
• The maximum timeframe to deliver or renew a Work Permit will be set at three weeks.
• The maximum renewal period for the manufacturing sector is to be extended to 10 years.
• Non-citizens holding a Retired Residence Permit will be allowed to work without an additional Work or Occupation Permit.