About Trusts in Mauritius
The main uses of trusts in Mauritius are for:
Under the Mauritius Trusts Act 2001, a trust exists where a trustee holds property of which he/she is not the owner in his/her own right, with a fiduciary obligation to hold, use, deal or dispose of it either for the benefit of any person (beneficiary) or for any purpose, including a charitable purpose, or for both these reasons.
This codifies the common law definition of a trust and allows for trusts to be developed with a range of applications – Discretionary, Fixed Interest, Protective, Charitable and Purpose.
Discretionary Trust
The most flexible type of trust, it gives wide powers to the trustees with respect to investment and distribution. Being a beneficiary does not create a right or entitlement to benefit from the trust and beneficiaries can be added or removed by the trustees. The trustees take direction and guidance from a Letter of Wishes provided by the settlor, where available. Settlors or beneficiaries requiring an extra level of comfort can appoint a Protector under s24 of the Act, whose approval can be required to perform certain actions. The Protector is further empowered to remove a trustee and appoint new trustees. A trust in Mauritius is generally valid for 99 years and requires a minimum of two beneficiaries in the event that one of the beneficiaries is the settlor.
Derived from a discretionary trust is an Excluded Property Trust, which is a recognised structure in UK inheritance tax planning. The non-UK assets should be settled while the settlor is not classified as a long-term UK resident (LTR), thereby avoiding exit charges, trust anniversary charges and UK inheritance tax (IHT) unless the settlor becomes an LTR. The status of the beneficiaries who are not settlors does not affect the IHT position of the trust.
Fixed Interest Trust
A fixed interest trust in Mauritius is a legal arrangement where a settlor transfers assets to a trustee, who must distribute income and capital according to a predetermined plan in the trust deed. These trusts can be set up by non-residents and are suitable for purposes like a life interest for a spouse, followed by a transfer of capital to other beneficiaries. They offer benefits like asset protection, tax efficiency and confidentiality.
Protective (Spendthrift) Trust
‘Protective’ and ‘spendthrift’ trusts are a form of asset protection for beneficiaries who, in the settlor’s view, are incapable of adequately managing their financial affairs. A beneficiary initially receives a life interest in the trust fund that will automatically end if, for example, they are declared bankrupt or attempt to assign their interest to their creditors. The fund will then be held on discretionary trust for the benefit of a wider class of beneficiaries that will include the beneficiary and their family.
Purpose Trust
A Purpose Trust is a trust created with a specific goal or objective. Upon the fulfilment of that purpose the trust is terminated. The purpose of trust must be reasonable, specific and capable of fulfilment and not immoral, unlawful or contrary to public policy. An enforcer is required in a purpose trust to ensure that the trustees are working to achieve the purpose of the trust.
Charitable Trusts
The Act provides for the creation of charitable trusts, where the trust fund is to be used for a purpose that is charitable. The document establishing the trust must state the purpose or purposes for which the trust has been created, which are restricted to:
The beneficiaries of a charitable trust can be a person or a class of persons inside or outside Mauritius.
Setting up a Trust in Mauritius
The documents required to set up a trust in Mauritius will vary depending on the type of trust.
A settlor will need to provide certified copies of passport and proof of address, a bank and professional reference letters, and will also be required to complete know Your Customer and Source of Wealth forms. If beneficiaries are named, similar documents will be required for them.
A trust deed and a Memorandum of Wishes must be drafted, along with a trust application form and documents showing the assets being settled into the trust. There is no requirement for the trust deed to be filed with any governmental body. However, it is advisable to register the trust at the office of the Registrar General to get a ‘date certaine’ that will be evidenced of the existence of the trust on the date of registration.
The duration of a trust in Mauritius is generally limited to 99 years or less, except for a non-charitable purpose trust, which is limited to a term not exceeding 25 years. A Charitable Trust may be of perpetual duration. There is the possibility to accumulate income for any period up to the maximum duration of the trust
The settlor can be a natural or legal person and is permitted to choose the proper law of the trust. The settlor can also be a trustee, a beneficiary or a protector but cannot be the sole beneficiary of the trust of which he/she is a settlor.
The identity of the settlor and beneficiaries can be kept private, as there is no mandatory public registration for all trusts. There is no disclosure of the trustees’ deliberations, the name of the settlor and beneficiaries unless they are Mauritian residents or body corporates resident in Mauritius.
Beneficiaries are identifiable by name or ascertainable by reference to a class of persons or relationship to another person. Beneficiaries can also give letters of wishes to the trustees.
The number of Trustees should not exceed four, of whom one at least should be a qualified trustee that is licensed by the Financial Services Commission to provide trustee services. The terms of the trust can also provide for the appointment of a custodian trustee and a managing trustee to hold and manage the trust assets.
Taxation of Trusts in Mauritius
Under the Income Tax Act, trusts fall within the definition of ‘company’. Any trust that is resident in Mauritius is liable to income tax on its chargeable income at the rate of 15%. According to Section 73 of the ITA, a trust is resident if:
- The trust is administered in Mauritius and a majority of the trustees are resident in Mauritius.
- The settlor of the trust was resident in Mauritius at the time the instrument creating the trust was executed or at such time as the settlor adds new property to the trust.
- A majority of the beneficiaries or class of beneficiaries appointed under the terms of the trust are resident in Mauritius.
A resident trust is entitled to claim 80 % exemption on specified sources of income (including interest income and dividend income) that fall within the Second Schedule to the ITA provided the conditions of substance are met.
Under Section 73A of the ITA, a trust will be treated as a non-resident if it is centrally managed and controlled (CMC). A non-resident trust will be subject to taxation only on income derived from Mauritius. The non-resident trust or foundation will be required to file an income tax return with the Mauritius Revenue Authority to declare and pay income tax on its Mauritius sourced income.
Benefits of a Mauritius Trust
Mauritius is a mature trust jurisdiction with efficient and cost-effective trust formation and administration. Mauritius trusts offer many benefits to foreign investors, including:
- Non-resident trusts are exempt from income tax, capital gains tax and estate duties.
- Strong legal safeguards protect assets from creditors, foreign claims and forced heirship rules.
- Mauritius trusts are not publicly registered and offer a high degree of privacy.
- Flexible trust structures with up to 99-year duration.
Mauritius is an attractive location for international investors seeking a tax-efficient and compliant jurisdiction. It has implemented various measures to ensure transparency and good governance in its financial sector, including the automatic exchange of financial account information, implementation of the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA).
As a result, it has maintained its status as a compliant country with the Organisation for Economic Co-operation and Development (OECD) and is not on the Financial Action Task Force (FATF) list of non-cooperative countries and territories.
Sovereign Trust (Mauritius) Limited is fully licensed by the FSC to act as professional trustee in Mauritius. Our qualified team of trust consultants in Mauritius can guide you through the options and assist you in making an informed decision about a trust structure that will meet your goals and requirements.
Mauritius Trusts – Frequently Asked Questions
While setting up structures for clients making use of Mauritian trusts and companies, we frequently get asked similar or comparable questions. We therefore thought it would be helpful to provide some general answers.
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