The Mauritius Revenue Authority issued a statement of practice last November in respect of the newly introduced section 73A of the Mauritius Income Tax Act, 1995, which treats a company incorporated in Mauritius as ‘non-resident’ for Mauritian income tax purposes if its place of effective management (POEM) is located outside Mauritius.
The statement of practice clarifies that in determining POEM all relevant facts and circumstances relating to the business activities of the company, including the use of information and communication technologies in the decision-making process of the company, must be examined.
Generally, a company will be deemed to have its POEM in Mauritius if the strategic decisions relating to the company’s core income generating activities are taken in, or from, Mauritius and either of the following conditions is met:
- The majority of the board of directors’ meetings are held in Mauritius; or
- The executive management of the company is regularly exercised in Mauritius.
If a company incorporated in Mauritius, including one holding a global business licence, does not meet these conditions, it will be treated as non-resident for Mauritian income tax purposes.
An ‘authorised company’ is a new category of company that was introduced last year after the withdrawal of the Category 2 Global Business Licence (GBC2). A foreign-owned company is regarded as an ‘authorised company’ where its business is conducted principally outside Mauritius or with such category of persons as may be specified in the FSC rules and its POEM is outside Mauritius.
An ‘authorised company’ is not considered to be Mauritian tax resident so that its foreign-sourced income would be outside the scope of the Mauritian tax system. Passive foreign income like dividends, interest and royalties would thus not be subject to tax in Mauritius. Since it is considered to be a foreign company, any dividend distribution made to a foreign shareholder should also be outside the scope of Mauritius.
A Mauritius ‘authorised company’ is therefore ideal for a business that intends to carry on international trading, invoicing, marketing, ship management, consultancy services, logistics and asset holding.
The country of source will generally have the taxing rights to such income, unless the country in which the POEM of the ‘authorised company’ is situated has a tax treaty with the source country and the treaty provides for a favorable withholding tax rate. The country where the POEM is situated may also tax the worldwide income of the company, unless its domestic law provides for a territorial regime.
The United Arab Emirates has a tax treaty with Mauritius and does not levy withholding taxes or other forms of non-resident taxation. It is therefore an excellent location for the POEM of an ‘authorised company’. For an ‘authorised company’ to have its POEM outside of Mauritius, it is recommended that its board should comprise mostly foreign directors and the majority of its directors meetings should be held held outside Mauritius. Sovereign can meet these criteria through its office in Dubai.
An ‘authorised company’ is also required to have a permanently-registered agent in Mauritius. This must be a management company and its responsibilities should include board minutes, company resolutions, record keeping and other transaction record archiving, and anything else required by the Financial Services Commission. Again Sovereign can provide all these services though its office in Mauritius.
For more information please contact Nico Van Zyl, Director at Sovereign Trust (Mauritius), at firstname.lastname@example.org or by phone on +230 525 04027, or Roné Silke, Consultant at Sovereign Trust (South Africa) Limited, on email@example.com or by phone on +27 21 418 2170