Mauritius Budget 2021 – The Offshore Perspective
The Mauritius Budget 2021, delivered by Finance Minister Dr Reganden Padayachy on 11 June, contains several measures to boost the economy in the wake of the Covid pandemic and also includes a number of changes that will be of interest to those looking to move to and/or establish a business on the island.
2021 is a critical year for the Mauritius financial services sector with the final phasing out of the GBC1 and GBC2 regimes at the end of June and the need to further reinforce the regulatory framework to accelerate the completion of the Financial Action Task Force (FATF) action plan and secure an exit from the FATF’s ‘grey list’ and the concomitant European Union ‘blacklist’.
The Budget was rather light on fiscal measures but contained three announcements that will make Mauritius a more advantageous jurisdiction for certain types of structures:
- The 80% partial tax exemption on specified income streams is to be extended to companies holding an Investment Dealer Licence, reducing the effective income tax rate for holders to 3%. The Investment Dealer Licence is already in demand because it allows a holder to establish a trading platform and trade securities and similar on behalf of clients. This partial exemption will make conducting this type of business in Mauritius even more attractive.
- The tax holiday available for Family Offices (FOs) established in Mauritius, as well as Fund and Asset Managers, is to be doubled from five to 10 years. The requirement for an FO to hold a Global Business Licence (GBC) is also to be abolished. This is a very welcome change because the FO structure has been impaired by the extent of the licensing and regulatory requirements in Mauritius in comparison to other jurisdictions.
- The list of activities available to be undertaken by Protected Cell Companies is to be extended, although details were not provided in the Budget speech. Whatever additional activities are added will add more utility to what is, already, a highly effective structure.
- The income tax legislation is to be amended to ensure compliance with OECD standards, including the extension of ‘substantial activity’ requirements to foundations and trusts that benefit from the preferential tax regime in Mauritius.
The Mauritian government has clearly identified attracting foreign talent and investment as a primary focus, which is evidenced by further measures to enhance the Occupation Permit (OP), a combined work and residence permit that allows foreign nationals to work and reside in Mauritius under three specific categories – Investor, Professional and Self-Employed. was already revamped in 2020, even more appealing.
- The validity of the Occupation Permit (OP) for Professionals has been extended from three to 10 years. This brings the permit into line with those for Investors and the Self-Employed and will provide the OP holders with additional comfort and allow them to obtain finance more easily from Mauritius institutions because repayment terms are typically limited to the amount of time remaining on the permit.
- Spouses of OP holders who wish to work and invest in Mauritius will be exempted from the occupation or work permit requirement.
- The current maximum age limit of 24 years for dependent children will be waived.
- A new category of OP – 10-Year Family Occupation Permit – will be introduced for those contributing USD250,000 into the COVID-19 Projects Development Fund.
- Non-citizens who purchase or otherwise acquire an apartment used, or available for use, as a residence, in a building of at least two floors above ground floor, for at least USD375,000 will be issued with a residence permit, including dependents, and will be exempted from the occupation or work permit requirement.
- Holders of a 10-year Permanent Residence Permit (PRP) will have the validity automatically extended to cover a 20-year period. PRP holders will also be able to renew their permits and will be given the flexibility to switch category between the OP Investor, Professional and Retired permits.
Finally, several ‘soft measures’ have also been put in place – the Economic Development Board (EDB) is to set up a ‘Concierge Service’ to enhance investor and retiree experience, while a ‘Privilege Club’ scheme will provide incentives to permits with privileged access to exclusive hotels, golf courses, restaurants and similar.
Financial Services Sector
Various initiatives to sustain development of the financial services sector are proposed as follows:
- A Securitisation Bill and a new Securities Bill are to be introduced.
- A new Bank of Mauritius Bill and Banking Bill will be introduced, reflecting best international practices.
- New legislation for virtual assets will be enacted.
- The Bank of Mauritius (BOM) to introduce a dedicated QR Code at national level to facilitate digital payments.
- The Financial Services Commission (FSC) to launch an online licensing portal – ‘One Platform’ – from 1 July 2021.
- The FSC to implement a digital centralised information exchange system.
- The Stock Exchange of Mauritius will introduce rules for the setting up of special purpose acquisition companies.
Mauritius has identified Fintech as a targeted area for growth and the 2021 Budget Speech seeks to assist this sector. These measures will hopefully bring some much-needed clarity to the sector and encourage a more open-minded approach from Mauritian institutions when dealing with Fintech:
- ‘Fintech’, ‘Regulator Sandbox Authorisation’ and ‘Regtech’ are to become defined terms standardised across a number of Acts.
- Establish the framework for applying for a Regulatory Sandbox Licence.
- The BOM will roll out a central bank digital currency – ‘Digital Rupee’ – on a pilot basis.
- Authorise the Financial Services Commission to set up such ‘fintech innovation hubs’ and ‘digital labs’ for the non-banking financial services sector.
The Mauritius government remains committed to full compliance with international Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) standards. It aims to complete implementation of the Financial Action Task Force (FATF) Action Plan to secure an early exit from the FATF’s list of jurisdictions under increased monitoring and, ultimately, the EU list of high risk third countries having strategic deficiencies in their regime on AML/CFT.
Measures to enhance and implement the AML/CFT legislative framework include:
- Amending relevant laws to meet the requirements of the FATF recommendations.
- Recruiting new personnel to strengthen compliance capacity.
- Set up Financial Crime Divisions at the Supreme and Intermediate Courts to ensure that financial crime cases are dealt with expeditiously.
- AML/CFT Core Group tom be given legal force under the Financial Intelligence Anti Money Laundering Act.
- A Financial Crime Commission to be established for more effective management in the fight against financial crime.
- Introduction of a new Bank of Mauritius (BOM) bill and Banking bill to reflect international best practices.
- Launch of a one-year AML training programme for 100 graduates.
Reopening of Mauritius
Not forming part of the Budget speech but announced on the same day is the government’s plan to reopen Mauritius to visitors as the Covid pandemic begins to be brought under control. As you may be aware. Mauritius has instituted a mandatory 14-day quarantine for all arrivals on the island. Since the re-emergence of COVID-19 on the island in March 2021, it has also limited inbound flights to the island to repatriation flights.
The government announced that, from 15 July 2021, all flights will open to Mauritius for fully vaccinated tourists. Tourists will still be required to quarantine for 14 days but during this quarantine they will be able to make use of full hotel facilities including the beach, restaurants, bars and pools. After 14 days guests will be able to leave their hotels and enjoy the rest of the island’s attractions.
From October 2021, the island will be fully reopened to vaccinated visitors under current plans.
By way of disclaimer, please note that these measures have been announced in the Budget Speech. They will then be drafted into a Bill that has to be debated and approved at Parliamentary and Prime Ministerial level before being brought into law. In our experience this process generally involves very little change, but it is possible that some measures will be removed or amended during this process.