Economic Overview & Business Opportunities
With its strategic location in the Indian Ocean, Mauritius is in fact Africa’s best kept secret. Its excellent infrastructure coupled with economic vitality and political stability makes it an ideal launching pad for firms, which are eager to secure a base in the Indian Ocean in order to do business in the African region. Mauritius has also positioned itself as the ‘Key of the Indian Ocean’ and the ‘Gateway to Sub-Saharan Africa’ for those businesses that are looking to tap into the emerging African markets.
Ease of doing business
According to Doing Business Report 2013 issued by the World Bank, for the fourth year in a row, Mauritius has been the easiest place in sub-Saharan Africa for an entrepreneur to do business. This comes to strengthen Mauritius objective to be the ideal investment route in the African region. Mauritius combines the traditional benefits of being an international financial service centre as well as the distinct credibility of being a treaty–based jurisdiction.
Stable political climate
The Republic of Mauritius is a sovereign democratic state within the Commonwealth with a long tradition of parliamentary democracy, modeled on the British system. Its constitution guarantees to all citizens the fundamental rights: right to liberty and protection of the law, freedom of conscience, of movement, freedom of expression, freedom of creed and of religious belief as well as the right to own private property. The constitution of Mauritius establishes clearly the separation of powers between the legislative, the executive and the judiciary branches of government.
Sound legislative system
The National Assembly is the supreme body where its members enact laws, discuss the affairs of the nation and control the use of public funds. Members of the National Assembly are chosen during general elections that take place every five years on the basis of universal adult suffrage and secret ballot. The National Assembly comprises 70 members: 62 elected members as well as 8 additional seats allocated to ‘best losers’ so as to achieve communal balance without disturbing the political equilibrium established by the election results.
Strong legal framework
The judicial system of Mauritius is a hybrid system emanating both from French and English law. The final court of appeal is the Judicial Committee of the Privy Council. As of now, the main sources of law are the Constitution (based on the Westminster model), private law (based on Napoleonic Code), public, commercial and administrative law (mainly Common law based), case law and international treaties.
Diversified economic system
Mauritius is a well-diversified economy based on tourism, manufactured exports, agriculture and a growing financial services sector. Efforts by the government to diversify the economy have been successful such that the island is no longer solely dependent on sugar production. The Mauritian economy is now in the bracket of an upper-middle-income economy with an annual average growth rate of 4.2% and per capita income of US$8,800.
The Mauritius workforce is productive, disciplined, flexible, highly literate and multilingual (English, French, Creole coupled with an Asian language such as Hindi, Bhojpuri, Mandarin, and Urdu, etc.). The high level of education as well as vocational training of the workforce ensures good communication, courteous service, and harmonious industrial relations. In addition, there is a national consensus between government, employees, trade unions, and political parties on the need to increase productivity and to maintain a peaceful labour climate in order to achieve rapid development across all sectors of the economy.
Currency and time zone
The local currency is the Mauritian Rupee. Exchange control was relaxed in 1994, allowing free repatriation of funds. For the offshore sector, currencies such as US Dollars, Euro, Pound Sterling, South African Rand, Indian Rupees and Singapore Dollars can be used for cross border transactions. In addition, banks in Mauritius provide the facility to open bank accounts in different main foreign currencies.
Mauritius has a very good advantage in terms of time zones. We are four hours ahead of GMT.
Since the 1980’s, Mauritius started an infrastructural and development plan that resulted in highways linking the Northern part of the island to the South, where the airport is situated. Recently, to tackle the problem of traffic jam, Mauritius has broadened its motorways and is actually developing a ring road. Investors can thus expect a relatively modern infrastructure characterized by a network of roads and highways covering the island, provision of water and electricity island-wide for domestic and industrial purposes, state of the art telecommunications services, a sophisticated ports facility servicing the region, international air connections, and one-stop shop free-port services including e-commerce. Apart from industrial parks in various parts of the country that are already serviced by electricity, water, telephone, fax, and telecommunications facilities, specialized parks such as the Informatics Park have been tailor-made corresponding to the needs of the industry.
Mauritius is among the most competitive economies in Africa and welcomes foreign direct investment, especially in export-oriented industries. Tax concessions and other incentives, introduced in 1970 to attract manufacturers to the Export Processing Zone, have since been extended to services and to companies in the Mauritius Freeport and the offshore sector.
It is also worth noting that Mauritius was a founding partner of a number of regional preferential trade areas and political organisation, including COMESA, SADC, the Indian Ocean Commission and the Africa Union. Its membership in these regional organisations, and being a signatory to all the major African conventions, makes Mauritius an ideal jurisdiction for establishing any vehicle for investment into Africa.
Also Mauritius’ first Chinese Special Economic Zone, the Jin Fei Trade and Economic Cooperation Zone, acts as a trading hub aimed at strengthening China’s position in the African markets.
Tax regime in Mauritius
Mauritius is a jurisdiction of substance which has adopted the international standard on exchange of information and is on the white list of the OECD. Mauritius income tax is 15% for both corporate and individual resident in Mauritius.
Companies that operate in the offshore sector can opt to be either resident or non-resident for income tax purposes. Category One Global Business Companies (GBC 1) are tax resident in Mauritius and can avail of treaty benefits. As such they are entitled to a tax credit equal to the higher of actual foreign tax suffered or 80% of the Mauritius tax liability which make them liable to tax at an effective maximum rate of 3%. Mauritius has 37 active tax treaties with various economies such as India, Singapore, South Africa, et cetera. The full list of countries is included in the table 1 below. The second type of companies is the Category Two Global Business Company (GBC 2) which is tax exempt and cannot avail of treaty benefits.
Mauritius does not charge withholding tax on dividends, interest and royalties of any resident in Mauritius. There is also no capital gains tax. Furthermore, to keep Mauritius as an attractive offshore jurisdiction there is no estate duty, inheritance tax, wealth or gift tax applicable to corporate operating in the offshore sector. To facilitate the way of doing business, there is no also no exchange controls as well as no thin capitalization rules.
Mauritius has also signed 39 Investment Promotion and Protection Agreements (“IPPAs”) with a number of countries such as UK, France, India and South Africa. The IPPA provides for free repatriation of investment capital and returns, guarantee against expropriation and a most favoured nation rule with respect to the treatment of investors, amongst others. A full list of countries with which Mauritius has IPPAs is provided for in Table 2 below.
Wide array of products for the offshore sector
Mauritius is famous for the types of companies which investors can set up, namely domestic companies and companies holding Global Business Licences, namely Category One and Category Two. GBC 1 is widely used for business substance and benefits from tax treaties that Mauritius has whereas GBC 2 is used for its tax exempt feature.
Mauritius is also well known for its trust structures. Given the flexibility of Mauritius trust laws, Mauritius is rapidly becoming the alternative to well-established trust jurisdictions such as Channel Islands, Cayman Islands and Isle of Man for the setting up and administration of trusts as well as for the back office administration of foreign trusts. The different types of trusts that can be set up in Mauritius include fixed interest trust, discretionary trust, protective or spendthrift trust, charitable trust and private purpose trust. Mauritius trusts are mainly used for asset protection, wealth management and estate planning.
Another product that is commonly used is protected cell companies. Being an entity that provides legal segregation between the different cells, it attracts investors who have various investment portfolios and where each has its own investment strategy and risk profile, and is even more attractive where investors are not common in each portfolio. The liabilities of one cell do not contaminate the assets of other cells and as such provide for protection of the assets of different cells.
Undoubtedly, Mauritius is also a popular jurisdiction for funds set up, namely closed end funds and collective investment scheme (open ended type funds) which include global fund, expert fund, professional collective investment scheme and specialised collective investment scheme.
It is also possible to obtain a licence to operate insurance, reinsurance and captive insurance, treasury management, investment dealer business, investment adviser and manager, pension scheme, etc.
Recently, with a view to further widen its products offering, Mauritius has introduced limited partnership and foundation legislations which gives it a definite competitive advantage over a number of jurisdictions.
Real Estate and residence permit
Mauritius is a great place to live, and the country is open for business. There are various options available for those looking for work, to set up their own business or simply retire.
An occupation permit which is both a work and residence permit, allows a non-national to reside and work in Mauritius whereas those who want to retire in Mauritius can obtain a residence permit by purchasing a luxurious villa classified either as an Integrated Resort Scheme or Real Estate Scheme.
A recognized stock exchange
The Stock Exchange of Mauritius Ltd (“SEM”) is committed to position itself as a listing venue of choice for companies and international funds. Having already gained international recognition through its membership to the World Federation of Exchanges, SEM has also been granted designation by UK authorities as “recognized stock exchange” in relation to its Official Market. In order to promote itself as a prime location for listing, SEM has brought a number of modifications to its general conditions such that now, it can list domestic companies, specialist entities, investment funds, mineral companies, depositary receipts, debt instruments and recently exchange traded funds. It operates two markets, namely the Official Market and the Development & Enterprise Market. It also provides a well-organised secondary market infrastructure for those clients who want to use the SEM for a secondary or dual listing.