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Mauritius – New Requirements reinforces its position as a Jurisdiction of Substance

March 2015 - Finance. Legal Developments by BLC Robert & Associates.

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Strategically located in the Indian Ocean perched on the axis of investments from Europe, Africa, the Middle East and Asia, Mauritius has throughout the last two decades forged a strong reputation as a premier international financial centre. The combination of fiscal and non-fiscal advantages together the diverse product-base have been the key ingredients of the Mauritius success story. Since the inception of the International Financial Centre in 1989, Mauritius has demarcated itself from other IFCs by focusing on the development of its network of Double Taxation Treaties and Investment Protection Agreements to be a regional financial centre and natural conduit for trade and investment into emerging economies in the region. The introduction of new substance requirements for Global Business Companies operating from Mauritius which will become effective on 1st January 2015 are part and parcel of the strategy to continue to deepen the financial services and increase its input to the country’s GDP.


The financial services sector comprises of an array of institutions including well-established banks, insurance and pension companies, stockbrokers, investment companies, non-bank deposit-taking institutions, leasing companies, credit institutions, money changers and foreign exchange dealers.

Mauritius is widely heralded as the “Gateway to Africa” and despite the talks about the impact of the Indian Direct Tax Code, it is still one of the preferred routes for investment into India. Its wide network of treaties and simple and favorable tax regime make it a preferred bridging step between the Western World and the emerging markets of Africa, India and China.

As a leading International Financial Services Centre, Mauritius has developed a fine brand of professional workforce rivaling in competence with European and Western jurisdiction. Mauritius is now an attractive jurisdiction for firms looking to capitalize on opportunities within this field. It has liberalized its legal services market to enable foreign law firms to establish local offices or joint ventures alongside Mauritian lawyers. The Mauritian authorities are keen to engage with a wider international legal sector in-country with the effect of further stimulating investor confidence in the market. Mauritius is also positioning itself as a regional centre for international dispute resolution and is actively promoting for international legal practitioners to represent parties and to act as arbitrators in international commercial arbitrations in Mauritius.


Mauritius is not a tax haven. Whist it has some of the characteristics of a traditional offshore financial center (there is no capital gains tax, no withholding tax, no capital duty on issued capital, confidentiality of company information, exchange liberalization and free repatriation of profits and capital etc.), contrary to traditional offshore centers, it offers the ability for treaty based tax planning through its network of double taxation avoidance treaties (DTA). Where a DTA applies, this results in interesting and attractive tax planning opportunities which include:

  • Reduction in withholding taxes on dividends, interest and royalties;
  • Taxing rights in respect of Capital Gains Tax being provided to Mauritius which does not tax gains;
  • The ability to use foreign tax paid as a credit to the domestic tax or to avail from an automatic deemed tax credit

In order to benefit from the DTA, the investment should be made by a “resident of Mauritius”. This will generally be through a Global Business Category 1 Company (GBC1). A GBC 1 company is qualified as a corporation resident in Mauritius. It is required to conduct business outside Mauritius but may also conduct business locally with the approval of the Financial Services Commission. A GBC 1 company is resident in Mauritius for tax purposes and as such may take advantage of double tax treaty between Mauritius and other states.


It has always been the case that GBC 1 companies had to demonstrate that they would be centrally managed and controlled from Mauritius. Indeed, in determining whether a company should be granted with a GBC 1 license, the Financial Services Commission (FSC) would consider whether the company will be managed and controlled in Mauritius. In doing so, the FSC will consider, inter-alia, whether the GBC1 Company:

  1. Will have at least 2 directors of sufficient calibre to exercise independent of mind and judgment, resident in Mauritius;
  2. Will maintain at all times its principal bank account in Mauritius;
  3. Will keep and maintain, at all times, its accounting records at its registered office in Mauritius;
  4. Will prepare or proposes to prepare its statutory financial statements and causes or proposes to have such financial statements to be audited in Mauritius;
  5. Will provide for meetings of directors to include at least 2 directors from Mauritius.

Conscious that the global regulatory environment is changing quickly, the Mauritian regulator has been pretty quick to review its approach to regulation. As substance over form is rapidly becoming the norm, the FSC has recently reinforced the concept of management and control by amending the above requirements. In addition to existing requirements for management and control, the regulator wants to see additional substance by way of one of the following requirements:

  1. Office premises in Mauritius; or
  2. Employment of staff; or
  3. Choosing Mauritius as the seat for arbitration of disputes; or
  4. Holding assets which is at least worth USD 100 000 in Mauritius; or
  5. Listing on a Mauritius Stock Exchange; or
  6. Incurring reasonable expenditures in Mauritius.

In addition to the substance requirements mentioned above, the FSC has also issued special guidelines for professional directors, especially those sitting on multiple boards in the global business sphere. In addition to the fiduciary duties expected from directors, resident directors must demonstrate that they have sufficient time to prepare for and attend board meetings. Resident directors are also expected to have a reasonable number of directorships. Reasonableness would be judged based on various factors including but not limited to number of board meetings held, categories of companies and staff supports available to the director. Last but not least, the new rules insist on the caliber and qualifications and especially the time available to the directors to properly exercise their functions and duties as directors.


We have gone a long way from the light touch of regulation of the liberal days. The international financial centre of the future is one which can balance meeting the continuingly changing global regulatory standards while being able to compete effectively with other jurisdictions. Mauritius has clearly charted its future by promoting substance over form and requiring increased local presence with demonstrable impact on the local economy and employment, heightening corporate governance rules to clarify the responsibility allocation within corporate structures, and finally by calling for transparent and frank disclosures within a context of international supervisory efforts to combat abuses.

© Assad Abdullatiff TEP, LLB(Hons), LLM, Barrister