The Hon. Minister of Finance of the Republic of Mauritius presented the National Budget 2023/2024 for Mauritius on 2nd June 2023, entitled ‘To Dare & To Care’. For his 4th budget exercise, this time in a period of economic recovery, with a GDP at +8,7 in 2022, a deficit at 2.9 % and a public debt estimated at 71,5%, the Minister has chosen to present a budget mainly focusing on social issues. Few measures have been introduced for the Global Business sector. However, the announcement to increase the partial exemption to 95% for Collective Investment Schemes (CIS) and Closed End Funds (CEF) is most welcome since this measure will increase Mauritius competitiveness as an International Financial Centre (IFC) and may encourage more investment Funds to structure through Mauritius. Above all, this budget proposes a major reform for the personal income tax through a progressive system which would result in a lower effective tax rate for every individual taxpayer. This reduction in the effective income tax rate coupled with the abolition of the solidarity levy, will increase the attractiveness of the country, and contribute to reduce the brain drain and appeal to foreign talents wishing to work and settle in Mauritius. We are pleased to provide a brief on the salient points in the budget speech for corporate and private investors with a special focus on the taxation issues.
I. Financial Services
Introduction of a new set of legislative amendments to reinforce the existing AML/CFT legal framework and a Whistleblowing Act to sustain the fight against corruption. The scope of the Variable Capital Companies will be extended to allow their use for family offices and wealth management.
Wealth Manager and Family Officer licence under Private Banking will be introduced.
II. Key Proposed Amendments to Existing Legal Framework
(i) Asset Recovery Act
Exemption from payment of registration dues and land transfer tax pertaining to seizure of assets.
Extension of the prescribed timeline to keeping vital documents.
(ii) Companies Act
the service address of a company has to be in Mauritius. shareholders of a company shall appoint new directors within one month of the date of resignation or death of the last remaining director, failing which the Registrar of Companies will remove that company from the Register.
a company shall send its annual report to shareholders at least 21 days, instead of 14 days, prior to the annual meeting.
the annual report and financial statements can be sent electronically.
provide that a meeting of shareholders and voting may be done in such manner as the Registrar of Companies may approve.
(iii) Financial Services Act
the FSC will be empowered to take enforcement actions in case of breach of AML/CFT legislation.
non-payment of administrative penalties and non-payment of license fees will be sanctioned similarly.
licensees will be obliged to submit independent compliance reports to the FSC. Breach of the AML/CFT legislation will be a ground for referral to the Enforcement Committee of the FSC.
Management Companies will be required to ascertain compliance of their clients with relevant laws.
Authorised Companies will be eligible to apply for a certificate of good standing with the Authorities.
the FSC will be able to enforce recovery action for any non-payment/late payment of annual fees for any outstanding period without any time bar.
(iv) Freeport Act
Refining and minting of precious metals will now be considered as new freeport activities.
(v) Insurance Act
Insurance Industry Compensation Fund to provide for appropriate non-pecuniary assistance to victims of hit and run road accidents.
(vi) Securities Act
Allowing Funds to invest in loans or similar debt instruments.
(vii) Virtual Asset and Initial Token Offering Services Act
A Virtual Asset Custodian will be allowed to hold custody of securities tokens. The FSC will be allowed to make rules for the setting up of a Virtual Asset Register on virtual asset service providers.
a) Corporate tax
Other Exemptions and Reliefs
Interest earned by a Collective Investment Scheme (CIS) or a Closed End Fund (CEF) established in Mauritius which qualifies for the partial exemption regime of 80% will now avail of 95% tax exemption. Thus, the current effective tax rate of 3% on interest earned by a CIS or CEF is being reduced to 0.75%.
Interest income derived from bonds, debentures or sukuks issued by an overseas entity with the aim to finance renewable energy projects (“Green Bonds”) will also be exempted. Presently, the exemption does not include an overseas entity.
Exports of Goods
Profits from sale of aviation fuel to an airline will qualify as export of goods and will therefore be taxed at the reduced rate of 3%.
Solidarity Levy on Telephony Service Providers
The solidarity levy will be reduced from 1.5% to 1%. The levy will still be applicable for loss making company.
Investment tax credit and double deduction for manufacturing companies
The investment tax credit of 15% over 3 years (that is 45% in total) in respect of expenditure incurred on new plant and machinery (excluding motor cars) will be extended up to the financial year 2025/2026. Any unrelieved investment tax credit may be carried forward over 10 years.
The double deduction on market research and product development expenditure will be extended beyond the African market; but will be restricted to companies having an annual turnover not exceeding Rs 500 million.
Double Deduction on emoluments paid by companies to newly employed women or women who have been unemployed for at least 1 year under the “Prime a l’emploi scheme”.
Waiver of COVID-19 Levy
All outstanding balance of the COVID-19 levy as at 20 January 2023 will now be waived along with its penalties and interest.
Corporate Social Responsibility (CSR)
The MRA will now transfer Rs 200 million of such CSR amount to the Solidarity Fund annually as from financial year 2023/2024.
Corporate Tax Administration:
a) Re-introduction of Tax Arrears Settlement Scheme (TASS)
TASS provides for full waiver of penalties and interest where tax arrears, outstanding under the Income Tax Act, the Value Added Tax Act and the Gambling Regulatory Authority Act. Taxpayers should apply for TASS by 31st December 2023 and pay the full outstanding tax by 31st March 2024 to benefit from the scheme.
Taxpayers with cases pending before the Assessment Review Committee, the Supreme Court or Judicial Committee of the Privy Council can only benefit from TASS after withdrawing their cases before these institutions.
b) Protected Cell Company and Variable Capital Company
The MRA will only recover tax owed by a cell of a protected cell company from the cell itself rather than having recourse to assets of other cells or non-cellular assets of the protected cell company.
Each sub-fund or special purpose vehicle of a variable capital company will also be treated as a separate entity and be independently liable in case of tax recovery from the Mauritius Revenue Authority (MRA).
c) Statement of Financial Transactions
A virtual asset service provider and an issuer of initial token offerings will have to report annually to the MRA a transaction made by an individual, a société or succession exceeding Rs 250,000 or transactions exceeding in the aggregate Rs 2 million in a year.
As regards a corporate, the threshold will be Rs 500,000 and Rs 4 million respectively.
d) Tax Deduction at Source (TDS)
Payment of fees made by insurance companies to panel beaters and spray painters for repairs of motor vehicles of policy holders will attract TDS of 3%.
Payments made to Interior Decorator/Designer will attract TDS of 5%.
No TDS shall apply on fees paid to a Management Company licensed by the Financial Services Commission (FSC).
No TDS shall apply on fees paid to an Investment Adviser licenced by the FSC.
Value Added Tax
No specific measures have been budgeted for the financial services sector, save for certain tax administration. Valued Added Tax Administration:
A person who has voluntarily registered for VAT purposes will be allowed to take credit for input tax as from the date of his registration.
The time period to issue a VAT assessment will not exceed 4 years following the period in which the tax liability arose, unless there is fraudulent conduct.
In view of its e-invoicing project, MRA will launch a developer’s portal to test the Electronic Billing Systems (EBS) supplied by vendors to ensure the EBS connect seamlessly with the MRA server and invoices generated are in a standard e-invoicing format.
To facilitate refund of VAT to a person who is not in business, it will be mandatory for a VAT-registered entity to specify on its VAT invoice the name and address of that person if he requests it.
b) Personal Income Tax
Solidarity levy of 25% which is currently applicable on annual leviable income of resident taxpayers exceeding MUR 3 million will be abolished.
With a view to ensuring a fairer taxation of resident individuals, a progressive tax system will be introduced, with tax rates varying between 0% to a maximum of 20%, as illustrated below:
Annual Chargeable Income
Up to Rs 390,000
Rs 390,001 to Rs 430,000
Rs 430,001 to Rs 470,000
Rs 470,001 to Rs 530,000
Rs 530,001 to Rs 590,000
Rs 590,001 to Rs 890,000
Rs 890,001 to Rs 1,190,000
Rs 1,190,001 to Rs 1,490,000
Rs 1,490,001 to Rs 1,890,000
Rs 1,890,001 to Rs 2,390,000
Exceeding Rs 2,390,000
c) Other Tax Matters Transfer of shares
For transfer of shares exceeding Rs 200,000 in value and requiring a supporting certificate from a professional Accountant, the duty/taxes will be levied either on the value declared in the deed of transfer or in the certificate, whichever is the higher.
Acquisition of more than 20% of the share capital in a company with option to be taxed on the value of shares transferred requires a description of immovable property held in the company together with a site plan to be given at time of registration of the deed of transfer; and the process of objection following an assessment on value of shares transferred will apply equally to the transferee and transferor if the latter is subject to land transfer tax on the transaction
IV Ease of Doing Business “Work and Live”
a) Reforms of the Existing Framework
Sale of project under the Smart City Scheme or Property Development Scheme (PDS), that is, one plot of serviced land not exceeding 2,100 m2 to a non-citizen holder of Occupation permits, Permanent Residence Permit or a Residence Permit will be extended for another period of two years, that is, up to 30 June 2026 instead 30 June 2024. Resident non-citizen is allowed, upon application, to acquire residential property of a minimum of USD 500,000 (previously USD 350,000) outside of existing schemes subject to the payment of an additional registration duty of 10%.
Processing fees under the Integrated Resort Scheme (IRS), Real Estate Scheme (RES), Invest Hotel Scheme (IHS) and Smart City Scheme (SCS) will be harmonised to MUR 25,000 upon acquisition of a ground plus 2 apartment by a non-citizen.
The Premium Investor Scheme was introduced in 2021 by the Economic Development Board (EDB) to attract investors in pioneering and innovative sectors. The scheme will now be extended to cover investors taking over or acquiring wholly or partly Government undertaking such as acquiring shares in a Government-owned entity.
b) New opportunities
A residence permit will be granted to retired non-citizen and his family on the acquisition of a property in a PDS project relating to senior living based on certain conditions.
Non-citizens will be allowed to acquire residential property in a sustainable city in the same manner as for an acquisition under the Smart City Scheme.
Non-citizen and his family will be granted a residence permit on the acquisition of property of a minimum price of USD 375,000 under the Sustainable City Scheme.
Non-citizens on a tourist or business visa will be allowed to apply for a work permit.
c) Additional benefits to non-citizens
The initial investment requirement of USD 50,000 for investors and USD 35,000 for self-employed will be exempted at the time of issuance of permits.
Applicants of Occupation Permit will no longer be subject to opening a local bank account. This includes application for foreign retirees.
Provision of business visa of 120 days to the applicant without having to leave Mauritius when applying for an Occupational Permit.
The threshold for occupation permit for professionals will be reduced from Rs 60,000 to Rs 30,000.
The Young Professional Occupation Permit of a maximum duration of 3 years will be opened to all fields of study and be no longer restricted to specific fields .
The introduction of a silent consent principle of 4 weeks to register foreign professionals with relevant professional bodies.
Foreign retirees above 60 years will now have access to medical insurance.