CORPORATE TAXATION

 

Goods or manufacturing activities in a Freeport zone

• Freeport operators or private Freeport developers engaged in the manufacture of goods meant for local market in whole or in part shall be liable to tax at the rate of 3% on its chargeable income provided certain substance conditions are met. 

• Freeport operators and private Freeport developers engaged in the sale of goods on the local market will be liable to Corporate Social Responsibility (“CSR”). CSR fund shall be calculated using the formula set out below:

      a/b x c x 2%

     where –

• a. Is the gross income derived from sale of goods on the local market for the preceding year
• b. Is the gross income derived from all the activities of the Freeport operator or private Freeport developer for the preceding year  
• c. Is the chargeable income for the preceding year
  
  Year of assessment commencing  1 July 2020

Real Estate Investment Trust (REIT)

• REIT includes a collective investment scheme or a closed-end fund authorised as a REIT by the Financial Services Commission established under the Financial Services Act.
• NO REIT shall be liable to income tax, provided it satisfies such conditions as may be prescribed.
• Every beneficiary or participant to a REIT, shall be liable to income tax on his share of the distribution made by the REIT.
• REIT is not subject to Corporate Social Responsibility (CSR).
• The first MUR 50,000 of the amount receivable by an individual in an income year from a REIT will be exempt from tax.
  
  Year of assessment commencing 1 July 2020

Carry Forward of Tax Losses

• Where there is a change in the shareholding of more than 50% in a manufacturing company or in a company facing financial difficulty which has accumulated unrelieved losses, the losses may be carried forward.  
  
• The above is subject to conditions as imposed by the Minister of Finance and Economic Development.
  
  1 July 2018

Additional Tax Deductions

• A company operating a hotel may, in an income year, deduct from its gross income an amount equal to 150% of any expenditure incurred in that income year on cleaning, renovation and embellishment works.
• Where, in an income year, a company makes an application for arbitration, conciliation or mediation for the settlement of a dispute before a recognised arbitration institution in Mauritius and has incurred expenditure in respect of filing fees, it shall be allowed a deduction of 150% of the expenditure.
  
  Year of assessment commencing 1 July 2020

Tax Residence

• A company incorporated in Mauritius shall be treated as non-resident if it is centrally managed and controlled outside Mauritius.

  
  1 July 2019

Taxation of Banks

• No actual foreign tax credit will be available in respect of foreign source income derived by banks.
  
  Year of assessment commencing 1 July 2019

Controlled Foreign Company (CFC) Rule

• The CFC rule has been introduced in the Mauritian tax laws under section 90A.  

• A Controlled Foreign Company is a company which is not resident in Mauritius and in which more than 50% of its total participation rights are held directly or indirectly by the resident company or together with its associated enterprises.

• A CFC includes a permanent establishment of the resident company.

• Where a resident company carries on business through a CFC and the Mauritius Revenue Authority (MRA) considers that the non-distributed income of the CFC arises from non-genuine arrangements to obtaining tax benefits, that income shall be deemed to form part of the chargeable income of the resident company.
• The rules do not apply to a CFC where in an income year-

• Accounting profits are not more than EUR 750,000, and non-trading income is not more than EUR 75,000.
• Accounting profits amount to less than 10% of its operating costs for the tax period; or

• The tax rate in the country of residence of the CFC is more than 50% of the tax rate in Mauritius.
  
  Year of assessment commencing 1 July 2020

Presumptive Tax on Small Enterprise

• The Presumptive Tax has been introduced in the Mauritian tax laws under Sub-Part BD. 

• Small Enterprise for the purpose of this Sub-Part is defined as a person engaged in activities such as Agriculture, manufacturing, wholesale and retails of goods etc… whose gross income in an income year does not exceed MUR 10million and gross income from other sources does not exceed MUR 400,000.

• A small enterprise may make irrevocable election to pay presumptive tax at the rate of 1% of its gross income.

• Tax deduction at Source (TDS) suffered can be offset against presumptive tax payable.

• Where election for presumptive tax has been made, the small enterprise shall not be entitled to claim deductions, relief and allowances.

• Penalties and interests shall be applicable for failure to pay presumptive tax.

• The MRA may impose presumptive tax on the undeclared gross income not exceeding MUR 10 million.
  
  Year of assessment commencing 1 July 2020

Exempt bodies of persons

• The SIC Development Co. Ltd is now exempt from tax.
  
  14 December 2017

Partial Exemption

• The partial exemption of 80% has been extended to cover the following:
  -Interest income derived by a person from money lent through a Peer-to-Peer Lending platform operated under a licence issued by the Financial Services Commission under the Financial Services Act after the 5-year tax holiday.
  -Income derived by a company from reinsurance and reinsurance brokering activities.
  -Income derived by a company from leasing and provision of international fibre capacity.
  -Income derived by a company from sale, financing arrangement, asset management of aircraft and its spare parts and aviation advisory services related thereto.
• The partial exemption for income derived from the above activities shall be granted provided the company satisfies conditions as may be prescribed relating to the substance of its activities.
  
  Year of assessment commencing 1 July 2020

Tax Holidays

• 4-year tax holiday for income derived by a company from bunkering of low Sulphur Heavy Fuel Oil starting from the income year ending 30 June 2019 or for a company set up after 1 July 2019

• 8-year tax holiday granted for income derived by a company from intellectual property assets which are developed in Mauritius on or after 10 June 2019

• 5-year tax holiday for income derived from the operation of the E-Commerce platform in Mauritius before 30 June 2025 provided the company is a holder of an E-Commerce certificate by the Economic Development Board, subject to certain prescribed conditions.

• 5-year tax holiday for income derived by a person from the operation of a Peer-to-Peer Lending platform operated under a licence issued by the Financial Services Commission under the Financial Services Act provided that operation is started before 31 December 2020, subject to certain prescribed conditions.

• 8-year tax holiday for income derived by a company set-up on or after 10 June 2019 and engaged in the development of a marina.

  Year of assessment commencing 1 July 2020

Expenditure incurred on fast charger for electric car

Where, in an income year, a person incurs expenditure on a fast charger for an electric car used in the production of his gross income, he may deduct from his gross income, twice the amount of such expenditure in that income year.

Year of assessment commencing 1 July 2019

 

PERSONAL TAXATION

 Solidarity Levy

The definition of ‘leviable income’ in the calculation of Solidarity Levy has been extended to include

• the share of dividends of an individual in a resident societe or succession as from 1 July 2019
• but exclude Lump sum income by a person as pension, death gratuity or compensation for death or injury and will take effect as from 1 July 2017.

Peer-to-Peer Lending

• A person who derives interest from money lent through any Peer-to-Peer Lending platform, may deduct the amount of debt or interest due which is proved to have become bad against interest received on money lent through the same peer to peer lending platform.
• The unrelieved amount of debt or interest may be carried forward indefinitely and set off against interest income in succeeding years.
• No tax deduction at source is applicable on Peer-to-Peer interest.
  
  1 July 2019

Income Exemptions and Reliefs

• A retired person or a person having a physical or mental disability, who, in an income year, has gross income other than specified income is entitled to deduct from his net income an additional amount of MUR 50,000 in addition to the appropriate amount of income exemption threshold.
• The deduction for a child pursuing tertiary studies has been extended to a maximum of 4 years.
• An additional relief of MUR 10,000 for medical insurance premium in respect of fourth dependent can be claimed.

    Year of assessment commencing 1 July 2019

Fast charger for electric car investment allowance

• Individual acquiring a fast charger for his electric car shall be entitled to deduct from his net income, the expenditure incurred for the acquisition of the charger.
• Any unrelieved amount may be carried forward and offset against the net income of succeeding years where single deduction is taken.
  
  Year of assessment commencing 1 July 2019

Tax Credit for employees

• A tax credit of 5% shall be available to employees deriving basic salary inclusive of compensation not exceeding MUR 50,000 in the first month provided that the annual net income does not exceed MUR 700,000.
• An employee whose net income is less than MUR 650,000 in an income year shall not be entitled to the tax credit of 5%.
  
  Year of assessment commencing 1 July 2019

Current Payment System (CPS)

• Where the gross income of an individual does not exceed MUR 10 million in the preceding year and he is engaged in activities such as agriculture, manufacturing, wholesale and retail of goods, he shall not be required to file a CPS statement.
  
  Year of assessment commencing 1 July 2019

Income Exemption Threshold

Category	From (MUR)	To (MUR)	Increase (MUR)
A.Individual with no dependent	305,000	310,000	5,000
B.Individual with one dependent	415,000	420,000	5,000
C.Individual with two dependents	480,000	500,000	20,000
D.Individual with three dependents	525,000	550,000	25,000
E.Individual with four or more dependents	555,000	600,000	45,000

   
  1 July 2019

 

TAX ADMINISTRATION

Voluntary Disclosure of Income Scheme – Foreign Assets

• This Scheme shall apply only to undisclosed income derived from Mauritius but held offshore in bank accounts or used to purchase assets offshore.

• Where a person makes a voluntary disclosure of his undeclared income on or before 31 march 2020, he shall pay tax at the rate of 15% on the disclosed chargeable income free of any penalty and interests.

• If the tax is not paid in full on or before 31 March 2020, an interest rate of 0.5% shall be applied on the unpaid amount.

• The Scheme is not applicable where an individual is subject to convictions, proceedings or inquiries relating to drug trafficking, terrorism, money laundering or corruption.

Voluntary Disclosure of Income Scheme – SMEs

• Where a small and medium enterprise makes a voluntary disclosure of –
  -Its undeclared or under-declared income for the year of assessment 2017/2018 and any preceding years of assessments; or
  -Its taxable supplies for taxable period ended 30 June 2018 and any preceding taxable periods; and
  at the same time pays tax due, the tax paid shall be free from penalty and interests.

• Where a small and medium enterprise which has been –
  -Assessed in year of assessment 2018-2019 or any prior years; or
  -Assessed for taxable period ended 30 June 2018 or any prior taxable periods

  May consider the voluntary disclosure if objection, representations or appeal was or were still pending as at 10 June 2019.

Arrears Payment Scheme – SMEs

• Where tax arrears owed by SMEs as at 10 June 2019 are fully paid on or before 31 March 2020, penalty and interests included in the tax arrears shall be reduced by 100%.

Assessment Review Committee (ARC)

• Where statement of case, witness statement and any relevant documents are not filed within one month of the proforma date, the ARC may upon reasonable grounds provide extension for the submission of the said documents subject to certain conditions.

Corporate Social Responsibility (CSR)

• Where in respect of a year of assessment, the MRA believe that money has not been spent in respect of a CSR Fund as required by law, they may raise an assessment in that respect.

VALUE ADDED TAX

Repayment of tax

• A VAT registered person may claim repayment of VAT paid on –
  – Goodwill on the acquisition of a business or part of a business; or
  – Computer software, patents or franchise agreements

Special Levy on Banks

• Income derived from Global Business Companies is not subject to Special Levy.
• Special Levy has been increased from 4% to 4.5% for a bank having leviable income of more than MUR 1.2 billion.
• The levy for a bank in operation as at 30 June 2018 shall be the lower of:
  – 4.5% or 5.5% depending on the leviable income; or
  – 1.5 times of the levy payable for the year of assessment 2017-2018.

Tax Liability of principal officer of a private company

• The principal officer of a private company shall be answerable and personally liable for VAT payable by the company.
• Principal officer means the executive director or any other person with powers which could be exercised by the Board of Directors.

Refund of VAT to persons on residential building, house and apartment

• The conditions relating to refund of VAT to persons on residential building, house and apartment of the twelfth schedule of the VAT Act has been amended to specify the following:
  – The VAT Refund Scheme will be extended to 30 June 2025
  – Cost of construction of residential building or house or purchase price of apartment has been increased from MUR 4 million to MUR 5 million
  – The annual net income of the applicant and his spouse has been increased from MUR 2 million to MUR 3.5 million.

VAT ADMINISTRATION

• When a single entity is splitting into different entities to avoid VAT registration, each entity shall be required to be compulsorily registered for VAT purposes.
•  A registered person who issues a VAT invoice to any purchaser in business shall specify in that VAT invoice the purchaser name. business address and the Business Registration Number.
• All VAT registered persons will have to file their VAT return and pay VAT electronically.
• The Exempt Schedule has been amended to cover payment of subscribed by professional bodies.

This Alert has been extracted from the Finance Act 2019 and is for information purposes only. Should you require any further information or have any specific query on the above, you may contact:

Jimmy Wong, FCA, TEP
Didier Viney, FCCA
Madvi Jeebun, FCCA, ACA

DTOS Ltd
10th Floor, Standard Chartered Tower,
19 Cybercity, Ebene
Mauritius
Email: info@dtos-mu.com
Tel: +230 404 6000
Fax: +230 468 1600
Website: www.dtos-mu.com

Date published: 21 August 2019