The Hon. Minister of Finance of the Republic of Mauritius presented the National Budget 2021/2022 for Mauritius on 11th June 2021….
1. Measures for Global Business
- Reinforcement of the Regulatory Framework
- Introduction of Innovative Products
- Ease of Doing Business
2. Reinforcement AML/CFT
- Corporate Tax
- Partial exemption tax regime
- Premium Investor Certificate
- Personal Tax
- Tax Administration
- Other Taxes
4. Encourage non-citizens to invest, work and live in Mauritius
A NO-TAX BUDGET FOR A “BETTER TOGETHER”
In an unprecedented time with a contraction of 14% of the economy following 2 lockdowns and largely due to a significant drop in investments and consumers’ expenditures, the Hon. Minister of Finance of the Republic of Mauritius presented the National Budget 2021/2022 for Mauritius on 11th June 2021, articulated around 3 main ideas: Accelerating the economic recovery, triggering revival and strengthening resilience.
Whilst acknowledging a deficit of 5%, this budget strategy rests on 3 pillars:
- investment boost, for which the government will provide Rs 65 billion in priority projects in the next 3 years and hopes to attract investors through the introduction of several bills and of different type of investor certificates;
- new economic architecture, with key measures such as the long awaited borders reopening which will be crucial to restart the tourism industry at a standstill for 18 months and to reach 60% green energy by 2030;
- restore confidence, thanks to a series of social benefits addressing all aspects of the Mauritian’s life (education, health, housing, culture,).
For the global business sector which is experiencing a slowing growth for the first time in 3 decades, this budget presents interesting measures which will help to boost investment in terms of tax holidays, tax incentives and tax credits.
It is also critical to restore investors’ confidence in our jurisdiction and this Budget is providing additional measures to strengthen the AML/CFT framework and to recover the reputation of our International Financial Centre (IFC) since the inclusion of Mauritius on the FATF grey list and the EU black list and recently the UK high risk countries list.
Investors may also find opportunities in a number of new sectors, such as Fintech, Sustainability, pharmaceutical and biotechnologies for which the government has great expectations that it could become a new pillar of growth for the country’s economy.
Over and above, this budget aims at not leaving anyone behind and create growth through green economy for the future.
A brief on the salient points of the speech delivered by the Minister for our sector is provided below with a special focus on the taxation issues.
1/ GLOBAL BUSINESS SECTOR
Among the priorities of the Government of Mauritius, a number of measures have been announced in view of reinforcing the Mauritius financial services sector and bringing it into the digitalisation era. In this regards, major amendments have been proposed to the relevant laws and introducing new products. In order to strengthen the sustainability and effectiveness of the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT), a new framework will enable Mauritius to reaffirm its commitment to achieve an early exit from the FATF list of jurisdictions under increased monitoring. Finally, in order to attract more investors, new incentives have been introduced. Details on the key measures announced are provided below: –
ENFORCEMENT OF THE REGULATORY FRAMEWORK
The Banking Act and the Financial Services Act will be amended to:
- Define “Fintech”, “Regulatory Sandbox”, “Regulatory Sandbox Authorisation” and “Regtech”
- Establish the framework for applying for a Regulatory Sandbox Authorisation
- Authorise the set-up of fintech innovation hubs and digital labs by the BOM for the banking sector, and by the FSC for the non-banking financial services sector
Digitalisation of payments: A Mauritian central bank digital currency, the Digital Rupee, will be rolled out on a pilot basis by the Bank of Mauritius. Wide adoption of the Digital Rupee would facilitate the development of new fintech infrastructure and decentralised financial solutions.
The Bank of Mauritius (BOM) and the Financial Services Commission (FSC) will revamp the existing framework for investment banking activities.
New legislation planned
- A new Securities Bill
- A Securitisation Bill
- A new legislation for virtual assets
INTRODUCTION OF INNOVATIVE PRODUCTS
Special Purpose Acquisition Companies
The Stock Exchange of Mauritius will introduce rules for the setting-up of Special Purpose Acquisition Companies.
Shared Services Centres
A new regulatory framework will be introduced to facilitate banking institutions to set up centres for shared services including asset management and treasury management activities.
EASE OF DOING BUSINESS
- Online licensing: A platform will be launched by the FSC allowing online licensing.
- Centralised exchange system: The FSC will implement a digital centralised exchange system.
‘Silence is consent’ principle to be applied to licenses and permits as may be prescribed.
For the setting up of Family Offices, the need for a Global Business licence will be eliminated.
Protected Cell Companies – Domestic companies
The Protected Cell Companies Act will be amended to extend the use of the Protected Cell structure to domestic companies.
Private/ Public / Limited by Guarantee Companies
The Companies Act will be amended to:
- provide that a public company having not more than 50 members may be converted into a private company
- remove the restriction on companies limited by guarantee not to have more than 50 members
FSC and Issue of Shares
The Financial Services Act will be amended to allow issue of shares of less than 5% in a licensee without the approval of the FSC unless such issue results in a change in control in the licensee.
2/ STRENGTHEN AND EFFECTIVENESS OF AML/CFT
Mauritius reaffirms its commitment to achieve an early exit from the Financial Action Task Force (FATF) list of jurisdictions under increased monitoring.
The Financial Intelligence and Anti-Money Laundering Act (FIAMLA) will be amended to:
- allow the Companies and Business Registration Department to exchange information in relation to Non-Profit Organisations with the FIU
- include private pension schemes under the purview of the FIAMLA
- review the definition of “financial institution” to include a qualified trustee
- require a reporting person to provide information to its regulatory body (even if the person is not carrying out the listed activities under the FIAMLA)
Financial Crime Commission
A Financial Crime Commission will be established for a more effective management in the fight against financial crime.
The Foundations Act will be amended to ensure compliance with the requirements of Financial Action Task Force on:
- the opportunity for foundations to take remedial actions when they have failed to meet disclosure requirements of beneficial ownership information;
- sharing of information with law enforcement agencies and institutions involved in AML/CFT in Mauritius or abroad.
Limited Partnerships & Limited Liability Partnerships
To provide that a Limited Liability Partnership or a Limited partnership may be removed from the register in case appropriate beneficial ownership information has not been provided to the Registrar of Limited Liability Partnerships.
The income Tax Act will be amended to;
- to ensure that Foundations and Trusts benefitting from a preferential tax regime comply with the OECD standards including substantial activity requirements.
- exclude foreign limited partnership which is a non-tax resident from the need to submit a return of dividend.
Dedicated financial crimes divisions will be set up at the supreme court and intermediate court.
3/ FISCAL MEASURES AND TAX ADMINISTRATION
Partial exemption tax regime – Investment dealers, leasing (rail transport)
The Income Tax Act will be amended to broaden the scope of partial exemption tax regime to cover licensed investment dealers, and also activities connected with the leasing of locomotives and rails and trains.
- Companies engaged in the medical, biotechnology and pharmaceutical sector will be taxed at 3% instead of 15%.
- Biotechnology and pharmaceutical companies will be allowed a full tax credit on the costs of acquisition of patents.
- All companies engaged in the manufacture of pharmaceuticals and medical devices will be eligible to a Premium Investor Certificate.
- 5% tax credit will be available to manufacturing companies holding an Investment Certificate, on new plant and machinery over three years until 30 June 2023.
- Holders of Export Development Certificate will be eligible to 3% corporate tax and enjoy the benefits under the Freight Rebate Scheme, Trade Promotion and Marketing Scheme.
- Any unrelieved investment tax credit of a manufacturing company may be carried forward for 10 years.
- A manufacturing company will be entitled to a double tax deduction in respect of expenditure incurred for market research and product development targeting the African market; and acquisition of specialised software and systems.
- The R&D tax incentive scheme (double deduction) expiring in June 2022, will be extended by 5 years, that is, to June 2027.
- Enterprises contributing to the COVID-19 Vaccination Programme Fund will be allowed to deduct the amount contributed from their taxable income at the time of submission of their income tax return.
- APS computation will be amended to cater for companies which are subject to corporate tax rate at a lower rate than 15% standard tax rate. Income tax liability of companies under the Advance Payment System (APS) due in November 2020 up to May 2021, will be deferred until 30 June 2021.
Premium Investor Certificate
- Minimum investment of Rs 500 million (except Pharmaceutical Manufacturing)
- Negotiable incentives upon recommendation of a Technical Committee and approval of the Minister of Finance, Economic Planning and Development.
- The tax holiday on Family Offices, Funds & Assets Managers, will be extended from 5 years to 10 years.
- The threshold of USD 100 million in respect of asset base being managed by an Asset/Fund Manager will be reduced to USD 50 million.
- New companies holding an Investment Certificate will benefit 8-year tax holiday on prescribed sectors/activities concerned subject to registering with the Economic Development Board.
Dividends between non-residents
The Income Tax Act will be amended toprovide that dividend paid by a non-resident to another non-resident is not taxable in Mauritius.
- The Income Exemption Threshold has been maintained as last year.
- A 5-year tax holiday is granted on emoluments of an asset manager, a fund manager or asset and fund manager who manages an asset base of not less than USD 100 million and who has been issued with a certificate on or after 1 September 2016. Holders of a certificate issued on or after 1 September 2016 will be exempted from tax on their emoluments for an additional 5 years while new certificate holders will be eligible to a tax holiday of 10 years.
- Under the Home Ownership Refund Scheme, a Mauritian citizen acquiring a house, apartment or bare land to construct a residential unit in the financial year 2021-2022 will be eligible to a payment of 5% of the declared value of the immovable property capped to Rs500,000. The amount is refundable if the property is sold within 1 year of acquisition.
- Individuals contributing to the COVID-19 Vaccination Programme Fund will be allowed to deduct the amount contributed from their taxable income at the time of submission of their income tax return.An individual may carry forward any unrelieved deduction in an income year for a maximum period of two successive income years.
- There will be an increase in the exemption threshold in respect of dependent child pursuing undergraduate course to MUR225,000 irrespective of the place of study of the child and total income of the household.
- Relief for medical insurance premium or contribution will be increased by MUR5,000 in the maximum allowable deduction for medical insurance premiums for self and dependents.
- There will be an exemption up to an amount of Rs 30,000 in respect of donations made to an approved charitable NGO or religious bodies and contribution made to an individual pension scheme.
- The method for computing tax liability of a self-employed individual under the Current Payment System will be amended to cater for those persons who are subject to tax at the lower rate of 10%. Advance payment of personal income tax by self-employed individuals under the Current Payment System (CPS) in the income year 2020/2021 will be deferred up to October 2021, that is at time of submission of their income tax return.
- In order for a self-employed individual to benefit from the Self-Employed Assistance Scheme, he or she should be paying the Contribution Sociale Généralisée (CSG) as from 1 July 2021. Moreover, the self-employed individual will also be required to submit an income tax return.
Premium Visa holders: Tax incentives
A holder of a Premium Visa, spending 183 days or more in the Republic of Mauritius, will be subject to income tax as follows:
- Mauritian-sourced income of a Premium Visa Holder (e.g. emoluments for work performed remotely in Mauritius) will be taxed on a remittance basis, that is in the same manner as foreign-sourced income
- Money spent in Mauritius through the use of foreign credit or debit cards by the holder of a Premium Visa will not be deemed to have been remitted to Mauritius;
- Income brought and deposited in a bank account in Mauritius will be liable to tax except if a declaration is made by the holder of a Premium Visa that the required tax has been paid thereon in his country of origin or residence.
These amendments will be backdated to take effect as from 1 November 2020.
- The Tax Arrears Payment Scheme (TASS) has been re-introduced. The Scheme provides for full waiver of penalties and interest where tax arrears, outstanding as at 31 October 2020 under the Income Tax Act, the VAT Act and the Gambling Regulatory Authority Act, are paid in full by 31 December 2021 and provided the taxpayer registers under the Scheme by 30 June 2021.
- Taxpayers having assessments pending before the Assessment Review Committee (ARC), the Supreme Court or Judicial Committee of the Privy Council, and who wish to take advantage of the scheme, may do so by withdrawing the case before these institutions.
- The Arm’s Length Test as provided for in the Income Tax Act for domestic companies shall equally apply to Global Business Companies.
- It will be possible for MRA to request information from taxpayers to be provided electronically.
- The time limit of 30 days for MRA to issue a Tax Ruling and VAT Ruling shall run as from the date additional information sought by the MRA is received from the applicant.
- In order to improve exchange of information with Treaty partners, penalties will be introduced for companies which fail to comply with MRA requests relating to exchange of information.
- A taxpayer will be allowed to make representation to the Assessment Review Committee without any payment where an objection was lapsed by the MRA because the taxpayer has failed to provide requested information.
- Money laundering in the MRA Act will be given the same definition as in the Financial Intelligence and Anti-Money Laundering Act.
- The Director-General of the MRA will not be required to seek the authorisation of the Independent Tax Panel under the Assessment Review Committee (ARC) to issue assessments under Revenue laws in cases of fraud or non-submission of tax return by a taxpayer.
Any aggrieved taxpayer will still be entitled to the normal objection and appeal process.
VALUE ADDED TAX
- The following criteria will be applicable for refund of VAT on the new construction or purchase of a house or residential apartment:
- the cost of construction of a residence or the purchase price of the residence should not exceed Rs 3 million;
- the aggregate limit on the amount of refund will be Rs 300,000;
- the household income eligibility threshold for the refund will be Rs 1 million per annum; and
- the refund will be applicable on the construction or purchase of a first residence.
- VAT exemption on construction of purpose-built factories for manufacturing of pharmaceutical products and medical devices as well as for clinical and pre-clinical trials.
Mogas and Gas Oil: An additional levy of Rs 2 per litre of Mogas and Gas Oil will be applied as from 1 July 2021.