A guide to offshore structures available in Mauritius

By Dev Erriah, Erriah Chambers
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Mauritius has developed as an offshore centre through its growing network of tax treaties and their application in structuring offshore investments. Many multinational companies have used Mauritius to route their investments into emerging regions.

So far Mauritius has ratified 34 tax treaties, including one with China.

Dev Erriah, Barrister 出庭律师, Erriah Chambers
Dev Erriah
Barrister
Erriah Chambers

Mauritius recently enhanced the legal framework for captive insurance business, and several reputable captive managers have already established a presence on the island. Mauritius is also becoming an attractive place to locate operational headquarters for multinational group operations. Legislation has been introduced to permit and regulate sophisticated products such as aircraft registration and financing. The island’s location, professional skills, political stability and membership of the Southern African Development Community (SADC) are enhancing its attractiveness as an offshore jurisdiction for Chinese investments overseas.

Procedures for the granting of visas, work permits and residence permits have been streamlined, and an offshore business channel is now in operation at the airport so as to expedite the entry formalities of investors.

There follows a brief introduction to some of the corporate structures available to Chinese and other foreign investors in Mauritius.

Companies holding category one global business licences (GBL1)

GBL1 companies are one of the most popular offshore products in Mauritius. Most of them have been incorporated to take advantage of double-taxation treaties. There is no capital requirement for setting up a GBL1 company. Shares in a GBL1 company must be registered shares. Par value shares or shares with no par value may be issued. GBL1 companies may issue redeemable shares of any type, and may redeem such shares provided the company satisfies a solvency test. GBL1 companies are exempted from the requirement to prepare group financial statements where the GBL1 company is a wholly owned or a virtually wholly owned subsidiary of any company incorporated outside Mauritius.

Companies holding category two global business licences (GBL2)

A GBL2 offers greater confidentiality, and is suited to holding and managing private assets. A GBL2 is a non-resident company, and therefore is exempt from tax in Mauritius. A GBL2 may be registered by way of direct incorporation, by continuation from its country of origin, or by conversion from a GBL1 company into a GBL2 company. A GBL2, like other companies, may be structured as a company limited by shares, a company limited by guarantee or an unlimited company. It may be incorporated as a private company. There is no capital requirement for a GBL2. A GBL2 must have a registered agent and a registered office at all times in Mauritius.

Protected cell companies (PCCs)

A PCC has the same status as a GBL1 company, but may be used for only two types of global business activity: insurance business and investment funds. The purpose of creating a PCC is to segregate and protect “cellular” assets. Each cell is separate and distinct from the other cells, and the assets and liabilities of each cell are separate from the other cells. A PCC must be administered at all times by a management company in Mauritius. PCCs are an attractive structure for umbrella funds or multi-class funds, as they offer the advantage of limited liability just as if separate corporate structures were used for each different category of investor.

Limited life companies (LLCs)

A company may be registered as an LLC under the Companies Act 2001. The duration of the company may not exceed 50 years from the date of its incorporation. An LLC may extend the duration beyond 50 years by special resolution, provided that such extension does not exceed in aggregate 150 years from the date of the incorporation of the company. LLCs may be used for venture capital, investment funds, real estate projects, joint venture and estate planning vehicles.

Offshore investment funds

GBL1 companies and PCCs have both been used to structure investment funds. Investment funds may be structured as single-tier, two-tier or even as branches or subsidiaries of foreign companies. Funds are currently structured as open-ended or closed-ended, and as a unit trust or limited partnership.

Investors may also establish a collective investment scheme (CIS). A CIS can be constituted as a company, a trust, or any other legal entity prescribed or approved by the Financial Services Commission by satisfying certain criteria. Criteria include the requirement that the CIS must diversify its risk, and that the participants do not have day-to-day control over the management of the scheme’s property. A CIS established in a foreign country may also be recognized in Mauritius.

The fiscal regime for offshore business

GBL2 companies are not resident in Mauritius and therefore cannot take advantage of double-taxation treaties. A GBL1 company incorporated in Mauritius pays tax at the rate of 15%, but is entitled to a foreign tax credit on its foreign source income under the Income Tax (Foreign Tax Credit) Regulations 1996 if it qualifies in one of the following ways:

  1. if the GBL1 company can prove that it has paid foreign tax on its foreign income, it is entitled to a full 15% tax credit (with the end result that that the company is not liable to tax at all); or
  2. if the GBL1 company has not paid any foreign tax on its foreign income, then it is presumed to have paid foreign tax. In this case the company is entitled to a foreign tax credit of 80% of the 15% tax to be paid in Mauritius, and pays only 3% tax.

Dividends derived from Mauritius and paid to non-residents of Mauritius are exempt from tax. There is no withholding tax on interest paid by a GBL1 or GBL2 company.

Opportunity

The outbound investment opportunities for Chinese businesses under the Mauritius offshore regime are obvious. Financial activities such as trade financing, leasing operations, loan syndication, equity financing, asset securitization and other structured financing operations, as mentioned above, are apt to be carried out through Mauritius.


Dev Erriah is a barrister at Erriah Chambers in Mauritius. For enquiries relating to Mauritius, he can be contacted on +230 208 2220 or by email at deverriah@intnet.mu

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