End of property tax breaks in Mauritius: How it affects you

Fiscal incentives for the Smart City Scheme and Property Development Scheme will be discontinued

Back in 2019, the Ministry of Finance of Mauritius granted tax exemptions on land transactions under the Smart City Scheme (SCS) as well as the Property Development Scheme (PDS). These exemptions were applied retroactively to properties purchased as far back as January 2016 or three years prior to that. These measures encouraged many expats to move to the tropical island during and after the COVID-19 pandemic.

However, this fiscal honeymoon is now over. The current Mauritian government is wrestling with high levels of debt and budget deficit, which have made it adopt austerity measures in all sectors of the economy. Its priority right now is to halve the budget deficit and improve the country's Moody rating. Hence, they've raised corporate and real estate taxes across the board.

The following taxes, previously waived under the Smart City Scheme (SCS) and Property Development Scheme (PDS), both commonly used by expats to purchase property, will no longer be exempt:

• VAT on buildings and infrastructure.
• If land is being sold into a Smart City Company, a registration duty paid by the purchaser. 
• If land is being sold into a Smart City company, a land transfer tax paid by the seller.
• Land conversion tax (e.g., reclassifying a plot of land from agricultural to residential use).
• Morcellement fee, or the fee levied on subdividing a plot of land into smaller plots.
• Customs duty when importing construction materials and machinery, as well as furniture for the house being built.
• The 8-year income tax holiday previously granted to income (e.g., rental income) derived from a Smart City Scheme.

Out of all these taxes, the following two will also apply retroactively to real estate projects that started before June 2025: customs duty for importing construction materials, machinery and furniture, as well as the land conversion tax. The other taxes will not apply to projects (e.g. the construction of a house) that started before the announcement of the budget this June.

Higher taxes for residential property bought under all EDB schemes

A tax escalation will also hit other Economic Development Board (EDB) real estate schemes for expats, in addition to the Smart City Scheme and Property Development Scheme mentioned earlier.

Expats in Mauritius can expect increased taxes when buying, selling, or transferring land under the Integrated Resort Scheme (IRS), Real Estate Scheme (RES), Invest Hotel Scheme (IHS), any apartment located at least two floors above ground level, as well as, of course, the Smart City Scheme and Property Development Scheme.

Here are the key changes:

• Registration duty: An increase from 5% to 10% of the property value, paid by the purchasing expat.
• Land transfer tax: When an expat is reselling land, they have to pay a land transfer tax of 10% of the property value and 30% of the profit made on the resale.
• Land transfer tax for promoters: If an expat is a real estate promoter in Mauritius, the sales tax they have to pay has been increased from 5% to 10% of the property value.

Investor confidence drops

On the forum of Expat.com, one British expat voiced his frustration and disappointment over the retroactive nature of the tax hikes, describing them as "a hammer blow to real estate confidence." He explained that he had already placed a 10% deposit on a property in 2023, unaware at the time that the tax regime was about to be overhauled. While he understands the pressing economic reasons why the Mauritian government is implementing these measures, he is also worried that “many investors will feel the proposed changes are hostile.”

Two other British expats echo his sentiments on the same forum thread. They say they are now re-evaluating whether they will stay in Mauritius long-term or move to another expat destination with a more favorable tax environment. One of them, a retired real estate agent himself, says he will now hesitate to recommend Mauritius to friends abroad who want to move or retire abroad.