When settling abroad, all questions must be dealt with in advance and be answered clearly and comprehensively, but some questions are more difficult to answer than others. This is the case of personal and corporate taxation, a subject that can be intimidating, albeit essential – income tax, tax year, corporate tax, VAT, taxation of offshore companies, tax benefits, etc. This chapter has been designed to guide you through the taxation process in Mauritius.
Mauritius offers a transparent tax system
Mauritius has put in place many tax advantages to encourage foreign investments while respecting international standards. The signing of international agreements with respect to these standards has allowed the Organization for Economic Cooperation and Development (OECD) to rank Mauritius among the most virtuous countries in terms of taxation.
Becoming a tax resident in Mauritius
The Mauritius Revenue Authority (MRA) considers a tax resident in Mauritius to be a foreign person who stayed:
- At least 183 days during the fiscal year on the island;
Or
- At least 270 days if one combines the time spent during the current fiscal year and the 2 previous fiscal years.
With that, they become taxable on the income generated in Mauritius but also on the foreign income transferred to Mauritius.
By income, the tax authorities mean:
- Income from professional activity;
- Pensions;
- Income from a trade or profession;
- Rents;
- Interest;
- Royalties.
Capital gains are the exception to the rule, not being subject to any taxation.
To date, Mauritius has signed 45 tax treaties. An additional series of treaties is also under negotiation.
Useful link:
Countries with which Mauritius has signed a tax treaty
Tax year in Mauritius
The tax year begins on July 1 and ends on June 30 of the following year. Tax returns must be submitted to the MRA by September 30 in person or October 15 electronically
Individual income tax in Mauritius
The Mauritian tax system is pretty straightforward.
In Mauritius, not only tax contributions but also social contributions (pensions and retirement) are deducted at source by the employer. The system is called PAYE - Pay As You Earn and all administrative procedures are taken care of by the company.
As far as income tax is concerned, all employees have a Tax Account Number (TAN) and benefit from the deduction at source. This means that the employer extracts the appropriate amount directly from each employee's salary each month.
However, at the end of the tax year, the employer gives each employee an "Employee Declaration Form" (EDF) on which the non-salary income (interest, royalties, dividends from abroad) is listed. The employee must use this form to calculate the taxable amount. If the total of the deductions made at source is less than what the employee is required to pay, the employee must pay the difference to the MRA. If the MRA has been overpaid, the employee is refunded the difference.
To find out, the employee returns his or her declaration to the tax office, the MRA. This can be done by going to the MRA in person with the EDF issued by the employer.
Alternatively, the employee can do this online by registering on the MRA's e-Service website with his TAN.
Individual tax rates
As of July 1, 2023, Mauritius has implemented a progressive income tax system. This means that the amount of tax to be paid is dependent on the annual taxable income. Essentially, the higher your income, the higher the tax rate applied to the excess portion of your income. This progressive taxation system aims to promote fairness by requiring individuals with higher incomes to contribute more.
Here's a breakdown of how the system works:
- 0% on the first Rs 390,000;
- 2% on the next Rs 40,000, i.e., for the surplus income between Rs 390,001 and Rs 430,000;
- 4% on the next Rs 40,000, i.e., for the surplus between Rs 430,001 and 470,000;
- 6% on the next Rs 60,000, i.e., for the surplus between Rs 470,001 and 530,000;
- 8% on the next Rs 60,000, i.e., for the surplus between Rs 530,001 and 590,000;
- 10% on the next Rs 300,000, i.e., between Rs 590,001 and 890,000;
- 12% on the next Rs 300,000, i.e., between Rs 890,001 and 1,190,000;
- 14% on the next Rs 300,000, i.e., between Rs 1,190,001 and 1,490,000;
- 16% on the next Rs 400,000, i.e., between Rs 1,490,001 and 1,890,000;
- 18% on the next Rs 500,000, i.e., between Rs 1,890,001 and 2,390,000;
- 20% on surplus income over Rs 2,390,000.
Tax allowances on individual taxes
Starting from the income year commencing on July 1, 2023, which pertains to income received by an individual on or after that date, the following changes have been implemented:
- The previous exemption of Rs 325,000 provided to a taxpayer for themselves has been replaced by a tax rate of 0%, which is now applicable to the first Rs390,000 of taxable income;
- Individuals without dependents and a net monthly income of up to Rs 30,000, as opposed to the previous Rs 25,000 limit, will be exempt from paying income tax.
Additionally, the amount of deduction (Rs) per dependent is as follows:
- 1 dependent: Rs 110,000;
- 2 dependents: Rs 190,000;
- 3 dependents: Rs 275,000;
- 4 or more: Rs 355,000.
Corporate income tax in Mauritius
The corporate tax rate is 15%.
It applies to the following:
- Commercial profits;
- Interests;
- Dividends from abroad;
- Rents, commercial income, liberal business income, CPS Current Payment must be declared quarterly to the MRA.
Several tax-related changes have been introduced, effective for the relevant income year, bringing about various exemptions and deductions:
- Interest earned by Collective Investment Schemes (CIS) or Closed-End Funds: The partial exemption on interest earned by these investment funds has been increased from 80% to 95%. This means that a larger portion of the interest earned will now be tax-exempt, offering potential advantages for investors and fund managers;
- Investment Tax Credit for manufacturing companies: Manufacturing companies, excluding cars, are now eligible for an investment tax credit. This credit is intended to incentivize investment in the manufacturing sector in Mauritius;
- Triple deduction for donations to NGOs: Companies making donations to NGOs involved in health and disability support, protection of street children, and rehabilitation programs can benefit from a triple deduction on their contributions, up to a maximum of Rs 1 million;
- Double deduction for companies employing women under Prime à L'Emploi program: Companies opting to employ individuals under the Prime L'Emploi program, particularly women, can now enjoy a double deduction on costs related to their employment;
- Interest income on Bonds, Debentures, or Sukuk: Eligible interest income now includes debt securities issued by foreign entities. Approval from the MRA is still required;
- Reduced tax rate for sale of aviation fuel to an airline: Companies engaged in the sale of aviation fuel to an airline will benefit from a reduced tax rate of 3%;
- Reduced Solidarity Tax Rate for telephone service providers: Providers of fixed or mobile public telecom networks and services, excluding those exclusively involved in internet or internet telephony services or international long-distance services as defined by the ICTA, will experience a reduced solidarity tax rate. The specific rate of reduction has not yet been announced.
VAT in Mauritius
Value Added Tax (VAT) is an indirect tax on consumer goods and services. The VAT rate in Mauritius is 15%.
However, some products are exempt from VAT in Mauritius, including:
- Medical, hospital and dental services provided in the public health system;
- Certain staple foods like sugar, margarine, rice, yogurt, edible oils, and bread, along with 15 essential products such as toothpaste, toothbrushes, medical silicone, and all musical instruments;
- Electricity and water;
- Export of goods and services;
- Cooking gas marketed in cylinders of up to 12 kg for domestic use;
- Photovoltaic systems;
- Glass-ceramic blocks for dental use;
- Construction projects for educational buildings;
- Construction of social housing units as part of a social housing project implemented by New Social Living Development Ltd;
- Instruments and appliances used in the medical, surgical, dental or veterinary fields, classified under HS code 90.18.
Is it possible to recover VAT in Mauritius?
The tax authorities provide for the recovery of VAT by individuals in 2 cases:
- Foreign visitors leaving Mauritius;
- Mauritians leaving Mauritius. Foreign visitors can recover VAT by making their purchases in 1,000 specific shops, displaying the logos: and . This is possible as soon as their purchases reach a minimum of Rs 2,300 (VAT included) per store and upon presentation of their passport and receipts at the MRA customs counter.
For departing Mauritians, this list is reduced to 200 shops.
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Taxation of offshore companies in Mauritius
Mauritius has put in place a number of regulations and benefits for offshore companies with the support of several actors: The Mauritius Financial Services Commission, the governing body for the creation and regulation of offshore companies, as well as the banking sector as a whole, knowing that both domestic and international banks in Mauritius also welcome non-residents. As a result, investors can set up an offshore company in Mauritius, specifically a Global Business Company (GBC) or an Authorized Company (AC).
They can also manage their offshore funds through collective investment schemes or private equity funds.
An offshore company is defined as a company:
- Which establishes its registered office in a foreign country in which it does not carry out any commercial activity;
- Whose responsible managers are not domiciled locally.
Offshore companies benefit from certain tax advantages, although they are entirely external, are not involved in the economy of the host country, and do not benefit from the facilities offered to local companies.
When considered a tax resident in Mauritius, the GBC is subject to a 15% tax. To prove that it manages and controls its assets from Mauritius, it must:
- Have among its directors 2 residents in Mauritius;
- Lead and chair its board of directors from Mauritius;
- Have a local bank account for the transit of funds;
- Keep its statutory documents and its registered office in Mauritius;
- Hire a qualified local company secretary;
- Hire a local auditor;
- Present minimum annual expenses proportional to the activity of the structure.
Depending on the business activity of the GBC, other substantive requirements may apply.
Offshore trusts
In Mauritius, offshore trusts:
- Are taxable on worldwide income at the prevailing tax rate, i.e., 15%;
- Are obliged to submit an annual tax return to the MRA within 6 months of the end of their accounting period;
- Can claim the 80% partial exemption applicable on their foreign source income, provided that they submit written proof of the amount of foreign tax levied, which must be equal to 80% of the Mauritian tax chargeable on such income.
Note that taxable income is defined as the difference between:
- The net income generated by the trust; and
- The aggregate amount is distributed to beneficiaries in accordance with the terms of the trust deed. In addition, any amount distributed to non-resident beneficiaries is exempt from income tax. An offshore trust may apply by written notification to the Mauritian auditor to be treated as a non-resident in Mauritius for tax purposes and be exempted from taxation. In such a case, it cannot benefit from the double taxation agreements signed by Mauritius.
The sine qua non condition to receive tax benefits in Mauritius is the notion of tax residence.
Therefore, any company that meets the criteria in force benefits from the following:
- No tax on dividends;
- No tax on capital gains;
- No wealth tax;
- No inheritance tax for direct descendants;
- Profits and dividends from companies located outside Mauritius are repatriable without any restriction, with a tax rate of 15%;
- 15% tax rate;
- Full tax exemption for import and export activities;
- 15% tax rate for processing activity;
- Exemption from customs duties on all goods imported through the free port;
- Free repatriation of profits.
Tax benefits for businesses
Global Business Companies (GBC) are not subject to:
- Capital gains tax, withholding tax on the payment of dividends, interests or royalties;
- Stamp duty;
- Capital tax;
- Inheritance tax.
Where it owns at least 5% of an underlying company, the GBC receives a credit against the foreign tax paid on the income from which the dividend was paid ("underlying foreign tax credit").
Where a non-Mauritian resident company receives a dividend from another non-Mauritian resident company ("secondary dividend") of which it directly or indirectly owns at least 5% of the share capital, such dividend will qualify as a foreign tax credit and an underlying foreign tax credit.
Interest and royalty payments made by GBC are fully tax deductible in Mauritius.
Tax savings credits
Under this regime, the effective rate of taxation in Mauritius can be reduced through a long-standing provision which allows GBCs:
- Not to have to provide written proof of the amount of foreign tax collected;
- Benefit from taxation at 80% of the standard rate of 15%, i.e., 12%. Thus, the isolated use of this long-term provision will reduce the effective tax rate in Mauritius from 15% to 3%.
Good to know:
A company that obtained a GBC 1 license after October 16, 2017, can claim a credit only for the actual foreign tax incurred.
We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.
