The 2019-2020 budget presents changes regarding Mauritius’s tax regime

The 2019-2020 budget of Mauritius was recently disclosed and the government announced several changes with regards to various areas of its tax regime. International tax reforms, value-added tax changes, new corporate tax relief measures and several other schemes were disclosed. The budget has revealed several measures that will be implemented to promote the development of the country’s financial sector.

Company tax measures

One of the announcement is the proposal for a generous patent box regime for start-ups. A newly set-up company that deals with activities driven by innovations and new technologies will benefit from a tax holiday for eight years on revenues gained from its intellectual property assets developed in Mauritius. Existing firms will also able to enjoy this eight-year income tax holiday on income derived from the same kind of assets since the 10th of June 2019. Moreover, companies introducing an e-commerce platform in Mauritius before the 30th of June 2025 will benefit from a five-year tax holiday.

The budget has also increased the limit for expensing of capital goods. Currently, capital costs of plants and machinery may be completely expensed if the amount does not exceed MUR 30,000 in that year. That threshold will be raised to MUR 60,000 per annum.

Peer-to-peer lending operators will also benefit from a five-year tax holiday on the condition that their company starts its operations before the 31st of December 2020. An individual receiving interest income from peer-to-peer lending will be subject to income tax at the rate of three percent. Any bad debt or fees payable to the peer-to-peer operator will be deductible from taxable interest income. However, no tax deduction at source will be applicable to peer-to-peer interest income. Lastly, a four-year tax holiday will be applied to income made from bunkering of low Sulphur Heavy Fuel Oil.

The government also proposes amendments with regards to carry forward losses in the 2019-2020 budget. Currently, the accumulated losses of a company lapse if its owner changes. However, in the case of a manufacturing company, the carry forward of its losses might be authorised if the relevant ministry is assured that it is in the public interest to do so. The decision will also be based on compliance with conditions related to the safeguard of employment. This derogation will be applied to any firm facing financial difficulties and that is taken over by another shareholder provided that the conditions set out by the ministry are met. This amendment will be operational as from the first of July 2019.

Moreover, the budget proposes amends to enhance Mauritius’s fiscal regime. Several measures to foster the development of new international financial services niches and to alter the tax rules for banks have been discussed. One of the projects consists on the introduction of Real Estate Investment Trusts (REITs). To support this development, the budget has announced new proposals and rules, as well as an attractive tax regime. Furthermore, as “umbrella licence” for related wealth management activities and a scheme for the headquartering of e-commerce activities have also been announced.

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