Some years back, the IMF forecasted that Africa will grow to become the home of several of the fastest growing economies in the world and that the average African economy is going to take the lead from Asia. Besides minerals and energy, a broad base of sectors are supporting the economic growth of this region. These include agriculture, technology, telecommunications, media and financial services. These industries are significant foreign direct investments and a large portion of this is from private equity investments. There has been a considerable flow of direct investment to Africa during the last decade, in which Mauritius has played a considerably large role.
Benefits of establishing a company in Mauritius
The island, found in the Indian Ocean, is considered as the number one jurisdiction for investment into Africa. Foreign companies can benefit from several advantages when establishing a business in Mauritius. First of all, there are the traditional advantages that an offshore financial centre offers. These are:
- no capital gains tax,
- no withholding tax,
- no exchange controls,
- and free repatriation of profits and capital, among others.
Moreover, in Mauritius, they will also benefit from an extensive network of treaties and double taxation avoidance agreements. So far, the country has concluded 46 tax treaties and is party to a series of treaties under negotiation. The treaties currently in force are with jurisdictions such as France, the UK, Germany, United Arab Emirates, India and South Africa, among others. 6 treaties are awaiting ramification, 5 are awaiting signature and 20 others are being negotiated.
Tax savings: Mauritius v/s other African states
In some parts of Africa, Capital Gains tax are imposed. These are generally levied at a rate ranging from 30-35%. However, foreign companies in Mauritius do not have to worry about that thanks to the Double Taxation Agreements established in the country. These restrict taxing rights of capital gains to the country of the seller of the assets. Considering the fact that there is no capital gains tax in Mauritius, a company registered in the island is able to potentially make significant tax savings.
Additionally, most of the states of Africa impose some withholding tax on dividends paid out to non-residents. These can vary between 10% and 20%. Nonetheless, the Double Taxation Agreements (DTAs) in force in Mauritius limit withholding taxes on dividend. The treaty rates are generally 0%, 5% or 10%. Therefore, depending on from which country the investing country is, there is the possibility of potential tax savings. With regards to capital gains tax, the Double Taxation Agreements guarantee the maximum withholding tax rate if ever there are changes in the fiscal policy in the countries on investment.
If you have a question or you wish to establish a company in the country, do not hesitate to get in touch with one of our agents. Our firm has contributed to the economic and financial growth of several individuals and companies. It has proven to be a reputable company which you can trust.