- October 25, 2023
- Posted by: Aurélie
- Category: Investment
Over the years, Mauritius has become an attractive destination for foreign investors seeking new ventures overseas. In fact, the island nation is world-renowned not only for its strategic location at the crossroads of Africa and Asia, its business-friendly environment but also for its favorable tax system. So, if you’re considering setting up your business under the Mauritian jurisdiction, here’s an insight into the taxation system to help you better understand your obligations.
It’s worth noting that an individual is considered a tax resident in Mauritius when residing in the country for at least 183 days in a fiscal year. The tax year in Mauritius starts on July 1 and ends on June 30.
All companies incorporated in Mauritius are, therefore, said to be tax residents, who, in fact, are subject to taxes on their worldwide income. As a foreign investor, it’s important for you to be aware of your tax residency status when starting a business or undertaking any other commercial activity in the country.
Types of taxes in Mauritius
Personal income tax
Individuals earning income in Mauritius, whether from a profession or a business, are subject to personal income tax. Following the latest tax reform, personal income tax applies at rates varying from 0% to 20%, depending on the individual’s tax bracket. What foreigners need to know is that non-domiciled residents are only subject to income tax earned in Mauritius and income from foreign sources remitted in Mauritius.
Corporate income tax in Mauritius is levied at a flat rate of 15% on different types of income, including business profits, interest, royalties, foreign dividends and rent. This applies to most types of companies, including Trusts and Unit Trust Schemes. However, some company structures are eligible for tax exemptions or preferential rates (see more information below).
Value Added Tax (VAT)
In Mauritius, Value Added Tax (VAT) is levied at a rate of 15% on goods and services. However, certain goods and services are exempt from VAT or benefit from preferential rates.
Customs duties and import taxes
Goods imported in Mauritius are subject to customs duties and import taxes at rates based on the type of goods and their origin.
Land transfer tax and registration duty
The good news is that there is no property tax in Mauritius. However, property owners are subject to a 5% tax levied on land transfer. This tax excludes the value of any building present on the land. Moreover, the transfer of shares of a company owning land is also subject to land transfer tax at a rate based on either the land value or the share value, whichever is lower. Registration duty also applies at rates varying between 5% and 15% on the transfer of immovable property, depending on the type of property and the duration it has been held. Regarding commercial and industrial buildings, the transfer tax rate depends on the transfer value.
Once you have successfully started your business in Mauritius, you will likely hire employers, whether locals or foreigners. As an employer, you have certain obligations towards your employees, who will be subject to income tax. You, therefore, have to ensure that you are registered as an employer for PAYE (Pay As You Earn) purposes, a system whereby employers are required to deduct tax from their employees’ emoluments every month and pay the withheld tax to the Mauritius Revenue Authority (MRA).
Tax benefits and incentives for foreign investors in Mauritius
Foreign investors will be glad to know Mauritius has signed double taxation avoidance agreements (DTAAs) with several countries. This means that individuals do not have to pay tax twice, that is, in Mauritius and in their home country. This also means that you might pay reduced tax rates on dividends, interest and royalties.
As mentioned above, Global Business License (GBL) Companies Category 1 and Category 2 are entitled to certain tax benefits, including exemptions on specific types of income and other advantages. They are also exempt from capital gains tax on the sale of shares, assets, or investments.
Foreign investors starting their businesses under the Freeport regime are eligible for tax exemptions, as well as benefits, for activities such as trading, warehousing and distribution. They are also entitled to duty-free importation, processing, repackaging, and re-exportation of goods.
Companies being set up in Mauritius’ Special Economic Zones (SEZs) are entitled to incentives such as tax holidays and are exempted from customs duties. They also benefit from reduced corporate tax rates.
Where to get help
While starting a business in Mauritius sounds like an exciting venture, considering the various incentives offered to foreign investors, it’s important to be aware of the country’s tax laws and regulations. This includes registration with the Mauritius Revenue Authority (MRA). It’s highly recommended that you surround yourself with experts who can provide you with the most up-to-date information and help you out in your project, from choosing your business structure to sorting out your taxes. Get in touch with Blue Azurite to kickstart your new venture in Mauritius.