Embracing a brighter future together as a Nation – The Mauritian Budget 2019/2020
On the 11th of June 2019, the Minister of Finance and Economic Development delivered his budget speech for 2019/2020.
No major changes have been made in terms of the country’s fiscal and Global Business regimes as major steps have already been put in place to ensure compliance with the Organisation for Economic Co-operation and Development and European Union’s guidelines on taxation and financial best practices.
The Budget for 2019/2020 is thus an attempt to further solidify recently introduced reforms and is in-line with the Mauritius IFC Blueprint 2030.
We are pleased to provide you with a summary of the different measures that we believe would be of relevance to you.
1. Corporate Tax
- Tax residency of companies
Companies centrally managed and controlled outside Mauritius will not be considered as tax resident in Mauritius.
- Partial Tax Exemption Regime
The 80% partial exemption regime has been extended to cover companies engaged in:
- Leasing and provision of international fibre capacity;
- Sale, financing arrangement and asset management of aircraft and its spare parts
- Reinsurance and reinsurance brokering;
- Including aviation related advisory services.
The Income Tax Regulations 1996 will be amended to include the following:
- A detailed definition of substance requirements to benefit from the partial exemption regime;
- To lay down the conditions in case of core income generating activities namely:
- Demonstrating adequate monitoring of outsourced activity;
- Ensuring the outsourced activities are carried are carried out in Mauritius;
- Not counting the economic substance of service providers multiple times by multiple companies when evidencing their own substance in Mauritius.
- Accelerated Depreciation
The threshold for expensing capital expenditure incurred on plant and machinery in the first year will be increased from MUR 30,000 to MUR 60,000.
- Freeport regime
A freeport operator or private freeport developer engaged in the manufacture of goods will be liable to income tax at the rate of 3% on profits derived from the sale of goods on the local market.
- Carry Forward of Tax Losses
Effective as from 1st July 2018, it is proposed to allow companies facing financial difficulty to carry forward unrelieved losses when taken over by another shareholder provided conditions imposed by the Minister are met.
2. Tax Holidays
||Tax Holiday Period
|Innovation Box Regime
||Companies will have to satisfy pre-defined substantial activities requirement in compliance with the Base Erosion and Profit Shifting (BEPS) Action 5 report
||For newly incorporated companies income derived from its intellectual income property assets developed in Mauritius. For existing companies income derived from intellectual property assets developed in Mauritius after 10th June 2019
||The E-commerce Company is incorporated in Mauritius before 30th June 2025. The Economic Development Board Act will be amended to allow for the issuance of e-Commerce Scheme Certificate.
||Chargeable Income of the Company
||The Peer to Peer Lending Operator Company starts its operation prior to 31st December 2020
||Chargeable Income of the Company
||Newly set-up company developing a marina
||Chargeable Income of the Company
||Company involved in bunkering of low Sulphur Heavy Fuel oil
||Income derived from bunkering of low sulphur heavy fuel oil
3. Personal Tax
- Income Exception Threshold
Effective as from income year start on 1st July 2019, the income exemption thresholds are proposed to be as follows:
||F (Retired/ Disabled)
||G (Retired/ Disabled)
|No of dependents
||Four or more
||One or more
|Proposed Income Exemption Threshold (In MUR)
- Tax band of 10%
The tax rate for individuals earning annual net income of up to MUR 700,000 will be 10%. Under PAYE, the rate of 10% will be applied if his average cumulative emolument in a month is below MUR 53,845.
- Negative Income Tax/ Special Allowance
Household employers will have the option to either pay the NPF/NSF contribution on a monthly basis or continue to pay NPF/NSF contribution at the end of the year but submit quarterly statements to the MRA. The National Pensions Act will be amended accordingly.
Furthermore, all employers will be required to submit their returns to MRA electronically and pay via e-payment.
- Additional Deductions Relief
- Lump sum income received by a person as pension, death gratuity or compensation for death or injury will be excluded from the computation of Solidarity levy. This will be backdated to take effect as from 1st July 2017;
- It was clarified that solidarity levy will apply on an individual’s share of dividend in a Société or succession.
- Peer-to-Peer Lending
- The tax rate on interest income received by an individual from Peer-to-Peer lending will be 3%;
- Any bad debt and fees payable to the Peer-to-Peer operator will be deductible for the taxable interest income;
- No tax deduction at source will be applied to Peer-to-Peer interest income.
4. Tax Administration
- Voluntary Disclosure
- It is proposed to introduce a scheme for voluntary disclosure of previously undeclared income held in a bank account overseas or used to purchase foreign assets by Mauritians;
A person making a voluntary disclosure on or before 31st March 2020 under the scheme will be subject to tax on the disclosed chargeable income at the rate of 15% free from any penalty and interest;
- Small and medium enterprises, that is enterprises having turnover not exceeding Rs 50 million will be given the opportunity to regularise any undeclared or under-declared income with the MRA free from penalty and interest and will be allowed to pay arrears of tax owed to MRA as at 10th June 2019 free from penalty and interest provided payment is made on or before 31st March 2020.
- Arms-Length Transactions
- It is proposed to fine-tune the legal provisions relating to arm’s length test to remove any doubts or uncertainty about its applications.
- Value Added Tax
- It is being clarified that, where a local company supplies services to a foreign company who is outside Mauritius, the services will be zero-rated for VAT purposes provided the foreign company does not in turn supply these same services to another local company;
- Presently, a VAT-registered person may claim repayment of input tax in respect of capital goods such as building, plant, machinery or equipment. Provision will be made to allow repayment of VAT paid on –
- Goodwill on acquisition of a business; and
- The acquisition of intangible assets such as software, patents or franchise agreements.
5. Financial Services
- New products / rules
- A new framework will be introduced for fund administration and fund management;
- The existing Special Purpose Fund regime will be revamped to ease access to new markets;
- FSC will enter into an agreement with the Gujarat International Finance Tec-City to recognise Mauritian licensed funds and management companies as qualified to operate in the Gujarat jurisdiction as well;
- New rules and an attractive tax regime will be introduced to promote the development of Real Estate Investment Trusts;
- An ‘umbrella licence’ for wealth management activities will be introduced;
- A scheme for headquartering of ‘e-commerce’ activities will be put forward;
- The Government will introduce a framework for Green Finance in line with the ‘Marrakech Pledge’ – a continental coalition of African Capital Markets Regulators and Exchanges committed to foster green financing on the continent;
- A new trading platform at the Stock Exchange of Mauritius will be introduced to allow medium sized profitable enterprises that do not qualify for listing on the official and DEM markets to raise capital and trade their shares.
- To facilitate conduct of business in the sector, a ‘single-window system’ will be set up at the FSC to allow for submission of documents for financial services and global business applications.
- A regime for Robotics and AI enabled financial advisory services will be established;
- A new licence for Fintech Service providers will be introduced;
- Self-regulation will be encouraged for Fintech activities in consultation with the United Nations Office on Drugs and Crime;
- The use of e-signatures and e-licences will be introduced on a pilot basis;
- Crowd Funding will be created as a new licensable activity.
- AML Laws
- The regulatory framework to fight fraud, corruption and financial crimes will be strengthened and the Financial Services Act will be amended to grant additional powers to the FSC in relation to inspections carried out.
- Applications for Work and Residence Permits by Foreign Nationals
- The Non-Citizens (Employment Restriction) Act will be amended to introduce strict timelines for assessment of completeness of application, obtaining clearances from other authorities and determination of an application;
- The process for issuing Occupation Permit, including the Schedule under the Economic Development Board Act will be reviewed making provisions for clearly defined eligibility criteria and introduction of guidelines;
- The capital outlay requirement of USD 40,000 under the innovator Occupation Permit for Start-ups, who will be mentored by an accredited incubator will be waived;
- The monthly transfer required for retired non-citizens will be lowered from USD 2,500 to USD 1,500.
- Amendment to Companies Act
The Companies Act will be amended to cater for the following:
- Individual compensation of directors are disclosed in the annual report;
- Dividend declared by the Board is paid within a maximum period of 15 months subject to solvency test;
- Allow for disqualification of a director upon a successful claim by shareholders;
- Review the limit on the number of shareholders permitted for private companies incorporated under the Companies Act;
- To provide that a small private company is a company which, amongst others, is not qualified as a ‘Public Interest Entity’ under the Financial Reporting Act;
- To provide for the definition of beneficial owner with a view to fulfilling the requirements of OECD;
- Require the board of a public company to consist of at least one woman director.
- Amendment to Securities Act
The Securities Act will be amended to ensure immediate disclosure to the public if the transaction has a value of at least 10% of the Company’s assets.
- Amendment to Listing Rules
The Listing Rules will be reviewed to provide for the requirement of obtaining shareholders’ approval for Related Party Transactions, where the percentage ratios as specified in the Rules, represent 10% or more.
- Amendment to Limited Partnerships Act
The Limited Partnerships Act will be amended to provide for the definition of beneficial owner with a view to fulfill the requirements of OECD.
For the latest full budget speech, click on the link below:
A further brief will be circulated once the budget has been ratified and the various amendments to the Act governing the changes have been effected.