Investing in Mauritius
Government Type and Legal System: Mauritius is a Republic governed by a parliamentary democracy with elections being held every five years, and is composed of an independent judiciary. It is a hybrid legal system based on English and French laws. The highest Court of Appeal is the Judicial Committee of the Privy Council of the United Kingdom.
Business Environment: Mauritius has realized a remarkable economic transformation from a mono-crop sugar-dominated economy to a diversified economy resting on, inter alia, export-oriented manufacturing, property development, tourism and financial business services sectors. Mauritius is a small economy with booming financial services and offshore sectors.
Official National Language: English.
Population: 1,26 Million (July 2016).
Currency: Mauritian Rupee (MUR).
GDP: USD 11 Billion (2016) ; growth rate of 3.9 % for 2016.
Foreign Direct Investment (“FDI”) Inflows: MUR 7.96 billion (January to June 2016) ; increase of 69 % from the first semester of 2015.
Free Trade Treaties: Preferential market access to the EU under the Cotonou Agreement; to the US under the Africa Growth and Opportunity Act (“AGOA”); and to Africa under the Common Market for Eastern and Southern Africa (“COMESA”) and under the Southern African Development Community (“SADC”).
I. Foreign Investment and Business Activity
How far is foreign investment appreciated and respected by law in Mauritius?
The attractiveness of Mauritius is enhanced by the fact that it offers a regulated business environment which is very conductive to investment and business growth. Mauritius aims to become a premier investment platform located midway between Africa and Asia.
Besides the Government’s incentives for investments including, inter alia, tax incentives and payment facilities, the country offers investors a stable economic, political environment and financial system as well as a highly skilled and dynamic work force. According to the ratings of Doing Business 2016 issued by the World Bank, Mauritius is 32nd (out of 189) most favorable countries for business in the world.
The Government of Mauritius has designated the Board of Investment (“BOI”) as a one-stop local agency which acts as the facilitator for all forms of investment in Mauritius and guides investors through the necessary processes for doing business in the country.
No restrictions on ownership of companies exist, only the television sector is subject to the restriction that a foreign company cannot hold more than 20% of the capital of a Mauritian television company. Mauritius does not apply stringent minimum capital requirements to set up a company and offers an extensive tax treaty network with several countries. Thus, foreign investors can do business in Mauritius with all available forms of legal entities and are allowed to own 100 percent equity in a local company
How far are (foreign) investments protected by the Mauritian law?
While Mauritius’s success as a well-established international financial centre can be attributed to its continually expanding network of Double Taxation Avoidance Agreements (“DTAAs”), Mauritius has also entered into numerous Investment Promotion and Protection Agreements (“IPPAs”) with various African countries which, while less well‐known than DTAAs, are potentially of great importance to investors seeking to invest in the developing markets of Asia and Africa.
In addition, Mauritius has signed several Bilateral Investment Treaties (“BITs”) to provide benefits and investment protection for the home state in the host state.
Moreover, Mauritius has the necessary framework to protect the interests of foreign investors, being a member of the International Court of Justice, the International Centre for the Settlement of Investment Disputes (“ICSID”), and the Multilateral Investment Guarantee Agency (“MIGA”).
Which regulations must be recognized in case of a merger?
A merger situation occurs when two (2) or more enterprises, of which one at least carries out its activities in Mauritius or through a company incorporated in Mauritius, are brought under common ownership or common control.
The procedures for mergers involve fairly straightforward corporate actions such as, inter alia, acquisition of the share capital of the target Mauritian company, and shareholder resolutions.
Mauritian companies, private and public, have been involved in considerable merger activities with companies listed on a number of international stock exchanges. In fact, together with amalgamations, mergers remain the primary means by which changes in control occur given the close-knit nature of Mauritius corporate groups.
Mergers can come under the scrutiny of the Competition Commission of Mauritius (“CCM”) where the transaction results in more than 30% of the market share being controlled by one entity or group, or where the CCM has reasonable grounds to believe that it will result in a substantial lessening of competition within the market.
Are there any provisions regarding public takeovers?
A takeover is an offer made by, or on behalf of, a person (the “bidder”) to acquire the securities of another (the “target”) which will result in the bidder acquiring effective control of the target, either immediately after the acquisition or over a period of time.
Public takeovers are governed by the Financial Services Act 2007, the Securities Act 2005 and rules and regulations made under these laws, namely the Securities (Takeover) Rules 2010 and the Securities (Acquisition of the shares of the dissenting shareholders during takeovers) Regulations 2010.
Are employers in Mauritius free to chose foreign employees?
Regardless of whether it is a national or an international investor, the employer must show that the skills required of the expatriate are not available on the domestic labour market in order for a foreign employee to be eligible for employment in Mauritius.
Do foreign employees require work permits and/or residence permits?
Non-citizens of Mauritius may opt to apply for a Work or an Occupation Permit to work and live in Mauritius.
A work permit is required for foreign employees with a prospected basic salary of less than MUR 30,000. It is the future employer who has to apply for the required work permit.
An Occupation Permit (“OP”), which is a combined work and residence permit, is required for professionals with a prospected basic salary of MUR 60,000, or MUR 45,000 for professionals in the Information and Communication Technology (“ICT”) Sector.
Do employees’ contracts of employment transfer on the sale/transfer of a business?
In Mauritius, there is no legislation per se governing the transfer of the employees’ contract of employment in case of a sale of business. In principle, under the Mauritian law, a change of employer involves the termination of the first employment contract with the previous employer, followed by the conclusion of a new/second employment contract between the existing employees and the new employer.
In the event of the sale of a business or shift in the corporate structure of an enterprise, the employees may either decide to transfer with the business to the new owner or end employment with the business.
Pursuant to the Mauritian common law, there are three (3) conditions that must be met in order for a transfer of employment to be effective and these are as follows:
- The new employer must make an explicit offer of employment to the employees of the former employer;
- The employee must then accept the contract as proposed. In the absence of acceptance by the employee, the court could conclude that the original employer remains the employer;
- Finally, the terms and conditions of the new contract must not be less favourable than those of the old one.
III. Exchange Control
Are there any restrictions or limitations with respect to exchange control?
There are no restrictions on currency and capital exchange in Mauritius.
The government of Mauritius abolished foreign exchange control by suspending the Foreign Exchange Control Act in 1994 in order to enable free repatriation of capital. Consequently, no approval is required for the repatriation of profits, dividends, and capital gains earned by a foreign investor in Mauritius. A foreign investor faces no legal obstacles when transferring profits made in Mauritius or divesting its assets in Mauritius and returning to its home country.
Which tax rates apply to business in Mauritius?
Mauritius is a low tax jurisdiction with an investor-friendly environment to encourage both local and foreign companies to set up businesses.
The Fiscal regime includes:
- An attractive corporate and income tax rate of only 15%. All income accruing in or derived from Mauritius by a resident company is chargeable to corporate tax
- No capital gains tax
- Generally no withholding tax on dividends Exemption from customs duty on equipment(s)
The tax rate is as follows:
- Corporate tax: 15%
- Income tax (personal tax): 15%
- Value-Added Tax (VAT): 15%
- Corporate Social Responsibility (CSR tax): 2% on book profits
- Land Transfer tax: 5%
- Registration duty: 5%
The Mauritius Revenue Authority is the agency responsible for collecting corporate tax, income tax and VAT in Mauritius. The fiscal year runs from the 1st of July to the 30th of June.
Additionally, Mauritius offers two types of companies to international clients, namely the Category One Global Business Licence (“GBC 1”) and the Category Two Global Business Licence (“GBC 2”). The formation and on-going maintenance of both companies are time and cost efficient and rest on very flexible and modern company and financial services legislations.
A GBC 1 company is tax resident in Mauritius and is eligible to benefit from the vast network of DTAs ratified by Mauritius. GBC1 companies also benefit from a deemed foreign tax credit equal to 80% of their taxable profits.
GBC 2 are tax exempt entities and hence are not considered tax resident for tax treaty purposes, but they are more user friendly and bear resemblance to the International Business Company (“IBC”) available in other jurisdictions.