September 2015 – SMART CITIES : A LEGAL ANALYSIS
The legal basis
The former Honorable Minister of Finance and Economic Development announced the creation of “Smart Cities” in his last budget and a lot has been said on these Cities since then. The Investment Promotion Act 2000 (“IPA 2000”) was amended to introduce the concept of the “Smart City Scheme” (“SCS”) and subsequently the Investment Promotion (Smart City Scheme) Regulations 2015 were made by the Minister under Section 12 and 28 of the IPA 2000. These Regulations are relatively complex and provide for the SCS, its objects and how to develop a project under the Scheme. They also create the SCS Technical Committee which shall examine all applications to set up an SCS and ultimately deliver the SCS Certificate. The whole matter is under the constant administration of the Board of Investment (“BOI”).
The Regulations set out the responsibilities of the Smart City company and we also note the concept of the “Smart City developer” and the “Smart City management company”.
Part VI of the Regulations is important as it concerns the sale and acquisition of land and properties and the conditions attached thereto as land will evidently have to be bought, to be developed and to be sold thereafter. We then note at Part VII of the Regulations, that the successful non-citizen applicant who intends to buy residential property within the smart city can become a Mauritius Resident together with his family or if the applicant resident is not married, he may bring in three dependents who can become residents. We finally note all the incentives provided by the Regulations and most of the said incentives relate to tax. One interesting issue within such incentives, is that after a continuous residence of two years the non-citizen is eligible to obtain Mauritian citizenship if he has invested in the country a sum of at least 5 million US dollars.
Finally the Regulations give the powers to the BOI to issue Guidelines to implement the SCS. The Guidelines have indeed been published and it is a bulky document of 48 pages found on the website of the BOI at http://www.investmauritius.com. The BOI website is nonetheless user friendly, is definitely worth a visit and I would recommend subscribing to their monthly newsletter.
The Objective of the Smart City Scheme
The Smart City is to be a city of mixed use development comprising in the first place of offices and businesses for people to work. Residential units also need to be proposed so that people may also live in the City and finally entertainment and leisure are to be provided to the inhabitants for their recreation. The Smart City should be environment friendly and equipped with state of the art internet connections. We should be clear that people are supposed to live, work and play in the Smart City without having the need to move to other places, thereby reducing traffic congestion on the roads and allowing the Smart Citizens to enjoy their city. We may note the following essential legal features of the SCS:
- The development of the SCS needs at least 50 acres (“arpents”);
- The adoption of the live, work and play concept;
- The use of land through commercial, leisure and residential components;
- The use of high tech information and communication technology to provide intelligent services;
- The Smart City is to be sustainable and environment friendly;
- 25% of the residential properties should be sold to Mauritians or members of the Mauritian Diaspora;
All the above must therefore be clearly stated in the application to the BOI and there are no less than 9 stages in the process before reaching full project development. At Stage 3, the BOI will provide a Letter of Comfort after clearance from (i) the SCS Technical Committee and (ii) the Ministry of Finance. After more appraisal and detailed assessments, the Smart City company will receive the Letter of Intent from the BOI. This will be a major step forward for the SCS developer which will allow him to obtain the necessary further permits and licences from other Authorities so as to obtain the Smart City Certificate from the BOI which is the ultimate stage leading to project development. All along in the future, the project will be monitored by the BOI and it is hoped that the BOI will be giving a helping hand to developers as this is a long winded and complex process.
The Way Ahead
The SCS is an innovative way ahead although it regroups certain existant projects which have had to change some of their objectives to be qualified within the concept of the SCS. One of the first developers to have obtained its Letter of Comfort is Mon Trésor Smart City promoted by Omnicane next to Plaisance airport. The Omnicane Project is mainly on Airport Logistics but is already diversifying itself towards new horizons.
As mentioned above, the tax incentives are numerous, whether they are for the developer of the Smart City or for those buying, renting or using the premises. Those incentives cover exemption from income tax for eight years; exemption of VAT on capital goods such as building, plant and equipment and exemption of Custom Duty on imported materials. More incentives follow in the form of wide exemptions on Land Transfer Tax, Registration Duty, Land Conversion Tax and Morcellement Tax.
In conclusion, let us hope that the Smart Cities are going to change the landscape, create employment and set new norms for intelligent urbanization. It will even be more interesting to see who will be the tenants and occupiers of the future Smart Cities and hopefully innovation and high tech will be major drivers therein. The Smart Cities will have to adhere to strict norms and will provide generous facilities. It should be checked that the outskirts of the Smart Cities will not give rise to savage development by those wishing to take advantage of the infrastructure and services provided in the Smart Cities. In any event, the legal framework is now in place and it is up to the developers to use it.
Marc Hein and Nicolas Richard