Financial Law Alert – The Expanding Mauritian International Financial Centre
The Double Taxation Agreements
Mauritius is known to have an impressive number of Double Taxation Agreements (D.T.A.s) which makes the island’s jurisdiction an attractive financial centre for international investors. For the eighth year running in 2014, Mauritius is No. 1 on the Mo Ibrahim African Index of good governance. The island has positioned itself as the financial centre of reference for investments into Africa whether they may be Anglophone, Francophone or Lusophone African investment destinations. The island is known for its hybrid system of English common law mixed with French civil codes. Indeed Mauritian specialist lawyers are busy using their knowledge of both systems to guide investors towards Africa whilst at the same time offering them sophisticated and efficient tax planning structures for their investments. Mauritius has just concluded tax negotiations with Cape Verde and Morocco to put in place D.T.A.s between Mauritius and both countries. Those two D.T.A.s will hopefully soon be signed and be implemented. The new D.T.A.between Mauritius and Rwanda is now effective and came into force on the 4 August 2014. Outside of the African network, it is worth noting of the new D.T.A. between Mauritius and Guernsey which came into force on the 30 June 2014. This is an interesting new treaty between both jurisdictions which boast to be international financial centres.
The Investment Protection and Promotion Agreements
What is less known is that Mauritius is an attractive place for companies or individual investors to have their holding companies also because of their existence of its network of Investment Protection and Promotion Agreements (I.P.P.A.s). Such Agreements are in fact bilateral investment treaties protecting the investor for example against nationalization or unjust expropriation. What are styled as I.P.P.A.s are sometimes called Bilateral Investment Treaties known in English tax jargon as B.I.T.s. The Mauritian holding company(which may be 100% owned by foreigners) investing into another country will fly the Mauritian flag, will benefit from being a Mauritian resident company and as such be protected by the I.P.P.A.s Mauritius has in place with a large number of countries, including various African countries. It is interesting to note that in case of breach of the treaty by the state in which the investment is made, that the state may be brought to task through arbitration proceedings. Mauritius has just concluded such I.P.P.A. negotiations with Cape Verde and Burkina Faso. The two bilateral agreements are in the process of being signed. Further, the I.P.P.A between Mauritius and Egypt was signed on the 25 June 2014. It may here be noted that Egypt and Mauritius are both COMESA member states which therefore allows preferential trade access into Egypt to Mauritian goods. As such, there a number of operators using the Mauritian Freeport to manufacture, for example, electronic equipment, which may then be exported to Egypt. Finally, to complete the update, the I.P.P.A between Mauritius and Kuwait came into force on the 24 July 2014.
Mauritius and India
Mauritius is back as the preferred jurisdiction for investments in India. From April to July 2014, 3.4 billion USD was invested in India by Mauritian Companies. It therefore demonstrates that, in that period, about 47% of the totality of Foreign Direct Investment flowing into India emanates from the Mauritian jurisdiction. Between the year 2000 up to June 2014, Mauritius has channeled about 82 billion USD of Foreign Direct Investment in India. The new government of Prime Minister Modi in India is known to be pro-business and wants to attract 1 trillion dollars of foreign investment within 5 years to develop India, create jobs and alleviate poverty. The Mauritian government and the Mauritian business community still see the relationship between India and Mauritius as being a first class WIN-WIN situation. It is the belief of many professionals here in Mauritius that the success story with India can be repeated between Mauritius and African countries to attract massive foreign capital to the continent in the years to come.
By Marc Hein – Head of Practice