Mauritius has long been valued as a jurisdiction with an efficient and effective regulatory framework and a diversified economy focused on the industrial, financial, and tourism sectors. Annual growth has averaged 5-6% over the past 10 years. The country is ranked first in Africa and 13th worldwide on the World Bank Ease of Doing Business Report 2020 (up from 20th in 2019).
Following the national budget delivered in June 2020, Mauritius has introduced a range of changes to make it easier for individuals to obtain residency in Mauritius. Two notable developments are a more flexible investment regime and an extended duration of residency permits. All changes have been implemented and are currently effective.
For high-net-worth (HNW) individuals or retired persons the most straightforward way to obtain a residency permit are:
- As a retired non-citizen (aged 50 or above);
- Via the Property Development Scheme; or
- By investing in companies with specific business activities.
Retired non-citizen route
A retired non-citizen can apply for an initial 10-year residency permit.
They must make an initial transfer of at least US$1 500 or the equivalent in freely convertible foreign currency to their local bank account in Mauritius at the time the permit is issued.
Thereafter, they should transfer at least US$1 500 monthly, or the aggregate of at least US$18 000 per year or equivalent in freely convertible foreign currency during the 10 years’ validity of the permit.
At the end of each year, they should submit the evidence of the transfer of funds into their local bank account to the Economic Development Board.
A holder of such a residence permit may invest in any business provided that they are not employed in the business, do not manage the business, and do not derive any salary or employment benefits from the business.
Property development and investment routes
For those who have more available funds, the Property Development Scheme (PDS) or investment option may be more attractive.
Both of these routes require funds of US$375 000 (previously $500 000) and the permit will remain valid for as long as you continue to hold the property, or 20 years if obtained through investment.
The PDS has replaced two previous schemes and allows the development of a mix of residences for sale to non-citizens:
- The development of luxurious residential units on freehold land to the extent of at least 0.4220 hectares;
- The development of at least six residential properties of high standing;
- High-quality public spaces that help promote social interaction and a sense of community;
- High-class leisure, commercial amenities and facilities in10ded to enhance the residential units;
- Day-to-day management services to residents including security, main10ance, gardening, solid waste disposal and household services; and
- Social contribution in terms of social amenities, community development and other facilities for the benefit of the community.
A non-citizen is eligible for a residence permit upon the purchase of a villa under the PDS scheme when they have invested more than US$375 000 or its equivalent. Non-citizens with a residence permit under PDS will be exempt from an occupation or work permit to invest and work in Mauritius.
The PDS does not differentiate between small and big landowners and harmonises the registration duty to a single rate of 5% instead of US$70 000 and US$25 000 on registration of a deed under the two previous schemes.
In addition, the Smart City Scheme introduced in 2015 – a ‘work, life and play’ concept incorporating mixed-use developments in cosmopolitan conurbations with smart technology and innovation at their core – has been amended. The threshold for investment to qualify for a residency permit has been reduced from US$500 000 to US$375 000.
An investor who invests at least US$375 000 in qualifying business activity is also eligible to apply for a 20-year residence permit.
Qualifying activities include agro-based industry, audio-visual, cinema and communication, banking, construction, education, environment-friendly and green energy products, financial services, fisheries and marine resources, freeport, information technology, infrastructure, insurance, leisure, manufacturing, marina development, tourism and warehousing, and initial public offerings.
For those who don’t have US$375 000 to invest, another route to entry in Mauritius is to apply for an occupation permit. These now apply for a longer duration – from three years previously to five and in some cases 10 years.
In a significant move and as a major incentive, the investment required to be eligible for an investor occupation permit has been halved – from US$100 000 to US$50 000 – and is valid for an initial period of 10 years.
All three occupation permit categories are capable of being converted into a permanent residency permit valid for 20 years, as early as three years after the original permit was issued (provided the relevant criteria are met).
Foreign nationals wishing to apply for an occupational permit to work and reside in Mauritius can do so under three categories: Investor, Professional and Self-Employed.
Permits for investors and the self-employed are issued for a maximum of 10 years, while those under the professional category are issued for a maximum period of three years depending on the duration of the contract of employment. All three are renewable as per established criteria.
Dependants of occupation permit holders or retired non-citizens may also apply for a residence permit for a duration not exceeding that of the primary holder. If dependants wish to work in Mauritius, they will have to apply for a residency or occupation permit.
This is a shareholder and director in a company incorporated in Mauritius under the Companies Act 2001. This also includes offshore trusts and companies holding the shares in the Mauritian company for as long as the beneficial owner behind the structure is a settlor and beneficiary. This allows for very flexible tax planning opportunities.
An investor is eligible to apply for an investor occupation permit in various ways:
Option 1 (normal): An initial transfer of US$50 000 or its equivalent in the bank account of the company making the application. As noted earlier, the previous threshold was US$100 000.
Option 2 (net asset value): Net asset value of at least US$50 000 or its equivalent for existing businesses and businesses inherited, and a cumulative turnover of at least 12 million rupees during the three years preceding the application.
Option 3 (high technology machines and equipment): An initial investment of US$50 000 or its equivalent, of which: (a) a minimum transfer of at least US$25 000 to the bank account of the company under which the application will be made; and (b) the equivalent of the remaining value in high technology machines and equipment, subject to such criteria as the CEO may determine, such as: (i) The high-tech machines and equipment will be evaluated based on the invoice issued by the supplier and a report from a recognised chartered valuator in the country of origin; (ii) In case the tech is yet to be shipped to Mauritius, the investor should submit the bill of landing to the Occupation Permit Unit at time of submission of the application; (iii) Investment in high-tech machines and equipment must be in a qualifying activity including but not limited to agro-industry, aquaculture, healthcare, ICT-BPO, fin-tech, life sciences, biotechnology, manufacturing, ocean economy and renewable energy.
Option 4 (Investor for innovative start-ups): Foreign nationals are also eligible to apply for an innovator Occupation Permit under two sub-categories:
- Category 1: No minimum investment is required; the investor must submit an innovative project to the Economic Development Board for approval.
- Category 2: No minimum investment is required, and the investor registers with an incubator accredited with the Mauritius Research and Innovation Council.
· The business plan should depict all expenditures related to R&D activities.
· The scheme applies to companies conducting R&D in qualifying sectors including but not limited to life and health sciences, technology, ICT, fintech, biotechnology, nano technology, light manufacturing, pharmaceuticals, and design.
· The R&D expense component should constitute at least 20% of total operational expenditure during the research phase.
· The Economic Development Board will assess, on a case to case basis, each project on its merits to determine its eligibility to the scheme.
For renewal of an occupation permit in the investor category, the company should generate a minimum gross income of MUR4 million (US$100 000 or ZAR1 531 000) per year as from the third year of registration.
For an investor to convert their occupation permit into a permanent residence permit, they are required to have held the former for at least three years and the company in which they invested would require a turnover exceeding MUR15 million (US$375 000) annually during each of these three years or the aggregate turnover exceeding MUR45 million (US$1 125 000) for the three years before applying in respect of each shareholder of the company.
This is an expatriate employed in Mauritius under a contract of employment earning a basic monthly salary of at least MUR60 000 (US$1 500 or R23 000).
However, for professionals in the sectors of information and communication technologies (ICT), business process outsourcing (BPO), pharmaceutical manufacturing and food processing, the basic monthly salary should be at least MUR30 000 (US$750 or R11 500).
Professionals may also apply for a short-term occupation permit for a period not exceeding nine months. This permit can only be extended once for a period not exceeding three months. To convert their occupation permit into a permanent residence permit, they must hold their occupation permit for at least three years. Further, they need to draw a basic monthly salary of at least MUR150 000 (US$3 745 or R57 455) during the entire three-year period before application.
This is a non-citizen engaged in a professional activity under the services sector only and registered with the Registrar of Businesses under the Business Registration Act.
A self-employed person should operate a one-person business activity, working exclusively for themselves. They should make an initial transfer of US$35 000 or its equivalent to their local bank account in Mauritius. For renewal, the business activity should generate a business income of MUR800 000 per year from the third year of registration.
To convert their occupation permit into a permanent residence permit, they must hold the former for at least three years. Further, they need to have income exceeding MUR3 million (US$75 000 or R1 150 000) every year during each of the three years before application.
High-level tax considerations
Once you have established a way to obtain your occupation or residence permit, you will need to consider your tax position once you are Mauritian tax-resident.
Generally, individuals resident in Mauritius are taxed on their worldwide income. However, income derived from outside Mauritius is taxed on a remittance basis. Non-residents are taxed on Mauritian-source income only (e.g. director fees).
An individual is resident in Mauritius in an income year in the following cases:
- The individual’s domicile is in Mauritius unless one’s permanent place of abode is outside Mauritius.
- Presence in Mauritius in that income year and the two preceding income years is for an aggregate period of 270 days or more.
- Presence in Mauritius is for a period of or periods amounting in the aggregate to at least 183 days in that income year.
Individuals are taxed at a standard rate of 15% on their annual net income.
As from the income year 2020/2021, the threshold for the applicability of the solidarity levy was reduced from MUR3.5 million to MUR3 million of the leviable income of Mauritius tax-resident individuals.
The leviable income of a taxpayer consists not only of the chargeable income but also includes any Mauritius-sourced dividend income, including the share of the dividend of an individual in a resident partnership or succession.
The standard rate of the solidarity levy is 25% (increased from 5%). The solidarity levy payable is, however restricted to a maximum of 10% of the total of net income and dividend income.
Your maximum effective tax rate on income in Mauritius will therefore never exceed 25%.
Social security contributions
Contribution Sociale Généralisée (CSG)
The CSG was replaced the National Pension Fund with effect from September 1, 2020.
The regulations provide that a participant other than a public sector employee who earns:
- Less than MUR50 000 per month must pay CSG at a rate of 1.5% of the remuneration, while the employer must pay 3%; and
- More than MUR50 000 per month must pay CSG at a rate of 3.0% of the remuneration, while the employer must pay 6% of the remuneration.
The CSG, together with the Solidarity Levy, has meant that employed professionals on total cost to company packages have been hardest hit by the recent tax changes, with their net pay potentially decreasing by 16%.
National Savings Fund (NSF)
Employers must contribute 2.5% of remuneration to this fund, subject to a maximum of MUR469 per month per employee, and a monthly levy of 1.5% of the basic salaries and wages of every employee. Employees are required to pay a 1% levy, subject to a maximum amount of MUR187 per month.
Value-added tax (Vat)
Vat is charged at the standard rate of 15% on all goods and services supplied by Vat-registered entities in Mauritius (except those taxed at 0% or exempt).
Net wealth/net worth taxes
There are no net wealth/net worth taxes in Mauritius.
Inheritance, estate, and gift taxes
There are no inheritance, estate, or gift taxes in Mauritius.
Capital gains are generally not taxable.
Resident individuals can benefit from an income exemption threshold (IET). The IET is deductible in determining chargeable income. The IET depends on the number of the individual’s dependants.
An individual is entitled to deduct the actual premium paid in connection with a medical or health insurance policy for themself or their dependant/s in addition to the IET. The maximum deductible premium is MUR15 000; this is also the maximum deduction for the first dependant. The maximum deduction is MUR10 000 each for the second, third and fourth dependants.
Outside of employment and dividend income, there are many planning opportunities to ensure that you are taxed at very low effective rates once you are Mauritian tax resident.
Planning may involve the setting up of non-Mauritian trust structures and creating a pot of tax-free capital before arrival. The main benefits emanate from the fact that Mauritius allows you to accumulate income outside of Mauritius tax-free for as long as it is not remitted.
That, together with no tax on capital gains, makes Mauritius a desirable low tax jurisdiction for individuals and their families.
As most readers may be aware, Mauritius is currently blacklisted under the EU anti-money laundering and countering financing of terrorism.
Without going into detail about the blacklisting, for HNW individuals wishing to move to Mauritius, it should be of little concern as most of their wealth will be managed and kept outside of Mauritius.
Mauritius has also been taking the appropriate steps within the financial industry to rectify any deficiencies it may have and is likely to be taken off the blacklist in 2021.
So although it may be an increased compliance burden and detract from the jurisdiction as a whole, our view is that it has not impacted on individuals considering a move to Mauritius.
The pros and cons, and is Mauritius for you?
The changes brought about by the implementation of the Finance (Miscellaneous Provisions) Act 2020 have certainly made it easier for individuals to live and work in Mauritius.
For HNW individuals who undertake careful prior planning, it remains an attractive place to reside at very low or sometimes zero effective tax rates.
The changes to the Solidarity Levy and the additional CSG have possibly put a slight damper on the expat rush to Mauritius and may have resulted in some expats leaving as the net benefit is no longer as attractive.
However, business incentives will continue to attract new business which inevitably attracts expat talent to the island. Companies may have no choice but to swallow a slightly higher cost.
For those wishing to do business in Mauritius, the journey of the financial sector towards whitelisting will no doubt affect your ease of doing business. However, we believe this is temporary and that Mauritius will soon be removed from the high-risk list bringing things onto an even keel.
Source: Moneyweb an article by Jaco van Zyl a consultant at Maitland (Mauritius).