Mauritius has earned its reputation as a business-friendly destination, drawing investors from around the globe. One of the key factors contributing to its appeal is its well-structured and progressive taxation system. In this article, we will explore the nuances of Mauritius’ taxation system, investigating how it stimulates economic growth and entices foreign investment.
Key takeaways
- Mauritius has a dual taxation system, incorporating both direct and indirect taxes. This balanced approach serves to generate government revenue while fostering a business-friendly environment, making it an attractive destination for investors.
- The standout feature of Mauritius’ corporate income tax system is its flat rate of 15%, contributing to a transparent and predictable business environment.
- Mauritius has established an extensive network of double taxation avoidance treaties (DTAs) with numerous countries. These treaties provide businesses with protection against being taxed twice on the same income, further enhancing the jurisdiction’s attractiveness for global investors.
Overview of Mauritius’ taxation system
Mauritius boasts a favourable and simple tax system that attracts investors globally. The key elements of the tax structure include corporate tax, which stands at a flat rate of 15%, offering an attractive environment for businesses. Furthermore, individuals benefit from a progressive income tax system, with rates ranging from 10% to 25%. Value-added tax (VAT) is implemented at a standard rate of 15%, while specific sectors may enjoy reduced rates or exemptions. Additionally, there is no capital gains tax, inheritance tax, or withholding tax on dividends, making Mauritius a tax-efficient jurisdiction.
This tax-friendly environment, coupled with various incentives, positions Mauritius as an appealing destination for individual and corporate investors seeking financial advantages.
Corporate income tax
One of the standout features of Mauritius’ taxation system is its flat corporate income tax rate of 15% (companies involved in exporting goods are subject to a 3% tax on chargeable income attributed to exports, calculated using a prescribed formula). This simplicity contributes to a transparent and predictable business environment, fostering trust among investors.
| Entity | Tax rate |
|---|---|
| Global Business Companies (GBC) firms (excluding specified income, as outlined below) | 15% |
| Freeport operators or Private Freeport Developers involved in Freeport activities | 3% |
| Companies involved in the export of goods | 3% |
| All other companies (excluding specified income, as detailed below) | 15% |
- Effective January 1, 2019, Global Business Category 1 (GBC1) companies have been rebranded as Global Business Licence (GBL) companies and are subject to a 15% tax rate.
- All companies, including GBL entities, are eligible for an 80% tax exemption concerning specific foreign-source income. This includes income such as foreign dividends not allowed as a deduction in the source country, interest income, earnings from companies engaged in leasing ships and aircraft, revenue from leasing and providing international fibre capacity, interest income from money lent through a peer-to-peer lending platform licensed by the relevant authority after the five-year tax holiday, income from reinsurance and reinsurance brokering activities, income from the sale, financing arrangement and asset management of aircraft and its spare parts, along with aviation-related advisory services.
- The tax exemption on interest earned by Collective Investment Schemes (CIS) or Closed End Funds has been increased from 80% to 95%.
- If a company claims the 80% exemption, no actual foreign tax credit is permitted on foreign-source income.
- Freeport companies, excluding local trading activity, were tax-exempt until June 30, 2021, provided that the Freeport certificate was issued on or before June 14, 2018.
Partial exemption
Certain income, such as dividends, capital gains and interest, may benefit from partial or full exemptions, particularly when derived from specified activities. This incentivises investment in key sectors, such as financial services, technology and renewable energy.
Tax treaties
Mauritius has an extensive network of double taxation avoidance treaties (DTAs) with numerous countries. These treaties provide businesses with additional protection against the risk of being taxed twice on the same income, further enhancing the attractiveness of the jurisdiction for international investors.
Here is an extensive list of Mauritius’ double taxation avoidance treaties (DTAs):
| Country | Date of agreement | Country | Date of agreement |
|---|---|---|---|
| Australia | 2002 | Morocco | 2001 |
| Austria | 2004 | Mozambique | 2001 |
| Bangladesh | 1983 | Namibia | 2002 |
| Barbados | 2003 | Nepal | 1987 |
| Belgium | 1999 | Netherlands | 2004 |
| Botswana | 2005 | Nigeria | 2001 |
| Brazil | 2003 | Oman | 1996 |
| Canada | 1982 | Pakistan | 1984 |
| China | 1986 | Philippines | 1982 |
| Croatia | 2012 | Poland | 2013 |
| Cyprus | 2000 | Portugal | 2001 |
| Czech Republic | 2015 | Qatar | 2001 |
| Denmark | 2002 | Republic of Korea | 2005 |
| Egypt | 2001 | Romania | 2008 |
| Finland | 2002 | Russia | 2000 |
| France | 1980 | Rwanda | 2001 |
| Germany | 1996 | Saudi Arabia | 1997 |
| Ghana | 2003 | Senegal | 2002 |
| Hungary | 2013 | Seychelles | 1985 |
| Iceland | 2010 | Singapore | 1982 |
| India | 1982 | South Africa | 1996 |
| Indonesia | 1989 | Spain | 2004 |
| Ireland | 2005 | Sri Lanka | 1983 |
| Italy | 2005 | Sweden | 2003 |
| Japan | 2005 | Switzerland | 1996 |
| Kenya | 1985 | Tanzania | 1986 |
| Kuwait | 1999 | Thailand | 1986 |
| Lesotho | 1998 | Tunisia | 2001 |
| Luxembourg | 2005 | Uganda | 2004 |
| Madagascar | 2001 | United Arab Emirates | 2006 |
| Malaysia | 1994 | United Kingdom | 1982 |
| Mauritius | — | United States of America | 1989 |
| Mexico | 2006 | Zambia | 1995 |
| Monaco | 2003 | Zimbabwe | 2005 |
Withholding tax
There is no withholding tax (WHT) with regard to payments made by Global Business Licence (GBL) entities to non-residents not conducting business in Mauritius using their foreign-source income.
Value-added tax (VAT)
Standard rate
Mauritius applies a standard VAT rate of 15%, with certain goods and services subject to a reduced rate of 5% or being exempt altogether. This helps strike a balance between revenue generation and supporting the affordability of essential items.
The following table outlines the key features of Mauritius’ VAT system:
| Category | Tax rate | Details |
|---|---|---|
| Standard rate | 15% | Applies to most taxable goods and services supplied in Mauritius by VAT-registered entities. |
| Zero-rated supplies | 0% | Applies to specific goods and services listed in the Fifth Schedule of the VAT Act. This includes exports, certain foodstuffs, medical services, educational services and residential building sales. |
| Exempt supplies | N/A | Not subject to VAT at all. Examples include banking services (except specific types), insurance and postal services. |
| Registration threshold | MUR 10 million | Businesses with annual taxable turnover exceeding MUR 10 million are required to register for VAT. |
| Return filing frequency | Monthly/Quarterly | VAT-registered persons with annual taxable turnover exceeding MUR 10 million must file VAT returns monthly. Others can file quarterly. |
| Taxable imports | 15% | VAT is charged at the standard rate of 15% on the value of goods imported into Mauritius. |
| Key requirements |
|
Registration threshold
Small businesses benefit from a relatively high VAT registration threshold, reducing the compliance burden on startups and encouraging entrepreneurship.
Personal income tax
The Mauritian income tax system transitioned to a progressive tax rate system on July 1, 2023, replacing the previous flat rate with 11 income brackets and tax rates ranging from 0% to 20%. The following table offers a comprehensive breakdown of the taxable income brackets, basis of computation and corresponding tax rates:
| Taxable income bracket (MUR) | Basis of computation (MUR) | Tax rate |
|---|---|---|
| Up to 390,000 | First 390,000 | 0% |
| 390,001 – 430,000 | Next 40,000 | 2% |
| 430,001 – 470,000 | Next 40,000 | 4% |
| 470,001 – 530,000 | Next 60,000 | 6% |
| 530,001 – 590,000 | Next 60,000 | 8% |
| 590,001 – 890,000 | Next 300,000 | 10% |
| 890,001 – 1,190,000 | Next 300,000 | 12% |
| 1,190,001 – 1,490,000 | Next 300,000 | 14% |
| 1,490,001 – 1,890,000 | Next 400,000 | 16% |
| 1,890,001 – 2,390,000 | Next 500,000 | 18% |
| Over 2,390,000 | Remainder | 20% |
Additional notes:
- The fiscal year in Mauritius runs from July 1st to June 30th.
- Residents are taxed on their global income, while non-residents are taxed only on income earned within Mauritius.
- Various exemptions and deductions are available, such as those for housing allowances, medical expenses and education, providing relief for individuals and encouraging skilled professionals to choose Mauritius as their place of residence.
Customs duty and excise tax
While Mauritius relies on customs duties and excise taxes for revenue, efforts are made to keep these rates competitive. This contributes to cost-effectiveness for businesses engaged in international trade.
Property tax
Property tax in Mauritius is relatively low, further supporting the real estate market and attracting foreign investors to the island.
How Iris Dea can help your business stay tax-compliant
Mauritius’ taxation system reflects a strategic balance between generating government revenue and fostering a business-friendly environment. The flat corporate income tax rate, extensive network of tax treaties and progressive personal income tax rates contribute to the nation’s attractiveness for investors. As Mauritius continues to position itself as a global business hub, its progressive and transparent taxation system plays a pivotal role in sustaining economic growth and encouraging foreign investment.
Iris Dea plays a crucial role in assisting businesses in Mauritius navigate the intricacies of the taxation system and regulatory landscape. With a deep understanding of Mauritius’ business environment, Acclime provides comprehensive services to help companies optimise their tax positions, ensure compliance with local regulations and enhance overall operational efficiency.
Contact us to explore how our professional corporate services can tailor solutions to meet your specific business needs. Let Iris Dea be your trusted partner in unlocking the full potential of your business in Mauritius.
Tax optimization for businesses in Mauritius
Over the past years, Mauritius has emerged as an incubator of opportunities for companies seeking to ease their tax burden while scrupulously complying with international laws and regulations. Corporate tax optimization in Mauritius is, therefore, a sought-after strategy for businesses looking to get the most out of the various tax benefits offered by the country to foreign investors.
Mauritius’s attractive and competitive tax system
Foreign investors choosing to start and grow their business in Mauritius are eligible for a wide range of substantial tax advantages. Here are some examples:
- Tax exemption on dividends, capital gains and inheritance tax for direct descendants.
- 15% income and corporate tax rate.
- Import-export businesses are exempt from corporate income tax.
- Zero property tax.
Corporate income tax in Mauritius
An additional tax liability applies to companies established in Mauritius and belonging to multinational groups generating annual revenues above 750 million euros. This measure ensures these companies are subject to the minimum 15% worldwide tax rate. It’s worth noting that this additional tax only applies to their domestic revenues.
Small businesses can also opt for a lump-sum tax payment. Through this option, they can pay a fixed amount representing 1% of their revenue. However, this payment must be made before the due date of the tax year when they submit their tax return. Another point to be noted is that companies forfeit the right to claim tax deductions when choosing this flat-rate tax.
According to Mauritian tax regulations, companies are also required to contribute 2% of their taxable income to a Corporate Social Responsibility (CSR) fund. Thereafter, at least 75% of this fund must be submitted to the tax authorities under current legislation.
The significance of double taxation agreements
Double taxation agreements are essential to foreign businesses being set up in Mauritius. Mauritius has signed such agreements with a number of countries, including the UK. This treaty lays down clear rules to avoid double taxation and ensures that companies only pay income tax in the state where the assets are physically located. This bilateral framework avoids tax-related for businesses while promoting consistency in the treatment of income and property in Mauritius.
Tax optimization through offshore companies
Specific legal structures, such as offshore companies, are often involved in corporate tax optimization in Mauritius. These legal entities provide a strategic way of capitalizing on the tax benefits offered by the Mauritian government. Therefore, companies can choose a jurisdiction and structure that best suits their business needs and particular situation.
Balancing legal opportunity and international compliance
The essence of business tax optimization in Mauritius lies in a delicate balance that involves exploring legitimate and ethical tax advantages while remaining firmly committed to legal obligations and international standards. This requires a thorough understanding of tax local and international legislation. To guarantee a successful approach, you must surround yourself with competent partners who can provide sound advice and assistance tailored to your needs throughout the tax optimization process.
