The Finance (Miscellaneous Provisions) Act 2018 (“FA 2018”) significantly amended the regulatory and tax framework applicable to companies (including global business companies) in Mauritius in order to bring them in line with the OECD’s minimum standards on Base Erosion Profit Shifting (“BEPS”).
The amended laws have been supplemented with tax regulations and guidance from the local regulator, the Financial Services Commission (the “FSC”).
The main regulatory changes include:
- the abolition of global business category 2 companies (“GBC2 companies”) from 1 January 2019;
- the introduction of the “authorised company” from 1 October 2018;
- the renaming of global business companies category 1 (“GBC1 companies”) as global business companies from 1 January 2019 and the introduction of enhanced substance requirements for global business companies; and
- the introduction of specific activity-related and industry-related substance requirements for companies licensed by the FSC.
This newsletter summarises the main tax changes and highlights the potential implications on doing business in Mauritius.
Abolition of the deemed foreign Tax Credit Regime
- The “deemed foreign tax credit” (or “DFTC”) will be abolished with effect from 1 January 2019, save for GBC1 companies which were established on or before 16 October 2017 which can continue to benefit from the DFTC until 30 June 2021.
- By way of background, the DFTC previously enabled GBC1 companies to benefit from a “deemed foreign tax credit” equal to 80% of the Mauritius tax credit, without having to prove whether foreign tax was actually suffered. In practice, this meant that GBC1 companies were subject to a maximum effective tax rate of 3%.
- Companies can continue to claim credit for actual foreign tax suffered (unless they are claiming partial exemption – see further below).
Abolition of GBC2 companies
- As mentioned above, GBC2 companies will be abolished from 1 January 2019. However, GBC2 companies established on or before 16 October 2017 will continue to be exempt from tax until 30 June 2021.
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