Ultimate Guide to Mauritius Tax System in 2023

Mauritius is a unique jurisdiction that has carved out its own path in the turbulent world of offshore finance. Zero taxes and no control, including corporate profits and individual income, are typical characteristics of any tax-free jurisdiction. Twenty years ago, these factors were considered undeniable advantages, but times have changed.

Zero taxes for individuals and corporate income have resulted in numerous risks. Therefore, the authorities in Mauritius have taken a different approach. They have created such attractive conditions for individuals and companies that the typical tax rate (both for corporate and personal income) is perceived positively by the target audience.

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The reasons for this are clear. Zero or extremely low tax rates attract those who are used to minimizing their fiscal obligations through aggressive and not always legal methods. Twenty years ago, this was not given much attention, so offshore jurisdictions were actively used by both companies and individuals. But now, as the process of deoffshorization is in full swing, zero taxes are gradually becoming a disadvantage.

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The basic tax rates in Mauritius (standard values given without considering possible deductions and discounts, * – there are special cases):

• corporate tax – 15% (export companies – 3%)
• personal income tax – 10-15%
• capital gains tax* – 0%
• VAT – 15%
•  withholding tax – 0%/15%
• other main taxes – on real estate transfer, on leasehold rights transfer, registration fee
• currency control – absent
• government fee – absent
•  stamp duty – from MUR 25 to MUR 1000.

It is easy to notice that calling Mauritius a classic offshore with such tax rates is inaccurate. However, if we depart from the template perception and look at the concept of tax-free territories more broadly, Mauritius does indeed have a certain offshore status. Mauritius is known not for its dubious reputation, aggressive tax optimization, erosion of the tax base, and concealment of information on beneficial owners but, on the contrary, as a respectable offshore jurisdiction. Mauritius is one of the best places to live and do business, with favorable tax rates and an excellent level of security.

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Taxes for individuals in Mauritius

When calculating tax, the status of an individual is not of particular importance. This means that the place of income generation (Mauritius or any other jurisdiction) becomes the priority factor in determining the tax rate. If the source of income is formally international, but in fact, it was generated in Mauritius, then residents are obliged to pay tax on it.

This point requires clarification. If an individual works for a foreign company, their income will be considered foreign. However, when determining fiscal obligations, attention should be paid first and foremost to the actual place of income generation. If it is Mauritius, the tax must be paid on it.

Regarding tax rates, the situation is as follows. The basic rate is 10% if the net income does not exceed MUR 650,000. Otherwise, the rate increases to 15%. It is essential to understand that taxes are levied at the local level in Mauritius, so the actual amount of fiscal payments will be slightly higher.

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Corporate income taxes in Mauritius

When calculating the tax rate, the company’s tax status is of crucial importance. A real chance to reduce mandatory payments is to apply Double Taxation Agreements (DTAs) to avoid double taxation. As of the date of writing this article, Mauritius has concluded 43 such agreements.

The basic options for calculating corporate income tax in Mauritius are:

• Resident company: only worldwide income is included in the base, with a standard rate of 15%.
• Non-resident company: taxable income is limited to income earned in Mauritius (even if it is considered foreign income by formal criteria), with a standard rate of 3%.

Corporate income tax rates in Mauritius are as follows:

• Global Business Category I companies – 15%
• Freeport operators – 15%
• Exporting companies – 3%
• All other companies – 15%.

Taxation of banks and certain foreign organizations:

• operate under a special tax regime
• tax base consisting of balance sheet profits (7% rate) and operational income (5% rate).

Corporate Social Responsibility Fund:

• rate – 2% of taxable income
• funds will be spent on healthcare, education, and social programs.

Other taxes in Mauritius

The jurisdiction of Mauritius provides an exceptionally comfortable standard of living and ease of doing business, which requires some budgetary spending. This fact, along with a reluctance to be included in black and gray lists, is likely the main reason why Mauritius does not qualify as a classic offshore criterion. However, the tax rates are pretty reasonable, so at a common level, the difference between a tax-free jurisdiction and a midshore in the case of Mauritius is practically imperceptible.

What other taxes apply in Mauritius:

• Value Added Tax (VAT) – 15%. Applies to any goods/services supplied in Mauritius, except for basic products and essential services. Typical examples where the value-added tax is not required to be paid include flour, medical and banking services.
• Customs Duties – the rate is set individually. Levied on all products and services imported into Mauritius without exception.
• Excise Taxes – indirect taxes imposed on certain imported goods (mainly tobacco products and alcohol).
• Transfer Tax – 5%.
• Leasehold Tax – 20%. The tax amount is based on the object’s market value at the time of transfer.
• Registration Duty – 5%. The tax basis is the amount paid in unforeseen circumstances at the time of exchange of movable property.
• Stamp Duty – from MUR 25 to MUR 1000.
• Payroll Taxes – formally absent. It is assumed that this tax is initially withheld at the source of the employee’s salary. Please note that employee contributions still apply.

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FAQ on taxes in Mauritius

The dedicated FAQ section will help you quickly find answers to the most common questions about tax in Mauritius. Please note that this article is not a substitute for a consultation with our experts. It provides only a general overview of taxation in Mauritius. If you need detailed information, please contact us at info@offshore-pro.info.

How often does the Mauritius Revenue Authority make amendments to tax legislation?

Minor changes are made almost every year, usually through the Finance Act (FA) under the Miscellaneous Provisions section. However, significant changes in tax rates or the introduction of new taxes that transform the nature of doing business in Mauritius are rare.

What are the deadlines for tax declaration? Who calculates taxes? Are there penalties, and how severe are they?

The tax year in Mauritius does not coincide with the calendar year and lasts from July 1 to June 30 of the following year. For individuals, the deadline for filing tax declarations is September 30 of the year following the reporting period. If it is filed electronically and payment is made online, the deadline is extended to October 15.

Taxes for individuals are usually calculated by employers within the framework of the Pay As You Earn (PAYE) system. Adjustment of taxes, if rates have not changed, is made at the end of the reporting period but before the tax declaration is filed. If an individual is self-employed, the Current Payment System (CPS) is applied.

Companies may choose a different reporting period (if they close their accounts not on June 30). The annual tax report must be submitted within a 6-month period after its completion. This same period is the maximum for tax payments.

If the company’s income exceeds MUR 10 million, tax declarations are filed through the Advance Payment System (APS). Payments are made for the quarter immediately following the reporting period and are mandatory. According to the law, corresponding records must be kept for five years.

Mauritius tax penalty system:

• MUR 2000 per month – failure to provide tax declaration on time. The qualification condition is when the total amount of taxes does not exceed MUR 20,000. The maximum penalty is MUR 5,000 (for a small company with a turnover of no more than MUR 10 million).
• 5% – failure to pay taxes on time. The maximum penalty is 2% (for a small company with a turnover of up to MUR 10 million).
• 0.5% – monthly fine charged until all taxes are paid.

What structures govern taxes and tax policy in Mauritius? How do they work with taxpayers?

Mauritius Revenue Authority (MRA) is the national regulator that governs taxes and tax policies in Mauritius. MRA actively collaborates with taxpayers in many aspects, providing clarification on complex matters and assisting with proper tax calculations. In Mauritius, there is no emphasis on penalties for noncompliance. The speed of MRA’s operations is average, and significant delays are rare.

Here are some approximate estimates of MRA’s operational speed:

• tax residency certificate – 2-4 weeks
•  tax assessment notice – 30 days
• appeals about a claim against a taxpayer to the Assessment Review Committee (ARC) through the Appeals Dispute Resolution Unit (ADRU) – may take several years
• appeals to the Alternative Tax Dispute Resolution (ATDR) for a similar issue – typically take no more than six months
• appeals to the Supreme Court of Mauritius – may take up to 2 years or more
•  if neither party is satisfied with the decision of the above institutions, the case will be referred to the Judicial Committee of the Privy Council, the court of final appeal for the UK overseas territories and Crown dependencies.

What are the deadlines for actual tax payments in Mauritius?

The deadlines for tax payments in Mauritius depend on whether the taxpayer is an individual (through the PAYE system) or a corporate entity (through APS). Accordingly, maximum time limits are set.

The following are the most important deadlines for tax payments in Mauritius:

• For individuals (hired employees), payment must be made no later than September 30th of the year following the reporting year (if there is an underpayment).
• For individuals (self-employed, paying taxes through CPS), payments must be made quarterly by the end of December/March/June.
• For Mauritian companies, payment is due when the declaration is filed, with a maximum deadline of 6 months (through the APS system – 3 months after the end of the quarter).

Is everything related to taxes subject to confidentiality requirements in Mauritius?

Mauritius has concluded eight agreements on the exchange of tax information (with several African countries and Russia). Therefore, it is incorrect to say that taxes and information related to them are entirely confidential. However, the Mauritius Revenue Authority employees never disclose taxpayer data, and the risk of leakage is minimal.

It is important to note that Mauritius signed the Common Reporting Standard (CRS) agreement in 2018 and the OECD Convention on Mutual Administrative Assistance in Tax Matters in 2015 (with effective exchange starting in 2018). However, this fact should not be seen as a disadvantage. In any case, complete anonymity is impossible in modern economic realities, and zero taxes come with significant risks, at least in the medium term.

How to calculate taxes based on determining the company resident status in Mauritius?

According to Mauritian law, a company registered in Mauritius or with its Central Management and Control (CMC) located in Mauritius is considered a tax resident. If the CMC is located outside Mauritius, the company will be considered foreign (non-resident). It should be noted that there is no clear definition of tax residency status in Mauritian legislation. Generally accepted rules are informally applied, with the main criterion being the location of the CMC.

Regarding other organizational and legal forms:

• Trusts – for tax purposes, trusts are considered companies. The main criteria are management/decision-making in Mauritius, most trustees, and the trust settlor being Mauritian residents.
•  Funds – are also considered as companies when determining tax residency status.

Attention! The legal status of trusts and funds in Mauritius changed in 2021. Such structures can no longer file a declaration of non-residence. Trusts and funds previously registered in Mauritius will operate under the old rules until 2025.

• Transparent Entities – this category includes sociétés and partnerships. Criteria for obtaining resident status:

o   location in Mauritius

o   having a CEO or associate director residing in Mauritius.

How does the tax service in Mauritius control cross-border transactions within an international group?

The principles of arm’s length or controlled foreign corporations are used. Legislation on transfer pricing in Mauritius is currently under development, so the tax service follows the rules and recommendations of the OECD. However, the regulator’s approach can often be formalistic.

How to deal with CFC regimes, thin capitalization, or transfer pricing in Mauritius?

The concept of thin capitalization rules is formally absent in Mauritius, although the Income Tax Act contains provisions regarding a company’s debt obligations to shareholders. Additionally, the Mauritius Revenue Authority may prohibit deductions of interest payments made to non-residents.

The Controlled Foreign Corporation (CFC) rules are present and actively enforced in Mauritius. For details, you can consult our experts. The transfer pricing concept is not recognized, but the Mauritius Revenue Authority reserves the right to recalculate a company’s taxes and applicable rates.

Is there an active fight against tax evasion in Mauritius?

The General Anti-Avoidance Rule (GAAR) exists in Mauritius. When making a decision on a specific transaction, the tax authorities consider seven basic factors for each commercial agreement (the method of concluding the transaction, its form, results, etc.).

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Special rules are developed and applied in relation to the following:

• the arm’s length test
• interest on debt obligations with reference to shares
• excessive remuneration/profit sharing (including for shareholders and directors)
• excessively high management or rent expenses
• rights to income retained.

Is there a digital services tax in Mauritius?

Currently, there is no tax on digital services in Mauritius. However, the government has plans to introduce such tax as part of the general tax rules in the future.

Are OECD’s BEPS recommendations followed in Mauritius?

Mauritius has been a member of the basic inclusive framework since 2017, and the minimum BEPS standards have been implemented. The tax legislation was modified in 2018, and now it complies with BEPS Action 5. The recommendations of the Forum on Harmful Tax Practices (FHTP) have also been taken into account.

Other steps taken by the Mauritian government in relation to BEPS include:

• ratification of Action 6 (Prevention of Treaty Abuse)
• adoption of a block of laws and regulations under Action 13 (Country-by-Country Reporting)
• actual implementation of Action 14 (More Effective Dispute Resolution).

All of these measures related to tax management and control have allowed Mauritius to avoid any claims. Thanks to this, the jurisdiction is not included in the black and gray lists of global regulators, which provides a very high level of reliability for implementing business and investment projects even in the long term. Thus, the Mauritius tax system, with the absence of zero rates, becomes a clear advantage of this jurisdiction.

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Does Mauritius’ tax model comply with OECD requirements?

Overall, yes. There are some criticisms of Mauritius’ legislation, tax collection methods, and information exchange, but the OECD does not consider them critical.

The main BEPS requirements and their applicability to Mauritius are:

• corporate income tax: yes
• personal income tax: yes
• value-added tax (VAT): yes
•  royalty tax (both for residents and non-residents): yes
• capital gains tax: no
• stamp duty or other capital tax: yes
• land transfer tax or registration fee: yes.

Is the concept of tax residency used in Mauritius?

Yes. For companies, having a resident status determines the tax base (worldwide or internal income) for tax calculation purposes. Individuals pay taxes according to the general rules.

Are there any special tax regimes in Mauritius?

Yes, there are. The PER (Partial Exemption Regime) tax regime can be used for certain types of income and owners of certain special licenses if requirements are met. Both Mauritius companies and offshore structures are entitled to tax deductions. Additionally, Mauritius provides tax holidays for several sectors.

Typical examples of situations where fiscal legislation allows for lower tax payments:

• companies engaged in exporting – 3% (only for the portion of income related to exports)
• companies that are operators of free ports and engaged in manufacturing activities (both conditions) – 3% subject to a set of requirements
• manufacturing companies (medicine, pharmaceuticals, biotechnology) – 3% (additional conditions apply)
•  tax holidays for up to 10 years (additional requirements apply depending on the sector and other conditions).

Are there any tax regimes for intellectual property in Mauritius?

Yes, there are. The main options include accelerated depreciation (50% of capital expenditure on research and development (R&D)), double deduction of qualified R&D expenses, and tax holidays. Additional conditions apply to all special tax regimes.

Is there tax consolidation/recognition of corporate groups for tax purposes in Mauritius?

No.

Does Mauritius have withholding taxes?

Yes, such a concept is provided for in the legislation, and it covers interests and services:

• Interests. If they are in favor of non-residents, then a withholding tax rate of 15% applies (there are exceptions for corporations with a global license).
• Services. For Mauritius residents, a tax rate of 3% applies. For some types of services (accounting, legal and tax consultancy), the withholding tax rate is increased to 5%.

Do companies in Mauritius pay any environmental taxes?

Direct green taxes are not applicable. However, this does not mean that the Mauritius government does not affect the ecological situation in the jurisdiction through taxes.

What fiscal levers of influence are provided in legislation:

• Environmental Protection Fee (EPF). This tax is levied on the import of certain goods, as well as on hotels, guesthouses, tourist residences, and for certain activities.
• Contributions to the Corporate Social Responsibility Fund (CSR). This fund is established by a company registered in Mauritius, and the rate is 2% of the taxable income for the previous year.

Do dividends qualify for exemption in Mauritius?

If paid by a resident company, dividends are exempt from tax. However, dividends are taken into account when calculating the solidarity for the resident shareholder. Foreign dividends are subject to a tax rate of 15%, but they are eligible for partial exemption.

In some cases, Mauritius resident company may claim a credit for foreign tax withheld or paid. Dividends received by individuals are subject to a tax rate of 15% (with foreign tax withheld being credited), but the partial exemption regime is not available for individuals.

Does Mauritius offer a suitable replacement for a company relocating from the UK due to Brexit? What advantages does it have?

It certainly makes sense to consider Mauritius as the receiving jurisdiction in such a relocation. Each case requires careful individual analysis, but in general, Mauritius can offer British (and any other) businesses a multitude of advantages.

Why Mauritius:

• ease of doing business
• low taxes
• political, social, and financial stability
• bilingual environment – English and French
• highly skilled local workers
• convenient time zone for Europe
• extensive network of tax treaties
• independent judiciary
• legal framework compliant with global financial regulators’ requirements
• Mauritius is not a problematic jurisdiction according to OECD and EU standards
• cooperation on tax matters
• excellent conditions for living and doing business
• attractive incentives for serious investors.

Is it worthwhile to start a serious business or investment project in Mauritius under the current difficult conditions? Definitely, yes, although the country is no longer formally considered a classic offshore jurisdiction (more of a midshore). However, it is much more suitable for conducting business than classic tax-free jurisdictions with zero taxes but low levels of security, even in the short term.

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E-mail to contact our experts for any questions – info@offshore-pro.info.