Mauritius Budget Brief 2020-2021
The Minister of Finance, Economic Planning and Development of the Republic of Mauritius, the Honourable Dr Renganaden Padayachy, on 4th June 2020 presented the National Budget. Call it coincidence, but history will retain that the first budget for a second consecutive mandate by the present Government in terms of timing could not be better as the country will have to sail through one of the hardest moment of its history. This is the defining moment…
Themed “Our New Normal: The Economy of Life”, the Budget aims to guide the economy and population on the path to healing and growth during these times of global and local economic slowdown, rising unemployment and low morale, caused by the COVID-19 pandemic. It also continues on it objective of building an innovative environment favourable to both local and foreign investment, with the overall objective of transforming Mauritius into a high-income economy.
After the Brexit and multiple threats of a full-blown trade war between two of the biggest economies of the world, which caused some economic uncertainty, the beginning of 2020 has seen the world facing yet another, more significant, challenge; the COVID-19 has brought the world, and the global economy, to its knees. In the local context, the pandemic has heavily affected the economic activity of the country since the end of March. For the fiscal year 2019/20, inflation was 2.2% but is expected to increase to 4% for 2020/21, unemployment rate is predicted to reach 17% by the end of the year and the GDP is expected to contract and approximate the -7% for 2020/21.
The Government has set out its plans to boost the economy and find “our new normal” which will consist also in setting new foundations for a more prosperous country: green initiatives, attracting foreign talents and investments, digital and innovative sectors are earmarked as drivers of future growth. Meanwhile, the Mauritius Investment Corporation (MIC), with a MUR 80bn capital, will act in a similar way to a Sovereign Fund, is expected to support the recovery of key sectors, and invest into future growth drivers.
Mauritius is the leading African country for Ease of Doing Business. To further strengthen and improve the business ecosystem for local and foreign investors, the Budget highlighted a series of business facilitation measures, with a particular emphasis on SMEs and the “Made in Mauritius” label.
The Budget also aims to reinforce the standard and trustworthiness of our Financial Services sector and further consolidate the position of Mauritius as a transparent and reputed International Financial Centre (IFC), fully compliant with FATF recommendations. Furthermore, to diversify the sector’s offerings, five new financial services products (as detailed below) will be introduced to enhance the existing offerings.
Nitin Collappen, Managing Director at Sunibel Corporate Services, has time and again, emphasised on the importance of opening our borders to foreign talents who will contribute to the development of the Mauritius economy as a whole, not only in the Financial Services sector, but in other innovative sectors as well. He says he “positively welcome the measures aimed at attracting more expatriates and investors, as the Government focuses on the development of innovative sectors such as Fintech, green initiatives and blue economy.”
The Government now needs to engage in the efficient and effective implementation of these measures to reach “Our New Normal: The Economy of Life”.
Ensuring compliance with international standards
Following the adoption of a new list of third countries by the European Commission, measures have been announced to accelerate the implementation of the five remaining recommendations under the Financial Action Task Force (FATF) Action Plan by September 2020.
The following measures will be put in place to meet the requirements of the FATF:
- Risk-based assessment for conformity.
- Sensitisation programmes on risks related to money laundering and financing of terrorism.
- Financial sanctions in cases of terrorism financing.
- Real-time access on information on ultimate beneficiary ownership.
- Introduction of a new AML/CFT (Miscellaneous Provisions) Bill.
- Setting up of a Financial Offences Court.
Start-ups and SMEs
- Setting up a Venture Capital Market on the Stock Exchange of Mauritius for start-ups and SMEs.
- New Credit Check for SMEs and MMEs to assess their credit worthiness.
- Broader access to factoring facilities through Maubank to SMEs.
Establishing Mauritius as a Fintech hub for the region
- Introduction of the Central Bank Digital Currency in line with the 10 year Blue Print.
- Introduction of a framework for digital banking and amending the Banking Act accordingly.
- Expediting the implementation of the Centralised KYC project through Bank of Mauritius.
- Upgrade the Mauritius Credit Information Bureau (MCIB) platform to provide credit scoring for potential borrowers.
Diversifying the product base of the Mauritius IFC
To diversify to financial products Mauritius offers, the Budget sets out to introduce:
- A digital currency by the Bank of Mauritius.
- An insurance wrapper to capture specified income and activities.
- A Variable Capital Company (VCC) framework, offering flexible corporate structure to complement the existing investment fund structures available.
- The issuance of Sukuks by the Bank of Mauritius.
- A framework for the Blue and Green bonds by the Bank of Mauritius.
- A new framework to regulate online banking, private banking and wealth management for banks.
Improving the business ecosystem
To further improve the business environment for our investors and foster further economic development, the Government will undertake a review of the regulatory framework in four key sectors of the economy, including:
- Land Use and Construction
- Trade and logistics
- Healthcare and Lifesciences
Enhancement of public service delivery to businesses with a Digital platform by the Corporate and Business Registration Department (CBRD) as a central repository for all business information and licenses.
Alignment to International Best Practices
- Directors will be liable for prejudicial conducts, which will be defined in the Companies Act.
- All public companies will need to have at least 2 independent and non-executive directors on their Board of Directors.
- Any creditor will be able to request the liquidator/receiver manager to furnish any financial information in relation to a company.
- The fees for re-instating companies will be reduced from MUR 15,000 to MUR 5,000, and the requirements for giving notice will be done online.
- Registration of Ultimate Beneficial Owners as well as VAT registration will be made at time of business registration.
- The Bank of Mauritius will provide credit score of potential borrowers.
- Public sector agencies will publish their Service Level Agreements.
- Special efforts will be made to ensure timely enforcement of contracts and settlement of commercial disputes.
Partial Exemption Regime
- 80% Partial Exemption Regime on interest income does not cover the following:
- Non-bank deposit taking institutions;
- Money changers;
- Foreign exchange dealers;
- Insurance companies;
- Leasing companies; and
- Companies providing factoring, hire purchase facilities or credit sale facilities.
- 8-year tax holiday for companies engaged in:
- Inland aquaculture scheme;
- Manufacture of nutraceutical products subject to operations started on or after 4th June 2020; and
- Manufacture of pharmaceutical products, medical devices or high-tech products if the company has started operations on or after 8th June 2017.
- 8-year tax holiday for worldwide institution setting up branch campuses in Mauritius.
- Pharmaceutical industry: VAT exemption for medical research and development centres on construction materials and specialised equipment.
- Blue Economy: VAT and duty exemption on equipment for inland aquaculture.
- Education: VAT exemption on IT and IT related materials and equipment used for online education for international educational institutions.
Opening up of the economy
Occupation Permit (OP)
- Minimum monthly salary of MUR 30,000, initially applicable to ICT professionals to obtain an Occupation Permit, will be extended to other sectors.
- Work Permit and Residence Permit to be issued as one permit instead of two separate documents.
- An OP validity will be increased to 10 years, and renewable.
- The minimum investment requirement for an OP as Investor will be reduced to USD 50,000, instead of the initial USD 100,000.
- Removal of the minimum turnover and investment requirement for Innovator Occupation Permit.
- Holders of an OP will not have any shareholding restrictions to invest in other ventures.
Dependents of Occupation Permit holders
- OP holders will be allowed to bring their parents as their dependents
- No restriction for spouses of OP holders to work in Mauritius
Residence Permit (RP)
- The validity of Retired non-citizens RP to be increased from 3 to 10 years.
- Residence Permit holders who have held the permit for three consecutive years will be eligible to apply for the PRP (20 years).
- Retired non-citizens holding a RP will not have any shareholding restrictions to invest in other ventures.
- Non-citizens who have a residence permit under IRS, RES, PDS or Smart City Schemes, will be exempted from an OP or Work Permit to invest and work in Mauritius.
- For a holder of an immovable property to obtain a residence permit, the minimum investment amount will be reduced to USD 375,000, from USD 500,000.
Permanent Residence Permit (PRP)
- PRP validity extended from 10 to 20 years, in addition to the existing turnover and salary criteria being removed.
- Existing OP holders, who have held the permit for three consecutive years, will be eligible to apply for the PRP.
- For an investor to directly obtain a PRP, the minimum investment amount will be reduced from USD 500,000 to USD 375,000.
Work Permit and Residence Permit will now be issued as one permit instead of two separate documents.
Acquisition of Property
Non-citizens, who hold a RP, an OP, or a PRP, will be authorised to acquire one plot of serviced land not exceeding 2,100m², for residential purposes, in Smart Cities.
Upon enactment, this measure will be valid for a period of 2 years ending 30th June 2022.
The rising level of public debt remains a concern for both for the government and of international organisations. However, we should remain positive about the outlook for the country. The next 2 years are going to be difficult and, during these challenging times, building-up a favourable investment climate through the opening up of the borders and the development in high-potential ventures are bold but necessary measures to reach “our new normal”.
Click here to read the full version of the budget speech.
Should you have any questions, do not hesitate to contact us. We will be very happy to help.
This article was prepared by Sunibel Corporate Services Ltd, and the information it contains are based primarily on the announcements made by the Minister of Finance and Economic Development in his budget speech. The measures announced are subject to parliamentary discussion and approval, and may change upon enactment of the Finance Act in due course.
While all reasonable care has been taken in the preparation of this Budget Brief, no representation of warranty, whether expressed or implied, is given as to the accuracy or completeness of the information contained in this article, and, to the extent permitted by law, Sunibel Corporate Services Ltd, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in the article or for any decision based on it. You should not act upon the information contained in this publication without obtaining specific professional advice.
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