Sunibel Corporate Services

Mauritius Budget Brief 2021-2022

The Minister of Finance, Economic Planning and Development of the Republic of Mauritius, the Honourable Dr Renganaden Padayachy, presented his Budget Speech 2021-2022 on 11th June 2021. It is his second Budget Speech in a challenging environment marked by the prevalence of COVID-19 around the world.

Themed “Better Together”, the Budget rests on:

  1. Boosting investments;
  2. Restoring confidence; and
  3. Creating a new economic architecture.

To encourage investments, the Government is proposing measures to improve the business environment. These measures include the introduction of a Regulatory Impact Assessment Bill, as well as an Insolvency Bill to preserve businesses amid the COVID-19 pandemic, while the Economic Development Board (EDB) will streamline other schemes.

The re-opening of the borders is a key measure to stimulate economic recovery, with tourists allowed to come to Mauritius as from 15th July 2021. Our Tourism sector is now seeing  light at the end of the tunnel after almost 18 months of inactivity. In addition, the Government’s budget will amend permit rules to encourage investors and foreign talent to come to Mauritius, along with the introduction of the 10-year Family Occupation Permit.

The financial services sector, among the few that registered growth in 2020, is going through challenging times since last year. This year’s budget pursues the objectives of previous ones of positioning Mauritius as a transparent and compliant jurisdiction. Among other measures, the Government has announced the creation of a Financial Crime Commission to ensure the effective management of AML/CFT matters.

This budget also focuses on continuing to promote innovation in the financial services sector, as well as to improve and deepen the country’s service offerings. It includes the rolling out of the Digital Rupee (a Central Bank Digital Currency) by the Bank of Mauritius (BoM) on a pilot test basis.

Further opportunities will arise for businesses set up in Mauritius, most notably in relation with the Trade Agreements signed (the Comprehensive Economic Cooperation and Partnership Agreement (CECPA) with India, the Free Trade Agreement signed with China, the UK Eastern Southern Africa Economic Partnership Agreement, and the African Continental Free Trade Area Agreement.

On the fiscal perspective, the Government is extending the tax holiday from 5 to 10 years on Family Offices and Fund Asset Managers. The scope of the partial exemption regime is also being broadened to other types of companies, while the introduction of other tax incentives aims to encourage biotechnology and pharmaceutical companies to set up in Mauritius. Tax rates for individuals and companies, as well as the VAT rate, remain unchanged.

For the fiscal year 2021-2022, total expenditure will represent 32.5% of the GDP compared to a revenue of 27.5%. The Budget deficit is therefore expected to be contained at 5% of the GDP (compared to 5.6% last year). The GDP growth is expected to reach 9%, whilst inflation has been kept under control at 2.5%.

By boosting investment and economic growth through the opening of our borders to foreign talents, in addition to the development of innovative sectors such as Fintech and green initiatives, this budget aims to guide the economy and population on the path to “recovery, revival and resilience”.

 

Financial Services

Ensuring compliance with international standards

As an International Financial Centre (IFC) of repute and substance, Mauritius remains committed to reinforce its AML-CFT legislative framework and to comply with the highest global standards through the implementation of the FATF Action Plan to achieve an early exit from the FATF grey list.

To further strengthen the sustainability and effectiveness of the AML/CFT system, the following measures will be implemented:

  • Amendment to relevant legislations to meet the requirements of the FATF recommendations on AML CFT;
  • Recruiting new personnel to strengthen the compliance capacity; and
  • Set up of Financial Crimes Divisions at the Supreme Court and intermediate court.

Additional measures to enhance the AML/CFT legislative framework and its implementation include:

  • AML/CFT Core Group given legal force under the Financial Intelligence Anti Money Laundering Act (FIAMLA);
  • Establishing the Financial Crime Commission in the fight against financial crime; and
  • Introduction of a new Bank of Mauritius (BoM) bill and Banking bill to reflect international best practices.

 

Improve and deepen the service offerings of the Mauritius IFC

    • Introduction of a new regulatory framework to facilitate banking institutions to set up centres for shared services including asset management and treasury management activities, amongst others, for the region from Mauritius;
    • Regulatory Sandbox Licences will be issued by the Bank of Mauritius and the FSC for activities falling under their respective scope;
    • Introduction of a securitisation bill, a new securities bill and new legislation for virtual assets; and
  • Introduction of rules by the Stock Exchange of Mauritius for the setting up of special purpose acquisition companies.

 

Embracing FinTech

  • Introduction of Central Bank Digital Currency – the Digital Rupee – on a pilot basis, with the aim of encouraging cashless payments through dedicated QR codes by the BoM;
  • The BoM will set up an Open Lab for banking and payment solutions; and
  • The FSC will set up a FinTech Innovation Lab to encourage an entrepreneurship culture.

 

Taxation

Partial Exemption Regime

80% exemption extended to include:

  • Licensed investment dealers; and
  • Leasing of locomotives and trains including rail leasing.

 

Taxation for non-residents

  • Dividends paid by a non-resident to another non-resident is not taxable in Mauritius; and
  • Non-resident foreign limited partnerships are not required to submit return of dividend.

 

Reduction of corporate tax rate

  • Companies engaged in the medical, biotechnology and pharmaceutical will be taxed at 3% instead of 15%; and
  • 3% corporate tax applicable to private universities set up in Mauritius.

 

Tax Credit

  • Manufacturing companies can carry forward unrelieved investment tax credit for a period of 10 years;
  • Biotechnology and pharmaceutical companies allowed a full tax credit on the costs of acquisition of patents; and
  • Research & Development (“R&D”) tax incentive scheme extended by 5 years up to June 2027.

 

Tax holidays

Asset/Fund Manager

  • Extension of the tax holiday on emoluments from 5 years to 10 years; and
  • Threshold relating to asset base being managed by an Asset/Fund Manager reduced from USD 100 million to USD 50 million.

Family Office

  • Extension of the tax holiday from 5 years to 10 years; and
  • Abolition of the requirement for a Global Business Licence for the setting up of Family Offices.

Drop us an email to discover the other activities benefitting from tax holidays.

 

New incentives

Investment Certificate

Companies registered with the Economic Development Board (“EDB”) as a holder of an Investment Certificate are eligible to:

  • A 5% tax credit over 3 years on capital expenditure incurred on new plant and machinery (manufacturing company only) until 30 June 2023; and
  • An 8-year tax holiday in the case of new companies.

These incentives are applicable to companies operating in the following sectors:

  • Aquaculture;
  • Industrial Fishing;
  • Seafood processing;
  • High Tech manufacturing;
  • Pharmaceutical research and manufacturing;
  • Agro Processing;
  • Food Processing;
  • Healthcare, Biotechnology and Life Sciences;
  • Nursing and residential care;
  • Digital technology and innovation;
  • Marina;
  • Tertiary Education;
  • Seeds Production; and
  • Other activities as approved by the EDB.

 

Export Development Certificate

Eligibility to 3% corporate tax, Freight Rebate Scheme, Trade Promotion and Marketing Scheme.

 

Tax exemptions

Biotechnology and Pharmaceutical industry: VAT exemption on construction of purpose-built factories for manufacturing of pharmaceutical products and medical devices as well as for clinical and pre-clinical trials.

VAT incentives to companies holding an Investment Certificate:

  • Companies operating in specific sectors (as listed above) and registered with the EDB as a holder of an Investment Certificate will benefit from VAT exemption on plant, machinery and equipment, and construction of purpose-built building and plant and equipment (excluding vehicles) for research and development; and
  • Companies providing healthcare, nursing and residential care services will benefit from VAT at 0% on the item listed above.

 

Opening up of the economy

Occupation Permit (OP)

  • A non-citizen who acquires an apartment used, or available for use, as residence, in a building of at least 2 floors above ground floor, on condition that the purchase price is not less than USD 375,000, will be issued with a residence permit, including for his dependents, and exempted from the requirement of a work or occupation permit;
  • A Privilege Club Scheme will be implemented providing incentives such as privilege access to hotels, golf courses etc. to OP holders and retirees;
  • A non-citizen will be eligible for an OP irrespective of his visa category when entering Mauritius;
  • 10-year Family Occupation Permit introduced for those contributing USD 250,000 to the COVID-19 Projects Development Fund; and
  • Requirement for OP applicants to enter Mauritius on a business visa will be removed.

 

Occupation Permit (OP) – Professional

  • Validity of OP as professional extended from 3 to 10 years;
  • Flexibility to switch job without the need to file a new application on condition that minimum criteria are met; and
  • Monthly basic salary applicable for an OP in financial services (fund accounting and compliance only) brought down to MUR 30,000 for companies holding an FSC licence, as long as the employee has at least 3 years relevant work experience.

 

Dependents of OP holders

Exemption from OP or Work Permit application for spouse of OP holders willing to invest or work in Mauritius.

Maximum age limit of 24 years for dependent children will be removed.

 

OP as Self-employed

Possibility for holders of OP as self-employed to incorporate a one-man company and employ an administrative staff.

 

Young Professional Occupation Permit (YPOP)

  • Students enrolled in a recognised educational institution will automatically benefit from a 10-year renewable YPOP upon graduation; and
  • International students enrolled in a recognised educational institution will be granted a 20 hours per week work permit.

 

Permanent Residence Permit (PRP)

  • 10-year PRP automatically extended to 20 years; and
  • PRP holders are allowed to switch categories between Investor, Professional and Retired upon renewal of PRP.

 

Premium Travel Visa

  • A person holding a Premium Travel Visa spending 183 days or more, will be subject to income tax as follows:
  1. The Mauritian-sourced income of a Premium Visa Holder (e.g. emoluments for work performed remotely in Mauritius) will be taxed on a remittance basis;
  2. Money spent in Mauritius through the use of foreign credit or debit cards by the holder of a Premium Travel Visa will not be deemed to have been remitted to Mauritius; and
  3. Income brought and deposited in a bank account in Mauritius will be liable to tax except if the holder of a Premium Travel Visa declares that the required tax has been paid thereon in his country of origin or residence.
  • Holders of a Premium Travel Visa having acquired a unit under the Invest Hotel scheme will not have any restrictions concerning the number of days they can occupy their units.

 

Although the level of public debt remains a concern for both for the government and international organisations, we can note that the outlook for the country remains positive. The next 2 to 3 years will be challenging as we are moving on from the turmoil caused by the COVID-19 pandemic. Building-up an even more favourable investment climate through the opening up of the borders, favourable incentives, and the development in high-potential ventures are necessary measures to reach our objectives.

Should you have any questions, do not hesitate to drop us an email. We will be happy to help.

 

Disclaimer

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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