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Mauritius tax regimes are not harmful – OECD’s 2018 Report on Peer Review Results on Preferential Regimes

Last year, 53 jurisdiction, including Mauritius, underwent a peer review assessment from the Organisation for Economic Co-operation and Development’s (OECD) Forum on Harmful Tax Practices (FHTP). Subsequent to this peer review and the changes brought recently by the Mauritian government, OECD’s report has found that Mauritius does not have any harmful tax regimes.

 

Why was the Mauritius jurisdiction reviewed by OECD?

OECD’s peer review forms part of the organisation’s Base Erosion and Profit Shifting (BEPS) Action 5. The Action 5 Report is one of the four minimum standards that all members of the Inclusive Framework on BEPS have committed to implement. As per the OECD, the review ‘relates to preferential tax regimes, where a peer review is undertaken to identify features of such regimes that can facilitate base erosion and profit shifting, and therefore have the potential to unfairly impact the tax base of other jurisdictions.’

The 10 local tax regimes analysed by the FHTP, were:

  • Category 1 and Category 2 Global Business companies;
  • Banks, as regard their foreign source income also known as segment B income;
  • Captive Insurance;
  • Partial Exemption System;
  • The newly introduced tax regimes for banks;
  • Freeport;
  • Global Headquarters Administration;
  • Global Treasury Activities;
  • Investment Banking; and
  • Shipping.

The delegation of Mauritius, which consisted of senior officials from governmental bodies, widely introduced and debated on the reforms carried out with regard to the Global Business sector, the Banking sector and the introduction of the Partial Exemption System, amongst others.

The conclusions of the OECD report on Mauritius

On the 15th of November 2018, the OECD has released its report on Peer Review Results. The report clearly indicates that Mauritius fulfils all the requirements of the BEPS Action 5, meaning it does not have any harmful practices in its tax regimes.

According to these senior officials, the government of Mauritius will keep its engagement in meeting and respecting international standards and best practices. This announcement further reaffirms the position of Mauritius as an International Financial Centre of repute and substance.

Another minimum requirement of the BEPS Action 5 includes ‘a commitment to transparency through the compulsory spontaneous exchange of relevant information on taxpayer-specific rulings which, in the absence of such information exchange, could give rise to BEPS concerns’; a criteria that Mauritius already fulfils.

An insight on Base Erosion and Profit Shifting by OECD

Over 115 countries and jurisdictions, counting Mauritius, are co-operating to implement the BEPS measures and tackle BEPS.

The OECD states that ‘BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity. Although some of the schemes used are illegal, most are not. This undermines the fairness and integrity of tax systems because businesses that operate across borders can use BEPS to gain a competitive advantage over enterprises that operate at a domestic level. Moreover, when taxpayers see multinational corporations legally avoiding income tax, it undermines voluntary compliance by all taxpayers.’

 

Please click here to find a full summary of the update.