The Mauritius Trust: a powerful tool for wealth structuring and succession planning
Mauritius: the ideal jurisdiction for establishing a Trust
Mauritius has evolved into a trustworthy jurisdiction for establishing and operating Offshore Trusts. The Mauritius Trust is especially used for the management, preservation and transmission of assets.
Selecting to establish a Mauritius Trust allows investors around the globe to channel their investments within the African continent and benefit from the tax advantages the island offers. The benefits include:
- No Capital Gains, Estate Duty nor Withholding Tax;
- In the case of a Settlor’s bankruptcy or liquidation, a Mauritian Trust will not be void or voidable;
- The Trust’s income is taxed at a fixed rate of 15%, thus this income is not subject to additional tax in the hands of Beneficiaries when distributed;
- Offshore Trusts are exempt from forced heirship limitations, letting an owner to leave his/her money to people of his choice. Ultimately, the forced heirship rules of other countries will not be furthered by the courts in Mauritius;
- No inheritance tax;
- Estate planning;
- Discretionary Trust allowing for tax planning and wealth protection;
- Purpose Trust for non-charitable objective;
- No registration needed;
- Avoidance of probate;
- Asset protection;
- Succession planning; and
- Assets can be held and managed on behalf of minors.
What is a Trust?
An Offshore Trust is a vehicle whereby an individual (also referred to as the Settlor) transfers property or assets to another individual or individuals (also called Trustees) to hold for the benefit of other individuals or specific class of people (called Beneficiaries). The Trust Act 2001 is the governing legislation in relation to the Mauritius Trusts.
Both citizens and non-citizens can establish a Trust in Mauritius, and, similarly, Trusts can be resident or non-resident.
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There are different types of Trust companies in Mauritius. These include:
- Discretionary Trust: Used in wealth protection and tax planning, the Discretionary Trust gives the trustee the power to determine who are the beneficiaries and the allocation of income and capital amongst them.
- Charitable Trust: A Charitable Trust is formed for purposes beneficial to the public in general (in Mauritius or another country). These include the relief of poverty, the advancement of education, the protection of environment, or the advancement of human rights and fundamental freedoms.
- Protective Trust: A Protective Trust provides for the protection of vulnerable members of a family or certain beneficiaries.
- Purpose Trust: A Purpose Trust is formed for advancing non-charitable purpose, such as holding an asset such as an aircraft.
- Sharia compliant Trust: A trust that is compliant with Islamic law (Sharia) must observe Sharia principles, in particular restrictions on investment and rules of inheritance.
Along with Foundations, Offshore Trusts are a powerful tool for wealth structuring, asset preservation and transmission.
Who makes up a Trust?
A Trust is composed of:
- The Settlor
- The Trustee
- The Beneficiary
- The Protector and Enforcer
A more detailed description of the roles that constitute of a Trust are specified below:
The Settlor is the owner of the property, which is ultimately transferred to the Trustee to be held for Beneficiaries.
The Trustee is an individual or a Corporate who manages and administers the property transferred to it. As a result, the Trustee will hold the property on Trust for the Beneficiary. Selecting a trustworthy Trustee is important as the Trustee may have the responsibility of protecting the assets and carrying out the activities of the Trust. Thus, a Mauritius Trust needs to have a Qualified Trustee resident in Mauritius and regulated by the Mauritius Financial Services Commission, such as Sunibel Corporate Services Ltd. The number of Trustees cannot surpass four.
The Beneficiary is an individual, group of individuals or a specific class of people who benefit from the property, which is preserved on Trust.
The Protector and Enforcer take the necessary steps to make sure the Trustees carry out their functions.
Charitable Trusts are not liable to tax. In addition, a Trust holding a Global Business Company Licence may benefit from an 80% Partial Exemption Regime on specified sources of income (interest, dividend, etc.), provided it meets the substance requirements.
A Trust registered or having its Central Management and Control (CMC) in Mauritius is considered to be Mauritius resident and is liable to a 15% income tax on its chargeable (worldwide) income. A Trust would have its Central Management and Control in Mauritius if:
- The Trust is administered in Mauritius and a majority of the trustees are resident in Mauritius;
- The settlor of the Trust was resident in Mauritius at the time the instrument creating the trust was executed or at such time as the settlor adds new property to the Trust; and
- A majority of the beneficiaries or the class of beneficiaries appointed under the terms of the Trust are resident in Mauritius.
Otherwise, Offshore Trusts that have their CMC outside of Mauritius will not be subject to tax on their foreign source income in Mauritius. However, non-resident Trusts will need to file an income tax return in order to declare and pay a 15% income tax on its Mauritius sourced income.
Establishing a Trust in Mauritius
Offshore Trusts are created by the enactment of a written document, which includes the name of the Trustee, the Settlor’s intention, the object of the Trust as well as the responsibilities and powers of the Trustees. Steps for the establishment of a Mauritius Trust include:
- Execution of Trust Deed (Can be done by a Settlement or Declaration of Trust);
- Provide Know Your Clients documents on all the parties (Settlor, Protector and Beneficiaries);
- A Settlement is where both the Trustee’s and Settlor’s names are stated in the Trust Deed;
- A Declaration of Trust is where solely the Trustee’s name is cited; and
- Transfer of the Initial Trust Fund to the Trustee.
How we can accompany you in establishing a Trust in Mauritius
With expertise in the industry, Sunibel Corporate Services Ltd is legally eligible to act as qualified Trustee and Company Secretary under the Trusts Act 2001. We will assist you in establishing your Offshore Trust and offer tailor-made advice to help you meet your goals and ensure asset protection.
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