The World of Business

Mauritius has strong business and communications infrastructures as well as a flourishing economy. The government has made encouraging foreign investment and offshore activities a priority, even setting up the Board of Investment to help facilitate both activities.

The government makes a clear distinction between onshore and offshore activities. To that end, foreigners cannot own shares in an onshore company without specific permission from the Prime Minister’s office. Meanwhile, Mauritians are not allowed to take part in offshore activities period.

The country’s legal system was overhauled and modernized in 2001. These changes were introduced for three main reasons – to catch up with competitors, to express to the decision to eschew \'offshore\' status as such, and to follow-up to the decision to sign a Commitment Letter to the OECD in to avoid \'blacklisting\'.

One of the consequences of the legislative changes was that the Mauritius Offshore Business Activities Authority (MOBAA), which had been a focal point for the offshore sector as well as the licensing and supervisory authority for offshore companies (except banks) since 1992, had clearly outlived its usefulness. This was also true of the various pieces of legislation that explicitly recognized offshore companies and structures. All this was thrown out of the window and new legislation came into effect in October of that year.

Although the new supervisory regime is clearly a lot tougher than the old one, to some degree the legislative changes were far more cosmetic than substantive. The Financial Services Development Act 2001 is an especially complicated piece of legislation that endows the new Financial Services Commission, which effectively replaced the MOBAA and took on some of the functions of the Central Bank, with very extensive powers. Despite a rough beginning, though, the offshore sector appears to be relatively satisfied overall with the changes brought by the new legislation.

Legal System

The legal system of Mauritius is based on English Common Law and French Civil Law in the form of the Napoleonic code. While the procedural law both in criminal and civil litigation is largely English, the substantive law is almost entirely based on the French Napoleonic Code.

Generally speaking common law, as opposed to civil or socialist law, is a type of legal system where legislation is continually evolving. Courts refine and create laws on a case-by-case basis. When resolving a legal dispute, in the ideal world, a common law court looks to precedents set by other courts. What this means is that when a court is resolving a dispute, it must look to see if a similar dispute was resolved in the past. If one has, then the present day court is obligated to following the same reasoning used in the prior case; this principle is called stare decisis. On the other hand, if the dispute is totally unique, the court may resolve the matter itself using general guidelines. This new decision then becomes the precedent to which all future cases are bound. Over the years, the precedents created by past decisions coalesce into a complicated set of rules that apply to a wide array of case; this collection of rules is known as “common law”. Of course, common law systems are much more complex in practice, nevertheless the principle of stare decisis as described above, is the foundation of all common law systems.

Civil law, also called Continental law or Romano-Germanic law, is the most prevalent legal system in the world. The main difference between civil and common law is that that common law draws abstract rules from specific cases, whereas civil law starts with abstract rules, which judges must then apply to the various cases before them. In other words, historically speaking, common law is based upon traditions and laws are codified following court rulings. On the other hand, in the case of civil law, laws are first codified and then applied. There are a number of civil codes besides the Napoleonic code.

Offshore Legal and Tax Regimes

Please be aware that the following is simply a brief summary of some of the more important aspects of Mauritius’s tax law and should be considered only general information. Please do not substitute it for professional tax advice.

Overview and Recent Development

In the past there was only one significant source of offshore regimes in Mauritius – the Mauritius Offshore Business Activities Authority (MOBAA). The MOBAA was created under the Mauritius Offshore Business Activities Act 1992 that oversaw the majority of kinds of offshore entities with the exception of banks. This includes the Free Port and the Export Processing Zone.

Like other offshore jurisdictions, Mauritius has had some issues with the Organization for Economic Corporation and Development, OECD, and in the spring of 2000, Mauritius submitted a so-called commitment letter in order to avoid being placed on the OECD’s list of jurisdictions offering “unfair” tax competition.

The government of Mauritius passed a variety of legislation in 2001 to replace older legislation. One such piece of legislation was the Financial Services Development Act 2001. This piece of legislation established a Financial Services Commission to replace MOBAA. Part of the stimulus behind this round of legislation was the government’s 2000 commitment to OECD.

The majority of existing offshore legislation was simply “grandfathered” into the new regime.