Offshore Operation

It is possible to establish an offshore entity in Mauritius in the following forms:

• GBC Category 1 (old Offshore Company);

• GBC Category 2 (old International Company);

• Limited Life Offshore Company;

• General Partnership;

• Limited Partnership;

• Offshore Trust.

While the Free Port, the Export Processing Zone and the Export Service Zone are not required to have to have offshore status as such, they offer benefits that are generally similar to those available to offshore companies.

Tax Treatment of Offshore Operations

Please refer to the section entitled Domestic Corporate Taxes for the general principles of Mauritian corporate taxation as they also apply to offshore entities that pay tax. In addition, refer to the section entitled Withholding Taxes for a simplified description of the somewhat arbitrary Mauritian withholding tax regime.

A GBC1 (old Offshore Company) incorporated after 1st July 1998 pays corporate income tax at 15%, while a GBC1 incorporated before 1st July 1998 does not pay any corporate income taxes.

In addition, GBC1 Companies are exempt from stamp duty, land transfer tax, and capital gains (morcellement) tax.

An offshore company’s expatriate staff only pays half the normal rate of personal income tax. Also, expatriate staff members per company are permitted to import cars and household equipment free of customs duty.

GBC1 companies paying dividends or other payments to non-resident shareholders are not subject to withholding taxes or equivalent deductions. Please not that residents are not generally allowed to be shareholders of such companies).

As GBC1 Companies are considered resident companies, they are therefore able to take advantage of Mauritian Double Tax Treaties. The tax treaty with India is especially favorable, and Mauritius is a favored location for holding companies for those trading with or investing in India.

GBC1 Companies are permitted to use the unilateral foreign tax credit which is 80% of the Mauritian tax rate (leaving a residual liability of 20% of the Mauritian tax rate = 3%); the credit used to be at the rate of 90% and it is possible that there will be further reductions.

Captive Insurers, Offshore Banking Units, and Offshore Investment Funds that are established as GBC1 companies are taxed in the same way that other GBC1 are. This is also true of GBC1 Companies holding ships on the Mauritian Open Registry (this is the mandatory structure), but additionally, earnings from shipping operations are exempt from tax, the crew of the ships are exempt from payroll taxes, and materials, fuel, equipment etc for the ship are all free of customs and excise duties.

The main difference between a GBC2 (old International Company) and a GBC1 is that the GBC2 is considered a non-resident company and is not entitled to utilize Mauritian Double Tax Treaties. GBC2 Companies are officially an exempt-status GBC1 Company.

A Limited Life Company Offshore Company can be based on either a GBC1 or GBC2 Company, and will be treated equivalently from a tax point of view.

It is possible for both General Partnerships and Limited Partnerships to obtain offshore status under the Code de Commerce Amendment Act 1995. Moreover, they have access to Mauritian Double Tax Treaties under the Finance Act 1996. Generally speaking, offshore partnerships have non-resident partners, and they are treated as companies for tax purposes, just as GBC1 and GBC2 Companies are treated (see above).

Although offshore trusts are taxed in the same way that GBC1 and GBC2 Companies are, chargeable income is defined as the difference between (a) the net income derived by the trust and (b) the aggregate amount distributed to the beneficiaries under the terms of the trust deed. Also, any amount distributed to non-resident beneficiaries is exempt from Income Tax.

An offshore trust receives credit for foreign tax on its foreign-source income. If no written evidence is presented to the Mauritius Commissioner of Income Tax showing the amount of foreign tax charged, the amount of foreign tax will be calculated to be equal to 80% of the Mauritius tax chargeable with respect to that income.

An offshore trust may choose, by written notice to the Mauritius Commissioner of Income Tax, to be treated as non-resident in Mauritius for tax purposes. If an offshore trust makes this choice, it will not be subject to any income tax in Mauritius. It is important to note, though, that being non-resident, the offshore trust is not guaranteed to benefit from Mauritius\' extensive network of double taxation agreements.

Taxation of Foreign Employees of Offshore Operations

The government of Mauritius does not in fact distinguish the employees of resident or non-resident operations for the purposes of taxes. Generally speaking the majority of compensation and benefit paid to employees are taxable and the only special privileges or exemptions for expatriate workers are as follows:

• The expatriate employees of both GBC1 and GBC2 Companies as well as of the other types of offshore entity listed above only pay half the normal rate of personal income tax;

• Expatriate staff members per company are permitted to import cars and household equipment free of customs duty;

• The crew of ships on the Mauritian Open Registry do not have to pay payroll taxes;

• Two expatriate employees of companies in the Export Processing Zone are partly exempted from income tax.