Mauritius is known for its pleasant tropical climate, multiculturalism, its dynamic economy and attractive tax regimes. Its competitive business landscape have bolstered the country’s global status and are attracting high net worth individuals and families from around the globe.
The Government has now rolled out a number of flagship measures to strengthen the country’s attractiveness to foreigners – whether investors, professionals or retirees – can now consider settling in Mauritius.
Residency Permit
For those who wish to reside in the island, the Mauritius Residence-by-Investment Program is the most efficient way to acquire such status. Under this program, individuals who invest in the real estate market can become Mauritian residents within two to six months.
In an effort to attract foreign talents and investors, the Government has, through the Finance Act 2021, brought changes to the Immigration Act, Non-Citizens (Property Restriction) Act and Non-Citizens (Employment Restriction) Act. These measures are aimed at encouraging non-citizens to work and live in Mauritius and at the same time help attract foreign investment into the country. The main changes are as follows:
- Premium Investor Certificate: Minimum investment of Mur 500 million (except Pharmaceutical Manufacturing)
- A non-citizen is granted a residence permit if the latter purchases a residence of at least 2 floors above ground floor and the purchase price is more than USD 375,000.
- A holder of an occupation permit or a residence permit as a retired non-citizen or a family occupation permit except young professionals are considered as being residents in Mauritius.
- A permanent residence permit acquired by an investor (at least USD 500,000) and his/her spouse granted on 01 September 2020 and is valid for a period of 20 years as from issue date of the permit.
- Any investor, professional or self-employed holding the status of a permanent resident is granted a retired non-citizen residence permit, provided that the latter has a monthly disposable income of USD 1500.
- The spouse of the holder of an occupation permit is also granted an occupation permit.
- A young professional is considered as resident, for the period specified in his contract of employment or for a period of 3 years, whichever is lesser.
- A non-citizen may apply for a family occupation permit which authorises the applicant, the latter’s spouse, dependent child, parent, other dependent or such other person working exclusively for the family unit, to become a resident for a period of 10 years, provided that some criteria are satisfied.
- A holder of a Premium Visa, spending 183 days or more in Mauritius, will be subject to income tax (e.g., emoluments for work performed remotely in Mauritius) on a remittance basis, that is, in the same manner as foreign-sourced income.
- Money spent in Mauritius through the use of a foreign credit or debit card is not deemed to be income remitted in Mauritius. On the other hand, money deposited in a Mauritian bank account is considered as income remitted in Mauritius and is subject to tax in Mauritius, unless a declaration is made to the effect that the required tax has been paid in the country of origin or residence.
Tax residency
Alternatively, the Mauritius Income Tax Act (“ITA”) 1995, defines tax residency if an individual has:
- his domicile is in Mauritius and he does not have a permanent place of abode outside Mauritius or
- spends 183 or more days in Mauritius in the tax year; or
- spend 270 or more days in Mauritius in the tax year and in the 2 preceding tax years.
The benefit of residence permit in Mauritius for an investor?
Change of tax residence. The tax year runs from 01 July to 30 June. Once an investor is treated as tax resident, the latter pays income tax in Mauritius. The standard rate is 15% but a reduced rate of 10% applies to individuals whose annual net income does not exceed Mur 650,000.
For tax residents, a solidarity levy of 25% is applicable on annual leviable income exceeding Mur 3 million but is restricted to a maximum of 10% of the total of net income and dividend income.
A tax resident is taxed on Mauritius-source income and foreign income remitted to Mauritius. Furthermore, he will be entitled to Income Exemption Threshold (“IET”).
A non-tax resident is taxed only on Mauritius-source income but he will not be entitled to IET.
Among other advantages, permanent residents benefit from non-double taxation agreements with over 40 countries and additional measures to encourage investment, such as exemption from capital gains, inheritance taxes and estate taxes. Hence, any income which has been subject to tax in a foreign jurisdiction will obtain a foreign tax credit in Mauritius provided there is documentary evidence to support the claim.
Why are these new residency rules needed?
Our population has remained relatively stagnant over a number of years, mostly as a result of an ageing population. Attracting people to live and work in Mauritius should create a virtuous cycle of increased spending and improved infrastructure.
This relaxation of the permits rules essentially stems from a recognition that not opening up our economy further to foreign labour and skills will hamper the country’s economic development. In the global race for skills and talents, we face tough competition from all developing and even developed economies. Most developed and developing countries around the globe have realised that talents and skills are key resources and while some, especially developed countries, have intrinsic advantages given the better quality of life, developing countries have put forward a lot of benefits – tax or otherwise – to entice expatriates.
In the case of Raymond Clyde Chung King Sow v/s The Director General, MRA – Sept 2020, the concept of residence was argued and it was held that where duties were performed outside Mauritius and income remitted in Mauritius, the legal consequence is that the income is derived in Mauritius and tax shall be paid on that income. The main points discussed in that case are highlighted below: –
The concept of residence and of source dichotomy was well debated. According to Professor Roy Rohatgi, unlimited taxation rights are granted to the country of residence, due to the “personal attachments” of persons. The country of residence may impose its taxes on the worldwide income of individuals.
On the other hand, limited taxation rights are granted to the country of source due to the “economic attachment” of persons. The country of source reserves the right to tax the income that is derived from the economic activities within its territory.
The primary taxing rights remain with the country with the source state and under domestic laws, countries will assert the right to tax income arising in their jurisdiction, and most countries will seek to tax residents on their income, wherever arising.
Mauritius taxes income under both concepts of residence and source. Section 5 of the ITA 1995 states that income derived by an individual from outside Mauritius shall be deemed to be derived by him when –
- it is derived in Mauritius by him or on his behalf; or
- it is dealt with in Mauritius in his interest or on his behalf.
To conclude…
With globalisation, a clear mandate of the residency regimes is being put in place to improve quality of labour as well as to tap into the potential of undeveloped and underdeveloped sectors such as high precision manufacturing, ICT, Food processing and pharma.
An important distinction should be made between residence permit and tax residency. A person having a residence permit is not necessarily a tax resident. The person needs to satisfy the criteria of tax residency under the Mauritius Income Tax Act in order to become tax resident.
The decision to live and work in Mauritius will become easier for expatriates more than ever by lowering the barriers to entry for non-citizens wishing to work and live in Mauritius in terms of minimum salary requirements, investing in local businesses, ability to bring dependent parents, and the right to purchase property.
Contributed by –
Yamisha Khadun
Tax Supervisor – Mazars
*The views expressed are personal.
