Mauritius is largely regarded as a low tax jurisdiction which is favourable for trade and investment. In addition to its strategic location in the Indian Ocean, the government has signed double taxation avoidance agreements with 44 countries in an endeavour to attract and retain foreign investment.
The Government of Mauritius has proposed several measures in the latest budget, which was subsequently enacted in the Finance Act 2021 to attract foreigners in the country. Some of the incentives include:
- Resident Permit will be issued to a person who purchases or otherwise acquires an apartment for residential purposes in a building of at least 2 floors above ground floor, provided the purchase price is USD 375,000 or more or its equivalent in any other hard convertible foreign currency.
- Any investor, professional or self-employed holding the status of a permanent resident may, on application be granted a permanent residence permit under the category of retired non-citizen in replacement of his status as permanent resident for the remaining period of its validity, provided that he has a monthly disposable income of 1,500 US dollars or its equivalent in any other hard convertible foreign currency.
- The extension of a validity period of a Professional Occupational permit from 3 years to 10 years;
- The dependents of a holder of an Occupational Permit may also apply for a residence permits up to the period entitled to the latter.
These measures, along with other amendments to the Immigration Act 1973, aim at encouraging non-citizens to work and live in the country and at the same time bringing foreign investment into Mauritius.
Taxation also plays an important role in attracting investors. Resident individuals in Mauritius are currently taxed at a rate of 10% on annual taxable income up to MUR 650,000 and 15% on taxable income over MUR 650,000.
First introduced in 2017, the solidarity levy was amended as part of the Finance Act 2020, which came into effect as from 01st July 2020, in an attempt to promote a more equitable distribution of income and ensure social justice during the Covid 19 pandemic which has been devastating for economies worldwide.
The solidarity levy which was previously at 5% has increased significantly and was expected to provide an estimated MUR 3 billion in revenue.
A tax resident individual will be subject to solidarity levy at the rate of 25% in excess of a reduced threshold of MUR 3 million of his leviable income. However, the levy is capped at 10% of the sum of his net income and dividends.
Also, solidarity levy at the rate of 25% shall be withheld under the PAYE system on emoluments in excess of MUR 230,769 in a month provided it does not exceed 10% of the total emoluments.
Furthermore, both an employer and employee should now contribute to Contribution Sociale Généralisée (“CSG”) under the National Pension Act which was introduced via the Finance Act 2020.
These measures can be contentious where one may argue that they are a way to increase revenue for the Government whereas the other can perceive same as exuberant and dissuade investment. Mauritius may no longer be perceived as a low tax jurisdiction by the investors. Also, given that only tax residents are subject to the levy, it will be difficult to attract foreign professionals and retain local talents.
The increase in tax which is beneficial for Mauritius must be linked to the global pandemic affecting the economies as a whole but at the same time discouraging for people to work and earn higher income. In the long term, this may be detrimental to the economy.
Contributed by –
Nilesh Ujoodha
Senior
Mazars – Tax and Accounting
*The views expressed are personal.
