Legislative updates in Mauritius
Iqbal Rajahbalee, Jean-Eric Sauzier and Fayaz Hajee Abdoula
Iqbal Rajahbalee (Bio)
Jean-Eric Sauzier (Bio)
Fayaz Hajee Abdoula (Bio)
When the Mo Ibrahim Foundation published the Ibrahim Index of African Governance at the end of 2010, it set itself to rank the 53 African countries' performances in terms of good governance, paying particular attention to a given set of parameters. These included safety, rule of law, human rights, sustainable economic opportunity and human development. Mauritius came out on top as the only jurisdiction scoring more than 80. While wishing to consolidate its position as the preferred route for investing in and out of India and other Asian jurisdictions, Mauritius has set also itself to being the preferred platform for investments in and out of Africa and for offshore Africa-oriented investment and holding structures. A number of recent legislative developments have contributed towards the further streamlining and increased flexibility of the Mauritian corporate and tax landscape which should, both in the short and long term, contribute towards the above goals.
Increased flexibility for offshore global business licence special purpose vehicles
Up until mid 2010, global business licences have usually been issued to special purpose vehicles that were meant to deal only with offshore transactions (GBL entities). While they were allowed to also deal with the domestic market, these were as a matter of exception and required the express prior approval of the Financial Services Commission. This restriction has now been lifted and GBL entities are now also allowed to trade on a domestic basis. This dual trading status of GBL entities comes with the added formality of having to keep separate records of its global and domestic trading activities and having to carry out dual filings with both the global and the domestic regulatory authorities. This development is accompanied with the further streamlining of GBL entity share transfers through the abolition of need to file share transfer forms when transferring GBL entity shares. While it may seem like a minor legislative development it will lead to a smoother transactional corporate landscape.
Contained introduction of capital gains tax
The Government has limited capital gains tax to Mauritian immovable property transfers only. While immovable property sellers would be exempt from tax on the first MauR(s)2 million ($70,000 approx.) of gains derived from a Mauritian immovable property sale, any further gains would attract a 10% levy. While this is the first time that capital gains would attract a levy in Mauritius, the scope is very much restricted and should leave the global business community unscathed. Insofar as tax structures geared towards investment into India are concerned, the above should be read in the light of a recent D B Zwirn Mauritius finding in which the Indian tax authority issued an advance tax ruling maintaining that the Mauritius/India tax treaty allowed for the exemption for capital gains made in India. This is a crucial finding on the interpretation of the double taxation agreement between Mauritius and India, especially in the wake of the adverse capital gains tax decisions made by Indian courts in the recent but notorious Vodafone decision. However, this is a matter still being looked into by the Indian authorities. If anything, this reinforces the need for offshore investors to use an appropriate jurisdiction and that Mauritius is one of those jurisdictions which is recognised by foreign tax authorities as an adequate treaty country.
The Securities (Takeover) Rules
The Securities (Takeover) Rules 2010 is effective since May 1 2011. It aims to unify the piecemeal legislation relating to M&A into a single act. It also brings a holistic process to the M&A landscape in order to adopt the best international practices within the local business community. The Mauritius Financial Services Commission is the sole regulator whilst the Competition Commission may also have an interest in relation to takeovers.
The key areas of legislation are around the structuring of 'offers' by any potential bidder , the definition of 'effective control', its application to both listed and non-listed companies and finally, bringing appropriate safeguards for minority and dissenting shareholders. It is important, however, to note that the new rules only apply where the offerer is a 'reporting issuer' and that the rules do not apply to companies holding a global business licence unless they are listed on a relevant securities exchange.
Mauritius has reaffirmed its position as the offshore platform of choice to serve both the Asian and African regions. Recently emerging economic power houses like India, China and resources rich Africa are set to attract further huge investments and investors,- having placed their beliefs in the economic expansion of these regions – must also look forward to being able to adequately capitalise their gains. We are set to see an extremely positive and eventful decade for both Asia and the African continent and while many jurisdictions will claim to be possible financial centres of choice for these economic regions, very few will have a proven track record as an established financial centre constantly featured on the OECD white list. Furthermore, the recent fine-tuning of the Mauritian legal and regulatory framework confirms that the jurisdiction is able to listen to and understand the requirements of the offshore business community.