Mauritius has emerged as a tried and trusted international financial centre of substance in cross-border investments. Its competitiveness among global players has been sharpened by the sound legal and regulatory framework and attractive fiscal and non-fiscal incentives (see examples below). In addition to the country’s excellent telecommunications infrastructure and well-established financial institutions, there is a dynamic demographic trend of young bilingual and multidisciplinary professionals who deliver timely and quality services to global institutions. Furthermore, the hybrid legal system in Mauritius incorporates aspects of English law and French Civil Code, enabling local law practitioners to be at ease with most foreign jurisdictions.
Effective corporate governance is at the centre of the country’s operations. Due to its full support of global initiatives aimed at combatting money laundering and terrorist financing, Mauritius regularly tops global rankings for governance and business. Some features include the Ibrahim Index of African Governance (IIAG), the Index of Economic Freedom, and the Forbes Best Countries for Business. Regarding taxation, Mauritius is tax efficient, with a wide network of double taxation conventions. Corporate tax is at 15% with a deemed foreign tax credit that mitigates the effective tax rate of global companies to a maximum of 3%. There are no withholding taxes on dividends, interests, and royalties, while capital gains on disposal of securities and other movable property are exempt from taxation. The non-fiscal incentives would include the absence of exchange controls, free repatriation of profits, dividends, and capital, the number of investment promotion and protection agreements and the flexibility to pay taxes in selected currencies.
In 2014, almost 40% of the private equity funds into Africa were structured and domiciled in Mauritius. Several African investors and institutions use Mauritius as their jurisdiction of choice to effectively tap into the African market. The country also attracts Indian and Chinese corporates, institutional investors, and Chinese state-owned companies for outbound investment into African emerging sectors, inter alia infrastructure, mining, telecommunications, agriculture, information technology.
The investments into Africa must be structured effectively to have an optimal balance between risk mitigation and decent returns. Mauritius has signed Double Tax Avoidance Treaties and Bilateral Investment Treaties with many African countries, which facilitate risk mitigation, reduction or elimination of withholding and capital gains taxes, free repatriation of investment capital and returns, guarantee against expropriation and most favoured nation rule with respect to treatment of investment.
Mauritius is bracing itself to meet the challenges to run the next lap of its global business development. It has adopted a three-pronged strategy to meet the changes unfolding internationally. For example, the country has introduced policies to have enhanced substance in its jurisdiction both to create more high level jobs and to respond to the unwarranted criticisms of being a tax haven. It is also diversifying its service offerings to include services such as wealth and asset management, regional treasury management and regional headquarters, investment banking and legal and advisory services. Finally, the country is positioning itself to become the business and financial hub between Asia and Africa. A new business and incentive framework has been introduced to attain these goals.« Back to Afri-Spective: An Inside Look at Private Equity in Africa