New regulations on Tax Residency Certificate in Mauritius
Rizwana Ameer Meea
et Willy Bashiya Mbayi
Mauritius is a strategic Global Business center located in the Indian Ocean. It is one of the most open and financially sound economies in Sub-Saharan Africa. Mauritius is located between Asia and Africa, and the success of its economy is largely a result of its political and socio-economic stability, coupled with good governance and a wide range of incentives to boost investment.
Mauritius has been known as an excellent place for doing business. The country’s adoption of international best business practices and sustainable development policies has been acknowledged by international agencies such as the Organization for Economic Cooperation and Development (OECD), the Financial Action Task Force (FATF) and the World Bank (WB).
The country has embarked upon a new reform program underpinned by an open economic philosophy. The objective is to boost its appeal to international investors and make Mauritius the financial hub of the African region and an ideal springboard for investment and doing business in Africa, Middle East and Asia.
The most prominent factor for setting up an entity in Mauritius is its concessional tax rate. In fact, the corporate tax rate is 15%, but its effective tax rate on foreign income is reduced to a maximum of 3% after allowance of foreign tax credit. The rate can be further reduced depending on the actual foreign tax credit. It can also benefit from the double taxation treaty network of Mauritius, currently standing at 33, thereby reducing or eliminating withholding tax on dividend, interest, royalty and capital gains.
However, to obtain the utmost benefit of the double taxation treaty, the entity needs a Tax Residency Certificate (“TRC”). At the same token, a new regulation (reg. 20a) was added to the 1966 Income Tax Regulations providing for payment of service fees when applying for a TRC during the application of a Truth and Reconciliation Commission. The new measure became effective as of 17 February 2013 and is set as follows:
a. In case the applicant is a collective investment scheme, USD $1,000; and
b. In any other case, USD $200;
Therefore, the Tax Administration will issue only the TRC without making any particular reference to any DTA except where a TRC is required under a specific DTA. The applicant will in such a case have to pay an additional fee depending on the category of the applicant.
The service fee is payable to the Tax Administration in USD via a bank transfer, cash or from an advance payment account. All TRC applications must be made on the prescribed TRC form to the Financial Services Commission for onward recommendation to the Tax Administration.
Applicants are advised to submit TRC renewal applications at least 30 days prior to the expiry of the current TRCs. Upon recommendation made to the Tax Administration, the Commission will issue a “TRC Recommendation Notice” which can be collected at the counter of the Financial Services Commission. Upon settlement of the relevant service fees to the Tax Administration, the TRC can be collected from there.
Please note that except for some procedures which have been revised as explained above, the practice adopted and the procedures laid down in Circular CL011006 and CL II/220408 will remain unchanged.