Manufacturing in Mauritius and the incentives to export and trade from Mauritius

Mauritius is an established manufacturing hub, nestled conveniently on the trade route between Europe, Asia and Africa. The two main products dominating this industry in Mauritius over the last few decades were textiles and sugar. In recent years the offering has become more diversified and a multitude of incentives for manufacturers have been created, both fiscal and practical, that can help those looking to use Mauritius as a global manufacturing hub. It is our intention to provide a simple guide explaining what the advantages of both manufacturing and exporting from Mauritius are.

Why manufacture in Mauritius?

1 – Business Environment
Mauritius is renowned for its ease of doing business and is ranked 1st in Africa for almost every business indicator. It is quick and simple to set up a company and an offshore bank account, even as a foreigner setting this up remotely. There are checks and documentary requirements as you would expect from any reputed jurisdiction. You will need to have a corporate service provider administering the entity or structure if it is to do business globally. It is relatively simple to relocate to Mauritius, buy property and get your occupation permits.

There is a Freeport and modern infrastructure in Mauritius with excellent global logistics by both air and sea. The local population is well-educated, cost-effective and bilingual, speaking English and French. Madagascar is often used for the outsourcing of certain activities, especially for textiles, as this brings the costs even lower. One can buy commercial property in Mauritius as a foreigner and can rent factories and warehouses for low prices.

2 – Fiscal Incentives
These are the current incentives for manufacturing in Mauritius listed on the Economic Development Board’s website as of the time of writing this article.

  • 8-year income tax-holiday for companies engaged in the manufacturing of pharmaceutical products, medical devices and high-tech products
  • 3 per cent corporate tax on profits derived from exports of goods
  • No import duties on equipment and raw material
  • No export duties in Mauritius
  • VAT on raw materials is payable at customs clearance but reimbursable on exports
  • Investment Tax Credit of 5% – 15% per year (i.e. 15% – 45% over three years) for investment in high-tech manufacturing equipment (the credit amount will depend on the nature of the activity)
  • Accelerated depreciation of 50% on machinery, equipment and construction of industrial premises dedicated to manufacturing activities
  • Companies can claim a double deduction in respect of qualifying expenditure on R&D until income year 2021-2022
  • No Registration Duty and Land Transfer Tax on any transfer of a building or land earmarked for the construction of a building, to be utilised for setup of qualifying high-tech manufacturing activities
  • Accelerated depreciation of 50 percent per annum on capital expenditure incurred on R&D

3 – Preferential Market Access and Unique Opportunities
Mauritius has in place several regional Agreements, such as SADC, COMESA and IOC but also AGOA and the Interim EPA with the US and the EU respectively. Each offers different trade and access benefits depending on where one is exporting to. Mauritius has many bilateral treaties with other countries in Africa and beyond that give further tax, business and protection benefits. These agreements are one reason why Mauritius is a very popular choice for trading and holding companies, especially when dealing with countries in Africa that are less stable or have high withholding taxes.

Mauritius has an Exclusive Economic Zone of 1.96 million square kilometres and a jointly-managed agreement with the Seychelles for another 396,000 square kilometres. There is therefore a thriving seafood processing sector in Mauritius with a strong focus on tuna. Due to the significant amounts of sugar being processed in Mauritius there are a number of very credible and renowned rum–makers.

Summary
For the many reasons listed above, Mauritius is strategically and geographically a very good place to set up a manufacturing or trading company. Whether a Mauritian company exports goods directly from Mauritius that it manufactures, or buys goods from Asia for example and ships them straight to Africa or Europe, the tax on profits in Mauritius are only at 3% with tax on dividends at 0%. Add to that a stable banking system used to trading globally, the Privy Council of England and Wales as the Apex Mauritian court, as well as the low-cost labour and safe idyll existence in Mauritius, then it is no wonder that demand for setting up Mauritian companies is high.

About the Arthur:
Philip Tsalikis is a practising UK barrister based in Mauritius and registered there as a foreign lawyer. He is the founder of TBI Mauritius, a consultancy firm based in Mauritius but with a global reach and network. TBI assists individuals and businesses with their investment, setup and operations in Mauritius, and throughout Africa.

 

Disclaimer
Our aim with our articles is to make them digestible. We keep them short and relevant but do not update them. They are not designed to be legally relied upon. This article contains no legal, tax or financial advice, all of which should be sought from relevant professionals.

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Formation of Offshore Companies in Mauritius

We have attempted to provide some information on what options people have for company formation and registering businesses in Mauritius, including both offshore companies and domestic companies. We try and go through a few of the benefits of the jurisdiction, the different options there are, and points to consider along the way. This is neither meant to be exhaustive nor detailed and is not to be relied upon other than for general information purposes.

Advantages of Mauritius
Mauritius packs quite a punch for a small island. Significant amounts of Foreign Direct Investment have headed to India and China, and now to Africa, using Mauritius as its conduit. There are many reasons for this. In short, there are Double Taxation Avoidance Treaties (DTA) and International Promotion and Protection Agreements (IPPA) with the countries that the company or fund are to invest in. The first of these, amongst other benefits, limits the withholding tax and tax on dividends amongst other taxes, and the second provides protection to the investment that it would not be possible to do if one did not base the company in Mauritius. The tax regime in Mauritius is flat at 15% for corporate and income tax, but with most structures and funds, this can be reduced to 3% or even 0%. The population is bilingual, highly educated, and the stability of the country defies much of the rest of Africa.

Types of Companies in Mauritius
Despite there being much information online regarding GBC 1 and 2s, (Global Business Companies), it is not possible to create either of these offshore companies anymore. Existing ones have special rules grandfathering some of their benefits for a while yet, but we are left with three options for companies in Mauritius if one wants to set up a new Mauritian company.

1 – Domestic Companies
These are local companies, primarily for doing business in Mauritius. They are very similar to any company from the UK, Australia or New Zealand, with the Companies Act having most of the same rules. These companies can be owned by foreigners. Practical instances of foreigners using these are generally for when the company will concern Mauritius in its operations. For example, they are often used when someone is on an investor permit and they are undertaking much of their development of investment in Mauritius. They are sometimes used to purchase Mauritian property to avail many of the benefits. Business registration is quick for domestic companies and the costs are low. There will need to be one resident director. These do not require a management company.

2 – Global Business Licences
There is now only one Global Business Licence as of January 2019. This is similar to the old GBC 1, but with different substance requirements and different tax consequences. There are more onerous conditions to qualify as a Global Business Company (GBC). The GBC is now taxed at 15%, but instead of the old deemed foreign tax credit of a GBC1, there is now a partial tax emption of 80% for certain income. This brings tax of the entity down to 3% for a structure that is properly set up. There still need to be 2 directors resident in Mauritius, whom are generally provided by the management company. These companies normally take 2-4 weeks to set up including a bank account. If other Mauritian licences are needed during the business registration process, such as Investor Dealer Licences, Investor Advisor Licences, Payment Service Provider Licences (Payment Intermediary Service Licence in Mauritius) or Collective Investment Scheme Licences (Fund Licences), then these other licences will delay the process significantly.

3 – Authorised Companies
The other offshore company is the authorised company. This is not resident in Mauritius for tax purposes, and therefore cannot utilize many of the benefits of using Mauritius such as the DTAs and the IPPAs. The tax is therefore 0% and this is the equivalent of the old GBC 2, an offshore Mauritian company. The directors need to be outside Mauritius so you need to make sure that whichever management company you are dealing with has a good partner in another country to provide these directors. Authorised companies are somewhere between the domestic companies and GBCs in terms of cost and timeframes to set up.

Management Companies
Management companies are corporate service providers that assist with the set up and administration of offshore companies in Mauritius. They are licensed by the Financial Services Commission (FSC), who are the regulators for the financial sector here, other than banking. For when there is insufficient regulation in an area, such as in FinTech, then the Economic Development Board, amongst other, is involved. Management companies vary greatly in terms of their size, competence and global reach. The fees that the client pays by coming through us are some of the best value around as the management companies we work know that we get multiple quotes, and the service level they provide is high as we give them numerous clients. Importantly also, when a client needs a global solution, or a particular area of expertise such as FinTech, then this requires us to use specific management companies and service providers for different clients and their specific needs, which we can guide you through.

Conclusion
You will need advice and guidance as to what company and structure to choose as you want to be tax-efficient but within the law. TBI works with the most reputable management companies, accountancy firms, lawyers and banks as well as with the FSC, EDB and Registrar of Companies, to provide a one-stop shop in Mauritius for your business setup and beyond. We act as a partner that the client can trust, and as an introducer to make sure that the right service providers with the necessary competence are giving the client both quality work and value.

About the Arthur:
Philip Tsalikis is a practising UK barrister based in Mauritius and registered there as a foreign lawyer. He is the founder of TBI Mauritius, a consultancy firm based in Mauritius but with a global reach and network. TBI assists individuals and businesses with their investment, setup and operations in Mauritius, and throughout Africa.

 

Disclaimer
Our aim with our articles is to make them digestible. We keep them short and relevant but do not update them. They are not designed to be legally relied upon. This article contains no legal, tax or financial advice, all of which should be sought from relevant professionals.

Please get in touch to find out more.

Service Page