The Mauritian Budget of 15th June 2018 has introduced certain changes to the Mauritian Global Business regime. Essentially, these provide for the harmonising of the fiscal regime for domestic companies and Global Business Companies.

GBC2 to be phased out

The Financial Services Commission (“FSC”) will cease to issue licences for Category 2 Global Business Companies (“GBC2s”) as from 1st January 2019, though GBC2s incorporated prior to 16th October 2017 will be grandfathered in terms of their exempt income tax status until 30th June 2021. We expect further clarity to be provided on the status of existing GBC2s as from 1st January 2019 as to whether they will be automatically converted to domestic or GBC status and their income tax status.

GBC1 to become GBC

The Category 1 Global Business Company (“GBC1”) will be remodelled as a Global Business Company (“GBC”). The restrictions that existed on the extent to which a GBC1 could conduct dealings in Mauritius have been removed.

A resident Mauritian company or partnership which is majority held by a non-resident and which conducts the majority of its business outside Mauritius will be required to obtain a GBC licence from the FSC and to do so through a duly appointed Management Company.

New harmonised corporate tax regime

All domestic companies and GBCs in Mauritius (including partnerships holding GB licences, but not banks) will be eligible for exemption from income tax for 80% of specified income. That specified income encompasses:

• foreign source dividends and profits attributable to a foreign permanent establishment;
• interest and royalties; and
• income from provision of specified financial services.

GBCs claiming the partial exemption will have to satisfy pre-defined substantial activities requirements.

The Deemed Foreign Tax Credit regime available to GBC1s will be abolished as from 31st December 2018.

The existing credit system for relief of double taxation will continue to apply where partial exemption is not available.

Using a GBC to access the advantages of the Mauritius IFC going forward

For clients wishing to access the advantages of the Mauritius International Financial Centre going forward and who intend to invest outside Mauritius, with majority foreign ownership, the type of Mauritian entity to be set up will be the GBC (formerly the GBC1).

For clients holding existing GBC1s, these will now be known as GBCs. They will continue to enjoy favourable tax treatment along the lines of the treatment that they have enjoyed before and to operate as they have previously operated, with the demonstrating of substance on the ground in Mauritius continuing to be important.

International Proximity is monitoring the position on GBC2s and will issue updates as more clarity is forthcoming.