Mauritius offers a relatively low tax jurisdiction with an investor-friendly environment to encourage both local and foreign companies to set up a business in Mauritius.
Local companies in Mauritius enjoy a low corporate tax rate of 15%, and companies in the global business (formerly offshore) sector are also taxed at a corporate rate of 15% on business profits. However foreign tax credits are allowed to the full extent of the Mauritius tax for taxes paid at source. There is also a system of foreign tax credits of 80% that effectively reduces the income tax rate to 3% on the qualifying income of the company.
Various type of income are exempt from income tax, including:
• Income derived by a Freeport company.
• Income derived by the registered owner of a foreign vessel.
• Income derived by the registered owner of a local vessel registered in Mauritius (provided the income is derived from deep sea international trade only).
• Capital gains on speculative or investment gains.
• A resident societe.
• Dividends received and paid by a tax incentive company.
• Interests payable on accounts held by qualified corporate (offshore).
• Interest payable on specific government securities.
• Royalties payable to a non-resident by a qualified company trust or bank.
In general, the taxable income of a branch of a foreign company is computed in the same way as that of a resident company. However, a branch may not claim a deduction for interest and royalties paid to its foreign head office. Payments of interest and royalties by a Mauritian subsidiary to its foreign parent, on the other hand, are deductible, although the payments will constitute Mauritian source income subject to Mauritian income tax in the hands of the parent.
All Mauritian double taxation avoidance treaties are based on the OECD Model Treaty of 1977. Under the post-independence treaties concluded so far, tax sparing is available. This implies that where Mauritian source dividends are exempt from tax under the tax incentive provisions, the foreign investor is entitled to credit a notional amount of Mauritian tax against the tax payable (if any) in his country, thus reducing his domestic tax liability.
A Tax Residence Certificate (TRC) is issued by the Income Tax Department in respect of a company holding a Global Business Category 1 Licence (GBC1). It allows such a company to claim Double Taxation Relief under the various treaties signed by Mauritius.