Mauritius has published the Finance (Miscellaneous Provisions) Act 2018, which was assented (enacted) on 9 August 2018. The Act provides for the implementation of measures announced in the Budget Speech 2018-2019 and related matters. The measures are summarized as follows:

Replacement of the Category 1 and 2 Global Business License Regimes:

• Effective 1 January 2019, the Deemed Foreign Tax Credit regime available to companies holding a Category 1 Global Business License is abolished, and replaced with a new Global Business License regime;
• A partial exemption is introduced whereby 80% of specified income is exempted from income tax for domestic Mauritius companies and licensed Global Business Corporations, including for:
  • Foreign source dividends, provided that the dividend is not allowed as a deduction in the source country;
  • Interest derived by companies other than a bank, provided that substance requirements are met;
  • Profits attributable to a permanent establishment in a foreign country;
  • Income derived from overseas by a collective investment scheme (CIS), closed-end fund, CIS manager, CIS administrator, investment adviser or asset manager, licensed or approved by the Financial Services Commission; and
  • Income derived by companies engaged in ship and aircraft leasing;
• The existing credit system for relief of double taxation continues to apply where the above partial exemption is not available;
• In order to obtain (and keep) a Global Business License, a Global Business corporation must at all times:
  • Carry out its core income generating activities in, or from, Mauritius by:
    • employing, either directly or indirectly, a reasonable number of suitably qualified persons to carry out the core activities; and
    • having a minimum level of expenditure, which is proportionate to its level of activities;
  • be managed and controlled from Mauritius; and
  • be administered by a management company;
• A new company type, the Authorized Company, is introduced that somewhat replaces Category 2 Global Business License and includes the following features:
  • The company is not held or controlled by a person that is a citizen of Mauritius;
  • The company conducts business principally outside Mauritius and has its place of effective management outside Mauritius;
  • Foreign-source income of the company is outside of the scope of Mauritius tax, while Mauritius source income is generally taxable and annual returns must be submitted (a registered agent must be maintained in Mauritius at all times);
• Depending on the date of issue, existing Category 1 or 2 Business Licenses will be transitioned as follows:
  • If issued on or before 16 October 2017, the licenses remain valid until 30 June 2021, after which Category 1 Business Licenses will be deemed to be Global Business Licenses and Category 2 Business Licenses will lapse;
  • If issued after 16 October 2017, the licenses remain valid until 31 December 2018, after which Category 1 Business Licenses will be deemed to be Global Business Licenses and Category 2 Business Licenses will lapse;
• For Category 2 Business License holders transitioned until 30 June 2021, current exemptions generally continue to apply except in respect of the following income for which returns must also be filed:
  • Income from intellectual property assets acquired from a related party after 16 October 2017;
  • Income from intellectual property assets acquired from an unrelated party, or newly created intellectual property assets, after 30 June 2018; and
  • Income derived from such specific assets acquired or projects started after 31 December 2018.

New Rules for the Taxation of Banks:

• The Deemed Foreign Tax Credit regime available to banks is abolished as from 1 July 2019, and replaced by a new regime specific that makes no distinction between Segment A and Segment B income, and includes the following tax rates:
  • 5% on chargeable income up to MUR 1.5 billion; and
  • 15% on chargeable income above MUR 1.5 billion;
• An incentive system is introduced for banks having chargeable income exceeding MUR 1.5 billion, including that any chargeable income in excess of the chargeable income for a set base year will be taxed at a tax rate of 5% if pre-defined conditions are satisfied (conditions to be issued); and
• The current special levy on Banks and the formula applied is maintained up to 30 June 2019, after which the special levy will be replaced by a new special levy under the VAT Act that will be charged on the net operating income derived by banks from domestic operations.

Other Business-Related Measures:

• The Freeport regime is amended, including the removal of the corporate tax exemption granted to freeport operators and private freeport developers on export of goods, with grandfathering till 30 June 2021 for those that have been issued with a freeport certificate before 14 June 2018;
• The 3% reduced rate of corporate tax applied on profits derived by any company from the export of goods is extended to companies involved in global trading activities;
• From 1 October 2018, VAT-registered persons are no longer required to pay VAT on the import of capital goods including plant and machinery, although the VAT-registered person must still declare the import in the VAT return (previously VAT must be paid but a refund could be claimed);
• An investment tax credit of 5% in the year of acquisition and the subsequent two years is provided in respect of expenditure in new plant and machinery (excluding motor cars) by a company importing goods in semi knocked-down form on the condition that at least 20% local value addition is incorporated in the goods (applies for expenditure made from 1 July 2018 to 30 June 2020);
• A new Work@Home scheme is introduced from 1 July 2018, which allows for a double deduction from tax of the wage and salary costs of employees under the scheme for the first two years, and an annual tax credit of 5% for employers on investments in the required IT system for homeworkers in the year of acquisition and subsequent two years (credit applies from 1 July 2018 to 30 June 2020);
• The solidarity levy on telephony service providers (5% of book profit + 1.5% of turnover) is extended until June 2020, and is made payable by all profitable companies with the removal of the condition that the book profit of a company exceeds 5% of its turnover;
• Corporate Social Responsibility (CSR) contribution rules are amended including that:
  • A company may reduce CSR contributions to the Mauritius authority by up to 25% of a CSR Fund set up on or after 1 January 2019 where the company intends to use such amount to finance a qualified CSR program that started before 1 January 2019; and
  • A company may not offset any unused tax credit such as the foreign tax credit against any amount of CSR payable;
• Tax Deduction at Source (TDS) is extended to 'commission payment' at the rate of 3%, and the TDS rate applied on rent paid to a non-resident is increased from 5% to 10% effective 9 August 2018 (related release); and
• From 1 September 2018, persons that intend to appeal the result of an objection of an assessment before the Assessment Review Committee are required to pay 5% of the amount assessed in addition to the 10% required prior to the initial lodgment of the objection.

Individual-Related Measures:

• The individual income tax exemption thresholds are increased effective 1 July 2018 as follows:
  • Individual with no dependents - MUR 305,000
  • Individual with one dependent - MUR 415,000
  • Individual with two dependents - MUR 480,000
  • Individual with three dependents - MUR 525,000
  • Individual with four or more dependents - MUR 555,000
  • Retired/disabled person with no dependent - MUR 355,000
  • Retired/disabled person with dependents - MUR 465,000
• A new individual income tax rate of 10% is introduced for individuals with annual net income of up to MUR 650,000 (prior 15% flat rate applies on income exceeding that amount); and
• A final withholding tax of 10% is introduced from 1 September 2018 on lottery winnings and winnings in casinos and gaming houses in excess of MUR 100,000.