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Mauritius Budget Brief 2020/21: Ocorian Analysis

Overview Ocorian in numbers The 2020/21 Budget (the Budget) entitled, “Our new normal: the economy of life” has been presented whilst the country still battles with the impact of Covid-19. It is a tricky balancing act: restarting an economy that has almost been brought to a standstill following the pandemic, whilst having to boost badly affected revenues. 20 The government’s strategy to create a platform for sustainable growth in a Office “new normal” world is commendable. Additional measures announced in the locations Budget, such as those aimed at attracting foreign talent, will also help to boost the development of emerging sectors such as Fintech. In relation to the financial services sector, the commitment to ensure compliance with international norms is critical, and embracing diversification through innovative technology and financial products will ensure that we have a 17,000 competitive edge. The target has been set: the jurisdiction needs to thrive in the Structures under “new normal” beyond merely addressing current challenges. administration We have outlined below the key measures that will be relevant for companies operating in the Global Business sector, along with our analysis on the potential implications for their business.

1. Regulatory framework 1,250+ • The Government has responded to the threat of the EU list of high-risk Staff jurisdictions and has shown its commitment to address the jurisdiction’s worldwide deficiencies in relation to the Financial Action Task Force (FATF) recommendations by September 2020. The following measures will be implemented: i. risk-based supervisions in accordance with the recommendations of the FATF; 8,000+ ii. targeted outreach programmes to promote clear understanding of Clients money-laundering and terrorist financing risks; iii. increased reporting of suspicious transactions; iv. targeted financial sanctions in cases of terrorist financing; and v. timely access to beneficial ownership information. $260bn Assets under • The Government will strengthen the current legislative framework by administration introducing a new AML/CFT (Miscellaneous Provisions) Bill. • The Government will also set up a dedicated and specialised Financial Offences Court.

ocorian.com Regulatory framework analysis Business facilitation analysis The Government is determined to convince the EU to keep At a time when many amongst the worst hit nations are Mauritius off the list of high-risk jurisdictions, and it has until showing a tendency for isolationism, it is encouraging the end of September 2020 to do so as the list is expected to see Mauritius pursuing its opening to the world with to be effective from 1st October 2020. We hope that the renewed vigour. Making it easier for foreign nationals to measures announced will be implemented swiftly and on a live, work and invest in Mauritius is a welcome move, more timely basis to remediate the gap in AML/CFT compliance so in the face of an ageing population and a dearth of in Mauritius. The new AML/CFT legislation should contain competencies in innovative and specialist sectors. On the robust and forward-looking provisions that not only solve business facilitation side, supportive measures such as the current problems, but also set the scene for the adoption Centralised-KYC platform will be a real game changer if of international norms and practices. This is critical for the implemented swiftly. Such a platform will accelerate on- reputation and success of our financial sector. boarding and related AML/KYC processes to allow clients to set up their businesses faster and more smoothly. 2. Business facilitation • The Government has announced a number of incentives 3. Fiscal measures to encourage foreigners to live, work and invest in LEVY ON GROSS INCOME Mauritius: A new levy will be applicable to domestic companies i. The Work Permit and Residence Permit will be whose gross income (on a group basis) exceeds combined into one single permit. MUR 500mn as follows: ii. The Government will be lengthening the validity of an i. 0.3% for insurance companies, financial institutions, Occupation Permit (OP) and a Residence Permit for service providers and property holding companies; and retirees to 10 years renewable. ii. 0.1% for other companies. iii. The minimum investment amount for obtaining an OP The levy will not apply to companies operating in the will be reduced from USD 100,000 to USD 50,000. tourism sector, nor companies holding a Global Business iv. The minimum turnover and investment requirements Licence (GBL). for Innovator Occupation Permits are being removed. INCOME TAX HOLIDAYS v. The spouse of an OP holder will not need a permit to An eight-year income tax holiday will be granted to: invest or work in Mauritius. i. Companies engaged in the manufacturing of vi. OP holders will also be allowed to bring their parents nutraceutical products. to live in Mauritius. ii. Companies engaged in the manufacturing of vii. Professionals with an OP and foreign retirees with pharmaceutical products, medical services or high-tech a Residence Permit will be able to invest in other products. ventures without any shareholding restriction. iii. Companies operating under the inland aquaculture viii. Non-citizens who have a residence permit under the scheme. various real estate schemes will no longer require an Occupation or Work Permit to work and invest in iv. Top 500 institutions worldwide setting up branch Mauritius. campuses in Mauritius. ix. The Permanent Residence Permit will be extended TAX INCENTIVES from 10 to 20 years. i. 100% annual allowance can be claimed on electronic, high precision machinery or equipment, automated x. OP and Residence Permit holders will be eligible to equipment and green technology equipment in the apply for a Permanent Residence Permit if they have year the expenditure is incurred. held the permit for three consecutive years. ii. Accelerated depreciation can be claimed on green xi. The minimum investment amount for an investor to technology equipment including equipment and obtain the status of Permanent Resident or for a holder machinery for eliminating, reducing and transforming of an immovable property under an existing scheme to industrial waste. obtain the status of Resident will be reduced from USD 500,000 to USD 375,000. iii. Investment tax credit of 15% over three years has been extended to all manufacturing companies. xii. Non-citizen holders of Residence Permit, Occupation Permit or Permanent Residence Permit will be allowed iv. Top 500 institutions worldwide setting up branch to acquire one plot of serviced land not exceeding campuses in Mauritius will benefit from a tax 2,100 m2 for residential purposes within Smart Cities. exemption on IT and IT-related materials and equipment for the purpose of online education. • The Central Bank will set up a centralised KYC platform. • The Corporate and Business Registration Department v. Double tax deduction will be made available to: (CBRD) will become the central repository for all • Companies impacted by Covid-19 on investment in business information and licences through a digital plant and machinery, during 1st March 2020 to 30th platform. June 2020;

ocorian.com • Manufacturing companies on the cost of acquisition been introduced to boost government revenues hit hard of patents and franchises and the costs incurred by Covid-19. However, these measures do not impact GBL to comply with international quality standards and companies and foreign citizens respectively. In line with norms; and previous budgets, the Government has introduced further • Pharmaceutical companies on R&D expenditure. tax holidays and incentives, particularly in relation to manufacturing and capital expenditure. The Government PARTIAL INCOME EXEMPTION has also brought reforms to the national pension by The partial income exemption regime that is applicable to introducing a new pension scheme. Employers based in certain streams of income has been amended, such that Mauritius will have to assess the financial impact of the new the following types of businesses will not be able to benefit pension contributions on their businesses. from the 80% income exemption on interest. This means that such income will be taxed at 15% instead of potentially 4. Africa strategy 3%, although credit may still be taken for any foreign tax • The economic recovery plan laid out by the Government suffered: will also focus on reinforcing the country’s partnerships • Non-bank deposit taking institutions; with the rest of Africa. • The Mauritius Investment Corporation has earmarked • Money changers; MUR 10bn to invest in African projects, including in • Foreign exchange dealers; Special Economic Zones under a G2G framework. • Insurance companies; • The Government will assist young African entrepreneurs to do business in Mauritius by making it easier to set up • Leasing companies; and operate a company, hire local talent, export to the • Companies providing factoring, hire purchase facilities or world, and resolve commercial disputes. credit sale facilities. Africa strategy analysis INDIRECT TAXES The announced investment in Africa underpins the jurisdiction’s continued engagement with the continent i. Digital and electronic services provided through in a spirit of broader economic integration. Mauritius still internet by non-residents for consumption in recognises mutual opportunities in working together with Mauritius will be subject to VAT. Africa and enhancing bilateral and well as multilateral co- ii. All transactions should be carried out at arm’s length operation. The conducive eco-system to make it easier principle, else the value of the supplies will be for African entrepreneurs to do business in Mauritius is a recomputed at market price by the MRA. welcome move, the success of which shall benefit both Mauritius and the continent. iii. A company should register for VAT on business registration and company incorporation. 5. Technology, Innovation and New Financial PERSONAL INCOME TAX/ PENSION Products i. Solidarity levy NEW FINANCIAL PRODUCTS Introduction of new innovative financial products in line • There will be an increase in the solidarity levy from with the recommendations of the 10-Year Blueprint to 5% to 25% on the amount of chargeable income plus enhance the competitiveness of the financial services dividends exceeding MUR3mn of a resident Mauritian sector: citizen. This solidarity levy will be deducted under the PAYE system. i. The Central Bank Digital Currency ii. Pension ii. An Insurance Wrapper iii. Variable Capital Companies • The Government will introduce a new pension scheme called ‘Contribution Sociale Généralisée’(CSG), to iv. An inaugural Sukuk issuance by the Bank of Mauritius replace the existing National Pension Fund. Under the v. Green and Blue Bond frameworks by the Bank of Mauritius CSG, monthly contributions will be due as follows: DATA TECHNOLOGY PARK Category: Employee earning up to MUR 50,000 A data technology park will be set up featuring 12 centres, monthly including deep artificial intelligence centres. Contribution: Employee: 1.5% Contribution: Employer: 3% A NEW SANDBOX FRAMEWORK Category: Employee earning more than MUR 50,000 A new sandbox framework will be introduced to facilitate monthly development of proof of concepts and pilot exercises to Contribution: Employee: 3% test the possibilities of innovative technologies. Contribution: Employer: 6% TECHNOLOGY AND INNOVATION FUND Fiscal measures analysis A technology and innovation fund will be created to invest Two of the main fiscal measures announced in the Budget in viable projects recommended by the Mauritius Research i.e. the gross income levy and the solidarity levy, have and Innovation Council.

ocorian.com and standards. We appreciate the Government’s relentless VENTURE CAPITAL MARKET determination to consolidate and enhance the reputation of the Mauritian International Financial Centre for years to A dedicated venture capital market will be set up at the come. Stock Exchange of Mauritius for start-ups and SMEs. It is also reassuring to see the Government’s commitment Technology, innovation and new financial products to ensure that Mauritius remains a key partner in the analysis development and success of Africa. We welcome the Technology-enabled financial services will be the new business facilitation measures announced in the Budget, norm. The continued investment in innovative technologies including the relaxation of the rules for foreign citizens to such as AI and the new data economy will attract new live, work and invest in Mauritius. In relation to the fiscal investors and businesses into the country. This will be measures announced, the gross income levy will not be facilitated by the relaxation of rules around residency applicable to GBL companies, whilst the solidarity levy will permits to attract specialist talents in Mauritius. We not apply to any foreign citizens living in Mauritius. welcome the set-up of a dedicated venture capital market at the Stock Exchange of Mauritius, which will help start-ups We look forward with optimism to the publication of the to raise funds in Mauritius. Finance Bill over the next couple of months, which will set out the legislative framework to implement the measures Conclusion announced in the Budget. The Government’s top priority in the short-term as far as the financial sector is concerned is to ensure that Mauritius not only stays out of the EU list of high-risk jurisdictions, but also leads the way for compliance with international norms

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The information in this Mauritius budget brief has been taken from the budget speech delivered by Dr. the Honourable Renganaden Padayachy, Minister of Finance, Economic Planning and Development, to the National Assembly, on 4 June 2020.

The content of this budget brief is to provide general guidance on the measures to be implemented by the Republic of Mauritius for the year 2020-21. It should not be considered as any advice. Should you be interested in any such measures, kindly get in touch with your advisers in Mauritius.

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