Mauritius Budget Brief 2017-2018

Foreward

The Honourable Pravind Kumar Jugnauth, Prime Minister, Minister of Home Affairs, External Communications and National Development Unit , Minister of Finance and Economic Development, delivered his Budget Speech for the fiscal year 2017/2018 on 8th June 2017.

This year’s budget is set against the backdrop of ten key measures already announced in last year’s budget and is but a logical continuation thereof, as enunciated by the five fundamental challenges as follows:

  1. Growth and job creation;
  2. Uplifting of our existing infrastructure;
  3. Enhancement of the quality of life;
  4. A paradigm shift on social aspirations; and
  5. Strengthening the basics of our macro-economic setup.

Strong words coined by the Honourable Prime Minister to convey his belief in what one should aspire as a country to fend off for itself in a world where competition is the rule of the day, include innovation, skills development, business facilitation, growth stimulation, adaptation, modernization and creativity.

Financial Services

  • Setting-up of an Economic Development Board (EDB) which will spearhead all investment and export promotion matters currently being carried out by the Board of Investment, Enterprise Mauritius, the Financial Services Promotion Agency and the Mauritius Africa Fund
  • Elaboration of a blueprint by the Ministry of Financial Services, Good Governance and Institutional Reforms in collaboration with relevant financial services institutions that will focus on developing the vision for the financial services sector over the next 10 years
  • To position Mauritius as a jurisdiction of substance, a GBC1 company will need to fulfil at least two (currently, one) of the six criteria established by the FSC
  • Amend the Companies Act 2001 to allow for Islamic Financial Institutions and Islamic Banks to adopt accounting standards issued by the Accounting and Auditing Organisation for Islamic Financial institution
  • The Stock Exchange of Mauritius will engage with Euroclear to transform the local debt market and set up an international capital market which would attract Governments and Corporates from Africa and other regions to issue multi-currency bonds in Mauritius
  • The legal obligations on Special Purpose Funds will be aligned with those of GBC1 companies
  • EDB will engage with stakeholders to create a Regional Fintech Association which will act as a think-tank and will advise on necessary regulatory and business climate amendments on Fintech matters
  • The minimum capital requirement of banks will be raised from Rs200 million to Rs400 million and existing banks will be given two years to adjust their capital to the new level
  • Companies holding a GBC1 Licence that are also listed in another jurisdiction will no longer be subject to the prospectus requirements as set forth under the Securities Act 2005 and Securities (Public Offer) Rules 2007. This measure aims to promote Mauritius as a capital raising platform as it reduces the legislative burden on such companies whereby only the requirements under the SEM Listing Rules will apply in future

Tax Measures

Corporation Tax

  • 3% tax will apply on the profits derived by any company from exportation of goods.
  • An 8-year income tax holiday granted to a company engaged in the:
    • manufacture of pharmaceutical products, medical devices and high tech products provided it is incorporated after 8th June 2017;
    • engaged in the exploitation and use of Deep Ocean Water for providing air conditioning installations, facilities and services.
  •  A company investing or spending on innovation, improvement or development of a process, product or service will be eligible to the following incentives:
    • accelerated depreciation of 50% on capital expenditure incurred on R&D
    • Additional 100% deduction for 5 years in respect of qualifying expenditure on R&D carried out in Mauritius
  • Companies will be required to submit to the MRA a list of individuals who have been paid dividends exceeding Rs 100,000 in a year
  • A company awarding contracts for construction works will be required to operate TDS irrespective of its level of turnover

  • VAT and Custom duties

    • The VAT exemption granted to a corporate body on construction of a private hospital, nursing home or residential care home will be extended to cover a charitable institution
    • Outstanding amounts of corporate tax, PAYE and VAT due to the MRA will be waived if deemed to be in the public interest
    • Extension of VAT exemption on construction of buildings constructed by a third party and to be leased to providers of tertiary education

    Income exemption thresholds has been increased as per table below:

    Income Exemption Threshold (MUR)
    Year of assessment From To Increase
    Individual with no dependent 295,000 300,000 5,000
    Individual with one dependent 405,000 410,000 5,000
    Individual with two dependents 465,000 475,000 10,000
    Individual with three dependents 505.000 520,000 15,000
    Individual with four or more dependents 505,000 550,000 45,000
    Retired/Disabled person with no dependent 345,000 350,000 5,000
    Retired/Disabled person with dependent 455,000 460,000 5,000

    Income Tax

    • An individual having a chargeable income plus dividends in excess of Rs 3.5 million will be required to pay a Solidarity Levy equivalent to 5% of that excess
    • TDS of 15% will be withheld in lieu of PAYE if director fees are paid to the employer of a director instead of to the director himself
    • The 270 days criterion used to determine tax residence is being reduced to 225 days for income years ending 30th June 2016 and 2017
    • The secrecy provision of the Income Tax Act will be derogated to allow the Director-General of the MRA to report suspected cases of unexplained wealth to the Agency set up under the Good Governance and Integrity Reporting Act

    Other Taxes

    • Exemption on registration duty and Land Transfer Tax for construction of a building used for qualifying Hi-Tech manufacturing activities
    • The exemption from payment of the Tax on Transfer of Leasehold Rights in State Lands on the first acquisition of an immovable property under the Invest Hotel Scheme is being extended to cover a resale

    Tax Administration

    • The new Tax Arrears Payment Scheme, provides for waiver of 100% of interests and penalties if the taxpayer agrees to settle the tax by 31st March 2018 and the full amount is paid by 31st May 2018
    • The Expeditious Dispute Resolution of Tax Scheme (EDRTS) will be re-introduced for another year for settlement of disputes of less than Rs 10 million
    • The Alternative Tax Dispute Resolution Panel will be allowed to review, in cases where the amount involved exceeds Rs 10 million, assessments raised by the MRA under the Gambling Regulatory Authority Act, PAYE, TDS and decisions taken by MRA
    • With a view to reducing the number of hearings at the Assessment Review Committee, the MRA Act will be amended to provide for any written representations relating to income tax, value added tax and gambling taxes to be accompanied by written Statement of Case and a Witness Statement
    • Objection will be considered by the MRA if a person who has appealed to the Assessment Review Committee against the payment of the 10% of tax assessed subsequently decides to effect that payment prior to the case being called Proforma
    • Necessary amendments will be made to ensure that the obligation on a person to furnish data and information at the request of MRA for purposes of enforcement of tax laws will not be constrained by the confidentiality provisions of the Data Protection Act, Information and Communication Technologies Act and the Companies Act
    • Law will be amended to enable the MRA to meet the commitments undertaken by Mauritius for exchange of information with other countries including penalty provisions for persons not furnishing the required information to the MRA