New legislation enacted in Mauritius brings opportunity to create international pension scheme for non-residents.
On the 1st of November 2012, the Private Pension Scheme Act (PPSA) came into effect in Mauritius and with it the exciting prospect of providing a framework for establishing financial vehicles that satisfy the need for global, tax-efficient pension funds administered for non-resident members.
The PPSA provides for a well-regulated and supervisory framework for pension funds and ensures the financial soundness of the assets under management, following global standards.
Categories of Private Pension Schemes
Three broad categories are provided for under the PPSA, namely:
A scheme regulated in Mauritius and providing benefits to beneficiaries located in Mauritius
External Pension Scheme
A scheme regulated and administered in Mauritius, holding a Category 1 Global Business License, catering specifically for beneficiaries outside of Mauritius
Foreign Pension Scheme
A scheme regulated in a jurisdiction outside of Mauritius that is allowed to also operate within Mauritius for local beneficiaries.
Key features of a general Private Pension Scheme under the PPSA
- The scheme must be structured as a Trust or Foundation, following the same framework
- PPSA allows for certain waivers from the Trust Act
- The Governing Body will be the board of trustees in the case of a Trust
- Specific disclosure rules to be followed with disclosures made to the FSC
- A chairperson, vice-chairperson and contact person shall be appointed annually
- The contact person shall be a licensed management company
- Annual audit report to be submitted
- Periodic actuarial valuation to indicate funding levels and to be submitted
- Financial soundness ensured by meeting technical funding and valuation methods
Specific focus – The External Pension Scheme (EPS)
With its global outlook and client base, Osiris Corporate Solutions (OCS) will focus on the category of External Pension Schemes. The Governing Body of these schemes are required to have a minimum of 3 persons (including Corporate persons), with at least 2 of these to be resident in Mauritius. OCS in itself will qualify as one of these and will be able to provide the additional person.
Where a scheme is an Employer sponsored scheme, a third of the governing body may be selected by the scheme members.
Key Roles of the EPS
All of the following functional roles shall form part of the structure of the EPS:
- a Pension Scheme Administrator – licensed by the FSC
- an Investment Advisor / Asset Manager– licensed by the FSC
- a Custodian – licensed by the FSC
- a Long-term Insurer – licensed by the FSC
- an appointed Actuary of the scheme
- the Auditor of the scheme
Taxation of an EPS
Being resident in Mauritius, the tax rate applicable to an EPS will be 15%. But with the EPS holding a category 1 Global Business License, the tax liability is reduced to a maximum effective rate of 3%. In addition to this, no capital gains are payable by the EPS on disposal of securities. This provides for a significant tax efficient vehicle for corporates and employees that are resident outside of Mauritius. Benefits paid to beneficiaries that are non-resident are also not subject to tax in Mauritius.
South African Resident Members
An interesting point to note is that for South African tax residents, foreign pensions received, including any lump sums, pension or annuity from outside SA are exempted from SA tax as well, to the extent that it forms part of consideration for past employment outside SA
Section 10(1)(gC) – Income Tax Act, RSA.
It follows that for those South African corporates, or Mauritius corporates with SA resident employees, but seconded into Africa and elsewhere, it may be possible to set up an external pension plan which would provide significant benefits to South African members.
The roles of Osiris Corporate Solutions
- The FSC requires that the contact person of the scheme must be a licensed management company. Osiris Corporate Solutions (OCS) will be the qualifying contact person.
- OCS will provide the required resident Trustees of the Governing Body
- OCS will provide the registered office of the scheme
- OCS will draft all of the formation documents, Scheme Rules and structure
- Registration with the FSC for the GBC 1 license and Pension Scheme License
- Assist in drafting scheme information to be provided to employees
- Opening of all accounts (bank accounts, custodian accounts and investment accounts)
- Assist in appointment of Investment Advisor / Asset Manager
- Assist in appointment of Auditor and Actuary