PURSUING OUR TRANSFORMATIVEJOURNEY

National Budget 2018 - 2019

It is no secret that the budget speech is one of major the highlights of the year in any country, and more especially so in Mauritius. This year has proved no different from any others – and this, despite the start of the FIFA World Cup 2018 on the same day as the budget speech was being delivered. And for good reason too – this is the fourth budget presentation of this Government as presently constituted. All stakeholders had high expectations from this year’s exercise.

The Government has framed this year’s budget as one of continuity with the three previous exercises, with a few surprising and indeed welcoming measures for the lower and middle class.

The Mauritian population will no doubt rejoice. The Income Tax threshold for complete exemption has been increased. Those earning between MUR 305,000 and MUR 600,000 annually will now be taxed on income at 10% instead of 15%. Fuel prices have been decreased and an undertaking has been provided that the Government that it will not increase the price of water, as previously anticipated. Those few examples, amongst others, shows clearly that this budget has been one crafted for the people.

True it is that, as concerns the financial services sector, some bold measures have been introduced – for e.g., the FSC will cease to issue Category 2 Global Business Licences as from January 2019, with a grandfathering provision for existing companies. Also, a new harmonised fiscal regime for domestic and Global Business Companies and a specific fiscal regime for banks have been introduced. How those measures will be

put into practice and how viable such measures will prove to be in the medium to long term, remain to be seen.

It is also apposite to note that the Government has taken cognizance of the changing global landscape, more especially the rise of Artificial Intelligence and Fintech. Indeed, certain new measures have been introduced, e.g. the Financial Services Commission will create new licensable activities, namely Custodian of Digital Assets and Digital Asset Marketplace. This will provide a regulated environment for the safe-custody of digital assets by investors and enable digital assets exchange. The Regulator will also put in place guidelines on investment in crypto currency as a digital asset.In short, this year’s budget is one resolutely orientated towards upholding Government’s public responsibility to create an inclusive and caring society and also towards lifting the standard and quality of life of the Mauritian population; while all the time ensuring continuity in the Government’s vision of transforming Mauritius into a high-income country.

CEO’s focus

Nishi KicheninChief Executive Officer - Founder - DirectorJuristax Holdings

PERSPECTIVE FOR THE GLOBAL BUSINESS SECTORThe budget 2018-2019 has embodied measures which will, at worst, cause a period of uncertainty in the Global Business Sector for the months, if not years, to come and, at best, pave the way to a more stable and competitive International Financial Centre (IFC) freed from the image of a jurisdiction hanging on to its tax advantages to pursue its growth. In the current international conjuncture, along with the commitment given by Mauritius to the OECD and the European Union, the Prime Minister had no other options than to engage in such bold reforms.

We have seen two major measures which will change the Global Business landscape drastically – the elimination of the Global Business Category 2 regime (“GBC2”) as from January 2019 and the harmonisation of the fiscal regime for domestic and Global Business Companies.

As per latest statistical update of the Financial Services Commission, GBC2’s represent 45% of the total entities licensed in the Global Business Sector. The elimination of this regime will undoubtedly narrow our traditional offerings as an International Financial Centre, at least in the shorter term. GBC2’s, much like its international counterparts such as the Seychelles IBCs and BVI companies, had increasingly been pointed out as entities allowing the artificial erosion of the tax base of the jurisdiction where the substance of economic activities are taking place. We need to face the fact that the advantage of a GBC2 would have been expunged, in any case, through the application of international initiatives such as the Base Erosion and Profit Shifting (“BEPS”). Whilst the 6 months moratorium for the elimination of the GBC2 regime may be short to reengineer the marketing strategy of the jurisdiction, we believe that the grandfathering provision till 30 June 2021 is a most welcomed breather to the sector.

The initiative of harmonising the fiscal regime follows the track of removing the so-called harmful tax practice by allowing a level playing field for all entities in Mauritius, local-oriented or foreign-oriented. The deemed foreign tax credit is being eliminated to introduce a partial exemption regime whereby 80% of specified income (foreign source

dividends, interest and royalties and specified financial services) shall be exempted from taxation. We further note that entities pursuing global trading activities shall now have a corporate tax rate of 3%. It is interesting to note that the government has cushioned the removal of the deemed foreign tax credit by introducing alternative measures which would net off the impact of the tax burden. We have also noted that companies holding a Category 1 Global Business Licence are being “renamed” as Global Business Companies and shall henceforth be allowed to deal in Mauritius without any restrictions. Furthermore, any Company / Partnerships having a majority of their shareholding held by non-residents and which conduct business mostly out of Mauritius would now be required to seek a Global Business Licence.

Overall, in an attempt to reform the Global Business Sector, the Government has adopted a balanced approach by ensuring that special tax regimes previously available only to Global Business Companies, where not eliminated, are extended to all companies in Mauritius. As part of the transformative strategy for the Global Business Sector, and to position ourselves as a jurisdiction of substance, the Minister of Finance has introduced innovative licensable activities such as the Custodian of Digital Assets and Digital Asset Marketplace along with a project of guidelines for investment into cryptocurrency. With such initiatives, we are clearly marking ourselves in the trend of economic digitisation and would offer the Mauritian IFC a new era of development which could potentially be a game changer. We would need to be wary of the recent failings of this system around the world and ensure that we adopt a strong, adapted and flexible framework to contain this ever-evolving activity.

With increasing international pressures, the Global Business Sector and the Mauritian IFC at large are at a cross-road. The budget 2018-2019 has chosen the way to a strategic reform which would need concerted efforts from both the private sector and the government to pursue relentlessly the vision of transforming ourselves in a jurisdiction of substance.

A GLANCE AT ECONOMIC INDICATORS

2015/2016 2016/2017 2017/2018 2018/2019

7.9

7.3

7.1

6.9

UnemploymentRate(%)

2015/2016 2016/2017 2017/2018 2018/2019

7.9

7.3

7.1

6.9

UnemploymentRate(%)

2015/2016 2016/2017 2017/2018 2018/2019

1.29 0.98

4.3

3.5

Inflation Rate (%)

2015/2016 2016/2017 2017/2018 2018/2019

3.20%

3.90% 3.90% 4.10%

GDP Growth (%)

FINANCIAL SERVICESNON-BANKING SECTOR - GLOBAL BUSINESS COMPANIES

REFORM IN THE GLOBAL BUSINESS REGIME

In view of eliminating harmful tax practices, there shall be harmonization of the Tax Regime for all Companies in Mauritius. The impact on Global Business entities in Mauritius are as follows:

GBC 2

a) Ceasing of the issuance of GBC 2 licence as from 01 January 2019;b) Any GBC 2 licence issued prior to 16 October 2017 shall be grandfathered till 30 June 2021.

GBC 1

• It shall be renamed as Global Business Companies

• GBC will now include any Company/Partnership which have a majority holding of non-resident and doing business

outside Mauritius. Such entity will now be administered by a Management Company.

• Global Business Companies shall now be allowed to deal in Mauritius

Global Business Companies shall now be required to enhance substance requirements.

There would be substantial changes in the taxation of Global Business Companies.

Please refer to taxation part.

CHANGE IN OPERATIONAL FRAMEWORK AND INTERNATIONAL NORMS

• Change in operational framework of Management Companies

Source: Financial Services Commission

Key:

1: Exclude Companies struck off/surrendered license/ license revoked/license lapsed or change regime during the year

2: Include Global funds

KEY MEASURES

Cessation of licence

substance requirements forGlobal BusinessCompanies

GBC2ENHANCE

FINANCIAL SERVICESNON-BANKING SECTOR FINTECH

• Setting up of a National regulatory Sandbox Licence Committee to consider all issues relating to Sandbox licencing to FinTech activities.

• I ntroduction of 2 licensable activities for FinTech to be regulated by the Financial Services Commission (“FSC”):

i Digital Asset Custodian ii Digital Asset Marketplace

• The FSC will put the necessary guidelines for the regulation of Crypto Currency as a digital asset, including appropriate cyber security and cyber resilience policies and capacities.

OPENING UP OUR ECONOMY AND COUNTRY – HIGH NETWORTH INDIVIDUALS

CITIZENSHIP

Foreigners wishing to obtain Mauritian citizenship may do so by making a non-refundable contribution of USD 1 million to a Mauritius Sovereign Fund and as for their spouse and dependents, they will have to make an additional contribution of USD 100,000 per member of family.PASSPORT

Foreigners may obtain Mauritian passport provided they make a

contribution of USD 500,000 to the Mauritius Sovereign Fund. For their spouse and dependents, they will have to make an additional contribution of USD 50,000 per passport.

EXEMPTION TO FOREIGN RETIREES

Foreign retirees shall be exempted from payment of customs duties on the import of personal effects up to a value of Rs.2 million.

OCCUPATIONAL PERMIT

The application will be processed within 5 days and the employer will have to contribute the equivalent of one-month salary per foreign worker recruited.

3) FSC in collaboration with OECD to host a regional centre for capacity building and best practices.

4) Ombudsperson for Financial Services Bill is being finalized for the better protection of banking and financial services.

ACTS

Limited Partnership Act, Foundation Act and the Companies Act shall be amended to require disclosure on beneficial ownership.

FORGING NEW PATH FOR OUR ECONOMIC DIPLOMACY

Government is thus finalising negotiations as follows: • The Comprehensive Economic Cooperation Partnership

Agreement (CECPA) with India; • The Free Trade Agreement with China; • The enhanced bilateral cooperation with Saudi Arabia and

Middle East countries; • Renewed partnership with the member states of the

Commonwealth Group; and • We have signed a framework agreement for the continental

FTA in Africa

MAKING HEADWAY TO OUR AFRICA STRATEGY

• 5-year tax holiday for Mauritian companies collaborating with the Mauritius Africa Fund for the development of infrastructure in the Special Economic Zones. The tax holiday will cover investments in SEZ infrastructure development and will benefit two eligible categories of firms:

- Project developer; and- Project financing institutions

FINANCIAL SERVICESBANKING SECTOR BANKING

• Increase the fine to Rs 1 million where a financial institution fails to comply with guidelines issued by the Bank of Mauritius (the “BoM”);

• Allow for banks carrying on exclusively private banking business in Mauritius, to import Gold and other precious metals as part of managing their clients’ investment portfolio and provide safety vault services; and

• Allow the BoM to impose a fine of upto Rs 1 million where confidential information of bank customers has been disclosed.

TAXATION OF BANKS

Deemed Foreign Tax Credit Regime

The Deemed Foreign Tax Credit regime available to banks will be abolished as from 1st July 2019.

For further explanation, please refer to the Taxation part.

SECTORAL ANALYSIS

AGRO-INDUSTRY

• Tea industry: Provision of a monthly income support of 50 cents per kilo of tea leaves harvested by small planters during winter.

• To support small planters, an increase of 15-18% custom duty on sugar.

• Incentive of Rs. 30 M for a new crop insurance for food security program.

• Creation of 100 additional farms over the next two years in Mauritius under the Shelter Farming Scheme. Access to finance at the Development Bank of Mauritius (DBM) and Maubank will be at the concessional rate of 3 % and all income derived from these projects will be exempted from tax for the first 8 years.

• Increase in subsidies on the production of onion and potato seeds.

FARMING

• Rs 10,000 shall be allocated to eligible families under the Mini Sheltered Farming Scheme for promotion of micro gardens, vertical agriculture and roof top gardening.

• Written off of loan with DBM for Pig Breeders Relaunching Scheme.

• A loan up to a maximum of Rs 1M being granted to operators of organic farms with a moratorium of 2 years, on capital repayment depending on the project.

• Provision of 2 plots of land to NGO’s for development of shelter planters.

• The government is contributing Rs 30 M under the new Crop Insurance Scheme for planters to be operated by the Small Farmers Welfare Fund.

TOURISM

• 2 additional airlines – Saudi Airlines and Kenya Airways – will service the Island.

• Mahebourg will be revamped into a tourist village and the marine park of Blue-Bay will be renewed and bettered.

OCEANIC ECONOMY

• Set up of an Ocean Economic Unit.• Merging of the Mauritius Oceanography

Institute and Albion Fisheries Research Centre into one unit.

• Introduction of a group life insurance for registered fishermen in the event of accident or losses at sea.

• Foreign industrial fishing companies will be allowed to fish in our sea provided that they sell their products in our local market.

• A grant of 60 percent on the acquisition of outboard engines and fishing net, by fishermen cooperatives, up to a maximum of Rs 60,000.

• Albion Fisheries Research Centre will provide fish fingerlings freely for the aquaponics projects.

ICT

• Employers under the Work@Home scheme shall be granted an Annual tax credit of 5 % for 3 years on investment in IT system.

• A Mauritius Artificial Intelligence Council will be established to foster innovative entrepreneurship.

• Investments in IT will be made in :

- An Anti Cyber Threat Monitoring System to better respond, monitor and coordinate cyber threats at the national level

- A new Certification Authority for issuance of digital signatures in order to consolidate trust in electronic transactions; and

- A Disaster Recovery Site at the Government Online Centre to ensure delivery of vital business processes and Government services on a 24/7 basis in a user friendly and fully secured manner

KEY MEASURES

Allocated to transport sector

years of tax holidayon income derived under the Shelter Farming Scheme

of annual tax credit for 3 years under the Work@home scheme

MUR37Bn

85%

SECTORAL ANALYSIS ( CONTINUED )

TRANSPORT

• Construction of two additional bus terminals at Immigration Square and Rose Hill

• The government is earmarking Rs 12 Bn over the next three years for the Metro Express.

UTILITY

• CEB will invest Rs 1.2Bn over the next 3 years for the undergrounding of 150kms of low voltage distribution lines

• Installation of 25,000 smart meters annually in relation to the automatic metering and development of smart grid

• No increase in water tarrifs

INFRASTRUCTURE

• Rs. 160 m allocated for the construction of Civil Service College at Reduit.

• Set up of new Business parks across the country. Rehabilitation of a hi-tech park in Côte-d’Or, a Logistic Park in Riche-Terre and a Pharmaceutical Park in Rose Belle.

• Rs. 12 Bn over the next 3 years for construction and upgrading of roads.

• NHDC has launched a major construction project and the target is 6,800 social housing units over the next 2 years. Rs 12.7 billion shall be invested in this project.

• Extension of a new passenger terminal to cater

for 8 million passengers annually.• Rs. 49 m allocated for upgrading of new district

courts in Pamplemousse, Flacq and Souillac.• New market fair and commercial complex in

Rose-Hill. • Improvement of the fish and poultry section in

Port Louis central market;• Rs 450M from King Salman Humanitarian Aid and

Relief Centre and the Adaptation Fund Board for the construction of drain infrastructure.

• Rs. 195M for sports games of Jeux des Iles de l’Ocean Indien’ 2019.

• Rs. 600M allocated to the Road Development Authority for road maintenance and Rs.75 m for road pavements and road markings.

• The income eligibility threshold under the Water Tank Scheme shall be increased from Rs 25,000 to Rs 30,000.

• The construction of a dedicated cruise terminal building with cutting edge technologies and modern facilities capable of handling 4,000 passenger will greatly contribute to position Port Louis harbor as a cruise hub.

MANUFACTURING

• In the light of the momentum and proportion brought forward under the film rebate scheme, the government intends to invest Rs 500M.

SOCIAL & OTHERS

UNEMPLOYMENT

• 3,000 unemployed will be enrolled in the National Apprenticeship Programme run by the Mauritius Institute of Training and Development (MITD)

• 3,500 youngsters in job placements through the Youth Employment Programme (YEP)

• The SME Employment Scheme will target 1,000 graduates in order to instill in our young graduates the entrepreneurial spirit.

EDUCATION

• Recruitment of an additional 150 Trainee Primary School Educators and 114 Educators for the secondary schools.

• Set up of 2 educational centres in Grand Baie and Montagne Ory

• Allocation of tablets to Grade 3 students.

• Necessary support will be provided to the University of Mauritius to double its intake of students in the field of Computer Science and Software Engineering to 240.

SPORTS

• An amount of MUR 375 million will be provided for the upgrading of sporting facilities.

• MUR 195 million for infrastructure and organisation of the games.

• MUR 75 million to support training of athletes.

HOUSING

• The NHDC will start a vast program of construction in 2018-19 with the aim of building 6,800 new social housing units over the next two years, with a project value of MUR 12.7 billion.

• Provision of MUR 1.3 billion for completion of 3,041 housing units.

• MUR 176 million for rehabilitation of 41 NHDC housing estates.

HEALTHCARE

• A medical hub is being developed at Côte d’Or City comprising a modern Eye Hospital, a warehouse for medical products, a New National Health Laboratory Services Centre and the AYUSH Hospital for ayurvedic treatment.

• Provision of MUR 100 million for e-Health.

KEY MEASURES

earmark for 14,000 job seekers.

for education

new social housing units

for healthcare

Jeux des Iles de l’Ocean Indien

MUR1Bn

6,800

MUR17,2Bn

MUR100M

TAXATION

1. Harmonisation of taxation regime

Domestic and Global Business Companies shall now benefit from a partial exemption of 80% on the following income:

• Foreign Source Dividend and Profits attributable to a foreign permanent establishment;

• Interest and Royalties; and• Income from provision of specified financial

services.

2. Introduction of Work@Home scheme

• Allowance for a double deduction from tax of the wage and salary costs of employees under the scheme for the first 2 years;

• In addition, employers under that scheme

will benefit an annual tax credit of 5% on the investment in the required IT systems for a period of 3 years.

3. The Mauritius Africa Fund

• Tax holiday of 5 years for local entities teaming up with The Mauritius Africa Fund for the development of Special Economic Zones.

4. Corporate Social Responsibility

• Companies will not be allowed to offset any unused tax credit against CSR payable

• Companies who have been granted tax holidays will be required to contribute to CSR

• Companies will have to pay 75% of their CSR to the MRA for the income year 2018/2019

5. Tax Deducted at source (TDS)

• TDS will be extended to commission payment at 3%;

• TDS will increase from 5% to 10% on rent paid to non-resident; and

TAXATIONCORPORATE INCOME TAX

KEY MEASURES

Application of a corporate tax rate of 3% on profits derived by companies for export of goods will be extended to global trading activities.

3%

NO

Abolishment of Deemed Foreign Tax Credit

• Banks as from 1 July 2019• Global business companies as

from 31 December 2018

TDS on

director fees.

Relief

• The exemption threshold for lump sum rose from Rs 2 million to Rs 2.5 million;

• Increase in relief for dependent child pursuing Tertiary Education:

The relief for abroad tertiary education has increased from MUR135,000 to MUR 200,000;

Relief for local tertiary education has increased from MUR 135,000 to MUR 175,000.

• A retired person will now be eligible to an enhanced exemption threshold granted to retirees even if he derives emoluments provided that such income does not exceed MUR 50,000 in an income year.

• Investment in rainwater harvesting system will be exempted from taxable income for an individual investing in such scheme

• Relief on legal aid increase from MUR10,000 to MUR15,000

TAXATIONPERSONAL

KEY MEASURES

The tax rate goes down from 15% to 10%, For income earners between 305,000 to 650,000

Rate for taxpayers earning above Rs 650,000 p.a remains at 15%.

10%

15%

Income Exemption threshold (IET)

In order to reduce the gap between the rich and the poor, the IET has been increased by MUR 5,000 throughout each category

Negative income tax

Negative income tax shall no more be computed on the monthly basic salary instead of total earnings. Further the employee is no more required to be a full time employee.

2018 / 2019

MUR

No dependent 305,000

One dependents 415,000

Two dependents 480,000

Individual with three dependents 525,000

Four or more dependents 555,000

Retired/ disabled person with no dependent

355,000

Retired/ disabled person with one dependent

465,000

Other taxes

Sheltered Farming Scheme - Tax holiday of 8 years on all income derived by farmers under this scheme

Exemption of custom duties on the import of goods up to MUR 2 million for foreign pensioners

Tax policies solidarity levy on telephony extended. Current formula for special levy for banks maintained until 2019

A withholding tax of 10% will be retained on gains exceeding Rs.100,000 from “loto” and “lottery vert”

The same withholding rate of tax will apply on gains exceeding Rs 100,000 from the casinos and the houses of game

Insurance industry compensation fund will be exempted from tax

Tax Administration

Currently, a person dissatisfied with a tax assessment made by the MRA and the Registrar-General’s Department pays 10% of the amount assessed prior to lodging an objection.

He will be required to pay an additional of 5% if he is still not satisfied with a determination at objection and intends to appeal before the Assessment Review Committee.

Islamic Finance

The income tax exemption granted on interest income received from debentures and bonds quoted on the stock exchange will be extended to returns from sukuks.

Exchange of Information with Other Countries

Penalties will be imposed on a person who fails to furnish information needed for automatic exchange of information with other countries.

Expeditious Dispute Resolution of Tax Scheme

The Expeditious Dispute Resolution of Tax Scheme (EDRTS), targeting settlement of disputes of less than Rs 10 million, will be extended to assessments raised from 1st July 2015 to 30th June 2016.

TAXATIONOTHER TAXES & TAX ADMINISTRATION

HIGHLIGHTS

withholding tax on gains > Rs100,000 on lotto, lottery vert, casino & game houses

Insurance industry compensation fund will be exempted from tax

10%

ABOUTJURISTAXWith over 10 years’ experience in the global business sector, JurisTax has built an expertise and excellence in structuring, setting-up and the administration of various corporate vehicles, including companies, trusts, funds, foundations, special purpose vehicles and other structures, to meet the personal and business needs of our esteemed clientele. Typically, these needs would include foreign market entry, tax planning, wealth protection, estate planning, property ownership and facilitating cross border businesses.

Over time, we have further developed our offerings to a variety of supporting services such as wealth management, yacht and aircraft registration, credit card applications, pension administration services, residence permits applications, as well as trade mark and intellectual property registration and protection.

Today, we manage over 2000 structures for a wide variety of clients comprising of companies, entrepreneurs, private investors, high net worth individuals (HNWIs) and their families and have assets under administration in excess of USD 20 billion.

The first JurisTax entity was established in Mauritius in 2008, born out of a law firm operating since 1989. JurisTax has since grown into one of the top trusted financial, corporate and

affiliated services providers in Mauritius for its international clientele including, in Africa, Asia, Europe. Our global reach enable us to provide expertise on an international scale and allows our clients to access a one-stop shop service delivery point.

Headquartered in Mauritius, JurisTax Holdings Ltd is the ultimate holding entity for various subsidiaries operating in the service industry. Our ultimate goal remains to provide our client with spot-on business solutions by adopting the best work practices. In our quest to provide our clients with a fully comprehensive service, we have partnered with leading local and international partners including banks, legal firms and other intermediaries.

Our Credentials

- A decade of experience and serving European, Asian and South African businesses and families

- Duly licensed and regulated entities operating within regulatory norms

- Comprehensive understanding of African market, South African Revenue Service and Double Taxation Agreements

- Excellent track record- Independent and expert opinions and advice are provided

on request

OURPEOPLE

Nishi KicheninCEO, Founder, Director

Varounen GoindenChief Executive Officer, Director - JurisTax Ltd

Kessen RamalingumDirector

JurisTax Services Ltd

Vichal PattooChief Executive Officer,

Director JurisTax International Ltd

Taroonah DoolubChief Executive Officer,

Director JurisTax Outsourcing Ltd

Kovilen RamsamyGroup Chief Financial Officer

& Director

Ebene HouseHotel Avenue33 CybercityEbene, 72201Republic of Mauritius Phone : + (230) 465 5526Mobile : + (230) 5943 5526 | 525 755 26Fax : + (230) 468 1886Email : marketing@juristax.comWebsite : www.juristax.com