Mauritius National Budget 2018/19 Announces Much Awaited Reforms To The Global Business Sector

20 June 2018
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press release

The Prime Minister and Minister of Finance and Economic Development, Hon. Pravind K Jugnauth presented the National Budget on 14th June 2018 under the theme “Pursuing Our Transformative Journey”.

The budget announces details of much awaited reforms through the harmonisation of the fiscal regime for domestic companies and Global Business companies (GBC1 and GBC2), and the introduction of enhanced substance requirements for Global Business companies. These announcements end a period of speculation regarding tax reforms in relation to companies operating in the Global Business sector. They will ensure that Mauritius continues to adhere to best practices and standards in tax matters in line with EU and OECD requirements, whilst retaining a very competitive fiscal regime.

The main changes consist of the abolition of the Deemed Foreign Tax Credit system available to GBC1 companies, and the introduction of a partial exemption system for certain specified income. Based on the proposed changes, it is expected that a GBC1 company that derives its income from foreign dividends, interest, royalties, specified financial services or global trading activities, will not experience changes to its overall tax position – i.e. it will continue to benefit from a maximum effective tax rate of 3%. However, it will need to demonstrate enhanced substance in Mauritius based on criteria to be issued by the Financial Services Commission (FSC). Whilst capital gains will continue to be exempt, other income derived by a GBC1 company will henceforth be subject to tax at the standard rate of 15%.

In relation to the GBC2 regime, which currently benefits from a full exemption from income tax, new licences will cease to be issued as from January 2019. The Income Tax Act provisions applicable to that regime will be reviewed accordingly. This represents a significant change, the full extent of which remains to be seen.

Under the proposed grandfathering provisions, the current regime for Global Business companies will continue to apply until 30th June 2021 for companies which have been issued a licence prior to 16th October 2017.

Overall, we welcome the announcements made in the budget in relation to the Global Business sector. We firmly believe they represent a positive step towards consolidating the jurisdiction’s reputation as an International Financial Centre of substance. Since the Global Business regime was identified as a harmful tax regime by the OECD, Mauritius had made a commitment to adjust the regime so that it satisfies the OECD’s requirements. It was therefore inevitable that reforms would be required in the sector at some point. The challenge was to come up with a fiscal regime that meets international norms and standards whilst remaining attractive to investors. We believe the proposed changes should alleviate concerns raised by the OECD regarding the jurisdiction. Mauritius remains a well-regulated international financial centre that is determined, more than ever, to create a conducive eco-system for investors.

We set out below a summary of the key changes relating to the Global Business sector as well as some new measures that have been announced:

Changes to the Global Business sector

  • Deemed Foreign Tax Credit: The Deemed Foreign Tax Credit regime available to companies holding a Category 1 Global Business Licence will be abolished as from 31st December 2018. This means that companies will cease to benefit from an automatic effective tax rate of 3% on their foreign source income.
  • Partial Exemption Regime: A partial exemption regime will be introduced whereby 80% of specified income will be exempted from income tax. The exemption will be granted to all companies in Mauritius, except banks, and shall apply to the following income:
  • foreign source dividends and profits attributable to a foreign permanent establishment;
  • interest and royalties; and
  • income from provision of specified financial services.
  • Global Trading Activities: The corporate tax rate of 3% applied on profits derived by any company from the export of goods will be extended to global trading activities effected by companies.
  • Enhanced Substance requirements: Companies licensed by the FSC and claiming the partial exemption will have to satisfy pre-defined substantial activities requirements of the FSC.
  • Credit Regime: The existing credit system for relief of double taxation will continue to apply where partial exemption is not available.
  • GBC2: New GBC2 licenses will cease to be issued as from January 2019 and the Income Tax Act provisions applicable to that regime will be reviewed accordingly.
  • Grandfathering: The current business regime will continue to apply until 30th June 2021 for companies which have been issued a licence prior to 16th October 2017.

Attracting High Net Worth individuals

The Economic Development Board (EDB) will manage two schemes to attract High Net Worth individuals who satisfy defined criteria subject to relevant due diligence:

  • The first scheme will offer foreigners the opportunity to obtain Mauritian citizenship provided they make a non-refundable contribution of USD 1 million to a Mauritius Sovereign Fund. For their spouse and dependents, an additional contribution of USD 100,000 per member of family will be required.
  • The second scheme will offer foreigners the opportunity to obtain a 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.The government will also offer a new package of fiscal and non-fiscal incentives to attract foreign retirees. Besides the right to acquire an apartment (in a Ground + 2 complex and for a minimum of MUR 6 million), they will be exempted from payment of custom duties on the import of personal effects up to a value of MUR 2 million.

Review of the Freeport Regime

The Freeport Regime will be amended, with the main changes as follows:

  • The corporate tax exemption granted to freeport operators and private freeport developers on export of goods will be removed;
  • The current tax regime will continue to apply until 30th June 2021 to companies which have been issued with a freeport certificate before 14th June 2018;
  • Repair and maintenance of heavy duty equipment will be introduced as a freeport activity;
  • An exhibition area being used for the purpose of vault activities will be authorised;
  • The 50% cap imposed on sales of goods on the local market will no longer apply; and
  • Manufacturing activities will not be allowed in the freeport. A transitional period will be granted to existing manufacturing companies.

Following the amendments, we expect that companies under the Freeport Regime will be subject to corporate tax at 3% on the profits derived from the export of goods.

Making Headway on the Africa Strategy

  • A 5-year tax holiday to be introduced for Mauritian companies collaborating with the Mauritius Africa Fund for the development of infrastructure in the Special Economic Zones (SEZ) in Africa. The tax holiday will cover investments in SEZ infrastructure development and will benefit project developers and project financing institutions;
  • A loan guarantee facility to be set up in collaboration with the EU to support cross border investment; and 
  • SBM and Mauritius Africa Fund have set up an Africa Infrastructure and Industrialisation Fund to assist Mauritian investors to execute projects in the SEZ on the African continent. 

Click on the download button below to get full access to the Mauritius Budget Speech 2018 - 2019:


We would be happy to discuss the announced changes with you, and the implications they may have on your business in Mauritius.

For any queries, please email me at or speak to your usual ABAX contact  person.

Fazeel Soyfoo

Director - Tax


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