Income Tax in Mauritius

Personal Income Tax:

Tax Rates on Chargeable Income: Individuals:

Flat rate of 15% on chargeable income.

Calculation of chargeable income:

Gross Income includes salaries, wages, annuity, pension, income from business, income from property, foreign dividends, royalty & interest.

Allowable deductions include expenditure incurred in the production of income, losses, bad debts, annual allowance (instead of depreciation).

Chargeable Income = Gross Income - Allowable Deductions - Exemptions and Reliefs

Income Exemption Threshold:

An individual who is resident in Mauritius is entitled to an income exemption threshold which he can deduct from his income to arrive at his chargeable income, if any.

The income exemption threshold in respect of income year ending 30 June 2018 is as follows:

Category	Amount (Rs)
Category A- An individual with no dependent	300,000
Category B- An individual with one dependent	410,000
Category C- An individual with two dependents	475,000
Category D- An individual with three dependents	520,000
Category E- An individual with four and more dependents	550,000
Category F- A retired / disabled person with no dependent	350,000
Category G- A retired / disabled person with one dependent	460,000

An individual is not entitled to claim an income exemption threshold in respect of:

·  Category B or Category G, if the net income and exempt income of his dependent exceeds Rs 110,000;

· Category C, if the net income and exempt income of his second dependent exceeds Rs 65,000;

· Category D, if the net income and exempt income of his third dependent exceeds Rs 45,000.

· Category E, if the net income and exempt income of his fourth dependent exceeds Rs 30,000.

Where a person claims an income exemption threshold in respect of Category B, C, D, E or G, the spouse of that person is entitled to claim for that year an income exemption threshold only in respect of Category A or Category F, whichever is applicable.

"Dependent" means either a spouse, a child under the age of 18 or a child over the age of 18 and who is pursuing full time education or training or who cannot earn a living because of physical or mental disability.

Child means:

·  an unmarried child, stepchild or adopted child of a person;

· an unmarried child whose guardianship or custody is entrusted to the person by virtue of any other enactment or of an order of a court of competent jurisdiction;

· an unmarried child placed in foster care of the person by virtue of an order of a court of competent jurisdiction.

"Retired person" means a person who attains the age of 60 at any time prior to 1 July 2017 and who, during the income year ending 30 June 2018, is not in receipt of any business income or emoluments other than retirement pension.

Additional exemption in respect of dependent child pursuing undergraduate course

·  Where a person has claimed an Income Exemption Threshold in respect of category B, C, D, E or G and the dependent is a child pursuing a non-sponsored full-time undergraduate course in Mauritius at an institution recognised by the Tertiary Education Commission or outside Mauritius at a recognised institution, the person may claim an additional exemption of Rs 135,000 in respect of that child.

 · The additional exemption is not allowable:

o   in respect of more than three children;

o   in respect of the same child for more than 6 consecutive years;

o   where the tuition fees, excluding administration and student union fees, are less than Rs 34,800 for a child following an undergraduate course in Mauritius;

o   to a person whose total income (net income plus interest and dividends received) or that of his/her spouse for the income year ending 30 June 2018 exceeds Rs 4 million.

Interest Reliefs on secured housing loan:

· A person who has contracted a housing loan, which is secured by a mortgage or fixed charge on immoveable property and which is used exclusively for the purchase or construction of his house, may claim a relief in respect of the interest paid on the loan.

· The relief to be claimed in the EDF is the amount of interest payable in the income year ending 30 June 2018. In the case of a couple where neither spouse is a dependent spouse, the relief may be claimed by either spouse or at their option, divide the claim equally between them.

· The loan must have been contracted from :-

o   a bank, a non-bank deposit taking institution, an insurance company, or the Sugar Industry Pension Fund;

o   the Development Bank of Mauritius by its employees; or

o   the Statutory Bodies Family Protection Fund by its members.

·        The relief is not allowable where the person or his spouse:

o   is, at the time the loan is contracted, already the owner of a residential building;

o   derives in the income year ending 30 June 2018, total income (net income plus interest and dividends received) exceeding Rs 4 million;

o   has benefited from any new housing scheme set up on or after 1 January 2011 by a prescribed competent authority.

 Relief for Medical insurance premium or contribution:

A person may claim relief for premium or contribution payable for himself or his dependents in respect of whom Income Exemption Threshold:

· on a medical or health insurance policy; or

· to an approved provident fund which has its main object the provision for medical expenses.

The relief is limited to the amount of premium or contribution payable for the income year up to a maximum of:

· Rs 15,000 for self

· Rs 15,000 for first dependent

· Rs 10,000 for second dependent

· Rs 10,000 for third dependent

No relief should be claimed where the premium or contribution is payable by the employer or under a combined medical and life insurance scheme.

Deduction for Household Employees:

Where a person employs one or more household employees, he may claim a deduction of the wages paid to the household employees up to a maximum of Rs 30,000, from his net income, provided he has duly paid the contributions payable under the National Pensions Act and the National Savings Fund Act. In the case of a couple, the deduction shall not, in the aggregate, exceed 30,000 rupees.

Income Tax forms for individuals

Applicable to an an individual in receipt of emoluments or deriving income from trade, business, profession, agriculture, rents, emoluments and other sources.

This return should be filled in by every person who:

·   is a registered person (i.e. has been allocated a Tax Account Number); or

·  has a chargeable income, whether or not he is a registered person; or

Derives:

· Net income exceeding Rs 295, 000 per year

· Gross Emoluments from business exceeding Rs 2 million per year

· Emoluments in respect of which tax has been withheld

· Income which has been subject to tax deduction at source 

Acquires:

· an immovable property , the cost of which including the cost of construction of any building or structure thereon, exceeds Rs 5 million in a year;

· motor vehicles costing more than Rs 2 million in respect of which registration duty paid is more than Rs 75, 000.

·  a pleasure craft as defined in the Tourism Authority Act, the cost of which , including the cost of its engine exceeds Rs 1 million.

Pays contribution to National Pension Fund (NPF) and National Savings Fund to the Director-General of MRA.

Has a chargeable income.

Due date for submission of annual return & payment of tax:

The return of income (IT Forms 1A or 1) should be filled in and submitted to the MRA not later than 30 September together with a remittance of the amount of tax payable, if any, in accordance with the return. Where return and tax if any is paid electronically, an extended delay up to 15 October is applicable.

Penalty:

·  Penalty for late submission of annual return of income:

Every person who is required to submit a return and who fails to do so, shall be liable to pay a penalty of Rs 2,000 per month until the time the return is submitted, up to a maximum of Rs 20,000. However, where the person is a small enterprise having an annual turnover not exceeding 10 million rupees, the maximum penalty is Rs 5,000.

·  Penalty for late payment of tax:

Where an individual fails to pay the tax in accordance with his annual return of income by the due date, he is liable to a penalty of 5% of the amount of the tax, excluding any penalty.

· Interest for late payment of tax:

Where an individual fails to pay any tax by the due date, he is liable, in addition to any penalty, to pay interest at the rate of 0.5% per month or part of the month during which the tax remains unpaid.

Corporate Income Tax:

A corporation resident in Mauritius is subject to tax on its worldwide income. A non-resident corporation is liable to tax on any Mauritius-source income, subject to any applicable tax treaty provisions.

Corporations are liable to income tax on their net income, currently at a flat rate of 15%. Companies engaged in the export of goods are liable to be taxed at the rate of 3% on the chargeable income attributable to that export based on a prescribed formula.

Mauritius has a credit system of taxa­tion whereby foreign tax credit is given on any foreign-source income declared in Mauritius on which foreign tax of similar character to Mauritian tax has been imposed.

All corporate bodies incorporated in Mauritius (except companies holding a Category 2 Global Business Licence and certain approved funds and associations) are subject to income tax. This applies to all associations and other registered bodies. Income derived by local partnerships is shared and taxed in the hands of the partners. Foreign corporations carrying on business, or having a place of business, in Mauritius are also liable to income tax on income derived from Mauritius. Resident sociétés are not liable to corporate tax.

Société means a société formed under any enactment in Mauritius and includes:

· a société de fait or a société en participation

· a limited partnership

· a joint venture, and

· a société or partnership formed under the law of a foreign country.

Income tax is payable on total net income before distribution at the following rates:

Entity	Rate (%)
Global Business Category 1 (GBC1) companies and offshore trusts	15
Freeport operators or Private Freeport Developers carrying on Freeport activities other than providing goods and services on local markets	Exempt
Global Business Category 2 (GBC2) companies	Exempt
All other companies	15

Global Business Category 1 (GBC1) companies are liable to tax at the rate of 15%. However, they are entitled to a foreign tax credit equivalent to the higher of 80% of the Mauritius tax chargeable or the actual tax suffered abroad in respect of foreign-source income. The maximum effective tax rate is therefore 3%.

Global Business Category 2 (GBC2) companies incorporated under the laws of Mauritius are exempt from income tax and are not tax residents for treaty purposes. For more information,

Special levies

Banks:

All banks are required to pay a special levy calculated according to their book profit and their operating income derived during, or its chargeable income in respect of, the preceding year. 'Operating income' means the sum of net interest income and other income before deducting non-interest expense.

The rates of the special levy on banks are as follows:

Year of assessment commencing	Rates
1 July 2016 and 1 July 2017	Segment A: 10% of chargeable income; Segment B: 3.4% on book profit; 1.0% on operating income

Segment A: Banking transactions with residents.

Segment B: Banking transactions with non-residents and corporations holding a Global Business Licence.

Except where the levy is computed on chargeable income, no levy shall be paid in a year where in the preceding year:

· the bank incurred a loss, or

· the book profit of the bank did not exceed 5% of its operating income.

Telephony service providers:

Providers of public fixed or mobile telecommunication networks and services (including information and communication services, such as value added services and mobile internet), commonly known as ‘operators’, are liable to a solidarity levy. The solidarity levy is calculated according to the book profit and turnover for the preceding income year of the operator. The applicable rates are as follows:

Years of assessment commencing 1 July 2016 and 1 July 2017: 5% of the book profit and 1.5% of the turnover of the operator.

'Book profit' means the profit derived by an operator from all its activities and computed in accordance with International Financial Reporting Standards (IFRS).

No levy is to be paid in a year where, in the preceding year, the operator incurred a loss or the book profit of the operator did not exceed 5% of its turnover.

Corporate Social Responsibility (CSR) Fund:

Every year, a company has to set up a CSR Fund equivalent to 2% of its chargeable income of the preceding year.

At least 50% of the CSR Fund set up on or after 1 January 2017 up to 31 December 2017 should be remitted to the Mauritius Revenue Authority (MRA), and at least 75% of the CSR Fund set up on or after 1 January 2018 should be remitted to the MRA.

In respect of the CSR Fund set up before 1 January 2019, the remaining amount of the CSR Fund shall be used to implement a CSR Programme in accordance with the company's own CSR Framework. For the CSR Fund set up on or after 1 January 2019, the remaining amount shall be used to implement a CSR Programme or finance a non-governmental organisation implementing a CSR Programme in the following priority areas of intervention:

· Dealing with health problems resulting from substance abuse and poor sanitation.

·  Educational support targeting families in the Social Register of Mauritius.

· Family protection; protection to victims of domestic violence.

· Poverty alleviation targeting families listed in the Social Register of Mauritius.

· Social housing targeting families in the Social Register of Mauritius.

· Supporting persons with severe disabilities.

Any amount unspent (to a CSR Programme) shall be remitted to the MRA together with the company's annual return. The amount to be remitted to the MRA could be reduced upon prior written approval from the National CSR Foundation. This is where the company intends to spend the unremitted amount within the priority areas of intervention.

No CSR money shall be spent by a company on the following activities:

· Activities discriminating on the basis of race, place of origin, political opinion, colour, or creed.

· Activities targeting shareholders, senior staff, or their family members.

· Activities that are against public safety and national interest.

· Religious, political, trade union, self-financing, staff welfare, and marketing activities.

Where the amount paid out of the CSR Fund is in excess to the amount provided for under that CSR Fund, such excess may be carried forward and offset in equal instalments against any amount to be remitted to the MRA in respect of five succeeding years starting from year of assessment 2016/17.

Where a company is required to submit an Advance Payment System (APS) statement, it should remit 25% of the CSR amount to be remitted to the MRA together with the APS statements, and the final 25% is to be remitted on the submission of the final return.

Note that the following entities are not subject to the CSR regulations:

· A company holding a GBC1 Licence under the Financial Services Act.

· A bank holding a banking licence under the Banking Act, in respect of its income derived from its banking transactions with non-residents or with corporations holding a Global Business Licence under the Financial Services Act.

· An Integrated Resort Scheme (IRS) company referred to in the Investment Promotion (Real Estate Development Scheme) Regulations 2007.

· A non-resident société, a foundation, a trust, or a trustee of a unit trust scheme.

Also note the following:

The CSR Fund shall apply in all respects to a resident société, other than a resident société holding a Global Business Licence under the Financial Services Act, its net income shall be deemed to be its chargeable income, and any distribution of its net income shall, for the purposes of the CSR Fund, be deemed to be dividends.

Residency Rule:

Under domestic law, a company is resident in Mauritius for tax purposes if it is incorporated in Mauritius or centrally managed or controlled in Mauritius.

A company not incorporated in Mauritius is resident in Mauritius only if it is centrally managed and controlled in Mauritius.

In the absence of a tax treaty, any income derived from the following is taxed in Mauritius:

· Any business carried on wholly or partly in Mauritius.

· Any contract wholly or partly performed in Mauritius.

A GBC2 company is not considered a resident in Mauritius for the purposes of double taxation treaties (DTTs).

Under a tax treaty, a company is considered a resident in Mauritius if it is incorporated in Mauritius or if its effective management is in Mauritius.

Permanent establishment (PE):

Generally, a PE is created under a tax treaty if one of the following criteria is met:

Branch, office, factory, workshop, or installation used for extraction of natural resources.

Building site, construction, installation, assembly, or supervisory services where the activity on the site lasts for a minimum of six months or 12 months, depending on the tax treaty.

Taxable Income:

Inventory valuation:

Inventories should be valued at the lower of historical cost or net realisable value. The last in first out (LIFO) basis of valuation is not allowed for tax purposes.

Conformity is required between book and tax reporting. Where the MRA is not satisfied that the basis of valuation is acceptable (e.g. where the LIFO basis has been applied), it will make such adjustment as it believes is appropriate to determine the profits arising from the business carried on.

Capital gains:

There is no tax on capital gains in Mauritius. However, certain transactions are taxed as ordinary business profit instead of capital gains. Where a transaction is in the nature of trade, the MRA may take the view that it is an ordinary trading transaction and assess the gains derived as income.

Any gains derived from the sale of shares held for less than six months are classified as trading income and are therefore taxed as ordinary income.

Gains realised from the sale of any property or interest in property acquired in the course of a business, as part of a profit-making undertaking or scheme, are taxable as ordinary income.

Dividend income:

Companies, whether resident or not, are exempt from tax on dividends received from resident companies.

Dividend income received from abroad by a company resident in Mauritius (non-GBC1 company) is subject to tax at the rate of 15%. Credit for any foreign tax withheld is given, subject to documentary evidence provided to the MRA.

Dividend income received from abroad by a GBC1 company is subject to tax at an effective rate of 3%.

Stock dividends:

A resident company can distribute stock dividends (bonus shares) proportionately to all of its shareholders. Stock dividends per se or convertible into cash are not taxable in the hands of the recipient. Dividends in kind (i.e. other than cash or shares) are treated as taxable benefits.

Interest income:

Interest income received by resident companies (non-GBC1 companies) is liable to tax at the rate of 15%.

A GBC1 company receiving interest income from abroad is liable to tax at the effective rate of 3%.

Interest income paid by any person, other than by banks or non-bank deposit-taking institutions under the Banking Act, to individuals and non-residents is liable to withholding tax (WHT) at the rate of 15% (final tax).

Royalty income:

Royalty income received locally is subject to tax at the rate of 15%.

Royalty income received from abroad is subject to tax at the rate of 15%. Any tax withheld from abroad will be allowed as a foreign tax credit. However, a company holding a GBC1 Licence receiving royalty income from abroad on which no foreign tax is suffered will be entitled to a deemed foreign tax credit of 80% of the Mauritian tax payable.

Foreign income:

Resident corporations are taxed on their worldwide income, but tax credit and treaty relief is generally available in order to avoid double taxation.

Undistributed income of foreign subsidiaries is not subject to any special taxation as long as the income of the foreign subsidiary before distribution is not included in the accounts of the local parent company. Dividends paid by the foreign subsidiary to the local parent company will, however, be taxable to the latter, whether or not such dividends are actually received in Mauritius.

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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.