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Income Tax

The taxation of income of both companies and individuals is governed by the Income Tax Act 1995 which is substantially based on UK tax law. Mauritius has a global system of taxation as opposed to a schedular system. Under this system, income from all sources is added up and the appropriate tax rate or rates are applied after reckoning all allowable deductions and exemptions.

Taxable Income

Taxable income of a person comprises the gross income from different sources less allowable deductions. Taxable income of an individual includes salaries and benefits derived from employment. No tax is levied on capital gains. Profits from the sale of securities and units are exempt from tax. There is no withholding tax on dividends.

Tax Year

The year of assessment runs from July 1 to June 30 and tax is levied on income derived during the preceding year. Every tax payer should furnish a return of income and pay tax due not later than September 30 every year. A corporation whose accounting year ends on June 30 has seven months to file its tax return: otherwise it has between 4 and 14 months to do so.

Personal Tax Rates

The chargeable income of individuals are taxed at the following rates:
Tax Rate : 15% Personal deductions and reliefs are detailed in Third Schedule of the Income Tax Act 1995

Expatriates

Expatriates employed in Mauritius are subject to the same regulations as local taxpayers and are assessed for income tax on income earned in Mauritius. Certain allowances and deductions cannot be claimed by expatriates in an income year during which they are not considered to be residents of Mauritius. Residence in respect of an income year means an individual who has:

. his domicile in Mauritius unless his permanent place of abode is outside Mauritius;
. been present in Mauritius in that income year for a period of, or an aggregate period of 183 days or more;
. been present in Mauritius in that income year and the 2 preceding income years, for an aggregate period of 270 days or more

Scope of Corporation Tax

Corporate Income Tax Rates

The rate of corporate income tax in Mauritius is 15% on chargeable income. However varying rates apply to other companies depending on their status as follows:

List of tax incentive companies include; companies holding categories 1 and 2 Business Licence, banks holding a Category 2 Banking Licence; companies involved in financial services such as investment trusts, mutual funds, venture capital fund, lease financing companies holding a Regional Development Certificate and so forth.

Corporate Income

For income tax purposes, a company is defined as a corporate body (except a local authority), whether incorporated in Mauritius or abroad. A company is regarded as a separate taxable entity distinct from its shareholders. Income included in gross income for a company includes income derived from any business, rents, royalties, premium, income derived from property, dividends, interests, etc.

Definition of Residence

The Income Tax Act 1995 defines a resident company as one which is incorporated in Mauritius, or if it has its central management and control in Mauritius. The place where central management and control is located would be determined by such factors as where the board meetings are held and hence where decisions are taken and orders given.

A resident company is taxed on its worldwide income excluding exempt income, which includes foreign-source income. A non-resident company is liable to income tax only on its income arising or deemed to arise in Mauritius, i.e. source income. A partnership or societe having its seat in Mauritius with at least one partner or associate being resident in Mauritius, is resident in Mauritius. A trust of which a settlor is non-resident or all the beneficiaries hold either Category 1 or Category 2 Global business licence can elect to be non-resident by filing a declaration to that effect, otherwise it is a resident trust for tax purposes.

Income derived from Mauritius includes:

. Income derived from any business carried or any contract wholly or partly performed in Mauritius.
. Emoluments derived from any office or employment, the duties of which are performed wholly or mainly in Mauritius, whether such emoluments are received in Mauritius or not.
. Income derived from outside Mauritius by a resident of Mauritius.
. Income derived from investment in shares, debentures or other securities in Mauritius.
. Income derived by a person from money lent by him outside Mauritius
Where the source of any income is not exclusively in Mauritius, that income shall be apportioned between its source in Mauritius and its source elsewhere in such a manner as the      Commissioner of Income Tax thinks fit.

Exempt Income

Various type of income are exempt from income tax, including:

. Income derived by a Freeport company.
. Income derived by the registered owner of a foreign vessel.
. Income derived by the registered owner of a local vessel registered in Mauritius (provided the income is derived from deep sea international trade only). Capital gains on       speculative or investment gains.
. A resident societe.
. Dividends received and paid by a tax incentive company.
. Interests payable on accounts held by qualified corporate (offshore).
. Interest payable on specific government securities.
. Royalties payable to a non-resident by a qualified company trust or bank.
All exempt incomes are specifically stated in the Second Schedule of the ITA 1995.

Allowable Deductions

In general, expenses are deductible if they are incurred exclusively in the production of gross income and they are not of a capital or private nature. Expenses are not deductible to the extent that they are incurred in the production of exempt income. Allowable deductions comprise of:

. Annual and investment allowances on fixed assets.
. Additional investment allowance for manufacturing companies on capital expenditure incurred on the acquisition of states-of-art technology equipment.
. Marketing and promotional expenses.
. Losses incurred in the production of gross income.
. Bad debts and irrecoverable sums.
. Pre-operational expenses of tax incentive companies.
. Donations to charitable institutions.
. Contributions to superannuation fund and employee's share scheme.
. Gains on profits derived from sale of units and securities.
. Expenses incurred in setting up social infrastructure.
. Contribution to the national ambulance services.
. Interest on bonds issued by statutory bodies and debentures issued by
companies cultivating sugar cane or manufacturing sugar.

Losses

Losses incurred in the production of gross income in a specific income year may not be deducted from or set off against the gross income for that income year. However, the loss may be carried forward and set off against the gross income in the following income year and in the succeeding years. With regards to the quantum of losses available for set off or carry forward, the Commissioner of Income Tax determines the relevant quantum.

Annual & Investment Allowances

Capital allowances are based on expenditure actually incurred, i.e. after deducting any subsidies received or exchange gains on foreign loans to purchase plant and machinery - exchange losses on foreign loans are added to the capital cost of the plant and machinery. Annual allowances are allowed on capital expenditure relating to acquisition of plant and machinery, construction or extension of industrial premises including hotels, agricultural improvement on agricultural land and scientific research. The rates are as follows:

Note:

Capital expenditure incurred by a manufacturing company on the acquisition of state of the art technological equipment and an ICT Company on the acquisition of new plant and machinery, computer software qualifies for a maximum investment allowance of 50% of the expenditure.

A tax payer incurring capital expenditure in relation to the construction of industrial premises, acquisition of new plant and machinery, or acquisition of computer software, is allowed an investment allowance of 25% of the capital expenditure in respect of the income year in which the expenditure is incurred.

Investment Tax Credit

A company that subscribed to the share capital of a tax incentive company listed on the Stock Exchange is allowed a tax credit (by way of deduction from its income tax payable) equal to 10% of the amount actually paid in cash. The credit is spread equally over two income years, but may not exceed Rs. 300,000 in any one income year.

Taxation of Branches and Subsidiaries

In general, the taxable income of a branch of a foreign company is computed in the same way as that of a resident company. However, a branch may not claim a deduction for interest and royalties paid to its foreign head office. Payments of interest and royalties by a Mauritian subsidiary to its foreign parent, on the other hand, are deductible, although the payments will constitute Mauritian source income subject to Mauritian income tax in the hands of the parent. A branch may deduct management expenses changed to it by a foreign head office provided the charge is reasonable having regard to the nature and extent of the management services rendered.