Thursday, June 21, 2018
Mauritius announced wide-ranging changes to its tax regime in its latest Budget, including for companies.
The Deemed Foreign Tax Credit regime available to companies holding a Category 1 Global Business Licence will be abolished from December 31, 2018, and a partial exemption regime will be introduced whereby 80 percent of specified income will be exempted from income tax. The exemption will be granted to all companies in Mauritius, except banks, and will apply to foreign source dividends and profits attributable to a foreign permanent establishment, interest and royalties, and income from the provision of specified financial services.
The current formula for the Special Levy on Banks, which is scheduled to end by June 2018, will be maintained up to June 2019. The Special Levy on Banks is currently 10 percent of chargeable income for Segment A banking business; and 3.4 percent on book profit and one percent on operating income for Segment B banking business.
The Deemed Foreign Tax Credit regime available to banks will be abolished from July 1, 2019. In its place, a new tax regime for banks will be introduced that will make no distinction between Segment A and Segment B income. Income up to MUR1.5bn (USD42.5m) will be taxed at five percent. Income above MUR1.5bn will be taxed at a rate of 15 percent unless the bank satisfies certain conditions entitling it to be taxed at five percent.
A five-year tax holiday will be introduced for Mauritian companies collaborating with the Mauritius Africa Fund for the development of infrastructure in special economic zones. The tax holiday will cover investments in infrastructure development in the zones and will benefit project developers and project financing institutions.
The solidarity levy on telephony service providers, which was introduced in 2009, will be extended until June 2020, and companies will no longer be required to have profits exceeding five percent of turnover before being liable to pay the levy.
An investment tax credit of five percent over three years will be granted in respect of expenditure on new plant and machinery (excluding motor cars) by a company importing goods in semi-knocked-down form on the condition that at least 20 percent local value addition is incorporated. The credit will be available in respect of investment made up to June 30, 2020.
Employers will be allowed a double deduction for wage and salary costs of employees under the "work at home scheme" for the first two years. In addition, employers under that scheme will be granted an annual tax credit of five percent for three years on investment in the required IT systems.
The income exemption threshold for individuals will increase by MUR5,000. This means an individual earning MUR305,000 will pay no tax (previously MUR300,000), while an individual with one dependent will be able to earn MUR415,000 tax-free (previously MUR410,000).
The tax rate for those earning between MUR305,000 and MUR650,000 annually will fall by five percent to 10 percent.
The exempt threshold for employees who receive a lump sum, either as a severance, pension, or retiring allowance payment, will rise from MUR2m to MUR2.5m.
A final withholding tax of 10 percent will be introduced on Mauritius National Lottery winnings exceeding MUR100,000. The 10 percent tax will also apply to casino and gaming house winnings in excess of MUR100,000.
The additional income tax deduction in respect of dependent children who pursue tertiary studies will be raised.
Finally, the profit charge payable under an Islamic financing arrangement for the construction of a house will qualify for interest relief if the arrangement is secured on immovable property.