In most respects, the 2001 Act inherited tax privileges granted under previous acts, and Section 46 of the Income Tax Act 1995 was amended accordingly:
(1) Subject to section 7 and subsections (2) and (3)
of this section, every trust shall be liable to income tax on its
chargeable income at the rate specified in Part III of the First
(2) A trust of which
(a) the settlor is a non-resident; and
(b) all the beneficiaries appointed under the terms of the trust are, throughout an income year, non-resident, or hold a Category 1 Global Business Licence or a Category 2 Global Business Licence under the Financial Services Development Act 2001
shall be liable to income tax on its chargeable income at the rate specified in Part II of the First Schedule.
(3) Where a trust which qualifies under subsection (2) deposits a declaration of non-residence for any income year with the Commissioner within 3 months after the expiry of the income year, it shall be exempt from income tax in respect of that income year.
(4) The chargeable income under subsections (1) and (2) shall be the difference between:
(a) the net income derived by the trust; and
(b) the aggregate amount distributed to the beneficiaries under the terms of the trust.
(5) Any amount distributed to the beneficiaries under the terms of the trust shall be deemed to be a charge under section 10(1)(d) and shall be liable to income tax in the hands of the beneficiaries.
(6) Notwithstanding subsection (5), a non-resident beneficiary of a trust shall be exempt from income tax in respect of his income under the terms of the trust.
Offshore Trusts are taxed in the same way as Offshore
Companies. These pay corporate income tax at 15% (0% if incorporated
before 1st July 1998). In fact until 2003 they could opt to
pay tax at any rate they chose between 15% (or zero) and 35%,
and normally made this choice according to the rules governing
'controlled foreign corporations' in the country where the major
shareholder is based. However, legislation enacted in 2000 removed
the facility to choose tax rates from 2003.
Offshore Companies, and therefore Offshore Trusts, are also exempt from stamp duty, land transfer tax, and capital gains (morcellement) tax.
Offshore Trusts are also able to take advantage of Mauritian Double Tax Treaties.
An offshore trust is allowed a credit for foreign tax on its foreign-source income. If no written evidence is presented to the Mauritius Commissioner of Income Tax showing the amount of foreign tax charged, the amount of foreign tax shall nevertheless be conclusively presumed to be equal to 90 per cent of the Mauritius tax chargeable with respect to that income. However, this deemed foreign tax credit of 90% was reduced to 80% as from the year of assessment 2003/2004, which is based upon the year of income ending June 30, 2003.
As noted above, an offshore trust may opt by written notice to the Mauritius Commissioner of Income Tax to be treated as non-resident in Mauritius for tax purposes, in which case it will not be subject to any income tax in Mauritius. However, being non resident, the offshore trust may not benefit from Mauritius' extensive network of double taxation agreements.