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Double Taxation Agreements

Mauritius offers investors an ideal platform of routing investments in a tax efficient manner because of the Double Taxation Agreements (‘DTA’) that the Island has with numerous countries.

The absence of exchange controls, capital gains tax or withholding tax in Mauritius enhances further the attractiveness of the Global Business Sector of Mauritius to investors.

A Global Business Company with Category 1 Licence can qualify as a tax resident in Mauritius and thus benefit from the tax treaty network Mauritius has established. It is therefore ideally suited for all investments to third countries, with whom Mauritius has signed a DTA, and which are likely to generate a flow of income in future years, be it as dividends, interest, royalties or capital gains.

Resident

The treaty applies to any person who is resident in one or both states. Resident of a state means a person who is liable to tax under the laws of that state by reason of his domicile, residence, place of management or any other criterion of a similar nature. A person includes an individual, a company, and any non-corporate which is treated as a taxable unit under the taxation laws of the respective states.

Permanent establishment

A person resident in a state and carrying on business in another state will be taxed in the other state only if he has a permanent establishment there. Permanent establishment essentially means substantial presence, for instance, a place of management, a branch or an office. It also includes a building site,  construction or assembly project lasting more than nine months.

Dividends

Dividend may be taxed in the source country at rates not exceeding 5% if shareholding is at least 10%. In other cases, it is 15%.  Mauritius does not levy tax on dividends paid by resident companies.

Interest

Interest may be taxed in the source country at the rate applicable under its domestic law but is tax free under certain conditions, e.g. if paid to the government of the other state, its agencies, to a bank resident in the other state, or if the debt-claim is approved. Under Mauritian tax law, interest paid by a company holding a Global Business Licence Category 1 or a bank holding a Category 2 banking licence to a non-resident not carrying on any business in Mauritius is tax exempt.

Royalties

Royalties may be taxed in the source country at a rate not exceeding 15%. However, under Mauritius tax law, royalties paid by a company holding a Global Business Licence Category 1 to a non-resident are exempt from tax.

Capital gains

Gains from the sale of shares are taxable only in the country where the shareholder is resident. While Mauritius does not levy capital gains tax, any gain or profit from the sale of securities or units is specifically exempt from income tax.

Relief from double taxation

Double taxation is avoided by means of a tax credit allowed for tax paid in the other state. The treaty, as well as Mauritius tax law, provides for credit in respect of underlying tax relating to dividends and tax sparing relief for tax exemption or reduction granted by a state.