Exploring Investment Vehicles And Structures In Mauritius As A Leverage And Strategy To Overcome Your Business Challenges In Africa.Part 2

By  Michael Adjei* [caption id="attachment_105161" align="alignnone" width="1280"] Michael Adjei is International Business Development Executive at Órama[/caption] Mark Twain wasn’t lying when he said, “Mauritius was made first, and then heaven, and that heaven was copied after Mauritius.” Many of us know Mauritius to be a tourist destination with beautiful beaches and scenery, however, from an optimistic outlook at independence, Mauritius has performed well on popular measurements of growth and human development, moving into the high human development category of the United Nations Human Development Index in 1996 and joining the World Bank’s high-income category list in 2020. These achievements have contributed to the country being lauded as a ‘miracle’, ‘Africa’s only tiger economy’, ‘a democratic developmental state’ and an ‘African success story’. Mauritius is a beacon of political, social and economic stability which offers investors a conducive environment for doing business which guarantees predictability, certainty and security. It is currently home to the Permanent Representative Office of the Permanent Court of Arbitration (PCA). The country provides ease of access to international markets. Over the years, Mauritius crafted a strong growth-oriented developmental path which enabled them to achieve one of the highest per capita income in Africa. From USD 400 in 1968 when it obtained its independence, their development strategy has propelled them in the league of high-income countries with a GDP per capita of USD 12,740 in 2019. This strategy, built on a combination of political stability, strong institutional framework, and favourable regulatory environment have established the foundation for economic development, while open trade policies have been key in sustaining growth. In the previous article (part 1) we discussed the state of doing business in Africa. In this article we will delve straight into using Mauritius as a strategy to overcome the challenges. So how relevant is Mauritius as a jurisdiction to help navigate through your everyday business challenges in Africa? As Africa garners increasing amounts of interest from foreign investors, Mauritius provides the complete platform to help facilitate businesses with ambitions on the continent. Basically, Mauritius acts as your vehicle and your gateway to spring boarding into Africa. Over the years this tiny but powerful nation has developed investment structures and vehicles that provides Africa’s solutions. A sophisticated, transparent and well-regulated international financial centre with a conducive ecosystem offering a complete range of financial products such as treasury management centres, global funds, protected cell companies, captives, family offices and trusts. To incentivize new activities, the Government has introduced tax holidays for setting up regional headquarters, investment banking, and fund management, amongst others.  Let’s take a look at some of the vehicles into perspective. Global Business company (GBC) The Global Business Company (GBC) is a strategic move by the Mauritian government to establish and strengthen the position of Mauritius as the leading regional financial and business hub for multinational companies doing business in Africa. A GBC is ideal to strategically manage and grow your operations across Africa and the rest of the world. It is a platform to springboard and easily spread your operations across the globe. If you’re thinking of expanding your company operations overseas, then you should think about the Mauritius GBC as an effective tool for international tax planning. The Global Business Corporation benefits from all the advantages of Mauritius as an International Financial Centre. A GBC benefits from Mauritius’ extensive double taxation avoidance treaty networks. With an array of network agreements comprising several Investment Promotion and Protection Agreement which offers an excellent protection for foreign business owners and Double Taxation Avoidance Agreements with African and international states that gives global investors, traders and private equity companies a preferential access to a number of key African markets and several hundreds of millions of customers. It is an ideal structure to benefit from the Mauritius business friendly environment. Demonstrating substance in Mauritius and as a tax resident entity, a GBC is incorporated to carry out global business activities or financial services activities. A foreign national may hold 100% shares when incorporating a company given that at least two directors reside in Mauritius that which management companies are able to provide competent directors in the case. The required minimum share capital is only $1 USD and the setup is usually accompanied with a corporate bank account with any bank of your choice or as recommended by your management company. Management Companies (MCs) are service providers which act as intermediaries between their clients and the Financial Service Commission (FSC), the regulators of the GBC.  An example of a competent Management Company is Órama Corporate Services. Like Órama, all MCs are licensed by the FSC and are to guide and assist clients with the set-up process. The duties of MC’s include ensuring that clients business is at all times in conformity with the stipulated conditions, norms of honorable conduct and with the laws of Mauritius; take all reasonable measures and exercise due diligence to ensure that their clients are sound and reputable; keep books and records in connection with their business of company management that reflect accurately their affairs and business amongst others. A good MC like Órama Corporate is essential because they will ensure their client is up to date with every information required to operate in Mauritius. [caption id="attachment_105163" align="alignnone" width="1100"] Mauritius has long been the jurisdiction of choice for firms wanting to expand their business into Africa.[/caption] Global Business Companies are eligible to an eight-year tax holiday on all income generated by the company from its headquarters activities, provided it satisfies the licencing requirements. It is commonly used to structure investments & projects in countries with Mauritius DTAA partners, holding rights to intellectual property such industrial designs, copyrights, trademarks, patents, Trading, consultancy services, collective investment schemes, Close ended Funds, PCC, regional headquartering, financing, marketing centre, purchasing property for business or residential purposes in Mauritius under IRS/RES/PDS/SMART city scheme. A GBC can also be structured as an investment holding, trading company, Collective Investment Scheme, Global Fund, Protected Cell Company or Limited Partnership. The tax benefits of setting up a GBC are enormous including no capital gains tax, No withholding tax on dividends, interest and royalties paid, no exchange control on repatriation of profit, capital or interest, no estate duty or inheritance tax. A Mauritius GBC is liable to corporate tax at the harmonised rate of 15% however, an established GBL Entity engaged in the certain qualifying activities can benefit from a partial exemption of 80% tax credit. As such the GBL entity is ultimately taxed at 3% on its chargeable income subject to meeting certain substance requirements (Scheme approved by EU/OECD). It is important to note that compliance and substance requirements have become the backbone of many businesses worldwide. Many banks now insist on only dealing with entities which are tax resident and have reasonable substance in their jurisdiction from where they are being managed and controlled. The EU/OECD are also pursuing a similar direction with more jurisdictions abiding by the ever-increasing criteria to remain in competition. It is therefore important to deal with jurisdictions like Mauritius which is the most compliant country and the number one in Africa in meeting all of the Financial Action Task Force (FATF) recommendations and has over the years consolidated its leadership position in Africa with the 1^st position for ease of doing business and number 13 in the world. Reach out to Órama Corporate Services for more information and guidance on how to use Mauritius as your investment destination. ** Michael Adjei is International Business Development Executive at Órama . The article is the second  in a three part series .Part one can be read here