By Michael Adjei*
Mauritius has become the go-to location for businesses in Africa looking to establish their presence in the global market. The Global Business Company (GBC) framework was introduced in Mauritius in 1992 and has proved to be a significant advantage for African businesses locating themselves in Mauritius. Despite its small size, the paradise nation has managed to develop a thriving offshore financial centre. The benefits of GBC’s are not only limited to Mauritius, but also extend to other African businesses.
One of the key components of the Mauritius International Financial Centre is the famous Global Business Company (GBC). The GBC is a legal entity established under Mauritian law that allows foreign companies to set up business operations in Mauritius and take advantage of the country’s favourable tax and regulatory environment as well as its several multilateral treaties. Over the past decade, the GBC has become an increasingly popular option for African businesses looking to expand their international operations. In this article, we will explore the real benefits that the GBC framework provides to African businesses.
The GBC framework in Mauritius offers a wide range of structural and financial benefits to businesses. One of the significant benefits includes tax incentives. Mauritius offers a favourable tax environment to businesses which are comparatively lower than other tax jurisdictions, providing a competitive advantage to businesses. GBC’s are subject to a low corporate tax rate of 15%, with no capital gains or withholding tax on dividends. This has attracted both local and foreign investors looking to set up headquarters or regional offices in Mauritius. The tax benefits have a direct impact on profitability and ultimately lead to increased revenue for businesses operating from Mauritius.
Additionally, investors benefit from the country’s Double Taxation Agreements (DTA’s) that the government has entered into with over 45 countries, including most African nations. The DTA’s ensure that investors are not taxed twice on the same income therefore, companies operating in Mauritius can avoid paying taxes on their profits twice – both in Mauritius and in their home country. This advantage makes Mauritius an attractive location for African businesses looking to expand their international footprint. Additionally, Mauritius does not have any capital gains tax, which makes it an attractive location for investment activities. These tax benefits have been a major draw for African businesses, many of which are looking to optimize their tax structures.
Another advantage of the GBC in Mauritius is the country’s regulatory environment. The Mauritius Financial Services Commission regulates the GBC, ensuring that it operates in a fair and transparent manner. The Commission also provides oversight for other aspects of the financial center, including banking and insurance services. This regulatory oversight has helped to build confidence in the system and attract a steady stream of foreign investment.
The GBC in Mauritius also provides a convenient gateway for African businesses looking to access international markets and vice versa, making it an important gateway for trade and investment. The country has strong economic and cultural ties with Asia, particularly India and China. Companies operating in Mauritius can take advantage of these relationships to expand their reach into new markets. For example, an African company with operations in Mauritius can use the GBC to establish a presence in India, which has a rapidly growing consumer market. This kind of expansion can help African businesses to diversify their revenue streams and reduce their reliance on domestic markets and vice versa. This has made Mauritius an attractive destination for multinational corporations looking for a base to expand their operations in Africa.
One example of a business benefiting from setting up a GBC in Mauritius is African Infrastructure Investment Managers (AIIM). AIIM is a subsidiary of Old Mutual Investment Group and is one of Africa’s leading infrastructure fund managers. In 2018, AIIM set up a GBC in Mauritius to act as the fund manager for its third infrastructure fund. The GBC provided AIIM with a tax-efficient structure and access to Mauritius’ extensive network of double taxation treaties. This has allowed AIIM to raise capital from a range of investors across the globe and ultimately invest in much-needed infrastructure projects in Africa.
The GBC framework is one of the most flexible legal frameworks in the world, giving companies the freedom to tailor their business structure to their unique requirements. As a result, businesses can adopt hybrid structures and combine the benefits of onshore and offshore structures.
One of the main reasons behind the growing popularity of the GBC in Mauritius for African businesses is the ease of doing business in Mauritius. According to latest reports, Mauritius has been ranked 13th out of 190 countries globally for ease of doing business and Number 1 in Africa by the World Bank in 2020, Iindicating the business-friendly environment while demonstrating the government’s commitment to creating an attractive and business-friendly environment for foreign investors. Additionally, the country has excellent infrastructure supporting businesses, including a well-established legal, banking and accounting system, stable political environment, and skilled labour force.
African businesses in Mauritius are also benefiting from the country’s strategic location. Situated between Asia and Africa, Mauritius provides businesses with a gateway to the fast-growing Asian market. The country’s time zone also allows businesses to operate efficiently in both Africa, Asia and the rest of the world.
The number of GBCs in Mauritius has been growing steadily, with over 12,000 GBCs registered in the country as of 2020. Furthermore, the volume of Foreign Direct Investment (FDI) in Mauritius has been increasing over the years, with the country being the third-largest investor in India. In 2021, Mauritius received FDI inflows worth $375 million, a testament to the country’s attractiveness for global businesses.
To learn more about Mauritius, contact Órama Corporate Services for more information.
* Michael Adjei is International Business Development Executive at Órama .
