Budget 2018-2019 Highlights: Overview of Key measures Sector by Sector

This year’s budget has been expected as one that would provide a strategic roadmap for the Global Business sector, a boost to the burgeoning Fintech industry and also one that would drive reforms where needed while continuing to address the issues of poverty alleviation, income inequality and unemployment.

Financial Services sector

The Financial Services sector, regrouping the global business, banking and non-banking activities, will need to continue its evolution following the introduction of a number of challenging measures.

Key measures announced are as follows:

 Setting up of a steering committee under the aegis of the Prime Minister’s Office for the timely and effective implementation of the Blueprint recommendations.
 Introduction of a new harmonised fiscal regime for domestic and Global Business Companies and a specific fiscal regime for banks.
 Deemed Foreign Tax Credit regime available to companies holding a Category 1 Global Business License will be abolished as from 31December 2018.
 Partial exemption regime of 80% of specified income will be introduced. This exemption shall be granted to all companies in Mauritius, except banks and shall apply to the following income:
 Foreign source dividends and profits attributable to a foreign permanent establishment
 Interest and royalties
 Income from provision of specified financial services
 Partial exemption claimed by companies will need to satisfy pre-defined substantial activities requirements. Enhanced substance will also be applicable to Captive Insurance Companies.
 The existing credit system for relief of double taxation will continue to apply where partial exemption is not available.
 Issuance of new Category 2 Global Business License will cease as from 31 December 2018.
 Grandfathering provisions will apply up to 30 June 2021 for Category 2 Global Business Companies licensed prior to 16 October 2017.
 All restrictions applicable for Global Business Companies dealing in Mauritius will be removed.
 Deemed Foreign Tax Credit regime available to banks will be abolished as from 1 July 2019.
 All resident companies and partnerships incorporated/registered under laws of Mauritius having majority shareholdings/parts held by non-resident and which conduct business mostly outside Mauritius will be required to seek a global business license or an authorisation from the Financial Services Commission (FSC) through a management company.
 A new framework will be setup to govern and improve the oversight of Management Companies.
 The FSC will have additional powers to ensure licensees maintain license requirements at all times. It will also be allowed to petition to wind up one of its past licensees to cater for situations where the licences have been terminated.
 Relevant legislation will be amended to cater for disclosure and availability of beneficial ownership information for Anti-Money Laundering & Combatting Financing of Terrorism (AML/CFT) purposes.

FINTECH

Financial institutions are expected to embrace innovation, forge collaborations with Fintech players and experiment with the latest technologies.

Key measures announced are as follows:

 Setting up of a National Regulatory Sandbox Licence Committee to consider all issues relating to Sandbox licencing for Fintech activities including the investment and development of blockchain technologies and cryptocurrencies as digital assets.
 Creation by the Financial Services Commission (FSC) of new licensable activities, namely Custodian of Digital Assets and Digital Asset Marketplace, so as to provide a regulated and safe environment for digital assets custody and exchange.
 Issuance by the FSC of guidelines on investment in digital assets such as crypto currency.
 Application for Fintech activities with the FSC will be subject to compliance with cyber-security and
cyber-resilience policies and capacities.
 Harmonization and updating of the regulatory framework against money-laundering and terrorist financing for banking and non-banking financial services with the best international norms and standards.
 Setting up of a Mauritius Artificial Intelligence Council to strengthen the foundations and ecosystem for Artificial Intelligence (AI) development.
 Setting up of a scholarship scheme for 50 students annually to specialise in digital technologies, including AI and Blockchain.
 Setting up of a new Mauritius Innovation and Entrepreneurship Framework for young inventors and
entrepreneurs to have access to state-of-the-art technologies to facilitate their business activities.

BUSINESS FACILITATION

Manufacturing sector

 New business parks will be set up across the island: Côte D’Or, Riche Terre, Rose Belle and a technology park in Rodrigues.
 The procedures for recruitment of foreign workers are being streamlined.
 Companies, having less than 20 employees, will no longer be required to advertise jobs in the press. Instead, they will use the facilities provided by the Employment Information Centres.
 The policy regarding ratio of local workers to expatriates will be reviewed in respect of certain sectors.
 A number of measures relating to work/occupational permit and application/recruitment will be implemented to facilitate the entire process

Further opening up our economy and country

 The Economic Development Board (EDB) will manage 2 schemes to attract High-Net-Worth individuals who satisfy defined criteria and due diligence.
 The first scheme will offer foreigners the opportunity to obtain Mauritian citizenship provided they make a non-refundable contribution of USD 1 million for the applicant and USD 100,000 per family member to the Mauritius Sovereign Fund.
 The second scheme will offer the opportunity to obtain a Mauritian passport provided foreigners make a contribution of USD 500,000 for the applicant and USD 50,000 per family member to the Mauritius Sovereign Fund.
 The EDB will also operate a Foreign Manpower Scheme to attract foreign talents, particularly in emerging sectors such as AI, Biotechnology, smart agriculture and the Ocean Economy, amongst others.
 Government will also offer a new package of fiscal and non-fiscal facilities to attract foreign retirees. Besides, the right to acquire an apartment, they will be exempted from payment of customs duties on the import of personal effects up to a value of MUR 2 million.
Promoting Innovative Entrepreneurship
DBM will earmark an amount of MUR 1 billion to support the Micro, Small and Medium Sized Enterprises (MSMEs) through a set of schemes:
 Loan facilities for start-ups, young entrepreneurs and women entrepreneurs will be disbursed at an interest rate of 3% per annum.
 Provision of loans of up to MUR 3 million to planters engaging in sheltered farming at an interest rate of 3% per annum, with a moratorium on capital repayment in the first year.
 Loan up to a maximum of MUR 1 million will be available to operators of organic farms with a moratorium of 2 years, on capital repayment, depending on the project.
 DBM will operate a factoring window aimed at providing quick working capital to MSMEs by discounting their invoices.
 DBM will operate an Enterprise Modernisation Scheme aimed at providing finance lease facilities to
MSMEs with turnover up to MUR 10 million to modernize their plant and equipment
 A VAT-registered person will henceforth not be required to pay VAT on import of machinery and equipment, if the amount payable is MUR 150,000 or more.

TAX

Harmonisation of the fiscal regime for Global Business Companies and domestic companies. The deemed foreign tax credit available to Category 1 Global Business Company will be abolished as from 31 December 2018. Introduction of partial exemption regime where 80% of specified income will be exempted from income tax for all companies in Mauritius, except banks.

Corporate Tax

 The Deemed Foreign Tax Credit (FTC) regime available to companies holding a Category 1 Global Business Licence will be abolished as from 31 December 2018.
 A partial exemption regime will be introduced whereby 80% of specified income will be exempted from income tax. The exemption will be granted to all companies in Mauritius, except banks, and shall apply to the following income:
(i) foreign source dividends and profits attributable to a foreign permanent establishment;
(ii) interest and royalties; and
(iii) income from provision of specified financial
services.
 Companies licensed by the Financial Services Commission (FSC), claiming the above partial exemption, will have to satisfy pre-defined substantial activities requirement of the FSC.
 The existing credit system for relief of Government Revenue double taxation will continue to apply where partial exemption is not available.
 The Category 2 Global Business tax regime will be abolished. The current regime will continue to apply until 30 June 2021 for companies which have been issued a licence prior to 16 October 2017.
 Deemed FTC regime available to banks will be abolished as from 1 July 2019. A new regime specific for banks will be introduced with no distinction between Segment A and Segment B income.
The tax rates will be as follows:
(i) chargeable income up to MUR 1.5 billion will be taxed at 5%; and
(ii) chargeable income above MUR 1.5 billion will be taxed at 15%. In addition, an incentive system will be introduced for banks having chargeable income exceeding MUR 1.5 billion. Under this system, any chargeable income in excess of the chargeable income for a set base year will be taxed at a reduced tax rate of 5% if pre-defined conditions are satisfied.
 Special levy on banks maintained up to June 2019.
 Removal of tax exemption for freeport operators and private freeport developers on export of goods.

Government Revenue

The current tax regime will continue to apply until 30 June 2021 to companies which have been issued with a freeport certificate before 14 June 2018.
 Freeport operators and private freeport developers will continue to be exempted from the Corporate Social Responsibility (CSR) contribution.
 The corporate tax rate of 3% applied on profits derived by any company from export of goods will be extended to global trading activities effected by companies.
 For CSR, an amount up to 25% of the 75% to be remitted to the Mauritius Revenue Authority (MRA) can be retained if CSR programme is already started.
 5-year tax holiday introduced for Mauritian companies collaborating with the Mauritius Africa Fund for the development of infrastructure in the Special Economic Zones (SEZs). The tax holiday will cover investments in SEZ infrastructure development and will benefit 2 eligible categories of firms: project developers and project financing institutions.
 Solidarity Levy on telephony service providers will be further extended for 2 years, up to June 2020. The requirement for the book profit to exceed 5% of its turnover to be liable to the levy will be removed.
 Companies will not be allowed to offset any unused tax credit such as the foreign tax credit against CSR payable. Companies which have been granted tax holidays will be required to contribute to CSR.
 The income tax exemption granted on interest income received from debentures and bonds quoted on the stock exchange will be extended to returns from sukuks.
 Tax Deduction at Source (TDS) will be extended to ‘commission payment’ at the rate of 3%. In addition, the TDS rate applied on rent paid to a non-resident will be increased from 5% to 10%. TDS will not apply to director fees.
 Companies will not be allowed to offset any unused tax credit such as the foreign tax credit against CSR payable. Companies which have been granted tax holidays will be required to contribute to CSR.

Personal Taxation

 The Negative Income Tax allowance will now be computed on the basis of the monthly basic salary instead of total earnings criteria. However, an employee whose monthly total earnings exceed MUR 20,000 will not be eligible to Negative Income Tax. Working conditions will be considered.
 The MRA will pay the Negative Income Tax on a monthly basis, not later than one month following the date on which the employer files his Pay As You Earn (PAYE)/NPF/NSF return for the concerned month.
 An individual having annual net income of up to MUR 650,000 will be taxed at the rate of 10% instead of 15%.
 An increase in the income exemption thresholds by MUR 5,000.
 Additional deduction in respect of a dependent child pursuing tertiary studies as follows:
 Abroad – from MUR 135,000 to MUR 200,000
 Mauritius – from MUR 135,000 to MUR 175,000
 A retired person who derives emoluments not exceeding MUR 50,000 will be eligible to an enhanced income exemption threshold.
 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.
 The exemption threshold on the lump sum received as severance allowance, pension or retiring allowance will be increased from MUR 2 million to MUR 2.5 million.
 The Insurance Industry Compensation Fund will be exempted from income tax.

OTHER MEASURES

Infrastructure

The construction sector is expected to register buoyant growth over the medium term with massive investment in major public and private sector infrastructure projects.
 MUR 37 billion will be invested by Government in transport projects over next 3 years.
 Completion of the 1st phase of Metro Express project by September 2019 and completion of the 2nd phase by September 2021.
 MUR 12 billion has been earmarked for the construction and upgrading of road networks for next 3 years.
 Setting up of a High-Tech Park at Côte D’Or extending over 150 acres of land, a Logistic Park at Riche Terre and a Pharmaceutical and Life Sciences Park at Rose Belle.
 Investment of MUR 3 billion for the construction of Cruise Terminal Building with handling capacity of 4,000 passengers and construction of a fishing port.
 Expansion of passenger terminal at the airport to increase passenger handling capacity to 8 million annually.

Regional Cooperation

 Finalisation of the Comprehensive Economic Cooperation and Partnership Agreement with India.
 Conclusion of the Free Trade Agreement with China.
 Enhanced bilateral cooperation with Saudi Arabia and Middle East countries.
 Introduction of a 5-year tax holiday for Mauritian companies collaborating with the Mauritius Africa Fund for the development of infrastructure in the Special Economic Zones.
 State Bank of Mauritius and Mauritius Africa Fund to assist Mauritian investors to execute projects in the Special Economic Zones on the African continent.
 Setting up of a loan guarantee facility in collaboration with European Union to support cross border investment.

Film Industry

 Setting up of a Film Promotion Fund under the Economic Development Board, with a seed capital of MUR 500 million to attract world renowned film producers.
 Creation of modern Studio for Film Making.

Freeport Sector

 Removal of corporate tax exemption granted to freeport operators and private freeport developers on export of goods.
 Continued exemption from the Corporate Social Responsibility (CSR) contribution for freeport operators and private freeport developers.
 Current tax regime for companies which have been issued with a freeport certificate before 14 June 2018 will be maintained until 30 June 2021.
 Manufacturing activities will not be allowed in the Freeport but a transitional period will be granted to existing manufacturing companies.

Source :Rogers Capital