By Joe Chan, Managing Partner, ATax Advisors Limited & Zaynab Hisaund, Senior Tax Manager, ATax Advisors Limited, Mauritius
On 7 August, Mauritius enacted its Finance (Miscellaneous Provisions) Act 2020 to give effect to the measures announced in the Budget Speech 2020-2021 presented by the Minister of Finance, Economic Planning and Development.
Amid the economic difficulties the country is facing due to the Covid-19 pandemic, changes to the fiscal landscape have been introduced as a recovery plan.
Tax holidays
In a view to boost the blue economy, eight continuous years of income tax holiday will be provided to companies starting operations on or after 4 June 2020 and engaged in inland aquaculture in Mauritius.
Persons engaged in an approved inland aquaculture activity have also been added to the list of exempt persons for value added tax purposes and will, therefore, be exempt from value added tax on payment of equipment to be used exclusively for such activity, subject to certain conditions.
Income derived by a company approved as a branch campus of an institution which ranks among the first 500 tertiary institutions worldwide at the time of registration will also benefit from eight successive income years of tax exemption, starting from the income year in which the institution has started its operations.
This is effective for companies starting operations in Mauritius on or after 4 June 2020.
Payment for information technology systems and related materials and equipment for the purpose of online education by such branch campuses will also be exempt from value added tax.
Previously, eight years income tax exemption was provided to companies incorporated after 8 June 2017 and deriving income from the manufacture of pharmaceutical products, medical devices, and high-tech products.
The exemption has been extended to income from the manufacturing of nutraceutical products by a company that has started its operations on or after 4 June 2020.
Notwithstanding the fact that, effective from 1 July 2021, double deductions will be provided on expenditures incurred on medical research and development carried out in Mauritius, this demonstrates Mauritius’ commitment to promoting the medical sector.
Indirect tax on digital or electronic services
Effective from 7 August 2020, value added tax will apply to digital or electronic services supplied over the internet or an electronic network or which is dependent on information technology.
This new tax on digital or electronic services will apply to supplies by a foreign supplier to a person in Mauritius.
A foreign supplier is defined as a person who has no permanent establishment in Mauritius, has his place of abode outside Mauritius and supplies, in the course of his business, digital or electronic services to a person in Mauritius.
This new measure raises a lot of questions, such as the applicable tax rate, who will bear the burden of collecting the tax, which type of digital or electronic services will be within scope, and whether the revised reverse charge provision will apply.
Although this measure seeks to tax resident suppliers and foreign suppliers the same way in Mauritius, it may also give rise to double taxation for Mauritian customers in the event the country of residence of the foreign supplier also imposes indirect tax on the supply.
Whether taxing the digital economy through value added tax is compliant with the “unified approach” under Pillar One as proposed by the OECD remains to be assessed!
We supply and support Broadcasting software, all over Africa. We intend to open a branch in Mauritius, and we will eb employing local French speaking University graduates.
Would we apply for the eight year tax holiday.