The financial attractions of Mauritius
Over the past couple of decades, the Mauritian government has gone out of its way to encourage foreign investment and stimulate economic growth (the annual growth rate has hovered between 3% and 4% over the past three years). The World Bank’s 2019 Ease of Doing Business Index ranked Mauritius 13th out of 190 economies worldwide (South Africa ranks 83rd).
According to the 2017 Economic Freedom ranking by the Fraser Institute of Canada, Mauritius has the ninth freest economy in the world, out of 162 countries (South Africa is in the third quartile, ranked 101), the main pillars of the economy being tourism, financial services, manufacturing and information and communications technology.
The people of Mauritius, who numbered just under 1.3 million at the last count, are as diverse as the people of South Africa. Although English is the official language, most Mauritians speak a local creole, with French also spoken widely. According to Wikipedia, the Human Development Index of Mauritius is the highest in Africa (the island republic is generally grouped with the continent). Its adult literacy rate is about 90%, as is its employment rate.
Apart from the relative administrative ease of setting up companies and opening bank accounts, there are big tax advantages. The island’s corporate tax rate is 15% (it’s 28% here). There is no tax on dividends (15% here) or capital gains tax (40% of the gain at your marginal rate, subject to exclusions, here) and no estate duty (20% here, subject to a R3.5 million exemption). Personal tax rates are also very low, at 15%. Mauritius has double-taxation treaties with 33 countries including South Africa.
At a recent seminar hosted by Sovereign Trust, which specialises in setting up companies, trusts and investment structures internationally, a line-up of financial and property experts provided valuable insights into investing, doing business and living in Mauritius. A key message was that while Mauritius welcomed foreign investment and business development, it had to be done responsibly, providing genuine benefits for the local population and without too heavy an impact on the environment.
As in many other low-tax jurisdictions, and in line with EU regulation, there has been a clampdown on “shelf” companies - companies in name only that have no purpose other than acting as a reservoir or conduit of assets.
Vidish Jugurnauth, director of Sovereign Trust (Mauritius), who enlightened the audience on the island’s new company laws, said EU substance and control regulations have ensured that the days of offshore “shelf” companies are gone. Investors needed to consider planning not for short term but for the long term, in investments that contributed to the country’s economic growth. Companies needed to be visibly producing goods or providing a service and employing Mauritian citizens.
But setting up a company in Mauritius was nonetheless very attractive, Jugurnauth said. The tax rate was a low 15%, and certain types of companies could enjoy a further 80% exemption, paying tax of just 3%, or getting a four, five or eight-year tax holiday subject to meeting certain conditions.
He said there was a range of residency permit options for potential investors and immigrants: the occupational permit, the residence permit, and the permanent residence permit.
* Occupational permit. This is valid for three years and renewable. There are three types: investor, professional and self-employed. The investor permit requires a minimum $100000 (R1.5million) investment into a Mauritius-based company, on which there are also minimum turnover requirements. The minimum investment for innovative hi-tech start-ups in qualifying sectors is reduced to $40000. These investment amounts do not have to remain in the company as a minimum balance - the money can be used as working capital, Jugurnauth says.
* Residence permit. Also valid for three years, renewable, and available to the dependants of an occupational permit and to retirees.
* Permanent residence permit. This is valid for 10 years, renewable, requiring a minimum investment of $500000 in an approved scheme or property. In the case of property, the permit is valid for as long as you own the property.
Permanent residents, after a consecutive two years’ full-time residence, are eligible for citizenship, subject to certain conditions and approvals.
Timo Geldenhuys, director of Sotheby’s International Realty, Mauritius, said that when the Mauritian government opened property ownership for foreign buyers, it set down fairly stringent conditions - “it did not want foreigners to buy just anywhere and push up property prices for locals”. So foreigners can buy only into certain qualifying schemes and developments.
To date, Geldenhuys says, more than 2400 properties have been sold to foreign investors, of which 22% were South African.
If you are interested in buying a property in Mauritius with a view to obtaining permanent residency, the minimum investment is $500000, but most of these properties lie in the $750000 to $1m range, Geldenhuys says. But there are other developments, geared for Mauritians, that offer more reasonable buy-to-let properties in which you can invest. While these investments don’t necessarily come with a residency permit, they do offer a way into the Mauritian property market.
The Smart City Scheme, set up in 2015, allows foreign investors to buy property in “smart towns” across the island. These are well-serviced nodes offering, among other things, upmarket rental apartment accommodation for young up-and-coming Mauritians. One such development is Moka, which lies a few kilometres inland from the island’s capital city, Port Louis. Studio units in Les Promenades D’Helvetia, start at the equivalent of about R1.5m, Geldenhuys says.
MAURITIUS: THE PROS AND CONS
Nico van Zyl, managing director of Sovereign Trust, Mauritius, outlined the pros and cons of living in the island republic, which, incidentally, comprises more than just the main island - there’s also Rodrigues, 560km east of Mauritius, and the outer islands of Agaléga, Tromelin and St Brandon.
The disadvantages are:
* Its remote location: it is well connected via telecoms infrastructure and airlines though flying from the island is expensive.
* Consumer goods are expensive, particularly meat and alcohol. New cars are expensive, Van Zyl says. Duties on imported goods are high.
* English is not widely spoken, so there is a language barrier to communication.
* Rentals for beachfront properties (which foreigners cannot own if they are less than 500metres from the shore) are high.
* Private schools are expensive.
The advantages, apart from the low taxes, are:
* The low crime rate. “It’s rated the safest country in Africa, and a great place to raise children,” Van Zyl says.
* There is free healthcare at public hospitals, although private health insurance is recommended.
* The standard of public education is high but while English and French are compulsory subjects, the medium of instruction varies from school to school.
* There’s a lot to offer in the way of outdoor activities and scenic attractions besides the beach.