Investment Advisory Services in Mauritius
Mauritius is recognized as a leading jurisdiction for setting up and administering funds in Africa and Asia. It has also garnered recognition from both fund managers and investors for structuring international investments, especially in Asia and Africa. Mauritius offers a low tax regime and also offers the benefits of double tax treaties.
Advantages of setting up investment funds in Mauritius
Following are the advantages which make it necessary for foreign businesses to set up investment funds in Mauritius:
- Low Tax regime
The maximum tax that is applicable in Mauritius is 3% under the Deemed Foreign Tax Credit regime. Withholding tax is not applicable to dividends and interests in Mauritius. Additionally, capital gains tax is not applicable in Mauritius. Exchange controls have not been put in place and funds can be repatriated freely from Mauritius into one’s home country.
Further, the Deemed Foreign Tax Credit regime has been replaced by the partial tax regime, which is applicable to both domestic and global business companies. As a result of this replacement, about 80% of the foreign source income derived by a closed-ended fund (CEF), Collective Investment Scheme (CIS), CIS administrator, and CIS manager will be exempt from income tax reducing the net effective tax rate to 3%.
- Wide network of double tax avoidance treaties
Furthermore, Mauritius is a signatory to a total of 44 tax treaties applicable worldwide and seven treaties have already been signed and awaiting ratification. About four treaties have been negotiated and await signatures, and close to 21 treaties are under negotiation.
- Robust and Flexible legislation
There are several other factors that have contributed to its success as an investment fund location which includes robust and flexible legislation. The quality and flexibility of the legislation lie in the strength of its legal system, its political setup, available infrastructure, its regulatory framework and a favourable time zone (GMT +4) which allows trading in all the global markets in a single day. Mauritius also offers a number of international banks and professional firms along with the skilled and qualified staff. Further, Mauritius also happens to be a cost-effective jurisdiction.
- Risk Mitigation platform
Mauritius also acts as a risk mitigation platform for investments that are made in Africa. Mauritius has a membership in the World Bank’s Multilateral Investment Guarantee Agency and has signed around 23 Investment Promotion and Protection Agreements with the various African states, which gives investors a sense of security for their investments against non-commercial risks.
Types of Investment funds in Mauritius
An investment fund in Mauritius can take the form of a company, a trust, a protected cell company, a foundation, a limited partnership or any other investment structure that is approved by the Mauritius Financial Services Commission (FSC). Funds can either fall under the category of Close-ended funds (CEF) with a fixed share capital, also known as private equity funds or can be open-ended with a variable share capital falling under the CIS category.
There are four types of funds or Collective Investment Schemes that have been recognised by the FSC in Mauritius:
- Global CIS
A Global CIS is a scheme that is essentially meant for the public. A Global CIS does not generally hold a Global Business Company (GBC) license and therefore not entitled to any of the exemptions that are generally provided to the funds.
- Professional CIS
This kind of scheme is meant for sophisticated investors or as private placements. These sophisticated investors include banks, public bodies, governments etc. These funds are exempted from most of the regulations and obligations provided that its interests are not resold to the public and not listed on the securities exchanges of Mauritius or around the world.
- Expert Fund
These funds are specifically meant for expert investors, where an investor has to make an initial investment of not less than the amount of USD 100,000. Similarly, most of the regulations and obligations applicable to the global funds are not applicable to the Expert funds.
- Specialised fund
Specialised funds are those that are invested in real estate activities or commodities or derivatives, or any other FSC-approved products.
Additional obligations under Investment advisory services in Mauritius
All the fully Regulated CIS must have a prospectus in the prescribed format, and details must be laid down in respect of the minimum amount of subscription, and at least 5% of the total amount should be raised within a period of 6 months or the risk being returned to the investors. However, Specialised CIS, Professional CIS and Expert funds are only required to have an offering document in order to obtain a license from the FSC.
A protected cell company has a core and separate and distinct cells where the assets and liabilities of one cell are separated and protected from those of the other cells. Vice versa, the assets and liabilities of the core cell are segregated and protected from those of the other cells. A protected cell company is beneficial in the case of an investment fund because it prevents cross-contagion if a specific portfolio within the umbrella fund becomes insolvent and if the creditors attempt to enforce judgments against the assets of other classes.
The vehicle of limited partnerships is also significant in the funds' industry in Mauritius because this business vehicle is the first choice for fund structures in foreign jurisdictions. The reason for selecting a limited partnership is the flexibility in its structure compared to companies and thus becomes an attractive investment vehicle for hedge funds, joint ventures and private equity funds.
The Stock Exchange of Mauritius also gives Mauritian registered Global Funds the advantage of flexible listing rules on its platform. The stock exchange of Mauritius is one of the leading platforms in Africa and a member of a number of international bodies such as the South Asian Federation of Exchanges, World Federation of Exchanges, Committee of SADC Stock Exchanges and African Securities Exchanges Association. Listing on the platform attracts investors’ value and demonstrates substance in the development of financial institutions and institutional investors.
Before 2010, the stock exchange of Mauritius only catered to unit trusts, investment companies and open ended funds. However, post-2010, the listing regulations have been amended to include Professional CIS, regulated Global schemes, Expert funds, Specialised CIS and CEFs. Every application to establish a fund in Mauritius must be made through a management company that has been given the license by FSC to operate in Mauritius. Additionally, every authorised company in Mauritius must have, at all times, a registered agent in Mauritius, which is a management company.