Business

Mauritius to Implement 2% Corporate Climate Responsibility

The Government of Mauritius has just adopted the Finance (Miscellaneous Provisions) Act 2024, imposing a 2% Corporate Climate Responsibility (CCR) charge on enterprises with a turnover over MUR 50 million from July 2024, seeking to fund climate change activities. Consequently, the effective tax rate will increase to 3.4% for businesses with partial exemptions and 5% for export-oriented companies.

Furthermore, an additional year has been added to the Tax Arrears Payment Scheme (TASS), which offers a complete waiver of interest and penalties for overdue taxes. Below, we will discuss this in depth.

Why does Mauritius Enforce 2% CCR?

World Tax News offers a brief overview of tax news weekly. Here is a peek at what’s happening with taxes worldwide this week. The Mauritius Revenue Authority has notified the Finance (Miscellaneous Provisions) Act 2024, which implements the 2024–2025 Budget measures.

• One of the main tax-related provisions is implementing a Corporate Climate Responsibility (CCR) charge, effective July 1, 2024, at 2% of a company’s income. Businesses that generate less than MUR 50 million in revenue are not subject to this tax.
• For taxes or contributions that are past due as of June 30, 2024, the Tax Arrears Settlement (Payment) Scheme renewal allows a complete remission of penalties and interest, provided that the total amount owed by June 26, 2025, and the application is completed by March 31, 2025.
• Since July 1, 2024, the 15% investment tax credit has been expanded over three years to include patents and artificial intelligence.
• Beginning on July 1, 2024, businesses that invest in corporate nurseries (child day care) will be eligible for a 25% tax credit based on capital expenditure or investment cost.
• Effective July 1, 2025, pharmaceutical, biotechnology, and medical manufacturing enterprises will no longer be subject to the 3% tax rate on income from intellectual property assets by international standards.

Ensure post-registration compliance in Mauritius with the new 2% corporate climate levy and tax incentives for innovation and corporate welfare.

Implications of the New Levy

The foundation for applying the levy, or the chargeable income, shall be determined once the turnover threshold has been established (according to Mauritius tax legislation). To be clear, exempt income (such as capital gains) is not included in the basis for charging the CCR levy.

The CCR Levy is 2%, applied to a company’s chargeable revenue as of the year of assessment starting on July 1, 2024. The annual return and the CCR Levy must be paid jointly.

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Know about the Mauritius 2024-2025-Budget

On June 7, 2024, Mauritius’s Minister of Finance, Economic Planning, and Development gave the Budget Speech 2024–2025. The primary tax-related measures are as follows: Extending the Tax Arrears Settlement (Payment) Scheme for an extra year, which offers a complete waiver of penalties and interest in cases where tax arrears owed under the Gambling Regulatory Authority Act, the Income Tax Act, and the Value Added Tax Act are paid in full by March 31, 2025, provided that the taxpayer registers under the Scheme by December 31, 2024; extending the 15% three-year investment tax credit to encompass patents and artificial intelligence; giving businesses that invest in corporate nurseries a tax credit equivalent to 25% of the total investment. 

To conform to international standards, a manufacturing company in the pharmaceutical, biotechnology, or medical industries should set the tax rate on income earned from intellectual property assets at 15% rather than 3%, offering a 50% grant or concessionary loan exemption from VAT, customs duty, and excise duty on the purchase of goods and services for projects supported by a donor organisation;

The following goods are zero-rated for VAT purposes:

vegetable, fruit, and flower seeds; planting or sowing bulbs and plants;

• seedling trays;
• plant pots;
• agricultural sprayers;
• roasted coffee, and
• baby lotions;

Services rendered by a management company to trusts with non-resident trustees and beneficiaries and foundations with non-resident founders and beneficiaries are zero-rated for VAT purposes, granting a VAT exemption for digital art gallery admission costs; extending, with retroactive effect.

The VAT exemption given for the construction of purpose-built facilities used for elementary, intermediate, and tertiary education to include pre-primary, technical, and vocational education and training; granting approved contractors working on the development of social housing units under a contract with New Social Living Development Ltd. a retroactive VAT exemption on motor vehicles related to construction; denying the filing of an amended return if the Assessment Review Committee receives a representation or the MRA receives an objection to an assessment; stating that a captive insurer will benefit from an eight-year income tax exemption beginning on the day the business starts operations.

Granting an 80% partial exemption on revenue received by a business that possesses a Financial Services Commission (FSC) licence for robotic and artificial intelligence-enabled advisory services, subject to the fulfilment of substantial conditions; extending the licensed closed-end funds 80% partial exemption to encompass revenue from the issuance of debt or money market instruments and clarifying that income received from a management company’s provision of administrative services to a CIS licence holder would not be eligible for the 80% partial exemption provided to a licensed collective investment scheme (CIS) administrator.

In addition to introducing the CCR Levy, the government has offered several tax breaks, among them are:

• Investment tax credit: Over three years, manufacturing enterprises investing in patents and artificial intelligence can claim a 15% tax credit.
• Tax exemption: Gains from selling tokens and virtual assets are now entirely income tax-free.
• Partial exemption regime (PER): This regime has been expanded to include businesses offering advice services for robotics, artificial intelligence, and payment intermediary services. Achieving the 80% PER requires these companies to fulfil specific substance standards.

The government has also instituted tax breaks and credits for businesses that sponsor artists, donate to non-profit organisations, and invest in nursery centres. Significantly, tax rates on income from intellectual property assets will rise from 3% to 15% for the pharmaceutical, biotechnology, and medical industries. In addition, a ten-year income tax vacation beginning from the date of operations is advantageous to captive insurers.

Due to the Finance Bill’s adoption on July 24, the following increases have been made to the effective tax rate for Mauritius entities:

• Global Business Companies argue for a 3.4% partial exemption instead of a 3% one.
• Exporters or Foreign Trade between 3 and 5 percent.
• From 15% to 17% are other worldwide business licence companies.
• Domestic businesses increased from 17% to 19% (with a 2% CSR charge included).

Vidish Jugurnauth, Client Service Director of Sovereign Trust (Mauritius), stated, “There are motivations for Mauritius outside of increasing the fiscus, although increased taxation is not welcome news.”

Though the financial services industry currently contributes about 14% of GDP, the government makes it plain that it values this contribution. Nevertheless, Mauritius is moving away from the reputation of being a “tax haven” and towards becoming a jurisdiction of substance. Travel worldwide is undoubtedly going in this direction, and Mauritius continues to be a very appealing destination for foreign direct investment and a gateway to doing business in Africa.

Register your company in Mauritius and leverage the 2024-25 budget’s tax credits and incentives to position your business for growth in this evolving global market.

Establishment of Climate and Sustainability Fund

The money produced by the new CCR levy will support national measures to preserve, manage, invest in, and restore the nation’s natural ecosystem and counteract the consequences of climate change.  Dr. Padayachy stated, “We must improve the ease of doing business environment to sustain higher levels of investment to foster economic dynamism.”

The labour market needs to be more dynamic to increase our competitiveness and productivity. Sectoral development needs to be strengthened for a well-diversified economic structure. This plan will give us a MUR1 trillion economy by 2030.

According to him, the financial services industry accounted for the majority of GDP growth in 2023, growing at a rate of 4.4%. The following were included in the budget proposals to keep up the momentum and grow the industry:

• Extending to holders of Payment Intermediary Services (PIS) licenses the Partial Exemption Regime.
• Examining the Asset Manager Certificate and the Fund to ensure that it has two or more competent executives.
• Examining the Funds Regime will make it more appealing.
• Examining the financial services industry’s blueprint in light of emerging possibilities, difficulties, and dangers.
• Sketching a plan with support from the UN Economic Commission for Africa to establish Mauritius as a Fintech hub for the area.
• Introducing centralised e-KYC to the international business community.
• A 10-year expert occupation permit is being introduced to recruit foreign talent for wealth management, family offices, virtual assets, and virtual tokens.
• We are investigating the possibility of establishing a Strategic Partnership Agreement (SPA) with Africa and India.

The following actions will be taken to enhance the business climate and promote an atmosphere favourable to trade, investment, and entrepreneurship:

• The FSC will expedite granting its licenses and permits, guaranteeing they are issued within ten business days, provided that all conditions are satisfied.
• The Companies and Business Registration Department’s information centre will be open around the clock.
• The framework for alternative dispute resolution will be modernised to facilitate the resolution of business conflicts.
• The Corporate and Business Registration Department will provide on-site electronic filing services during business hours.
• Establish a code of good regulatory practice to help with the institutional and legislative transformation of Mauritius’ business and investment environment.
• The FSC is implementing a new system that will shorten the time it takes to answer investor enquiries and handle license applications.
• The FSC sets a deadline for completing particular licenses. The application is sent to a fast-track subcommittee for licence issues as soon as the deadline approaches.
• With an optional pause in between, all foreign workers employed in industries where the present maximum stay of four years will be permitted to remain for up to eight years.

Significant Changes to the Financial Services Act 2007

The budget proposes changes to the Financial Services Act 2007 to strengthen regulatory monitoring and preserve the integrity of the Mauritius International Financial Centre. Among the changes is the mandate that the FSC CEO note in the register any necessary information about a licensee if their license is revoked or suspended.

• Establish deadlines for the FSC-regulated licence processing.
• Make sure eligible trustees submit data upon the FSC’s request.
• Give the FSC CEO the authority to name an investigator.
• Give the FSC CEO the authority to refer past cases to the Enforcement Committee involving licensees who conducted business that jeopardised the stability of Mauritius’ financial system, went against or was harmful to the public interest, or involved financial crime.
• Give an Authorised Company six months from the end of the fiscal year to file its financial statements, accounts, financial summary, and returns with the FSC.
• Permit the CEO of the FSC to give instructions to businesses with global business licenses and authorised companies.

Modified Companies Act

• Make provisions for submitting a copy of the constitution with an application to incorporate a limited liability company.
• Clearly state what a one-person corporation’s nominee for company secretary should be responsible for.
• Mandate that the Board of Directors report to the Registrar of Companies the resignation of a director or secretary from a company.
• Verify that the administrator chosen to oversee the dissolution of a limited liability company adheres to the Insolvency Act’s regulations.
• Upon requesting the withdrawal of a firm holding a global business licence from the Register of Companies, obtain the preceding no objection from the FSC.
• Mandate that all costs owed to the Registrar of Companies be paid when a document is submitted or a request is made.
• Unless the firm’s charter specifies otherwise, let a company possessing a Global Business Licence or an Authorised firm abide by the Companies Act’s regulations for prejudiced shareholders and amendments to the constitution.

The Financial Crimes Commission Act will also be modified to comply with recommendation 38 of the Financial Action Task Force, which calls for the ability to act quickly in response to requests from other nations to identify property that might be subject to seizure.

Regarding Tax Administration

• If a company’s shareholding changes by more than 10%, it will be considered that an effective ownership change has occurred.
• The MUR2.5 million exemption threshold will be increased to MUR3 million for lump sum payments received as severance, retirement, or pension payments.
• The extension of the exemption from income received from the sale of securities will cover the sale of virtual assets and tokens.
• By international standards, manufacturing companies operating in the pharmaceutical, biotechnology, or medical industries will pay a 15% tax on income obtained from intellectual property assets instead of 3%.
• The captive insurer’s eight-year income tax holiday will begin when the business begins operations.
• A business offering robotic and artificial intelligence-enabled advisory services can claim the 80% partial income exemption if it satisfies the substance requirements.
• The approved 80% partial exemption for closed-end funds will now include profits from the sale of debt or money market instruments.
• Make it clear that revenue received from a management business providing administrative services to a CIS licence holder is not eligible for the 80% partial exemption offered to a licensed Collective Investment Scheme (CIS) Administrator.

Other Noteworthy Recommendations in the Budget

Below are some of the other noteworthy recommendations in the budget:

• Other noteworthy ideas in the budget are (i) services rendered by a management company to trusts with non-resident trustees and beneficiaries or (ii) services rendered to foundations with non-resident founders and beneficiaries, which will be zero-rated for VAT purposes.
• The FSC will be able to charge fees for post-licensing procedures such as the appointment of officers, directors, auditors, actuaries, new controllers, beneficial owners, management companies, and registered agents by amending the Captive Insurance Act, Financial Services Act, Insurance Act, and Private Pension Schemes Act. The FSC will raise the processing and annual costs that licensees must pay.
• The amount that an intelligent city enterprise must contribute under the Smart City Scheme will rise from MUR25,000 to MUR100,000 for each residential property or serviced land parcel.
• Professionals will only need an occupation permit if their income is MUR22,500 instead of MUR30,000.
• Professionals who have worked for at least ten years will be granted a three-month temporary occupation permit, which will allow them to work until it is approved.
• Eliminating quotas on foreign labour will hasten hiring foreign workers in the manufacturing, jewellery, freeport, information and communications technology (ICT), and business process outsourcing (BPO) sectors.
• Three weeks will be the maximum amount of time that can be used to deliver or renew a work permit.
• The manufacturing sector’s maximum renewal time will be increased to ten years.
• Non-citizens with a retired residence permit (without a work or occupation permit) will be permitted to work.

Conclusion

According to the Budget, implementing the Tax Arrears Settlement Scheme and the Contribution Arrears Settlement Scheme will not result in penalties until June 2025. Additionally, the budget states that taxi drivers can purchase vehicles up to MUR120,000 with a one-time VAT exemption. Entirely biodegradable PET bottles will be free. Lastly, the budget states that private investments in the creative sector can access the Premium Investor Certificate. Secure your business’s future with sustainable growth in Mauritius by visiting our website Enterslice to navigate the new 2% corporate climate responsibility levy and optimize your compliance strategy.

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