Are we doing enough?
The Minister of Finance, Economic Planning and Development, Dr the Hon Renganaden Padayachy, in his Budget 2024-2025, ambitions to make Mauritius a one trillion rupee economy by 2030. He expects to achieve this objective through enhancing the ease of doing business to sustain higher levels of investment, making the labour market more vibrant and strengthening sectoral development.
Financial Services
With a recorded growth rate of 4.4% in 2023, the Minister is right to focus on the Financial Services sector, which has in recent years gone through numerous turmoils. The tax landscape is continuously changing, and while the country had successfully navigated the Base Erosion and Profit Shifting (BEPS) initiative (driven by the OECD), the impact of the Global Minimum Tax is yet to be felt. Mauritius has long been the desired platform for routing investments in India and this to a large extent has been the backbone of the sector. Mauritius has recently signed the Protocol with India, amending the tax treaty between the two countries which has created added uncertainties in the industry.
The Minister has announced a series of measures to consolidate the position of Mauritius as an International Financial Centre (IFC), which includes the review of the blueprint for the financial services in the context of the new challenges and opportunities, attracting foreign talents in the wealth management, family office, virtual assets and virtual tokens space, and engaging in discussions with India for the development of our financial sector. Would these measures help sustain Mauritius as an IFC? We already have favourable tax regimes for wealth management, family offices which did not achieve the desired result. We should rather consider whether increasing our value offerings could be the key to thrive our way. Further, Mauritius as an IFC will only sustain if we are a jurisdiction of substance. The country has done a lot to elevate itself since its creation as an IFC. But are we doing enough or are we already late?
The definition of Securities will be extended to include virtual assets and virtual tokens, which will make the gains on sale tax exempt. At PwC, we strongly advocated for such an exemption. In a “crypto era”, such an exemption can be a game changer to attract investment opportunities through Mauritius.
Tax Administration
The Budget 2024-2025 proposes to prevent a taxpayer from submitting an amended tax return if a case is at the objection stage or before the Assessment Review Committee. The statutory period for the taxpayer to amend a tax return is four years and a similar timeline applies for the Mauritius Revenue Authority to raise a tax assessment. This amendment in the tax rules will deprive a taxpayer of his fundamental statutory rights.
The Tax Arrears Payment Scheme will be extended for another year, which will bring more relief to taxpayers who are struggling with huge tax bills and hefty penalties and interests. We expect this scheme is also available to taxpayers who have recently been issued with tax assessments.
New Taxes
A Corporate Climate Responsibility (CCR) levy of 2% on the company’s profits will be introduced to financially support the “Climate Agenda”, and it will apply to companies having a turnover exceeding Rs50m. This is a disguised tax, similar to bank and telephony levies which will increase the effective tax rate and negatively impact companies. Further, we hope Rs5bn collected as levy will find its way towards its designated objective!
Other Tax Incentives
Increase in the tax exemption threshold on lump sum received as pension, retiring allowance or severance allowance from Rs2.5m to Rs3m, interest income exemption on interest income derived from bonds issued by a public sector company to finance infrastructure projects and extension of investment tax credit to companies in AI and patent industries are a few of the other tax incentives announced in the Budget.
Conclusion
The Budget has plugged in a few desired incentives which will help in the context of an evolving business environment. It is also interesting that the Minister emphasised on the promotion of the Financial Services as one of the priority areas. We can only hope that the measures that have been announced crystallise, failing which Mauritius will lose its grips as an IFC.
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