Tax alert - MFD case - March 2023
The Mauritius Freeport Development case confirms that capital allowances can be claimed flexibly
On 09 March 2023, the Assessment Review Committee (“ARC”) ruled in favour of Mauritius Freeport Development Co Ltd (“MFD”) on the issue of claim for capital allowances.
MFD is a freeport developer operating in Mauritius, and PwC Mauritius, as part of its ‘Tax Dispute Resolution’ services, acted as Tax advisor to MFD on this case.
MFD restricted the claim for capital allowances in order to -
- Maximise the claim for trading losses which lapses after a period of 5 years; and
- Secure a higher tax written down value for future years.
The MRA argued that:
- capital allowances claim is mandatory in the year in which the assets are put to use;
- where MFD has not claimed capital allowance at the prescribed rate in a particular year, it loses the right to claim that allowance;
- by deferring the claim for capital allowances, MFD had circumvented the restriction of 5 years imposed prior to 30 June 2006 on carry forward of losses arising on capital allowances. No anti-avoidance provision was invoked by the MRA.
The ARC ruled that the Income Tax Act does not impose any minimum threshold in relation to capital allowances claim. A taxpayer therefore has the option to claim or not to claim annual allowance in and for each year. In other words, capital allowances can be claimed flexibly.
At PwC Mauritius, we are proud of the outcome of this ruling, which sets a judicial precedent in Mauritius. This is much in line with our objective of servicing our clients to the best of their interests in a fair and transparent manner.
