Pravind Kumar Jugnauth, the Prime Minister and Minister of Finance and Economic Development presented his Budget for 2018-2019 to the National Assembly on 14 June 2018.
The FINANCE (Miscellaneous Provisions) BILL (N° XI of 2018) has been deposit the 13th of July and voted at the Parliament the 9 August 2018, the ACT n°11 of 2018.
The evolution of macroeconomic figures has been positive for the country: the gross domestic product has increased by 4.1% this fiscal year against 3.9% in 2017-2018; unemployment estimated at 6.9% in 2018; the inflation rate estimated at 3.5% in 2018-2019; foreign direct investment increasing to MRU 17.5 billion up from MRU13.6 billion in the previous year; foreign exchange reserves at MRU 222 billion representing 10.7 months of import coverage rate.
The measures cover: youth and the workforce; innovation specifically in new technologies (Blockchain, Artificial Intelligence, Fintech); the substitution of imports; construction of new infrastructure for future needs; guarantee economic development consistent with sustainable development; improve the standards and quality of the population by investing in health, sport, education; to continue social responsibility by consolidating the social system, women's participation and support for the elderly.
Financial Services
The substantial measures are linked to the harmonization of Global Business regimes. The key measures are:
- The removal of the Global Business License 2 from January 2019 with a provision of "grandfathering" for existing companies. The abolition of the foreign tax credit, known as the "Deemed Tax Regime" (an automatic reduction of 3% to 15% for foreign activities);
- Standardization of the "Global Business";
- Tax reduction of 3% to 15% but only for certain types of activity;
- Substance of Global Business Companies.
First, the most important measure: the termination of the Global Business License 2. GBC2 will no longer be
incorporated after 1 January 2019. Companies incorporated before 16 October 2017 will be regulated under the current regime until 30 June 2021.
There will be standardisation, including a modification to the terminology: the name of the "Category 1 Global Business License" will become "License for Global Business".
Also measures of "best practice" will be implemented requiring additional substance and a harmonized framework for service providers.
The second key measure is the abolition of the foreign tax credit called "deemed tax regime" granted to companies holding Global Business Category 1 license and banks from 31 December 2018.
A new system will provide a partial exemption (“Partial Tax Regime”) of up to 80% limited to certain types of incomes: foreign source dividends and profits, interest and royalties and income from certain activities (including trading, import/export). These exemptions will be conditional on companies meeting the substance requirement.
The incorporation of a Global Business is subject to a legal requirement that before the start of the activity,: FSC’s authorisation, licenses, and registration depending the area of the GBC’s activity. The company must meet substance requirements, such as: directly or indirectly have a substantial number of employees in Mauritius; a minimum expenditure proportional to the company’s activity; to be administered and controlled in Mauritius; and be administered by a “management company”. The directives require a minimum of: two Directors and a Company secretary, who are both residents in Mauritius; a Mauritius bank account, a bookkeeper located in Mauritius, and hold the Administrator’s meeting in Mauritius.
Innovation : Artificial Intelligence-fintech-Blockchain
Mauritius wishes to focus on Artificial Intelligence, Blockchain and Fintech to become an African centre of innovation.
- A new legal status “Mauritius Innovation and Entrepreneurship Framework” will be established for entrepreneurs and young inventors such as 3D printing technology, digital libraries and digital asset custodians;
- The establishment of a “Sandbox” Licensing Committee to consider all questions related to the issue of licenses for Fintech activity. These guidelines will cover the subject of Blockchain technology and cryptocurrencies.
- Strengthening anti-money laundering rules with financial institutions and management companies;
- The finalisation of regional cooperation agreements such as the development of Special Economic Zones on the African continent, establishment of a mechanism for collaboration with the European Union that supports cross-border investment;
- Creation of a Film Promotion Fund, supervised by the Economic Development Board with a capital of MRU 500 million and a film studio.
For more information, please contact Patricia Cressot: p.cressot@monoeci.com