Undoubtedly, due to its strategic location, experience of the African market and the favourable tax regime, Mauritius is a well-placed international financial centre to access the African market and is becoming the perfect gateway for global investors to structure their investments in Africa.

Mauritius has a comprehensive range of offshore investment vehicles, ranging from companies, funds, trusts and partnerships, for investment into Africa. However many global investors would generally invest in Africa through an investment fund incorporated in Mauritius which is an ideal structure of routing investments in the African continent in a tax efficient manner. Over the years, Mauritius has developed a robust legal and corporate framework in the investment fund business and is proving to be very useful and efficient to global investors who are investing in Africa.

An investment company is regulated as either a collective investment scheme (i.e. an open-ended fund) or a closed-ended fund pursuant to the Mauritius Securities Act and is commonly structured as companies under the Mauritius Companies Act 2001. It deals in the pooling of funds from investors which would be invested collectively and holds a Global Business Licence issued by the Mauritius Financial Services Commission.

The Legal Framework

Investment funds in Mauritius are governed by the Securities Act 2005, the Securities (Disclosure Obligations of Reporting Issuers) Rules 2007, the Securities (Licensing) Rules 2007, the Securities (Public Offers) Rules 2007 and the Securities (Collective Investment Schemes and Close-Ended Funds) Regulations 2008 (the Regulations).

Collective Investment Scheme (CIS)

Definition of CIS

A CIS:

1. means a scheme constituted as a company, a trust, or any other legal entity prescribed or approved by the Commission:

whose sole purpose is the collective investment of funds in a portfolio of securities, or other financial assets, real property or non-financial assets as may be approved by the Commission;

whose operation is based on the principle of diversification of risk;

that has the obligation, on request of the holder of the securities, to redeem them at their net assets value, less commission or fees; and (iv) where the participants do not have day to day control over the management of the property, whether or not they have the right to be consulted or to give directions in respect of such management; and

2. includes closed-end funds whose shares or units are listed on a securities exchange; but

3. does not include such schemes as are specified in Part II of the Schedule of the Securities Act 2005 such as a contract of insurance, other than an insurance policy traded on the secondary market, a cheque, order for the payment of money, bill of exchange or promissory note or a scheme or arrangement operated by a person otherwise than by way of business.

Categories of CIS

CIS can be divided into the following categories:

1. Fully regulated CIS (mainly offered to the Public).

2. Professional CIS: professional CIS are CIS which offer their shares solely to sophisticated investors or as private placements. The Professional CIS are exempted from most on-going obligations/regulations generally imposed on public CIS.

3. Specialised CIS: a Specialised CIS is a CIS which invests in real estate, derivatives, commodities or any other product authorised by the Mauritius Financial Services Commission.

4. Expert Fund: an Expert Fund is a CIS that has applied to the Mauritius Financial Commission to be licensed as an Expert Fund. Expert Funds are only available to expert investors.

Fully regulated CIS

A fully regulated CIS which is mainly offered to the public, is a CIS that does not fall within any of the exemptions applicable to Professional, Specialised and Expert CIS. All the provisions of the Regulations would apply to a fully regulated CIS and therefore it would not be eligible to benefit from any exemptions provided under the Regulations.

Professional CIS

The provisions relating to professional CIS applies to a CIS offering its shares solely to sophisticated investors, or a CIS offering its shares as private placements. Moreover, the provisions also apply to closed-end funds which are not reporting issuers or to those CIS that the Mauritius Financial Services Commission classifies by rules as professional CIS.

Sophisticated Investor means: (a) the Government of Mauritius; (b) a statutory authority or an agency established by an enactment for a public purpose; (c) a company, all the shares in which are owned by the Government of Mauritius or a body specified in paragraph (b); (d) the government of a foreign country, or an agency of such government; (e) a bank; (f) a CIS manager; (g) an insurer; (h) an investment adviser; (i) an investment dealer; or (j) a person declared by the Commission to be a sophisticated Investor.

A professional CIS is exempted from several provisions of the Regulations provided the shares acquired by the participants shall not be resold to the public and the participants are advised of this restriction at the moment of subscription or the CIS is not listed for trading on a securities exchange.

Specialised CIS

A specialised CIS is one that invests in real estate, derivatives, commodities or any other product authorised by the Commission. A person wishing to establish a specialised CIS shall apply to the Commission for a decision as to whether or not such a scheme would be authorised.

Prior to giving a decision the Commission shall determine which of the regulations would apply, whether specific rules should be issued and the conditions that would apply to such a scheme.

Expert Funds

An expert fund shall only be available to expert investors, and an expert investor means:

an investor who makes an initial investment, for his own account, of not less than USD 100,000; or

a sophisticated investor or any similarly defined investor in any other securities legislation.

A CIS can apply to the Mauritius Financial Services Commission to be authorised as an Expert Fund based on the condition that the scheme is only available to expert investors.

An expert fund may appoint a manager who, where appointed, shall be the holder of a CIS manager licence, or a licence issued by a regulatory body in a jurisdiction having comparable regulation as Mauritius for investor protection.

The CIS manager of an expert fund need not be resident in Mauritius. The board of the fund or the CIS manager (where appointed) must satisfy itself that the fund is and continues to be managed in accordance with the fund’s constitutive documents.

Closed-End Funds

Closed-end funds are principally characterised by the fact that the investors are not entitled to redeem their investment and therefore the investors do not have control on exiting the fund. Closed-end funds are usually the favoured type of vehicle for private equity funds. They are exempted from a number of requirements under the Regulations normally applicable to fully regulated CIS.

A closed-end fund shall appoint and have at all times a CIS manager, however where the closed-end fund is self-managed the board of directors of the fund shall be subject to all provisions relating to a CIS manager.

Taxation

An open-ended fund or a closed- ended fund, being licensed as a Category 1 Global Business Company is liable to corporate tax at 15% but may claim a foreign tax credit on in respect of the actual foreign tax suffered or 80% presumed foreign tax credit (Deemed Foreign Tax Credit), whichever is higher. As such the maximum effective tax rate would be 3%. However, pursuant to the Finance (Miscellaneous Provisions) Act 2018 which has been recently introduced, the Deemed Foreign Tax Credit regime that is currently available for global business companies will be abolished and, instead, an 80% exemption regime will be introduced. The 80% exemption regime enables a global business company to retain the maximum effective tax rate of 3%, This new regime will be applicable to the following income:

Foreign source dividend, provided the dividend has not been allowed as a deduction in the source country.

Interest income from foreign source.

Profit attributable to a permanent establishment of a resident company in a foreign country.

Foreign source income derived by a CIS, Closed End Fund, CIS administrator, investment adviser or asset manager licensed or approved by the Mauritius Financial Services Commission.

Income derived by companies engaged in ship and aircraft leasing.

Tax Treaty Network

Being the holder of a Global Business Licence, an investment company can qualify as a tax resident in Mauritius and thus have access to the tax treaty network that Mauritius has established. Currently, Mauritius has concluded 44 tax treaties (DTAAs) of which 16 are with African Countries namely Botswana, Lesotho, Madagascar, Mozambique, Namibia, Rwanda, Senegal, Seychelles, South Africa, Swaziland, Tunisia, Congo, Egypt, Uganda, Zimbabwe and Zambia. The benefits provided under those treaties include:

no capital gain tax implications in the African states;

reduction in withholding taxes on dividends, interests and royalties.

Conclusion

The extensive DTTAs, tax incentives, sound regulatory and legal framework, well trained professionals, high end telecommunication services and strategic location make Mauritius an appealing jurisdiction for the establishment of investment funds for those who are interested in directing their investment into the African continent.

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