The Privy Council Provides Clarity to the Global Business Industry: Interest Exemptions Upheld in Mauritius

In Alteo Energy Ltd and another v Director-General, Mauritius Revenue Authority (2026) UKPC 27 (Alteo Case), the JCPC clarified the meaning of the phrase “core income generating activities” under the Income Tax Act 1995 (ITA). It rejected the narrow interpretation used by the Mauritius Revenue Authority (MRA) and thereby dismissed its appeal.

Background & Dispute

• The Core Activity: the principal business of Alteo Energy Ltd (Alteo) for the 2019/20 tax year was electricity production. The aforesaid electricity was sold to the Central Electricity Board, the Government owned and sole supplier of electricity in Mauritius and, this sale represented 95.7% of its income.
• The Tax Issue: Alteo also earned interest on certain loans (Loan Interest). The Loan Interest was incidental to its activities and represented approximately 0.25% of its total income.
• MRA Assessment: in its notice of assessment to Alteo, the MRA computed Alteo’s taxation on 100% of the interest income, claiming that Alteo did not qualify for the statutory 80% partial tax exemption because in order to claim the exemption, Alteo had to establish that the interest-generating activities of Alteo was part of its ‘core business’.
• Alteo’s Standpoint: Alteo argued that it was entitled to the 80% exemption under the ITA because it met all substance requirements on the basis that all of its operational activities took place within Mauritius.

Judicial Proceedings

• First Instance: The Assessment Review Committee initially upheld the MRA’s tax assessment.
• Supreme Court: Alteo appealed to the Supreme Court of Mauritius, which reversed the ARC’s decision and allowed the 80% exemption.
• JCPC: The MRA challenged the Supreme Court’s judgment with the JCPC which allowed the appeal and held that Alteo was entitled to the 80% exemption on its interest income.

The Advice of the JCPC

1. Defining “Income”

• The JCPC found that the term ‘income’ referred specifically to the type of income covered by the relevant exemption (in this case, interest income). In other words, the exemption under Regulation 23D(2)(a) applied only to the income that was eligible for exemption as opposed to the entire income of Alteo. The JCPC thereby qualified the Supreme Court’s finding that the term “income” meant all income generated by a company.

2. Interpreting “Core” Activities

• The JCPC held that the term “core” refers to the place where the activity is undertaken not how vital the activity is to the business. In other words, the term ‘core’ does not mean ‘core business’ but in fact it seeks to identify which part of the business activities of the company is generating the relevant income in Mauritius in order that the 80% exemption can be claimed.
• In so doing, the JCPC rejected the MRA’s argument that in order to successfully claim the exemption, a company must establish that money lending is a central ie ‘core’ aspect of a company’s business model.
• The JCPC stated that the ITA merely required that the core activities that generate that specific interest are performed inside Mauritius.

3. Substance and Location Over Nature of Business

• The law places no restriction on the nature of a company’s main business.
• The JCPC preferred a broad view of the ITA, looking at the entire operational presence of the company.
• Since Alteo carried out all its business, employed its staff, and incurred its expenses within Mauritius, it satisfied the substantial activity requirements.

Conclusion

This judgment has significant implications for companies operating under the Mauritius harmonised fiscal regime:

• Substance requirement: Confirms that exemptions turn on where the income-generating activities occur, not whether they are the company’s main business.
• Flexibility for non-core activities: Even incidental income streams (like interest) can qualify for the 80% exemption if their generating activities are conducted locally.
• OECD compliance: Reinforces Mauritius’ alignment with OECD’s Base Erosion and Profit Shifting (BEPS) Action 5, ensuring tax benefits are tied to genuine local activity.
• Broader certainty: Provides clarity for multinational and domestic companies that Mauritius’ regime does not restrict exemptions to businesses whose core operations are in finance.
• Encouragement of local operations: Incentivises companies to base substantive activities in Mauritius, strengthening its reputation as a compliant and attractive jurisdiction.

For more information, please do not hesitate to contact Sharmilla Bhima, or Nivedita Patten.