Global Finance Mauritius: FATCA Update

The purpose of this communique is to keep you updated of the Foreign Account Tax Compliance Act (FATCA) developments at the national level.

You were kept informed through our various earlier news releases that a working group chaired by Mr Wasoudeo Balloo, Tax partner of KPMG, had, in September 2012, produced a report outlining an impact assessment of FATCA and had recommended to the policy makers that a country to country (inter-governmental) approach be adopted instead of each Financial Institution having to enter into a separate agreement with the IRS.

GFM represented by Mr Balloo and the CEO thereafter was invited to join the Technical Committee set up by Ministry of Finance to review the different Models Inter-Governmental Agreement (IGA) issued by IRS and to recommend the most appropriate IGA for Mauritius. The Committee was chaired by Mr Mosafeer, Technical Adviser to the Director-General of Mauritius Revenue Authority and comprised of industry and government representatives. This Technical Committee has been meeting on a monthly basis since March 2013.

The main recommendations of GFM to the Technical Committee have been as follows:-

1. to enter into a Tax Information Exchange Agreement (TIEA) and to sign a Model 1 Intergovernmental Agreement (IGA) with the US to facilitate the compliance of financial institutions (FFIs) in Mauritius with FATCA reporting rules
2. that our IGA with the US should contain a 'most favoured nation' clause which provides that any more favourable terms negotiated under another country’s IGA will automatically be applicable to Mauritius
3. that a CIS should be exempt from the reporting obligations where all the investors in the CIS are FATCA compliant

The Model 1 IGA requires Mauritius Financial Institutions to report information directly to Mauritius Revenue Authority, which then automatically exchanges the information with the US pursuant to an income tax treaty or exchange of information agreement.

You will find attached the final versions of the draft TIEA, IGA and Annexes as agreed by the MRA with the US. We are pleased to report that all recommendations of GFM have been taken into consideration in the final versions of the IGA.

We would also like to bring to your attention that MRA has received confirmation about the following:

1. Restricted/ unrestricted investment advisor and CIS Manager are included under paragraph IV(D) of Annex II;
2. Collective investment vehicles where all interests (irrespective of the amount) are held by or through one or more financial institutions that are not non-participating financial institutions are covered under paragraph IV (E) of Annex II;
3. The Stock Exchange of Mauritius is treated as an “established securities market” referred to in the definition of “Financial Account” in Article 1(1)(s) of the IGA.

While both Governments are completing the necessary procedures to sign the agreements, the Technical Committee shall now work on the legal framework needed for the implementation of the IGA in Mauritius.