Reforming our Financial Services Sector
The Blueprint which I had announced in last year’s budget to take our financial centre to a new level of development has now been completed with the support of international consultants.
A Steering Committee will be set up at the Prime Minister’s Office to ensure the timely and effective implementation of the recommendations of the Blueprint.
In light of the ever-increasing challenges faced by the Global Business sector, Government is committed to give its full support to the global business sector whilst ensuring compliance with the best international norms and standards. The two can only go hand in hand. To this end, I am announcing the following measures:
- First, we are introducing a new harmonised fiscal regime for domestic and Global Business Companies and a specific fiscal regime for banks;
- Second, the FSC will cease to issue Category 2 Global Business Companies licences as from January 2019, with a grandfathering provision for existing companies;
- Third, Global Business Companies will be required to comply with enhanced substance conditions; and
- Fourth, we will establish a new framework to govern and improve the oversight of Management Companies.
Madam Speaker, the FSC will further develop equivalence frameworks with other key jurisdictions in view of enhancing our competitiveness as a financial centre.
And the FSC, in collaboration with the Organisation of Economic Cooperation and Development (OECD), will host a Regional Centre for capacity building and best practices in our mutual combat against financial malpractices.
Review of Taxation of Global Business Companies
The Deemed Foreign Tax Credit regime available to companies holding a Category 1 Global Business Licence will be abolished as from 31st December 2018.
A partial exemption regime will be introduced whereby 80% of specified income will be exempted from income tax. The exemption will be granted to all companies in Mauritius, except banks, and shall apply to the following income –
- foreign source dividends and profits attributable to a foreign permanent establishment;
- interest and royalties; and
- income from provision of specified financial services.
Companies licensed by the Financial Services Commission (FSC), claiming the partial exemption, will have to satisfy pre-defined substantial activities requirement of the Commission.
The existing credit system for relief of double taxation will continue to apply where partial exemption is not available.
The Category 2 global business regime will be abolished and the Income Tax Act provisions applicable to that regime will be reviewed accordingly.
The current regime will continue to apply until 30th June 2021 for companies, which have been issued a licence prior to 16th October 2017.
Taxation of Banks
The Deemed Foreign Tax Credit regime available to banks will be abolished as from 1st July 2019.
In its place, a new regime specific for banks will be introduced which will make no distinction between Segment A and Segment B income. The tax rates will be as follows –
- chargeable income up to Rs 1.5 billion will be taxed at 5 %; and
- chargeable income above Rs 1.5 billion will be taxed at 15%.
In addition, an incentive system will be introduced for banks having chargeable income exceeding Rs 1.5 billion. Under this system, any chargeable income in excess of the chargeable income for a set base year will be taxed at a reduced tax rate of 5% if pre-defined conditions are satisfied.
Special Levy on Banks
The Special Levy on Banks is currently –
- 10% of chargeable income for Segment A banking business; and
- 3.4% on book profit and 1% on operating income for Segment B banking business.
The current formula which is scheduled to end by June 2018 will be maintained up to June 2019.
The Special levy under the Income Tax Act will be removed with effect from 1st July 2019. A Special levy will be introduced under the Value Added Tax Act and will be charged on the net operating income derived by banks from its domestic operations.
Financial Services Act
The Financial Services Act will be amended to –
(i) allow the FSC to –
- give directions to any person as may be required, for the purposes of its functions, to ensure compliance with licensing conditions;
- take actions against a licensee which fails to comply with section 52 or section 52A of the Bank of Mauritius Act; and
- appoint an administrator in relation to the business activities of a person whose authorisation has been withdrawn;
(ii) ensure that licensees maintain the requirements needed for the grant of a licence at all times;
(iii) extend the scope of the offence with respect to licensees who provide false and misleading information;
(iv) extend the scope of the offence with respect to a person who destroys, falsifies, conceals or disposes of, or causes or permits the destruction, falsification, concealment or disposal of any document, information stored on a computer or other device where such information is relevant to the Commission;
(v) clarify that the Review Panel needs to receive the application for review within 21 days of the issue of the written notification;
(vi) allow for any determination of the Review Panel to be published except that any information which the Review Panel considers to be sensitive shall be omitted;
(vii) allow the FSC to regulate Custodian Services (Digital Asset) and Digital Asset Marketplace;
(viii) allow the FSC to regulate Compliance Services and Global Shared Services;
(ix) cease the issuance of Category 2 Global Business Licence as from 1st January 2019;
(x) rename the Category 1 Global Business Licence as Global Business Licence;
(xi) remove all restrictions applicable to dealings in Mauritius;
(xii) provide that all resident companies and partnerships incorporated/registered under the laws of Mauritius whose majority shareholdings/parts are held by non-resident and which conduct business mostly outside Mauritius will be required to seek a Global Business Licence or an authorisation from the FSC, through a duly appointed Management Company. The latter will be responsible for Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT), Legal, Regulatory & Corporate Governance compliance of these companies/partnerships; and
(xiii) provide for enhanced substance requirements for entities holding a Global Business Licence.
Consequential amendments will be made to sections in other legislations relating to companies holding a Category 1 or 2 Global Business Licence, namely, the Companies Act, Foundations Act, Insurance Act, Limited Liability Partnership Act, Limited Partnerships Act, Private Pension Schemes Act, Non-Citizens (Property Restriction) Act, Protected Cell Companies Act, Securities Act, and Trusts Act.
Companies Act
The Companies Act will be amended to –
(a) make provision for an offence being committed by a director for breach of duty where the director fails to disclose that he has an interest in a transaction or a proposed transaction with the company. On conviction, the Director will be liable to a fine of up to Rs 100,000 and to imprisonment for a term of up to 1 year;
(b) make provision for the Annual Report of a company to also mention any major transaction which took place during the accounting period to which it refers;
(c) provide that where the Registrar restores a company on his own motion, the requirement to give public notice in 2 daily newspapers will no longer apply to avoid unnecessary costs in relation to publication;
(d) eliminate the requirement for a certificate of current standing to contain a statement regarding payment of licence fees as same are no longer applicable;
(e) allow for disclosure and availability of Beneficial Ownership Information following enquiries related to AML/CFT;
(f) allow for the time for keeping the share register to be extended to 7 years following the removal of the company from the register;
(g) allow for enhanced protection to minority shareholders;
(h) allow for more transparency to shareholders; and
(i) allow for recovery of outstanding fees during liquidation process.
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