Set up a company or a fund in Mauritius
Many investors thinking about establishing a fund consider Mauritius as a starting point because of its flourishing financial sector full of opportunities. With flexible management choices and simple and well-known fund designs, it has become increasingly popular recently.
The country is also acknowledged as a significant driver of development for blockchain ventures and other alternative types of assets. Many international investors consider setting up a fund in Mauritius due to its favorable business environment and attractive tax incentives.
Why choose Mauritius to set up a company or fund?
How was Mauritius formed? Mauritius has enacted many rules governing the establishment of funds in the state throughout the years. Additionally, the country has entered into a number of Investment Promotion and Protection Agreements with other African nations.
The country of Mauritius has been positioned as an investment link between Africa and Asia due to its stable and business-friendly financial climate. Additionally, an 80% tax relief is available for income from closed-end funds and collective investment schemes (CIS), which makes this country an even more appealing place to set up a fund.
Advantages of setting up and investing in Mauritius funds
In Mauritius, low taxes are applied to domestic and international business enterprises under the Partial Exemption Regime since 80% of foreign-sourced income from closed-end funds, collective investment schemes, managers, or administrators will be excluded from income tax. In the end, there are no capital gains taxes or interest taxes. Thus, the tax rate is as low as 3%.
Additionally, Mauritius has a robust and adaptable legal framework that recently enhanced the nation’s anti-money laundering regulations.
Different schemes are feasible, and you might find a variety of structure solutions beneficial with differing benefits.
You can dive deeper into investing legislations of Mauritius funds by looking through official funds governing documents:
- The Securities Act 2005;
- The Securities Rules 2007;
- The Securities Rules on Licensing 2007;
- The Securities Rules on Public Offers 2007;
- The Securities Regulations on CIS and close-ended funds 2008.
You might also want to study other key legislation bodies on AML, licensing and fees, and advertising guidelines.
The Financial Service Commission, the Registrar of Companies, and the Registrar of Limited Partnerships are the regulatory organizations in charge of overseeing CIS and closed-end funds.
The Financial Service Commission governs alternative investment funds in Mauritius. The commission has a broad range of authority.
First of all, it sets rules and standards and provides guidelines. The FCS also ensures compliance with current laws and conditions ‒ and if they are violated, it has the right to issue a warning, censure, or even imply penalties (up to revoking a license).
What are the main types of Mauritius funds?
In Mauritius, there are two different kinds of funds: closed-end funds and collective investment funds. Financial Services Commission approval of the funds is required. The following conditions must be met for FSC to accept an application:
- track record and qualifications of the promoters;
- fund structure and objectives;
- market and investors that are the focus;
- asset types that the fund will deal with;
- experience records of an investment manager and fund administrator;
- adherence to international and third-party laws and regulations, where necessary.
Let’s focus on collective investment funds as the most approachable type.
Collective investment funds
The objective of a collective investment scheme is to invest money in a portfolio of securities, other financial assets, real estate, or non-financial assets allowed by FSC regulations.
The diversification of risks is the foundation of CIS operations. On request from the security holder, funds in this scheme are required to redeem the securities at their net value, less commission and costs.
The most common ways to create a collective investment scheme are as a business, a protected cell company, or a unit trust. The registration fee and yearly fee for the CIS fund are each $1000 and $3000 respectively.
But there is more to it. Collective investment schemes exist in several forms.
Professional CIS fund is free from the majority of continuing responsibilities as long as the shares purchased aren’t offered for sale to the general public or listed for trading on a market. At least two weeks prior to the offering, you must inform FSC about it. You must also provide a copy of the presentation at the same time. Also, you have to inform FSC of the actual number and the value of the shares sold when the offering is over. Any bankruptcy applications must be reported to the FSC by CIS professionals.
Legal requirements for a professional CIS fund include being a category one global business company, having at least two corporate stakeholders with local residency, as well as an external auditor with local residency.
Founding a professional CIS fund in Mauritius requires a single payment of $1000 for a license application to FSC and a yearly fee of $2500.
Expert Fund is an opportunity only for experienced investors. Expert investors are those who make their first investment from their own funds of at least $100000.
International customers have the option to assign the management of the funds to an authorized CIS in Mauritius or another regulated country. The CIS manager need not reside in Mauritius in order to perform their duties.
To open this type of CIS fund, you have to represent a category one global business company, have at least two corporate employees with local residency and have a local external auditor as well as a local custodian. You also have to employ a fund administrator. Just as with a professional CIS fund, you have to pay an application fee of $1000 and a yearly $2500 fee. But also, there is a requirement of a minimum subscription of $100000.
The specialized fund is specifically used to target high-risk or illiquid assets such as commodities, derivatives, and real estate. Before applying for a specialized fund, you are required to obtain FSC’s approval on whether such a scheme would be authorized.
The requirements are similar to those of professional CIS funds, except for the limitation on the size of the fund or total assets under management of $100000.
Also, there is a retail scheme. It targets retail investors and is subject to Investment Restrictions and Practices under CIS. It is mandatory for an open-ended retail fund to appoint a custodian licensed by FSC to safeguard assets in the retail fund. Custodians are required to maintain a minimum stated “unimpaired” capital of MUR10 million.
And finally, there is a global scheme. The global scheme is allowed to carry out the activities of a CIS but does not fall into specific categories such as Professional CIS, Expert Fund or
Specialized Fund. Upon approval of the FSC, a global scheme can appoint a CIS Manager from other regulated jurisdictions. Unlike the more specific categories, the global scheme is required to adhere to most of the regulations set by the FSC.
Do CIS funds operate similarly to hedge funds?
Hedge funds can be characterized as CIS Professional funds or CIS Expert funds, despite the fact that neither a defined regime nor an official nomenclature applies to them. Since they are excluded from a significant portion of the restrictions, these funds operate similarly to hedge funds ‒ this is why we have mentioned hedge funds in this article.
How to set up a fund in Mauritius?
So, you want to start a fund registered in Mauritius. In order to do that, you have to incorporate either a trust, a company, or a limited partnership and then get a global business corporation license we have mentioned before.
Your next step is to send an application to FSC to authorize your company and let it operate as a fund of your choice. After one to three months depending on the type of fund, you will obtain the license if you meet FSC regulations for collective investment scheme funds.
Want to learn more about the intricacies of obtaining necessary licenses and setting up a fund? Thales Capital Luxembourg can offer you a consultation as well as services you might need in the process of setting up the fund.
What are the legal requirements for setting up a company or fund in Mauritius?
To set up a company or fund in Mauritius, you need to fulfill certain legal requirements. These include:
Company Registration: For a company, you must register with the Registrar of Companies and provide details such as the proposed name, registered address, nature of business, and details of shareholders and directors.
Capital Requirement: There is no minimum capital requirement for most types of companies. However, certain regulated activities may have specific capital requirements.
Fund Licensing: To establish an investment fund, you need to obtain a license from the Financial Services Commission (FSC). The application process involves submitting various documents, including an offering document, financial projections, and background information on the management team.
Compliance and Reporting: Once established, companies and funds in Mauritius are subject to ongoing compliance obligations. This includes filing annual financial statements, maintaining proper accounting records, and adhering to regulations set by the relevant authorities.
What types of companies and funds can be set up in Mauritius?
Mauritius offers various options for setting up companies and funds, catering to different business needs. Some common types include:
Global Business Company (GBC): GBC entities can conduct business outside Mauritius and benefit from tax advantages such as no capital gains tax, no withholding tax on dividends, and no inheritance or wealth tax.
Investment Funds: Mauritius has established itself as a popular destination for setting up investment funds. Funds can be structured as mutual funds, private equity funds, real estate funds, venture capital funds, or other specialized funds.
Limited Liability Company (LLC): An LLC provides limited liability protection to its members and is suitable for small and medium-sized enterprises (SMEs) and family businesses.
Trusts: Mauritius has a robust legal framework for the establishment of trusts, which can be used for wealth management, asset protection, and estate planning purposes.
Are there any tax incentives or benefits for companies and funds in Mauritius?
Yes, Mauritius offers several tax incentives and benefits for companies and funds. Some key advantages include:
Double Taxation Avoidance: Mauritius has an extensive network of double taxation avoidance agreements (DTAAs) with over 40 countries, which provide tax relief and help eliminate or reduce the incidence of double taxation.
Tax Treaties: These treaties often provide beneficial withholding tax rates on dividends, interest, and royalties, making Mauritius an attractive jurisdiction for international business and investment.
Global Business License (GBL): GBC entities can apply for a Category 1 GBL, which allows access to Mauritius’ tax treaty network and favorable tax treatment, subject to certain substance requirements.
Capital Gains Tax Exemption: There is no capital gains tax in Mauritius, except for gains derived from the sale of immovable property situated in Mauritius.
Can a foreigner or non-resident set up a company or fund in Mauritius?
Yes, foreigners and non-residents can set up companies and funds in Mauritius. The country actively encourages foreign investment and has a favorable business environment. The process involves fulfilling the necessary legal requirements, as mentioned earlier, and complying with relevant regulations.
Foreigners can hold 100% ownership in most sectors, except for a few specific industries that may require local participation or approval from regulatory authorities. Additionally, appointing a local resident director is mandatory for certain types of entities, including GBCs.
It is advisable to seek professional guidance from lawyers, tax advisors, or company formation specialists with expertise in Mauritius company and fund setup procedures to ensure compliance with all legal and regulatory requirements.