On 17 January 2022, the Mauritius Financial Services Commission (FSC) addressed a letter to management companies explaining its new policy stand on the application of the core investment generation activities (CIGA) requirement to global business corporations (GBCs).
The Financial Services Act, 2007 (FSA) was updated in 2018 to provide for the new global business regime and accordingly section 71(3)(a) of the FSA was amended to provide that a GBC must always:
- carry out its CIGA in, or from, Mauritius, as required under the Income Tax Act, 1995 (ITA);
- be managed and controlled from Mauritius; and
- be administered by a management company.
As a reminder, a GBC is the primary tax-resident vehicle used to establish a business or holding structure in Mauritius to conduct cross-border trade.
The obligation of GBCs to carry out their CIGA in or from Mauritius is subject to the requirements laid down in the ITA. The ITA provides for an income tax exemption of 80% on certain categories of income (such as dividend and interest) or certain types of companies holding special licences or authorisations issued by the FSC, provided they meet certain prescribed substance requirements. The substance requirements are prescribed in the Income Tax Regulations 1996 (ITR), which include, amongst others, the requirement to carry out CIGA in Mauritius.
The FSC has now clarified that the CIGA requirement under the ITA and the ITR will only apply to GBCs claiming the 80% income tax exemption under the ITA. Therefore, GBCs not claiming the income tax exemption will not be required to demonstrate that their CIGA are, or would be carried out in or from Mauritius.
The new policy stand, which became effective as from 1 January 2022, was much awaited by the industry. This is because previously there was uncertainty about whether the CIGA requirement was both a regulatory obligation and a substance requirement in order to benefit from the partial tax exemption regime under the ITA, or simply a requirement to demonstrate sufficient substance in Mauritius to obtain the preferential tax advantage.
