Mauritius is well known among promoters and institutional investors as a domicile for structuring funds. This is mainly because the country has one of the strongest financial services sectors in the region due to its sophisticated levels of regulation and service.

More recently, Mauritius has been looking to establish itself as an international financial centre to act as a conduit for cross-border investment and trade between Africa and the rest of the world. In line with this objective, and to broaden its product offering, the Financial Services Commission (FSC) has set out new criteria for its Special Purpose Fund (SPF) regime.

The SPF was first introduced in 2013 under the Financial Services (Special Purpose Fund) Rules 2013 (2013 Rules). It was designed for funds:

• that conduct investments solely in countries that do not have tax arrangements with Mauritius; or
• whose purpose is to invest mainly in securities whose returns are tax exempted; or
• where investors of the schemes are pension schemes or other persons entitled to tax exemption.

The SPF had not found much traction in the mainstream fund market particularly because of its limited applicability. The 2013 Rules have now been repealed and replaced by the Financial Services (Special Purpose Fund) Rules 2021 (2021 Rules), which came into force on 6 March 2021.

In contrast with the 2013 Rules, the 2021 Rules do not set specific criteria for a scheme to be categorised as an SPF. Rather, they give the FSC the power to use its discretion to grant such authorisation and to impose conditions that it may deem fit on an authorised SPF.

The removal of clear criteria makes it difficult to gauge accurately when an SPF licence will be granted, but it is hoped that the regulator will exercise its discretion liberally so that the vehicle becomes as commonplace as the versatile exempt fund vehicles in other popular fund domiciles.

The 2021 Rules detail certain obligations of an SPF which include that it must:

• offer its shares, solely by way of private placements, to investors having competency, significant experience and knowledge of fund investment;
• have a maximum of 50 investors and a minimum subscription of USD 100 000 per investor; and
• at all times, be managed by a CIS manager and administered by a CIS administrator.

Furthermore, the SPF, its CIS manager and its CIS administrator must carry out their relevant core income-generating activities in, or from, Mauritius, and have the obligation (i) to employ, directly or indirectly, an adequate number of suitably qualified persons to conduct their core income-generating activities and (ii) to incur a minimum expenditure proportionate to the level of such activities.

Although the SPF has been overhauled completely from its 2013 predecessor, it is important to note that it remains a tax-exempt vehicle under the Mauritian Income Tax Act 1998 and all interest, rents, royalties, compensation, and other amounts paid by an SPF to a non-resident continue to be exempt income.

It is anticipated that these new rules will provide further flexibility and ease access to new markets. A copy of the 2021 Rules may be accessed here.