Holding Regimes 2018 : Mauritius compared to other jurisdictions

Loyens & Loeff N.V has published the 13th edition of its ‘Holding Regimes 2018 – Comparison of Selected Countries’. Especially since « international taxation is developing at an unprecedented pace. » They have focused, among other countries, on Mauritius in this issue, and Mauritian law firm BLC Robert & Associates has contributed in terms of information

Changes at the level of international taxation are moving at a rapid pace. Especially with the OECD Base Erosion Profit Shifting (BEPS) project. As of 1 February 2018, 70 countries have signed the Multilateral Instrument (MLI). Recently, Loyens & Loeff N.V has published its 13th edition of ‘Holding Regimes 2018 – Comparison of Selected Countries’. Mauritius figures in this edition, and information has been provided by Mauritian law firm BLC Robert & Associates.

How does our regime compare, in certain aspects, with selected jurisdictions like the Netherlands, Singapore, Spain, Switzerland and the United Kingdom?

 

Tax on Capital Contributions

MAURITIUS

THE NETHERLANDS

SINGAPORE

SPAIN

SWITZERLAND

UNITED KINGDOM

There is no tax on capital contributions in Mauritius.

There is no tax on capital contributions in the Netherlands.

There is no tax on capital

contributions in Singapore.

No tax is due on capital contributions made to a Spanish company upon

incorporation or thereafter

(whether or not the contribution

entails a capital increase).

1% (stamp duty) of the amount contributed (fair market value) with a minimum equal to the nominal value of the shares issued.

There is no tax on capital

contributions in the UK.

However, stamp duty or stamp

duty reserve tax is payable

at 0.5% on consideration for

the transfer of shares in a UK

incorporated company, unless

an exemption is applicable.

Corporate

Income Tax

Rate

 

 

 

MAURITIUS

THE NETHERLANDS

SINGAPORE

SPAIN

SWITZERLAND

UNITED KINGDOM

The general applicable rate is

15%.

25%. Reduced rate of 20% for the first EUR 200,000 of taxable

profits.

CIT rate is 17% (unless a

concessionary rate applies).

25%

Banks and other financial

entities are taxed at a 30% tax

rate.

Taxes are levied at 3 levels:

federal, cantonal and communal.

Taxes are deductible for

calculating taxable income.

Consequently, effective tax

rates are lower than the

statutory rates.

19%

An additional 8% corporation

tax surcharge is chargeable on

the profits of certain banking

companies and building

societies.

Dividend

Regime

(Participation

Exemption)

 

 

MAURITIUS

THE NETHERLANDS

SINGAPORE

SPAIN

SWITZERLAND

UNITED KINGDOM

There is no participation

exemption in Mauritius.

Dividends are fully exempt from

CIT under the participation

exemption if three

requirements are met:

All dividends paid by resident

companies are exempt in

the hands of shareholders in

Singapore.

Dividends derived from a

Spanish or a foreign subsidiary

are fully exempt from CIT

under cumulative

conditions:

For dividends, relief from

federal, cantonal and

communal income tax

is granted (‘Participation

Reduction’) in case:

(i) dividends derived from a

participation of which at

least 10% of the nominal

share capital is held;

(ii) dividends derived from profit

rights to at least 10% of the

profits and reserves; or

(iii) the shares have a fair

market value of at least

CHF 1 million.

UK companies other than small

companies (see below) are fully

exempt from corporation tax on

dividends received, regardless

of whether the distributing

company is

located in the UK or outside

the UK, provided that: (i) the

dividend distribution falls

within one of the five exempt

classes described below; (ii) the

dividend is not taken out of an

exempt class by anti-avoidance

rules; and

(iii) no tax deduction is allowed

to a resident of a territory

outside the UK in respect of the

dividend. No minimum holding

period applies.

Gains on

Shares

(Participation

Exemption)

 

 

MAURITIUS

THE NETHERLANDS

SINGAPORE

SPAIN

SWITZERLAND

UNITED KINGDOM

Gains derived by a GBC 1

company are always exempt.

Gains realized on the alienation

of a participation (including

foreign exchange results) are

fully exempt from CIT under the

same conditions as described

under 2.2 above for dividends.

Capital gains realized on the

sale of shares are not subject

to income tax.

Capital gains derived from

the sale (including liquidation,

separation of shareholders,

merger, partial or total division,

capital reduction, contribution

in kind or global transfer of

assets and liabilities) of a

Spanish

or foreign subsidiary are fully

exempt from Spanish CIT if certain conditions are met.

For capital gains, relief

from federal, cantonal and

communal income tax is

granted in the form of the

Participation Reduction (see

under 2.2 above) under the

following conditions:

(i) the shares disposed of

represent at least 10% of

the participation’s nominal

share capital or the capital

gain derives from profit

rights to at least 10% of the

profits and reserves; and

(ii) the shares or profit rights

disposed of must have been

held for at least 12 months.

Capital gains on shares held

by a UK company are subject

to UK corporation tax, unless

the capital gains qualify for

a full exemption under the

substantial shareholding

exemption rules.

Tax Rulings

 

 

 

 

 

MAURITIUS

THE NETHERLANDS

SINGAPORE

SPAIN

SWITZERLAND

UNITED KINGDOM

Any person who derives or may

derive income in Mauritius may

apply to the Director General of

the MRA for a binding ruling as

to the application of the Income

Tax Act to that income.

The application of the

participation exemption regime

does not require obtaining

an advance tax ruling (‘ATR’),

although this is possible.

Singapore offers taxpayers the

possibility to obtain an advance

tax ruling provided it concerns

an interpretation of the law.

There is no requirement under

the law to obtain an advance

ruling for foreign dividends or

gains, but doing so may be

helpful if there is doubt about

the interaction of the foreign tax

position of an asset with the

Singapore tax system.

Binding rulings can be obtained

in relation to the interpretation

and/or application of the

provisions regulating the

Spanish holding company.

The application of the

Participation Reduction has to

be claimed in the tax return and

does not require a tax ruling.

It is not common practice to

obtain advance tax rulings.

However, under specific

statutory provisions, advance

clearance may be obtained

for certain transactions.

Withholding

Tax on Royalties

Paid by the

Holding

Company

 

MAURITIUS

THE NETHERLANDS

SINGAPORE

SPAIN

SWITZERLAND

UNITED KINGDOM

Subject to the belowmentioned

exemptions,

Mauritius levies a withholding

tax at 10% on royalties paid to

residents and 15% on royalties

paid to non-residents.

Royalties paid by an individual

or a company holding a

Category 1 Global Business

License are exempt from

withholding tax.

None.

The Netherlands has

announced that it intends to

introduce a withholding tax on

royalties as of 2020 in the case

of interest payments to “low tax

jurisdictions” and in the case of

“abuse”.

Royalties paid to non-residents

are generally subject to a final

withholding tax of 10% on the

gross amount of the royalty,

unless reduced under a tax

treaty.

24%, which can generally be

reduced under a tax treaty.

Royalties paid to residents of

an EU or EEA country with

which an effective exchange

of information treaty exists, the

withholding tax is

reduced to 19%.

None.

The UK levies 20% withholding

tax on patent royalty payments

and payments for copyrights

made to non-residents, as well

as on certain other classes of

regular payments to nonresidents.

The UK has implemented the

provisions of the EU Interest

and Royalty Directive.

Income Tax

Treaties /

Signatory to

the MLI /

Ratification

 

MAURITIUS

THE NETHERLANDS

SINGAPORE

SPAIN

SWITZERLAND

UNITED KINGDOM

Mauritius signed the MLI on

5 July 2017.

The MLI covers 23 of the

existing tax treaties of

Mauritius.

For the remaining tax treaties

that are not covered by the MLI,

Mauritius is discussing bilaterally

with the respective treaty

partners in order to implement

the BEPS minimum standards

at latest by end of 2018.

Mauritius has also submitted a

provisional list of reservations

and notifications in respect of

the various provisions of the

MLI. In particular, Mauritius has

reserved to not apply, in its

entirety, the following articles:

- Article 3: transparent

entities,

- Article 4: dual resident

entities,

- Article 5: application

methods of elimination of

double taxation,

- Article 8: dividend transfer

transaction.

- Article 10: anti-avoidance

rule for PE establishments

situated in third jurisdictions;

- Article 11: application for

tax agreements to restrict a

party’s right to tax its own

residents;

- Article 12: artificial

avoidance of permanent

establishment status

through commissionaire

arrangements;

- Article 13: specific activity

exemption;

- Article 14: splitting-up

contracts; and

- Article 15: definition of

persons closely related to

an enterprise.

The definitive positions of the

MLI will be provided upon

the deposit of its instrument

of ratification, acceptance or

approval of the MLI.

As of 1 February 2018,

Mauritius has not published any

(draft) legislative proposal for

ratification of the MLI.

The Netherlands signed the

MLI on 7 June 2017.

The Netherlands has largely

accepted all provisions in the

MLI, with limited reservations.

The Netherlands has chosen

for option A in relation to article

5 (Application of Methods for

Elimination of Double Taxation)

and the ‘principal

purpose test’ without

‘limitation on benefits’ clause

in relation to article 7

(Prevention of Treaty Abuse).

The Netherlands will not apply

article 11 (savings clause).

The Netherlands published

a legislative proposal for the

ratification of the MLI on

20 December 2017. Ratification

is expected in 2018.

Singapore signed the MLI on

7 June 2017 and notified 68 of

its tax treaties.

Singapore chose to apply

for the PPT in the MLI as a

minimum standard and opted

for improved mutual agreement

procedures and arbitration as

dispute resolution mechanisms.

Singapore made reservations

to most of the optional

provisions.

As of 1 February 2018,

Singapore has not published

any (draft) legislative proposal

for ratification of the MLI.

Ratification is expected in 2018

or 2019.

Spain signed the MLI on

7 June 2017.

Spain has largely accepted

all provisions in the MLI, with

limited reservations. Spain

reserves the right for article 4

(Dual Resident Entities) not to

apply. Spain has chosen for

option C in relation to article

5 (Application of Methods for

Elimination of Double Taxation).

Spain will not apply article 11

(savings clause).

The ratification of the MLI

includes the fulfillment of the

procedures required for any

international treaty signed by

Spain.

With regards to anti-abuse

provisions, Spain has opted for

the application of the PPT in its

covered tax treaties.

As of 1 February 2018,

Spain has not published any

(draft) legislative proposal for

ratification of the MLI.

Switzerland signed the MLI on

7 June 2017.

Switzerland expressed

reservations on the majority

of the articles of the MLI, i.e.

committed to the application

of only the minimum standards.

Note that Switzerland made

a general reservation that it

might choose to implement the

BEPS minimum standards by

way of bilateral negotiations of

its tax treaties instead of the

mechanisms introduced by the

MLI.

Switzerland notified to apply

the switch-over clause, i.e.

option A, in relation to article

5. With regard to article 7,

Switzerland will apply the

Principal Purpose Test (PPT) as

the minimum standard.

The Federal Council submitted

the Convention for public

consultation in December 2017,

which will end on 9 April 2018.

Switzerland aims at ratifying the

MLI in the course of 2018 with

the goal of having it entered into

force on 1 January 2019 (i.e.,

applicable to tax years as of

1 January 2020).

The United Kingdom signed the

MLI on 7 June 2017.

The United Kingdom has

accepted most of the

provisions in the MLI. However,

the United Kingdom will not

apply: article 3 (Transparent

Entities); article 8 (Dividend

Transfer Transactions); article 9

(Capital Gains from Alienation

of Shares or Interests of Entities

Deriving their Value Principally

from Immovable Property);

article 10 (Anti-abuse Rule for

Permanent Establishments

Situated in Third Jurisdictions);

article 12 (Artificial Avoidance

of Permanent Establishment

Status through Commissionaire

Arrangements and Similar

Strategies); and article 14

(Splitting-up of Contracts).

As of 1 February 2018, the

United Kingdom is yet to

publish a legislative proposal

for ratification of the MLI but

ratification is expected in 2018.

 

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