The 2018-2019 Budget Speech having for theme “Pursuing our Transformative Journey’’ was presented by The Honourable Pravind Kumar Jugnauth, Prime Minister, Minister of Finance and Economic Development yesterday Thursday 15 June 2018.

The key budgetary measures having an impact on the legal, tax and regulatory framework of Mauritius are as follows:

Taxation

• An individual having an annual net income of up to Rs 650,000 shall be taxed at the rate of 10% instead of 15%.
• Lump sum received as severance allowance, pension or retiring allowance will now benefit from an exemption threshold of Rs 2.5 million (previously Rs 2 million).
• In order to address concerns raised by the international community, including the OECD and the EU, there will be a new harmonised fiscal regime for domestic and Global Business Companies and a specific fiscal regime for banks.
• The Deemed Foreign Tax Credit regime (which was available to companies holding a GBC1 licence) will be abolished as from 31st December 2018. By way of background, the ring-fenced tax treatment of global business companies had been flagged as potentially harmful by the OECD.
• The tax treatment of captive insurance companies and freeport companies will also be amended to address OECD’s concerns.
• Henceforth, an exemption will be granted to all companies in Mauritius except for banks. 80% of specified income, which will refer to foreign source dividends and profits attributable to a foreign permanent establishment; interest and royalties and income from provision of specified financial services, will be exempted from income tax.
• Global trading activities carried out by companies will benefit from the corporate tax rate of 3% (which is already applicable to profits derived by any company from export of goods).
• The Deemed Foreign Tax Credit regime available to banks will be abolished as from 1st July 2019. Instead, banks will be subject to a new regime which will treat Segment A and Segment B income in the same manner. Under the new regime, banks having a 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%, with an incentive system for banks having a chargeable income above Rs 1.5bn if certain pre-defined conditions are met.
• The taxpayer who is not satisfied with a determination at objection and who wishes to appeal before the Assessment Review committee will now have to pay 15% of the assessment amount instead of 10% previously to able to proceed with such an appeal. This measure is expected to be unpopular with taxpayers and perceived as restricting their access to justice.
• Gaming houses and bookmakers will be required to submit detailed information on wins exceeding Rs 100,000 to the MRA.
• Penalties will be imposed on a person who fails to furnish information needed for automatic exchange of information with other countries.
• Tax Deduction at Source (TDS) will be extended to “commission payment” at the rate of 3%. The TDS rate applied on rent paid to a non-resident will be increased from 5% to 10%. TDS will not apply to director fees.

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