August | 2022 | Offshore Companies International

Mauritius Special Purpose Funds Framework

Two weeks ago we looked at the various options for the set-up of Investment Funds in Mauritius. Today we drill down to take a close look at the SPF ie Mauritius’s version of an Incubator Fund (ie a Start Up Fund aimed primarily at first time Fund Promoters and or Successful Traders looking to spread their wings by taking on/trading investor funds for the first time)

1. What is a Special Purpose Fund (“SPF”)?

New measures announced in the 2019/2020 Mauritius National Budget included the modernising of the existing Special Purpose Fund regime to provide further flexibility and ease access to new markets.

In line with this measure and its object to study new avenues for the development of the Financial Services Sector, the Mauritius Financial Services Commission (“FSC”) issued the Financial Services (Special Purpose Fund) Rules 2021 to govern “Special Purpose Funds” (“SPFs”), effective as from 6 March 2021. These new rules have replaced the Financial Services (Special Purpose Fund) Rules 2013.

An SPF is a Collective Investment Scheme (“CIS”) or a Closed-End Fund (“CEF”) which is authorised by the FSC as a Special Purpose Fund.

2. What are the requirements for a CIS/CEF to be authorised as an SPF?

The FSC may authorise a CIS or a CEF as an SPF if the fund will:

a. offer its shares, solely by way of private placements, to investors having competency, significant experience and knowledge of fund investment;

b. have a maximum of 50 investors and a minimum subscription of USD 100,000 per investor;

c. at all times, firstly be managed by a CIS manager; and secondly be administered by a CIS administrator;

d. comply with any such other conditions as may be imposed by the Commission.

3. Can an SPF invest in Mauritius?

Yes, investments can be made within as well as outside of Mauritius while benefitting from tax exemption provided in the Income Tax Act.

4. Can a Global Business Company (“GBC”) be authorised as an SPF?

A CIS/CEF holding a Global Business Licence can seek authorisation as an SPF if the Fund/Company is meeting the relevant requirements.

5. What are the on-going obligations of an SPF?

An SPF must comply with the provisions of the Financial Services Act, the Securities Act 2005 and the Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008 in so far as the provisions relate to a CIS and CEF.

In addition, an SPF must ensure that it abides by all provisions of the Financial Services (Special Purpose Funds) Rules 2021.

Furthermore, the submission of the Audited Financial Statements of an SPF must be accompanied by certificates from the SPF’s directors and auditors to confirm that the SPF is in compliance with the abovementioned rules and substance requirements referred to in point 8 below.

6. Can an SPF present its financial statements in a currency other than the Mauritius currency?

Yes. This is permissible subject to approval being granted by the Registrar of Companies in accordance with the provisions of the Companies Act 2001.

7. What happens if the CIS/CEF no longer fulfils the requirements/conditions under which it was authorised as an SPF?

Without prejudice to its powers under the relevant Acts, where a CIS/CEF, which was authorised as an SPF no longer, fulfils the requirements/conditions under which it is authorised, the FSC may withdraw its authorisation as an SPF.

8. What are the substance requirements of an SPF?

An SPF, its CIS manager and its CIS administrator shall carry out their relevant core income generating activities in, or from Mauritius, and shall:

a. employ directly or indirectly an adequate number of suitably qualified persons to conduct such core income generating activities; and

b. incur a minimum expenditure proportionate to the level of such activities.

9. Is there any new/additional application form to be filled-in by an SPF?

There is no new/additional application form to be filled-in by an SPF. An SPF will have to fill-in only the current application form and pay the applicable processing fee so as to be authorised as a CIS/CEF. Once authorised, an SPF will have to pay the annual fee applicable to the CIS/CEF authorisation and an additional annual fee of MUR 200,000 (USD 5,000 for a holder of a Global Business Licence).

10. Does an SPF benefit from tax incentives?

An SPF, as well as a certain category of investors in the SPF, will benefit from tax exemptions as provided in the Income Tax Act.

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.

How To set up an Online or Telehealth Medical Practice Offshore

Are you a practising GP/Family Doctor?

Are you thinking post Covid of ways to move online and or to reduce your overall tax burden?

If so, once can easily understand where you are coming from/what you are thinking…. If I can deliver all or most of my services online why live/pay tax in a high tax jurisdiction?

There are 2 aspects to this. The first is the issue of physical residence. The second is the issue of tax residence.

First you need to identify places where you could reside in that are nil tax or tax friendly. Then you’d need to check out their residency programs and whether you’d qualify for residency rights.

There are a number of jurisdictions where one can live exotically and free from tax. Many of the nil tax havens you’ve probably heard of or read about in novels… You may even have holidayed in some of them! They include:
• The Cayman Islands
• St Kitts and Nevis
• Dubai
• Monaco
• The Bahamas
• Bermuda
• Vanuatu
• The Turks & Caicos Islands
• Anguilla

Countries with no Income Tax

The below mentioned countries generally speaking do not levy a tax on income regardless of where the income is/was sourced:

UAE
Qatar
Oman
Kuwait
Cayman Islands
Bahrain
Bermuda
The Bahamas
Saudi Arabia
Brunei Darussalam

Countries That Don’t Tax Offshore Income

Another option is to live/base yourself in a country which has a territorial tax system (ia country which only taxes you on locally sourced income) and run your business income through a (tax free) Offshore company. Hong Kong is an example of such a place. Singapore is another. Panama would also be in the discussion as would the UAE be. Other examples include:

Costa Rica

Gibraltar

Hong Kong

Malaysia

Nicaragua

Panama

Paraguay

San Marino

Singapore

Seychelles

In such a scenario all your business sales in the first instance would run through a tax-free Offshore Company. Thereafter you should only (maybe) have to report/pay tax locally on any salary paid to you by the Offshore Company.

To be able to live in such a place you’d need to obtain a residency permit or citizenship. We can assist you to obtain residency rights in Panama and the UAE. We can also assist you to apply for citizenship in Nevis.

Second Issue

The next thing you need to would be to take steps to ensure that you effectively exit the local tax system. From a taxing rights perspective in terms of which country has the rough to tax you the question isn’t where I am residing (or where do I have a residency permit for) but where am I resident for tax purposes.

We are often asked by individuals where (ie in what country/s) am I liable to pay tax?

The starting point it this: If you are regarded at law to be tax resident (ie resident for tax purposes) in a particular country you are liable to pay tax there on your (usually, worldwide) income.

The concept of tax residency however (ie what it takes to be classified as non-tax resident) varies from country to country. Depending on where you originate from you may pass the non-tax resident test of one country but fail the same test had you originated from the country next door.

Let me explain….

The most well-known tax residency test is in fact the oldest ie the days spent at home test. Historically, in most countries (USA excepted – see below), you were considered non-tax resident if you spent less than half the year inside your “home” or mother country.

Over the years, and particularly with the proliferation of “fly in-fly out” jobs (seen most prevalently in the oil/mining industries) a number of countries (in particular the more developed countries) have brought into play a multifaceted tax residency test. In other words notwithstanding that you might spend less than half the year on the ground in your mother country if you have a “substantial connection” with your mother country you may still be classified as tax resident of/in that country.

So what constitutes “substantial connection”?

In considering whether you still have a “substantial connection” to your mother country a number of factors are looked at including:

Do you retain a residency/home in your mother country?
Do you own any personalty in your mother country (eg a car, furniture/home contents/boat/leisure toys etc etc)
Do you have a bank account in your mother country?
Do you have investments or business interests in your mother country?
Do you retain a professional or trade license (eg Lawyer/Plumber/Doctor/Teacher/Nurse/Engineer/Architect/Builder/Dentist etc) license in your mother country?
Do you keep current a golf/tennis/leisure club membership in your home country?
Do you regularly renew a driver’s license in your home country?
Do you have children at school in your home country?
Do you have a spouse/partner living full time in your home country?
Etc etc etc

Chances are, as a minimum, what you will need to do in order to become non-tax resident in your mother country is:

(a) Sell your home/residence in your mother country (or cancel any lease you might have over residential premises there)

(b) Sell any business you own on the ground in the mother country

(d) Hand in (and not renew) any professional/trade license you may have in your mother country

(e) Close down any bank/investment accounts you might have in your mother country

(f) Write to your local IRS/Tax Office and advise that you have departed the country permanently and filed your last tax return.

For USA citizens however a unique situation applies. Generally speaking, if you are a US citizen you are required to declare worldwide income in and pay tax in America regardless of (a) whether you spend less than half the year there and (b) whether you have no substantial connection with the USA. (For Americans the only way to be classified as “non tax-resident” of the US is to hand in your passport and denounce your citizenship).

All that said we are not tax advisers or financial advisers. Before committing to move abroad we’d advise you to seek advice from a local Tax Lawyer and a local tax Accountant (ie both in the country where you are departing from and the country where you are going to).

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

Mauritius Investment Funds Setup Options

Over the course of the past 20 years+ the reputation of the central Indian Ocean Islands Financial Centre of Mauritius has indeed blossomed.

Led by an innovative Financial Services authority and boasting political stability and low taxes – alongside a powerhouse and stable economy – Mauritius has become a popular jurisdiction for fund managers, institutional investors, entrepreneurs and private investors looking to set up Private Funds, Blockchain enterprises or Fiduciary structures. In recent years – thanks to vibrant new laws, quality service providers, value for money pricing and solid banking infrastructure – Mauritius has increasingly become a/the jurisdiction of choice for Fund Managers and Traders looking to set up traditional funds, start-up funds and alternative investment collectives.

If you are a Fund Manager or successful Trader looking to kick off a Hedge Fund or Private Fund structure this article will provide you with an overview of the various Fund structures on offer in Mauritius.

Key advantages of Mauritius

Low tax – A Partial Exemption Regime is applicable to domestic and global business companies ie GBCs – 80% of foreign-source income from collective investment schemes (CIS), closed-end funds (CEFs), CIS manager or administrator will be exempted from income tax. And a tax rate of just 3%.
No capital gains tax and no withholding tax on dividends and interest
No exchange controls
Innovative well drafted legislation and a British Legal/Court system
Advantageous time zone for global markets (GMT +4)
Low-cost jurisdiction for services
Minimal red tape/Business friendly set up procedures
Wide Range of Fund structuring options (Global CIS, Professional CIS, Specialised CIS and Expert Fund)

How to set up a Collective Investment scheme in Mauritius

An Investment Fund if incorporated/established in Mauritius is regulated as a “Collective Investment Scheme” – CIS.

A Collective Investment Scheme’s aim is to pool capital from accredited investors or institutional investors and to infuse such funding in a variety of assets, often with complex portfolio-construction and risk management techniques thus diversifying its investment risk whilst at the same time ensuring an absolute return objective.

Essentially, such a CIS is structured with an elastic capital and provides its subscribers the freedom to exit at any time based on the NAV (Net Asset Value).

Sub-categories of CIS:

Professional CIS: A Professional CIS is a CIS which offers it shares solely to sophisticated investors or as private placements
Specialised CIS: A Specialised CIS is one that invests in real estate, derivatives, commodities or any other product authorized by the Mauritius Financial Services Commission (FSC)
Expert Fund: An Expert Fund is a Fund which is only available to expert investors. As per the Securities Act 2005 (‘SA 2005’), an expert investor means: a. an investor who makes an initial investment, for his own account, of no less than USD 100,000; or b. a sophisticated investor as defined in the SA 2005 or any similarly defined investor in any other securities legislation
Public CIS: A CIS other than sub-categories (1), (2), (3) above, and which is fully regulated and meant mainly to be offered to the public (Such a CIS may be referred to as a “Public CIS”).

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com