Mauritius – The Gateway to Africa
Mauritius has a crucial role to play in Africa’s development. The World Investment Report 2010 identifies Mauritius as a favourable and tax efficient platform for African investments and Mauritius has been on the OECD white list since 2009. Africa has recognized Mauritius for its excellence and best practices in African business and acknowledged its leading drive that is transforming the continent. And being first in the EFI and EPI 2010 index sets Mauritius apart at being the most appealing country in Africa.
Mauritius currently has tax treaties with 13 African states (Botswana, Lesotho, Madagascar, Mozambique, Namibia, Rwanda, Senegal, Seychelles, Swaziland, South Africa, Tunisia, Uganda and Zimbabwe) and has signed Double Taxation Avoidance Agreements (DTAAs) with 6 other states (Cape Verde, Kenya, Congo, Zambia, Morocco and Nigeria) which are awaiting ratification. DTAAs are currently being negotiated with Burkina Faso, Algeria, Tanzania, Egypt, Gabon, Malawi and Ghana.
Capital gains tax (CGT), where imposed in Africa, is generally levied at a rate ranging from 30-35%. However, the DTAAs in force in Mauritius restrict taxing rights of capital gains to the country of residence of the seller of the assets. Since there are no CGT in Mauritius, the potential tax savings for the Mauritius registered entity are significant.
The majority of African states impose WHT on dividends paid out to non-residents, with rates varying between 10-20%. The DTAAs in force with Mauritius however serve to limit such WHT. What’s more, treaty rates are generally 0, 5 or 10% ensuring potential tax savings of between 5 to 20% depending on the investee country.
Similarly, DTAAs guarantee that the maximum effective WHT with regards to CGT shall occur in the country of investment.
The IPPA - A Powerful Investment Ally
What is an IPPA and how can they be of assistance?
An IPPA is an international agreement between governments for the promotion and protection of investments made by investors of one contracting party in the area of the other contracting party.
A typical IPPA provides for, among others, fair and equitable treatment for investors, compensation for losses arising from strife and expropriation, free transfer of investments and returns, and settlement of investment disputes under internationally accepted rules. It can give additional assurance to overseas investors that their investments in Mauritius are adequately protected, and to enable Mauritian-based investors to enjoy similar treatment and protection in respect of their investments overseas.
IPPAs are bilateral agreements between countries designed to promote and protect the interests of investors from one country in the territory of the country where the investment is being made.
Among other things, IPPAs increase investor confidence by ensuring a fair and equitable protection of investments. Each agreement provides the following guarantees to investors:
- Fair and equitable treatment of investments and returns of investors
- Free transfer of monies relating to investments and returns
- Expropriation guarantee – investments shall not be nationalised, expropriated or subjected to measures (having effects equivalent to nationalisation or expropriation) except for public purposes, under due process of law, on a non-discriminatory basis and against prompt, adequate and effective compensation (which shall be made without delay, and be effectively realizable)
- Provisions for settlement of disputes between investors and the contracting states
- Provisions for settlement of disputes between contracting states
- Most favoured nation rule with respect to treatment of investments and compensation for losses (in case of war or armed conflict, revolution, a state of national emergency, revolt, insurrection or riot) – investors who, in any of these situations, suffer losses in the territory of the other contracting party resulting from the following shall be accorded restitution or adequate compensation:
(a) requisitioning of their property by the forces or authorities of the latter contracting party
(b) destruction of their property by the forces or authorities of the latter contracting party, which was not caused in combat action or was not required by the necessity of the situation of the observance of any legal requirement.
Guarantees for investors
Mauritius’ network of IPPAs with various African countries makes it an ideal investment platform. In these countries, there is often pressure to redistribute wealth to local indigenous populations, which have historically been both politically and economically disenfranchised. This has resulted in a perceived threat of nationalisation of assets (such as mines and natural resources) in certain of these countries. In these circumstances, it is useful to invest via a country that has an IPPA with the relevant African country, in order to take advantage of the guarantees offered by the IPPA.