Mauritian budget aims to broaden horizons
THE Mauritius 2016-17 budget, presented by Finance and Economic Development Minister Pravind Jugnauth on July 29, is intended to usher in a new era of development through a focus on 10 key strategies, including promoting innovation, boosting exports and private investments, building infrastructure, reforming business facilitation, and expanding economic horizons.
In addition to announcing measures for diversifying the manufacturing base and modernising the manufacturing sector, activities in the freeport are expected to increase by reducing the restriction of 80% of the annual export value with respect to manufacturing activities towards Africa to 50%, introducing a new legislative framework enabling the transition from a freeport to a free zone and catering for companies incorporated in Mauritius providing freeport-related services such as advisory, marketing, engineering, project management and technical support outside Mauritius.
An international private consortium is setting up a modular near-shore mobile oil refinery and onshore storage facilities at Albion. An Indian delegation has expressed an interest in setting up several manufacturing projects on the island, including the production of bicycles and motorcycles.
Manufacturers of textiles, apparel, ships and boats, computers, and pharmaceuticals are to qualify for an increased investment tax credit of 15% per annum (previously 5%) over three years and a 40% subsidy is to be granted towards airfreight for textiles for three years.
Unrelieved income tax losses on the takeover or merger of a manufacturing company may be carried forward where the acquiree company remains in operation as a going concern and the takeover of a company or transfer of undertaking has been deemed to be in the public interest under the Land (Duties and Taxes) Act.
According to the minister, the financial services industry needs to reach out to new markets with a wider spectrum of products. He announced the development of Mauritius as a fully fledged international arbitration centre and the issuing of a new global legal advisory services licence to cater for flagship international law firms to set up regional operations in Mauritius to provide legal advisory services on international and domestic transactions. These law firms will not be allowed to litigate in Mauritius.
A five-year tax holiday is to be granted to organisations holding a treasury management centre licence, investment banking and corporate advisory licence, asset and fund managers licence or overseas family corporation licence, and international law firms with a global legal advisory services licence providing international arbitration services to global business clients and foreign ultra-high-net-worth individuals investing a minimum of $25m in Mauritius.
An eight-year tax holiday is to be introduced for companies holding a global headquarters administration licence (subject to employment creation and substance conditions) and industrial fishing companies.
A holistic and coherent urban planning and development strategy has been identified as an imperative and a new mass transit system (the Metro Express) is to be launched. The construction of three smart cities will begin in 2017.
Mauritius’s next strategy in infrastructure development focuses on sea and air connectivity with a 770-million Mauritian rupee ($21m) investment to be made in a new integrated government clearance centre in the Cargo Village and a modern control tower at the airport, as well as another 425-million Mauritian rupees to be invested in a substation to cater for cargo and freeport power requirements.
To free the economy from restrictive bureaucracy, the minister announced an intention to drastically cut the time taken to deliver building and land use permits, as well as clearance for construction-related projects and the launch of an e-licensing platform providing a single point of entry of permit and licence applications. However, contractors tendering for government contracts exceeding 5-million rupees are required to submit a tax clearance certificate from the Mauritius Revenue Authority.
The ministry of technology, communication and innovation is making the information highway for sharing of information among public sector agencies operational and is launching 50 new e-services to facilitate citizens’ interaction with public sector agencies.
Measures to give additional impetus to Mauritius’s regional integration strategy with Africa and Asia include finalising the negotiations with New Delhi on the Comprehensive Economic and Partnership Agreement, including a preferential trade agreement, and building on the progress made with signing agreements with Senegal, Madagascar and Ghana for the establishment and management of special economic zones.
Material investments in connectivity are to be made to significantly improve the deployment of broadband infrastructure and its quality, including a “third undersea cable” project by a consortium led by Mauritius Telecom and a fibreoptic undersea cable by a consortium of regional telecom operators, which will link Mauritius, Madagascar and Reunion with an international backbone through SA.
To ensure a level playing field between domestic and foreign business providing services in Mauritius, persons who are not VAT registered are now required to charge VAT on the supply of services in Mauritius by foreign service providers and remit such VAT to the Mauritius Revenue Authority. Details regarding the mechanism are not yet available.
Taxpayers with VAT liability exceeding 50,000 rupees will be obliged to pay electronically. Tax deduction at source will be extended to services provided by accountants and tax advisers and management fees paid to individuals.
The budget remains in line with Mauritius’s fundamental philosophy of maintaining a pro-business and social welfare agenda, which should support the stable growth rate of 4.1% of GDP forecast for 2017.
Minister accelerates plans to modernise the island’s economy and expand manufacturing capacity
Celia Becker is an Africa Regulatory and Business Intelligence executive at ENSafrica.