Mau­ri­tian bud­get aims to broaden hori­zons

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - Celia Becker

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.

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