STRUCTURING INVESTMENTS INTO AFRICA THROUGH MAURITIUS/ESTATE PLANNING AND WEALTH MANAGEMENT FOR HIGH NET WORTH INDIVIDUALS IN EAST AFRICA (KENYA)

Transcription

1 STRUCTURING INVESTMENTS INTO AFRICA THROUGH MAURITIUS/ESTATE PLANNING AND WEALTH MANAGEMENT FOR HIGH NET WORTH INDIVIDUALS IN EAST AFRICA (KENYA) Presentation by Mona K. Doshi Senior Partner Anjarwalla & Khanna (Part of Africa Legal Network)

2 2 Mauritius Coastline

3 AFRICA LEGAL NETWORK & AX1S Have the expertise to advise and help in structuring investments into Africa through Mauritius and to give estate and wealth planning advice 3 NETWORK OF LAW FIRMS IN: BOTSWANA BURUNDI ETHIOPIA KENYA MALAWI MAURITIUS NIGERIA RWANDA SUDAN TANZANIA UGANDA ZAMBIA AFFILIATE OF ALN: Mauritius/ Kenya/Seychelles ALN also works closely with its regional office in UAE and its associate firm in South Africa

4 Why Invest in Mauritius 4 Attractive Tax Incentives such as: Double tax avoidance agreements with 16 African countries Flat tax rate of 15% Tax credits No Capital Gains Tax No Inheritance, Wealth or Gift tax Zero rated Value Added Tax tax exempt on interests paid on Bank deposits No Withholding tax on dividend, interest, and royalty payments No stamp duty, registration duties and no capital is levied on the issue of share capital No exchange control Modern and investor friendly legislation with a reliable regulatory framework A hybrid legal system developed from the British Common Law and the French law codes which favour investors with origins from these regimes Predominately modern commercial statutes which provide clarity, flexibility and reflect international best practice Stable political environment with good governance that support investment and economic freedom Offers access to African and Indian Ocean markets through membership into key bilateral and multilateral trade agreements such as COMESA, SADC, the Indian Ocean Rim Association for Regional Co-operation (IOR- ARC), AGOA and the Indian Ocean Commission (IOC)

5 Mauritius Global Business Companies 5 There are two types of Global Business Companies in Mauritius, GBC 1 and GBC 2. Key Features of GBC 1: Can undertake any lawful activity May be set up as unlimited or limited shares or guarantee May be specifically structured as a Limited Life Company, a Protected Cell Company, or a Collective Investment Scheme May have a dedicated office in Mauritius and employ staff Is Tax resident in Mauritius Has access to Mauritian network of Double Taxation Treaties Effective tax rate of 0-3% is applicable Is subject to strict confidentiality Key Features of GBC 2: Can undertake any lawful activity other than financial services May be set up as a unlimited or limited shares or guarantee May be specifically structured as a Limited Life Company Must be administered by a management company Is non-resident for tax purposes Is tax exempt in Mauritius There are minimum filing requirements Is subject to strict confidentiality

6 Structuring Investments into Africa through Mauritius 6 Shareholders 100% Ownership GBC 1 Mauritius 60% 60% 60% 60% 60% Kenya company Uganda company Botswana company Rwanda company Tanzania company In this case client wishes for 40% in each Company to be held by local partners in each country. Consider: Local taxes application of double tax avoidance agreements thin capitalization rules transfer pricing

7 Highlights of Mauritius Tax Treaties 7 Country Maximum tax rates applicable in the State of Source Dividends Interest(i) Royalties 1 Botswana 5% & 10% 12% 12.5% 2 Congo 0% & 5% 5% Exempt 3 Egypt 5% & 10% 10% 12% 4 Lesotho 10% 10% 10% 5 Madagascar 5% & 10% 10% 5% 6 Mozambique 8%, 10% & 15% 8% 5% 7 Namibia 5% & 10% 10% 5% 8 Rwanda 10% 10% 10% 9 Senegal Exempt Exempt Exempt 10 Seychelles Exempt Exempt Exempt 11 South Africa 5% & 15% Exempt Exempt 12 Swaziland 7.5% 5% 7.5% 13 Tunisia Exempt 2.5% 2.5% 14 Uganda 10% 10% 10% 15 Zimbabwe 10% & 20 % 10% 15% 16 Zambia 5% & 15% 10% 5% Where interest is taxable at rate provided in the domestic law of the State of source or at reduced treaty rate, provision is usually made in the treaty to exempt interest receivable by a Contracting State itself, its local authorities, its Central Bank/all banks carrying on bona fide banking business and any other financial institutions as may be agreed upon by both Contracting States.

8 Mauritius Double Tax Avoidance Treaties (DTAS) with Countries in Africa 8 DTAs awaiting ratification: DTAs awaiting signature: DTAs being negotiated: Gabon Kenya Nigeria South Africa (New) Burkina Faso Cape Verde Ghana Morocco Algeria Lesotho (New) Malawi Tanzania NB 1. Obtained from the Mauritius Revenue Authority website. 2. Some sources cite Egypt as another country awaiting ratification of a DTA with Mauritius

9 Mauritius Investment Promotion And Protection Agreements (IPPA) With Countries In Africa 9 IPPA IN FORCE IPPA AWAITING RATIFICATION Burundi Egypt Madagascar Mozambique Congo Senegal South Africa Tanzania Benin Cameroon Comoros Gabon Ghana Guinea Republic Kenya Mauritania Rwanda Swaziland Chad Zimbabwe NB 1. From Invest Mauritius official website of the Board of Investment Mauritius- the National Investment Promotion Agency in Mauritius.

10 10 Kenya Estate Planning and Wealth Management Law of Succession Act (Chapter 160) Will Provision for dependants Intestacy Probate process and time frame Shareholders agreement Pre-nuptial agreement Trust structure

11 Trusts 11 Why use Trusts? asset management and protection succession planning tax planning accumulation and preservation of wealth off balance sheet transactions Key Features of Trusts in Mauritius No registration or filing requirements No forced heirship rule Trustee must be regulated by the Financial Services Commission Wide powers may be given to the Protector Possible to split Trusteeship into a Custodian and a Managing Trustee Maximum duration of 99 years Non-resident trusts are tax-exempt Trusts may apply for a GBC 1 license and benefit from tax advantages Confidentiality enshrined in the law No probate formalities

12 12 Using A Trust In Mauritius To Hold Shares in a Kenyan Company Settlor Beneficiary Trustee Beneficiary GBL1 Company Kenyan Company

13 Setting up a Foundation in Mauritius 13 Why use Foundations? distinct legal entity and can own assets in its name asset protection succession planning can own wasting assets or investments which fluctuate values as Council does not have duty to monitor performance of investment (unlike trustees) Key Features of Foundations in Mauritius Has a separate legal personality Foundation needs to be registered Charter need not be registered Requirement to have a council Requirement to have a company secretary licensed by the Financial Services Commission Registered office to be in Mauritius Wide powers may be given to the Protector Non-resident foundations are tax-exempt Foundations may apply for a GBC 1 license and benefit from tax advantages Information filed in respect of offshore foundations not available for public inspection.

14 Using a Foundation 14 Kenya Kenyan Co Limited Mr. Rich 99% Nominee 1% Transfer of shares 1% stamp duty Mauritius Foundation (Trustees) Beneficiaries Mr. Rich s Family

15 Private Trust Companies in Mauritius 15 Why use Private Trust Companies ( PTCs ) to act as trustee of a single trust or a group of related trusts allows a settlor to have his own trust company gives settlor a higher degree of control over management of the trust settlor and family members can form part of the board of directors Key Features of PTCS in Mauritius A PTC can be set up either as a Category 1 Global Business Company or a Category 2 Global Business Company The PTC must be set-up by a licensed Management Company The PTC must adhere to conditions set out by the Financial Services Commission The PTC does NOT need to be licensed as a Corporate/Qualified Trustee

16 Private Trust Companies in Mauritius 16 The PTC is required to: - restrict its activities to that of private trust business services - at all times maintain a minimum paid up capital of US$5,000 - provide its private trust business services solely to connected persons - not solicit trust business from, or provide trust business services to, the public - appoint a duly licensed Management Company to carry out its trust administration services in relation to any express trust to which it is a trustee - appoint the Management Company as Company Secretary - adhere to the AML/CFT Framework.

17 Example of Private Trust Companies in Mauritius 17 Ownership Control/Administration Management Company (Trustee) Director 1 Director 2 Purpose of Discretionary Trust Private Trust Company Trust 1 Trust 2 Administration Agreement Management Company