China-Africa Investment Forum Beijing June 2013 FOCUS: MAURITIUS A presentation by Mardemootoo Solicitors
Mauritius...Star & Key of the Indian Ocean
Mauritius: a strategic stop-over into Africa
Mauritius
Tax treaty network Mauritius has ratified (r), awaiting ratification (a), awaiting signature (s) or is negotiating (n) tax treaties with 24 African countries. These countries are Botswana (r), Lesotho (r), Madagascar (r), Mozambique (r), Namibia (r), Rwanda (r), Senegal (r), Seychelles (r), South Africa (r), Swaziland (r), Tunisia (r), Uganda (r), Zimbabwe (r), Zambia (r), Republic of Congo (a), Egypt (a), Kenya (a), Nigeria (a), Ghana (s), Gabon (s), Algeria (n), Burkina Faso (n), Tanzania (n), Malawi (n). Mauritius
African Country Corporate Income Tax Rate Capital Gains Branch Tax Rate Dividends Interest Royalties Botswana 22 22 30 7.5 5/10 (1) 15 12 15 12.5 Mozambique 32 32 32 Namibia 34 0 34 10/20 (2) 10/20 (4) 8/10 (3) 20 8 20 5 5/10 (5) 10 10 10.2 5 1. 5 of the gross amount of the dividends if the beneficial owner is a company which owns at least 25 of the capital in the company paying the dividends; 10 of the gross amount of the dividends in all other cases. 2. 10 rate applies to dividends paid on shares listed on the Mozambique stock exchange 3. 8 of the gross amount of the dividends if the beneficial owner is a company which holds at least 25 of the capital of the company paying the dividends; 10 of the gross amount of the dividends if the beneficial owner is a company which holds less than 25 the capital of the company paying the dividends 4. This is a final tax applicable to nonresidents. Dividends paid to nonresidents are subject to a final 10 withholding tax if the recipient of the dividend is a company that holds at least 25 of the capital of the company paying the dividend and if it is the beneficial owner of the shares. For all other cases, the dividend withholding tax rate is 20. Dividends paid out of oil and gas profits are exempt from withholding tax. 5. 5 of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 25 of the capital of the company paying the dividends; 10 of the gross amount of the dividends in all other cases.
African Country Corporate Income Tax Rate Capital Gains Branch Tax Rate Dividends Interest Royalties Uganda 30 30 30 15 10 15 10 15 10 Zimbabwe 25 1/5/20 (1) 25 10/15 (2) 10/20 (3) 15 10 15 15 Rwanda 30 30 30 15 0 15 0 15 0 1. Tax is imposed on capital gains on sales of immovable property and listed and unlisted marketable securities. The tax on the disposal of assets acquired before 1 February 2009 are 1 for listed marketable securities and 5 for unlisted marketable securities and immovable property. The tax on disposal of assets acquired on or after 1 February 2009 are 1 for listed marketable securities, 5 for unlisted marketable securities and 20 for immovable property. 2. The 10 rate applies to dividends paid by companies listed on the Zimbabwe Stock Exchange to resident individuals and nonresidents. The 15 rate applies to other dividends paid to resident individuals and nonresidents. 3. Lower rate applies to companies holding at least 25 of capital.
African Country Corporate Income Tax Rate Capital Gains Branch Tax Rate Dividends Interest Royalties Lesotho 25 25 25 25 10 25 10 25 10 Madagascar 20 20 20 0 (1) 5/10 (2) 20 10 10 5 Senegal 25 25 25 10 0 6/8/ 16/20 (3) 0 20 0 1. The withholding tax on dividends was repealed in 2008. However, withholding tax on dividends continues to apply to certain entities. 2. 5 of the gross amount of dividends if the company paying the dividends is a company eligible under the Investment Code or a venture capital company 3. The 6 rate applies to interest on long-term bonds. The 8 rate applies to bank interest. The 20 rate applies to interest on deposit receipts. The 16 rate applies to other interest payments.
African Country South Africa 28 Corporate Income Tax Rate Capital Gains 18.64 8 (1) Branch Tax Rate 28 15 Dividends Interest Royalties 5/10 (2) 0 (3) 10 (4) 12 (5) 5 (6) 1. The current DTA provides protection against South African capital gains tax ( CGT ) for a Mauritian company owning shares in a South African company holding immovable property. However, the capital gains article of the new DTA now specifically provides that a country may tax gains derived from the alienation of shares deriving more than 50 of their value directly or indirectly from immovable property situated in such country. 2. Dividends: In terms of the current DTA, the South African withholding tax on dividends will be reduced to 5 if the beneficial owner is a Mauritian company which holds at least 10 of the capital of the company paying the dividends, while in all other instances, the dividends tax may not exceed 15. The fall-back position has now been amended to reduce the maximum dividends tax rate to 10. 3. South Africa does not levy a withholding tax on interest. However, with effect from 1 July 2013, a 15 withholding tax will be levied (subject to certain exemptions) on interest paid to a nonresident, unless the rate is reduced under a tax treaty. 4. Interest: The current DTA provides for the country of residence of the recipient of interest to have the taxing rights if such recipient is the beneficial owner of the interest. A Mauritian lender would thus not be subject to the new South African withholding tax on interest (once it comes into effect) if the Mauritian lender is the beneficial owner of the interest. However, the new DTA does not provide for an exemption but instead caps the tax on interest which may be imposed by the source country, to 10 of the gross amount of the interest. Mauritius does not currently impose a withholding tax on interest paid by so-called GBL1 or GBL2 companies. South African lenders to Mauritian borrowers would thus as a general rule not be negatively affected by the amendment of the interest article, while Mauritian lenders to South African borrowers would on the other hand be prejudiced. 5. The withholding tax on royalties paid to a nonresident is 12 unless the rate is reduced under a tax treaty. The rate is proposed to be increased to 15 as from 1 July 2013 to be in line with the withholding taxes on dividends and interest. 6. Royalties: The current exemption from royalties withholding tax has been replaced with a 5 maximum rate. Source of update on the DTA with South Africa: Bowman Gilfillan tax team
African Country Corporate Income Tax Rate Capital Gains Branch Tax Rate Dividends Interest Royalties Swaziland 30 0 30 15 7.5 10 5 15 7.5 Tunisia 30 30 30 0 0 20 2.5 15 2.5 Zambia 15 to 40 (1) 0 15 to 40 15 5/15 (2) 15 10 20 5 1. Resident and nonresident companies are subject to tax on their income derived from Zambian sources. Resident companies are also subject to tax on profits derived from a business carried on partly inside, and partly outside, Zambia. A company is considered resident in Zambia if it is incorporated in Zambia or if the central management and control of the company s business or affairs are exercised in Zambia. 2. 5 of the gross amount of the dividends if the beneficial owner is a company which holds at least 25 per cent of the capital of the company paying the dividends; or 15 of the gross amount of the dividends in all other cases. Source for figures: Ernst & Young 2013 Worldwide Corporate Tax Guide.
Additional Investment Benefits & Protection: Southern African Development Community (SADC) Common Market for Eastern and Southern Africa (COMESA) Indian Ocean Commission (IOC) Africa Growth and Opportunity Act (AGOA) African-Pacific-Caribbean (ACP) L'Organisation pour l'harmonisation en Afrique du Droit des Affaires (OHADA)
SADC
SADC: Common Free Trade Area with 15 countries Population: 258 million GDP: USD 472 billion
COMESA
COMESA: Common Free Trade Area with 13 African countries Population: 430 million Annual import bill: USD 152 billion Annual export bill: USD 157 billion
In addition to double taxation avoidance agreements, Mauritius has signed Investment Protection and Promotion Agreements (IPPAs) with 19 African Countries of which 6 are already in force and 13 are awaiting ratification
IPPAs: Free repatriation of investment capital and returns Guarantee against expropriation Most favoured nation rule with respect to investment and compensation for losses due to war and riots
In Force Burundi Madagascar Mozambique Senegal South Africa Tanzania Awaiting Ratification Benin Botswana Cameroon Comoros Ghana Guinea Republic Mauritania Republic of Congo Rwanda Swaziland Chad Zimbabwe Kenya
Investment into Zimbabwe as at March 2013: Mauritius: USD 3.4 Billion China: USD 1.7 Billion South Africa: USD 0.4 Billion
Setting up an operational base for Africa in Mauritius
Investment vehicles: Global Business Company- GBC1 and GBC2 Domestic Companies Trusts Limited Liability Partnerships Foundations Sociétés
International Rankings: Index Global Rank Africa Rank Environmental Performance Index 2010 6th 1st Fraser institute economic freedom 9th 1st 2012 Index of Economic Freedom 8th 1st Forbes Survey of Best Countries for Business 2011 19th 1st World Bank Ease of Doing Business 2012 23rd 1st Democracy Index 2011 24th 1st Global Enabling Trade Index 33rd 1st Knowledge Economy Index 2012 62nd 1st Mo Ibrahim Index of African Governance 1st 1st
Holistic Investment Environment: Socio-Economic stability High standard work and live environment Rule of law Easy access / favourable timezone