BUDGET 2014: BUILDING A BETTER MAURITIUS CREATING THE NEXT WAVE OF PROSPERITY The Vice Prime Minister and Minister of Finance and Economic Development, the Honourable Xavier Luc Duval, delivered his budget speech on 8th November 2013. The theme of the Budget 2014 is BUILDING A BETTER MAURITIUS CREATING THE NEXT WAVE OF PROSPERITY. This budget includes a comprehensive set of measures and policies in order to achieve its two main objectives as following: 1. Invigorating investments and growth; 2. Building a modern, inclusive and caring society The budget 2014 sets out the measures for Accelerating the Build Mauritius Plan through the development of the following pillars of the economy: i. Developing an Aviation Hub ii. Creating a Marine Services Platform iii. Developing Mauritius into a Petroleum Hub The Budget further outlines the measures to lay the foundation for our next economic architecture through the development of other economic pillars as follows: iv. Developing an Ocean Economy v. Developing a Green Economy vi. Designing new courses targeted for the film industry by the Youth Employment Programme The Mauritius Financial Services sector having maintained a good performance over the recent years is at the centre of this Government s attention. With the aim of further increasing commercial substance of this sector, several provisions have been made with regards to the enhancement in terms of strengthening the regulatory framework and augmenting the product offerings. Emphasis has been made on further developing the Mauritius jurisdiction as an International Financial Centre, along with provisions made for the supervision and enforcement procedures on identified cases of financial crimes. P age 1
FISCAL MEASURES The major fiscal measures announced are: Fees derived by non-residents will be subject to tax whether the services are provided in Mauritius or from outside Mauritius, subject to the provisions of the Double Taxation Agreements. Income derived by the registered owner of a foreign ship from its operation, including income obtained from the charter of such ship, is exempt from income tax. Exemption from income tax for holders of a Private Freeport Developer Licence. However, income derived from sale on the local market or any specified manufacturing or processing activities remains taxable. Corporate Social Responsibility is now applicable to resident société which will be calculated at 2% on the previous year net profits adjusted for income tax purposes, excluding exempt income. FROM TO IRS Land Transfer Tax on resale of residential property USD 50,000 Higher of: USD 50,000 or 5% RES Registration Duty on acquisition of residential property Land Transfer Tax on resale of residential property USD 25,000 Higher of: USD 25,000 or 5% USD 25,000 Higher of: USD 25,000 or 5% Annual allowance on acquisition of patent will shift from 5 % on cost to 25% on base value. Tax Deducted at Source (TDS) will now cover certain consultancy and management services and interest payments made by financial institutions and other companies to an individual where such interest is taxable. The special levy on banks in respect of segment A activities will now be computed on 10% of chargeable income for years of assessment 2014 and 2015. Land transfer tax and registration duty aligned at a single rate of 5% - effective 1st January 2014 IRS/RES residence and Land transfer Tax on resale harmonised as follows: Registration duty will be introduced on the transfer of pleasure crafts P age 2
FISCAL MEASURES (CTND) Value Added Tax Credit or debit cards services provided by nonbanking financial institutions to a company engaged wholly and exclusively in the provision of e-commerce services to non-residents are now exempt from VAT. The provision on claw back of VAT applicable on building sold before the twentieth year is now being reviewed where a transfer is made between VAT registered persons. Tax Administration Introduction of the Tax Administration Bill to consolidate, streamline and incorporate common and repetitive administrative provisions under revenue laws into a single piece of legislation to facilitate better tax compliance by tax payers. The corporate tax return for corporate businesses with a turnover of up to MUR 10 million will be simplified. The filing date of companies having an accounting year end of 30 June and with no tax payable has been extended to 15 January of the following year. The payment dates of various taxes and other remittances payable to the Mauritius Revenue Authority will be synchronised to enable block payments. An Arrears Payment Scheme will be introduced at the Registrar-General department where: Any payment owed to the department as at 8 November 2013 can be settled free of penalty on or before 30 June 2014. Cases which are pending before the Objection Unit or the Assessment Review Committee can be removed and settled free of penalty. Penalties in connection with registration and stamp duty for late submission of documents will be simplified. OTHER FISCAL MEASURES The exemption from payment of levy, National Pensions Fund and National Savings Fund applicable to foreign workers in their first two years of employment is now being removed, except for those working in Export Oriented Enterprises, As from 1st January 2014, customs duty on certain goods originating from a SADC country will be removed. P age 3
NON-FISCAL MEASURES The major non-fiscal measures are: Financial Services Amending the Investment Promotion Act to include investment in Initial Public Offering as a qualifying business activity for the granting of Permanent Residence in Mauritius Amending the Investment Promotion (Real Estate development Scheme) Regulations to allow GBL 1 Companies to purchase residential property in Mauritius under the IRS/RES Schemes Introduction of New Bill on Captive Insurance has the potential to make Mauritius a captive insurance jurisdiction of choice Introduction of a Sustainability Index by the Stock Exchange of Mauritius (SEM) active promotion of sustainability cause by listed companies SICOM Ltd will be listed on the SEM Joint Committee under the Financial Services Consultative Council assigned to improve integration of global business with the domestic sector Strengthening the regulatory framework as following: Setting up a Serious Fraud Office and a Coordination Committee among all agencies fighting financial crime Redefining financial crime to cater for an offence under the various existing Acts and banking laws Amending the Bank of Mauritius Act and the Financial Services Act to strengthen their regulatory functions Expanding the Membership of the Financial Stability Committee to include the Financial Intelligence Unit Adhering to the Multilateral Convention on Mutual Administrative Assistance in tax matters developed by Council of Europe and the OECD Extending the powers of the FSC to investigate on breach of the laws under its administration by any person inclusive of its licensees. Provision of Special Fund of MUR 50 million to set up a joint public-private sector Financial Services Promotion Committee to implement targeted promotion campaign (Expanded Africa Strategy) P age 4
BUILDING THE AFRICA STRATEGY Creating the Mauritius-Africa fund of MUR 500m over five years. The main objectives of the fund is: i. to participate in the equity financing of businesses investing in viable projects in any African country ii. to offer fee paying consultancy services on the continent and hereby providing job opportunities for professionals and consultants Providing a subsidy of 25% of the freight cost on containers exported to all countries in Africa Providing a 50% subsidy on the cost of Credit Guarantee Insurance for exports to Africa Enhancing the role of Mauritius as a Gateway to Africa through conferences across the continent by the Board of Investment (BOI) to reinforce the good image of Mauritius, strengthen economic cooperation and promote our financial and business services Promoting the placement of technicians, graduates and professionals on the African continent by the Africa Centre of Excellence Renewing the offer of 50 scholarships to African students FURTHER OPENING UP THE MAURITIAN ECONOMY Abolishing bank guarantee needed for application of Occupation and Residence Permits together with the revision of fees for permits. Setting up of fast track committee to accelerate the process of all permits and approvals for big investment projects Accelerating building and land use permits process through the e-governmental portal. Possibility for retiring high net worth foreigners to purchase an apartment in Mauritius, upon a minimum transfer of USD 120,000 at the time of application of residence permit. Introduction of integrated online system for the application of Occupation permits and visas Setting up a Joint Public Private Tourism Committee to focus on destination marketing strategy Operating five flights weekly to China and continuous efforts by MTPA to attract more flights from existing and new markets Introducing daily service using Airbus A380 aircraft by Emirates and new weekly service from London using the Dreamliner by TUI Airlines Seeking to renew successful partnership for flights in other emerging markets, and heightening priority on flights to Russia Redoubling our efforts promote Mauritius on the African continent and enabling direct flights to Africa P age 5
Percentage of GDP (%) Percentage (%) ECONOMIC REVIEW As averred by the Minister in his Budget 2014 Speech that the Mauritian economy has been resilient to the instabilities occurred in the world financial system. A summary of the relevant reported facts and figures with regards to key economic indicators is provided below. Key Economic Indicators - Comparative Estimates Figure 1 Inflation Rate (%) Unemployment Rate (%) Real GDP Growth (%) 2014 3.6 8.3 2.9 2013 6 8 4.0 2012 4.1 8 3.4 60 Economic Outlook for the Financial Year 2014 50 40 30 20 10 0 Budget Deficit (% of GDP) Public Sector Investment as a Debt (% of GDP) ratio of GDP (%) Foreign Exchange Reserves (% of GDP) External current account deficit (% of GDP) Figure 2 P age 6
ECONOMIC REVIEW (CTND) Figure 2 provides a graphical representation of the other important elements that have been taken into account in measuring the overall performance of the local financial economy s performance. Other important key statistics provided by the Minister for the year 2013, are as follows:- Mauritius Per Capita Income amounts at US 9,300 dollars; The Proposed National Budget amounts to MUR 101.3 billion as expenditure and total revenue of MUR 86.3 billion, of which MUR 74 billion will be from taxes Foreign Direct Investment expected to a total of MUR 10 Billion; Stock Exchange experienced a growth of around 18 per cent since the beginning of the year; External current account deficit has fallen to 9.9 per cent of GDP; Public sector debt to GDP ratio amounts to 54.8 per cent, which is in line with the Government aim of bringing it to 50 per cent by 2018; With regards to the budget deficit of 3.7 per cent of GDP, it has been highlighted that 97 per cent of the same is due to investment expenditure; and Government will invest a total of MUR18.4 Billion in 2014 and MUR 54.7 Billion over the next three years. Conclusion In line with the Government programme, this budget sets the base for a more robust framework to cater for the further development of existing sectors with significant focus on new potential avenues for investments. The ultimate aim of this Budget is to empower our businesses to expand into Africa and to grow globally. P age 7
Board of Directors Nicolas Maigrot (Chairman) Jimmy Wong (Managing Director) Gaetan Lan Amit Verma DTOS is a leading service provider in the Global Financial Services Centre of Mauritius. It is a Management company duly licensed by the Financial Services Commission (FSC) to provide inter alia, corporate, trustee and fund administration services. DTOS Trustees Ltd is a wholly owned subsidiary of DTOS Ltd and licensed by the FSC to act as qualified trustee and to provide trust-related services. The above information has been extracted from the budget speech 2014 delivered by the Vice Prime Minister and Minister of Finance and Economic Development, the Honourable Xavier Luc Duval. Nevertheless, the budget proposals may be subject to amendments during debates in parliament and deemed to be proclaimed under Finance Acts which will be communicated in due course. Editorial Team: Jimmy Wong Madvi Jeebun Khooshyal Callika Kheshal Soobhug Gianesha Rampall Should you have any further information or have any specific query on the above, you may contact Jimmy Wong, FCA, TEP Madvi Jeebun, FCCA DTOS Ltd 10th Floor, Raffles Tower 19 Cybercity, Ebene Mauritius Email: bd@dtos-mu.com info@dtos-mu.com Tel: +230 404 6000 Fax: +230 468 1600 Website: www.dtos-mu.com Disclaimer: The information in the newsletter was prepared by the professional staff of DTOS Ltd. The information given is not exhaustive and readers are advised to consult with professionals such as independent accountants, legal counsel and investment bankers before taking any formal action. DTOS Ltd will be pleased to discuss specific problems. Whilst all reasonable care has been taken in the preparation of this newsletter, DTOS Ltd accepts no responsibility for any errors it may contain, whether caused by negligence or otherwise, or for any loss, however caused, sustained by any person that relies on it. P age 8