A Trust is a legal arrangement where one person (the “settlor”) vests ownership of his assets into another person (the “trustee”) which manages / administers those assets for the benefit of potential or named beneficiaries or for a specific purpose in accordance with the terms of the trust, as provided in a trust deed.
Types of trusts
- Discretionary trust
- Protective trust
- Fixed income trust
- Trading trust
- Purpose trust (charitable or non-charitable)
- Employee benefit trust and pension trust
- Service trust
- Business trust
- Carried interest trust
- Family trust/office
Main Uses
- Asset protection
- Estate/succession planning
- Holding of investment and intellectual property rights
- Protection of inheritance wishes through avoidance of forced heirship rules
- Continuation of ownership and management of business.
Types of Trusts for Tax Purposes
- Domestic Trust: 15%, except charitable trust which is tax exempt
- Trust with GBL1: maximum effective rate of 3%
- Non-resident Trust: the settlor and the beneficiaries who are non-resident in Mauritius throughout an income year or hold a GBC1 or GBC2, and have filed a declaration of non-residence with the Mauritius Revenue Authority, is tax exempt.
Main Features of Mauritius Trusts
- Confidentiality of trustee’ deliberations, identity of Settlor and Beneficiaries.
- Possibility to establish letters and memorandum of wishes.
- Anti forced heirship rules.
- Migration of Trust is possible.
- Concept of managing and custodian trustee (up to four trustees)
- Charitable Trusts are exempt from tax.
- The proper law of the trust is the one chosen by the Settlor, or the one implied in the Trust Deed. If no law is chosen, the one which is most closely connected at the time of creation of the Trust will be treated as the proper law.
Taxation of Trusts
A trust is liable to income tax at the rate of 15% if the settlor and beneficiaries are non-residents or hold a Category 1 or 2 Global Business license or is a purpose trust.
However, such trust will be entitled to the presumed foreign tax credit of the higher rate suffered or 80% of its chargeable income, or may deposit a declaration of non-residence within 3 months after the expiry of the income year, it will then be exempt from income tax.
Chargeable income shall be the difference between the net income derived by the trust and the aggregate income distributed to the beneficiaries under the terms of the trust. Any amount of income distributed to the non-resident beneficiaries shall be exempt from income tax in the hands of the beneficiaries.
To be tax resident, a Trust has to apply for a Tax Residence Certificate with the Commissioner of Income Tax, which is delivered under the following conditions:
- At least one Trustee is resident in Mauritius
- A bank account is maintained in Mauritius, through which all cash movements are routed.
- All accounting records are kept with the local Trustee.
The local Trustee is a party to all decisions pertaining to the Trust.
A Foundation may apply for a Global Business Licence. It is a separate legal entity similar to a company, with a Founder who endows property to the foundation (just like a settlor in a trust), a Council to conduct the affairs and administer the property of the foundation like a board of directors managing a company. It may also have beneficiaries (similar to a trust) in accordance with the terms of the Charter. The Regulator shall have regards to whether the conduct of business will be or is being managed and controlled from Mauritius.
Potential Uses
- Asset holding
- Succession, estate and tax planning
- Protection of inheritance wishes through avoidance of forced heirship rules
- Asset protection
- Wealth management
- Establishment of charities
- Ownership of private trust company
- Vehicle for pension scheme
- Vehicle for Employee Stock Ownership Plan
- Shareholder of Private Trust Company.
Taxation of Foundations
A Foundation holding a Category 1 Global Business Licence may elect to be tax resident in Mauritius to benefit from the tax treaties which Mauritius currently has with 38 countries. Under the tax treaties, a Foundation is eligible to benefit from the foreign deemed tax credit of 80 % on foreign source business income.
- Domestic foundation: 15%, except charitable foundation which is tax exempt
- Foundation with a GBL1: maximum effective rate of 3%
Non-resident foundation: the founder and beneficiaries who are non-resident in Mauritius throughout an income year or holds a GBC1, and have filed a declaration of non-residence with the Mauritius Revenue Authority, is tax exempt.
