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[September 01, 2014]
MIANO: Why Mauritius is preferred by global investors [Business Daily (Kenya)]
(Business Daily (Kenya) Via Acquire Media NewsEdge) Most global investors consider Mauritius as the gateway to Africa. What exactly are the aspects of the Mauritian legal and tax regime that make it so popular? First, Mauritius has a wide double tax treaty network. Currently, it has concluded 38 double tax treaties. Kenya ratified its treaty on May 23 this year.
Second, the corporate legal regime offers two diverse legal structures which are appealing to global investors.
Third, the tax system allows generous foreign tax credits. Although the corporate tax rate is 15pc, a company may claim deemed foreign tax credits at the rate of 80pc which reduces the effective corporate tax rate on a GBC1's income to three per cent.
Fourth, it has a favourable withholding tax regime because of the wide double tax treaty network. Mauritius does not levy withholding tax on dividends and it does not have a branch remittance tax. Fifth, Mauritius does not have tax anti-avoidance rules. For instance, it does not have prescriptive transfer pricing regulations and thin capitalisation rules although the law requires related parties to transact at arm's length.
Mauritius does not have controlled foreign corporation rules which are typically common with outbound company locations.
Sixth, Mauritius does not tax capital gains. Seventh, it is an optimal location for intellectual property (IP) holding companies. There are some companies which prefer to have a centralised ownership model for their IP such as trademarks, copyrights, trade secrets, patents and industrial designs.
The location of an IP holding company is chiefly influenced by the regime protecting intellectual property and the effective tax rate on royalties. As a member of the WTO, Mauritius has designed its local IP regime in line with TRIPS.
Mauritius is a party to the Berne Convention (governing copyrights), the Paris Convention (protecting industrial property) and is a member to the World Intellectual Property Organisation.
The absence of prescriptive transfer pricing regulations on intangibles, the low corporate tax rate on royalty income and the wide double tax treaty network also make Mauritius an optimal location for intellectual property holding companies.
Mr Miano is an international tax attorney with Deloitte Tax LLP in the US.
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