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Gary Gowrea |
The latest addition to the Mauritius DTAA network is the Republic of Congo. The DTAA was signed on December 20 2010 and it will be in force once it is ratified by both states. The DTAA offers considerable tax planning opportunities for structuring investments and royalties in Congo. The main articles of the DTAA have been summarised in tables 1, 2 and 3.
Other income – Article 21
Other income not expressly mentioned under other articles of the DTAA is taxed only in the resident state.
Other treaties which are awaiting signature are Zambia, Nigeria, Egypt and Kenya. Once these are signed the treaty network with African countries will be 18 (14 already signed and 13 in force), this will make Mauritius the ideal platform for structuring into Africa. Over and above the tax reasons, the business rationale for using Mauritius is worth considering, namely:
It is a member of the regional trading blocs, such as Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA), Indian Ocean Rim Association for Regional Cooperation (IOR-ARC);
It has ratified investment promotion and protection agreements with several of the Africa treaty partners;
It is a member of the Multilateral Investment Guarantee Agency, a World Bank agency;
There are no foreign exchange restrictions in Mauritius allowing for free repatriation of funds;
There are no thin capitalisation rules, hence company can be capitalised in whatever proportion of equity and debt funding;
It has a modern legislative framework with ultimate court of appeal is by judicial review by the Law Lords of the Privy Council of the UK;
Mauritius is also positioning itself as the arbitration centre in Africa;
Ranked first in Africa in the World Bank Ease of Doing Business report and in the Mo Ibrahim survey on corporate governance;
The Stock Exchange of Mauritius is designated as a recognised stock exchange by HM Revenue and Customs in the UK.
Table 1: Withholding tax (WHT) implications |
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Article |
Income |
DTAA WHT |
Congo DTAA |
10 |
Dividends |
WHT 0% if holding is > 25%; otherwise 5%. |
20% |
11 |
Interests |
5% |
20% |
12 |
Royalties |
0% |
20% |
Table 2: Capital gains taxation |
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Article |
Income |
DTAA taxation |
Congo taxation |
13 |
Capital gains |
• Immoveable property and assets of a permanent establishment taxable in the source state. • Other assets taxable only in the resident state. • Ships and aircrafts where the effective management is carried out. |
38% |
Table 3: Permanent establishment – Article 5 |
|
Type of PE |
Occurs if related works last for |
Construction PE |
>12 months |
Service PE |
>12 months |
Gyaneshwarnath (Gary) Gowrea (gary.gowrea@cimtaxservices.mu)
Cim Tax Services – Taxand
Tel: +230 405 2002
Fax: +230 212 5265
Website: www.cim.mu
