(PART OF THE ASIACITI GROUP)

Synopsis:

The Offshore Trust Act 1992 (as amended) ("the Act") provides for the registration of offshore trusts including protective and discretionary trusts, charitable trusts, asset protection trusts, foreign trusts, purpose trusts, trading trusts, and unit trusts. The Act defines an offshore trust as a trust in respect of which (a) the settlor is not at any time in the trust's duration a resident of Mauritius, (b) at all times there is trustee resident in Mauritius, and (c) the trust property does not include any moveable or immovable property in Mauritius.

Registration of an Offshore Trust:

In order to avail of the benefits of the Act, an offshore trust must be registered with the Mauritius Offshore Business Act Authority ("MOBAA"). Application for registration is made by the resident trustee who must declare that the trust qualifies as an offshore trust as defined under the Act, and that the trust property does not include any immovable property in Mauritius nor any money in a Mauritius domestic bank (as distinct from a Mauritius offshore bank).

Taxation of Offshore Trusts in Mauritius:

The taxation status of an offshore trust is essentially elective. An offshore trust that elects to be treated as a non-resident trust is exempt from all taxes and duties, etc, in Mauritius. Beneficiaries of a non-resident offshore trust are similarly exempt from tax in Mauritius on any distributions made from such a trust. A non-resident offshore trust is not entitled to the benefits of the various Mauritius double tax treaties.

An offshore trust that does not deposit a declaration of non- resident status with MOBAA is liable to be taxed in accordance with the provisions of the Income Tax Act, i.e. as a resident offshore trust. Tax is levied at the rate of 15% on the chargeable income of the resident offshore trust. Chargeable income is net investment income less the aggregate amount of distributions to beneficiaries or unit holders. A resident offshore trust is entitled to access the benefits of the Mauritius network of double tax treaties. A credit is allowed for foreign tax paid by the resident offshore trust against the 15% tax levied on its chargeable income in Mauritius.

Attractive features of the Act:

Apart from the tax planning opportunities offered through access to the tax treaty network, a Mauritius offshore trust can provide significant benefits for asset protection, inheritance or estate planning purposes. The statute of limitations period on dispositions of property into an offshore trust is two years. Forced heirship rules may be avoided in the trust instrument. The perpetuity period is 100 years and there is flexibility in selection of the proper law of the trust. Offshore trusts and their beneficiaries are subject to the confidentiality provisions of the Act.

The content of this article is intended to provide general information on the subject matter. The reader should therefore obtain professional advice specific to their circumstances.