Mauritius: Offshore Trusts in Mauritius

1. Introduction

Mauritius has unified its legislation on trusts under the Trust Act 2001. This act provides for a single law for trusts for residents and non-residents of Mauritius and incorporates the latest trends in international trusts legislations.

In this article, we shall discuss the advantages of setting up 'offshore' trusts in Mauritius, i.e., trusts set up by and for the benefit of non-residents of Mauritius.

2. Main Characteristics

Different types of trusts can be set up in Mauritius by non-residents. These can be trusts with interest in possession, charitable trusts, purpose trusts, accumulation and maintenance trusts, bare trusts, protective trusts, discretionary trusts, employee benefit trusts and trusts for the disabled, among others.

Discretionary trusts have proved to be very popular with international clients, due to the optimum flexibility if offers in the organisation of the trust property and for the distribution of income to beneficiaries. A discretionary trust is basically a settlement where both capital and income may be paid or applied, at the sole discretion of the trustee(s), to any one or more of a class of beneficiaries, as the trustee(s) deem(s) fit.

Offshore trusts are usually used for tax and estate planning, protecting assets from creditors, to postpone the time of vesting of property, to pass on to trustees the decision of who receives the trust income or the trust capital and to enable the settlor to choose professional persons to administer and pass on assets according to his wishes, among others.

3. Taxation

Mauritius resident trusts are taxed at 15% on their chargeable income, meaning the gross income less expenses, but before any distribution. They are also eligible for a 80% presumed foreign tax credit on foreign source income and entitled to tax treaty benefits, under the various double taxation agreements between Mauritius and some 33 countries.

An offshore trust of which the settlor is a non-resident and of which all the beneficiaries are also non-residents, shall be exempt from income tax in Mauritius, where it has deposited a declaration of non-residence with the local tax authority. Non-resident beneficiaries of a trust are exempt from tax on income in respect of income under the terms of the trust, as well as from value added tax, whereas resident beneficiaries having received such income will be taxed at a flat rate of 15%.

4. Other Advantages of the Mauritius Offshore Trust

Below is a summary of the various advantages for non-residents to establish offshore trusts under the laws of the Republic of Mauritius. Among these, we can find the following:

• The terms of the trust deed can be drafted in such a way as to fit almost every asset protection, wealth management and tax planning needs;
• The settlor of an offshore trust can also be a beneficiary, but he cannot be the sole beneficiary of the trust of which he is the settlor;
• The settlor of an offshore trust can also be a trustee, provided that at least one trustee is a qualified trustee resident in Mauritius, such as AAMIL Trustees Ltd;
• There is no mandatory registration requirement of the trust deed, thus total confidentiality of the terms of the trust is guaranteed;
• Possibility of avoiding forced heirship rules usually in force in Civil law jurisdictions;
• An offshore trust can do business/trade in the name(s) of the trustee(s) or in the name of an 'underlying' company, usually a Category 2 Global Business Licence (GBL2) company, specifically set up for that purpose under the laws of the Republic of Mauritius. A GBL2 can be constituted with a few disclosure requirements, in a short lapse of time and at minimal costs;
• The trust property can be any tangible or intangible property, such as shares and stocks, bank accounts, insurance policies and most other assets can be settled onto the trust;
• The trust concept is recognised in most Common law countries and is being increasingly accepted in major Civil law countries also;
• Provision of the office of the protector of the trust in order to cater for clients from Civil law countries who might not be comfortable with the trust concept of 'giving away' ownership rights over property;
• Provision of the offices custodian and managing trustee in order to facilitate the migration of trusts; managing trustees can be replaced without the need for the trust property, held with the custodian trustee, and which may be substantial or complexly arranged, to be vested in new trustees; and
• The duration of a trust, other than a purpose trust, shall not exceed 99 years.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.