The China International Luxury Property Show ( CILPS) 2007 ( 7 - 9 Septembre Shanghai, Pudong) Siv Potayya, Barrister

Opening Statement:
Ladies and Gentlemen and Honorary Guests, on behalf of the Government of Mauritius and the Board of Investment I would like to thank Government of China for hosting CILPS 2007. The historical ties between Mauritius and China have today reached a high level of development, fiscal and economical relationship. The Prime Minister of Mauritius recently paid visits to China to further strengthen the ties. What the former French minister Alain De Peyrefitte stated more than 25 years back “ QUAND LA CHINE S’ EVEILLERA LE MONDE TREMBLERA “ meaning the whole world will shake when China wakes up has become true. China has proven its values to the world and Mauritius is among the countries which enjoy the hospitality of China.

This presentation will principally focus on the issues revolving around legal, fiscal and financial matters pertaining to Mauritius real estate investments.

As stated by Mr Raju Jaddoo ,the Managing Director of the Board Of Investment of Mauritius, the tourism industry attracts most of the foreign currency with Rs 3,5 billions, closely followed by the IRS projects.

The purpose of having a Mauritius presence here is to offer our luxury properties to potential investors.

Few words about Mauritius:

I. Constitution and Government

The Arabs first visited the island in the 12th century followed by the Dutch in late 16th when they found the famous bird called DODO.
Formerly known as ‘’ Isle de France’’, Mauritius from 1810 up to 12th March 1968 remained a British Colony preceded by the French, when it became independent. It became the Republic of Mauritius on the 12th March 1992 with the principles of separation of powers deeply rooted in its written constitution and its democracy is based on the Westminster model. Laws are passed by a 70-member National Assembly.

II. Population

The population is estimated at 1.2 million which consists of a mosaic of races, cultures and religions. The people of the country are mainly Hindus, followed by Christian, Muslims, and Chinese.

III. Language

English remains after the decolonisation the official language of the country. However, French and Creole are the most spoken.

IV. Geography

The Republic of Mauritius, with a surface of 720 square miles (1 865 square km) is strategically located in the Indian Ocean. It lies about 800 km on the eastern coast of Africa and some 4 000 km from the southwest coast of India. It is of volcanic origin and has an exclusive economic zone. The island-state stands on what was once a land bridge between Asia and Africa called the Mascarene Archipelago.
V. Climate

The average temperature is 28◦C in summer and is 22◦C in winter. On the upper hills it is cooler and more humid and the month of February is the wettest one.

VI. Currency

The unit of currency is the Mauritian rupee which has 100 cents.

Rates updated : Friday 10 August 2007
At a Licenced money changer BANK Rates
Country Flags TC Notes Notes Notes Notes
25 25.45 27 25.27 28.21
27.75 28.05 30 28.24 30.67
5.25 5.43 5.81 5.42 5.88
40.6 40.8 43 40.698 43.71
Hong Kong
3.7 3.77 4.05 3.81 4.15
0.5 0.5 0.78 0 0.8
Japan [100]
23.5 24 26.9 24.95 26.88
New Zealand
22 22.3 23.6 21.98 25.03
4.85 5.02 5.37 5.03 5.5
Saudi Arabia
7.85 8.01 8.61 7.99 8.68
19.85 20 20.96 20.03 21.25
South Africa
3.8 4 4.45 4.14 4.7
4.2 4.37 4.67 4.31 4.75
24.65 24.9 26.2 24.97 26.4
U A Emirates
7.4 7.6 8.6 7.69 8.66
30 30.16 31.9 30.139 32.27
United Kingdom
60.35 60.55 63.5 60.45 64.97

VII. Economy

Over the years, tourism and textiles industries have paved their way and have gradually outclassed the sugar sector which was the main one owed to the several international conventions.
The economic centre used to be the city of Port Louis and most of the services are now decentralized towards the Cyber city at Ebène which is more or less in the middle of the island and where the temperature is cooler than Port Louis. The Government now aims at developing the country into an international financial sector. Several legislations are set up to that end and the sugar industry is experiencing a huge transformation easing the way for other new sectors attracting the latest technology and expertise. Mauritius which is the gateway to all part of the world enjoys close ties with China, Europe, Africa, India, and North America which are on the competitive edge of technology and information society. With the change of Government in Madagascar a new market with new opportunities is available and the Republic of Mauritius is called upon to be of paramount importance.

A. Issues revolving around legal matters pertaining to Mauritius real estate investments.

A.1.Investments for residential purposes
Through the Integrated Resort Scheme (IRS) the international buyers can become Mauritian residents as soon as they acquire a property in Mauritius. The Government has planned a number of IRS providing for the development by real estate developers and offering luxury residential properties for sale to foreigners at a price exceeding half a million US dollars. Under this scheme the spouse and the children are granted resident status.

All IRS schemes duly approved by the BOI are designed to ease the way for the acquisition of immovable property for the residence purposes by foreigners. A foreigner is authorized to buy a property with the permission of the BOI, and so the former authorization under the Non-Citizens (Property Restriction) act has now been simplified with the formula adopted by the BOI.

A.2 Investments for business purposes

I-Board of Investment

The Board of Investment (BOI), the leading agency of the Government of Mauritius promotes and facilitates investment in Mauritius. As Mauritius Opens to the World, transforming itself into a competitive global business platform, the BOI caters for the international business community by providing a personalized range of services to attract international investment and talents in the country. BOI free-of-charge range of services include inter alia:
• Counselling on investment opportunities in Mauritius
• Providing tailor made information for the setting up of a business in Mauritius
• Organization of customized meetings and visits
• Identification of joint venture partners
• Assistance with site locations and production facilities
• Assistance for occupation permits, licenses and clearances

The Mauritius Board of Investment is viewed both locally and internationally as a strategic partner for any investor wishing to benefit from the thriving business environment of Mauritius.
This investment for business purposes should as per the guidelines of BOI generate an annual turnover of more than MRU3,000,000.00. The administration and control of this legal entity should be exercised by foreigners. The BOI is now vested with such powers which only the Prime Minister had under the Non Citizen (Property Restriction) Act. However this novelty can only be exercised to the exclusive use of business purposes and are applicable in the following cases:
• For a lease not exceeding 20 years
• For the acquisition of Shares in companies which is not holder of immoveable property
• For the acquisition of Shares in listed companies with the stock exchange of Mauritius
• For the formation of the Trust and Investment Projects
• For the acquisition of Property under the IRS

II The Financial Services Commission

In carrying its mission, the FSC aims to:
• Promote the development, fairness, efficiency and transparency of financial institutions and capital markets in Mauritius
• Suppress crime and malpractices so as to provide protection to members of the public investing in non-bank financial products and ensure the soundness and stability of the financial system in Mauritius for the benefit of the economy
• The FSC is also committed to the sustained development of Mauritius as a sound and competitive international financial services centre.
II-I) The following instruments enable the foreigners to invest in Mauritius:
III-I-A) Global Business Companies Category 1 and Category 2

A qualified global business is defined under the Financial Services Development Act (FSDA) 2001 as a corporation holding either a Category 1 or a Category 2 Global Business License.

Category 1 Global Business License: A Global Business corporation (Category 1) is a corporation which undertakes any of the following activities listed in the Second Schedule of the FSDA 2001 which is carried on from within Mauritius with persons all of whom are resident outside Mauritius and which is conducted in foreign currency:
• Aircraft financing and leasing
• Assets management-Consultancy services
• Employment services
• Financial services
• Funds management
• Information and communication technologies
• Insurance
• Licensing and franchising
• Logistics and or marketing
• Operational headquarters
• Pension funds
• Ship management
• Trading
Any other activity as may be approved by the Commission. A GBL 1 may be unlimited or limited by shares or by guarantee. A GBL 1 may be registered as a Limited Life Company or a Protected Cell Company.
Category 2 Global Business License: A Global Business corporation (Category 2) undertakes any business or other activity which is carried on by a private company, which is incorporated or registered under the Companies Act 2001; which does not conduct business with persons resident in Mauritius nor conduct any dealings in Mauritius currency which holds a Category 2 Global Business License.
Company Holding a Category 2 Global Business Licence (GBL 2). The GBL 2 provides for greater flexibility and is a suitable vehicle for holding and managing private assets. It is however not allowed to raise capital from the public or to conduct any financial services or to act as a fiduciary. The GBL 2 may either be limited by shares or by guarantee or limited by shares and guarantee or simply unlimited. A GBL 2 may also be structured as a Limited Life Company.

In addition to the above two categories there are other GLOBAL BUSINESS VEHICLES which are Trusts, Société and Global Funds:
Trusts set up under the Trusts Act 2001 provide an effective and legitimate means of sheltering ones' assets. Various types of Trusts may be set up by residents and non residents in Mauritius such as charitable, discretionary, purpose and trading trusts. Registration of the trust is optional. Flexibility is provided under the Trusts Act in terms of determining the governing law applicable to a trust. There also exists the possibility to accumulate income for any period within the duration of the trust. With regards to trusts set up by non- citizens, the forced heirship rule does not apply. The Trusts Act 2001 further allows the enforceability of a foreign trust provided that it does not purport to do anything which amounts to an offence under the law of Mauritius or is immoral or contrary to public policy. A trust may carry on a Qualified Global Business after obtaining a Category 1 Global Business License. (A trust may not apply for a Category 2 Global Business License)
“Société en Nom Collectif” (partnership) and "Société en Commandite Simple" set up under the Code de Commerce Amendment Act 1985 (limited partnerships) may be used to structure investments in the global business sector. A Société may conduct any qualified global business activities after it has received a Category 1 Global Business Licence from the Financial Services Commission. However, a Société does not qualify for a Category 2 Global Business Licence. To enhance the use of such vehicles the Finance Act 1996 has introduced favourable taxation resignation/removal. When the Register is electronic or magnetic or other storage data form, the company must be able to produce legible evidence of its contents, Remuneration of directors may be fixed subject to the Constitution of the company or in a unanimous shareholders agreement, by a resolution of director, The company may prepare its financial statement in accordance with International Accounting Standards or any other Internationally Accepted Accounting Standards., Must not hold shares, debenture, security or any interest in a local company.

III-I-B) Global Funds
Pending the introduction of specific legislation for Collective Investment Schemes, the Commission has adopted "best industry" practices from long established jurisdictions for regulating investment business. In the meantime, a set of flexible regulatory practices have been developed.
Corporate & Legal Structure
Global funds registered with the Financial Services Commission in Mauritius are commonly structured as companies incorporated under the Companies Act 2001 and licensed as a company holding a Category 1 Global Business Licence under the Financial Services Development Act 2001. Such a structure, referred to as an Investment Company, is defined as one where the company’s business consists of investing its funds mainly in securities with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds. The Government has implemented wide sets of reforms under the Business Facilitation (Miscellaneous Provisions) Act 2006
The following legislations are usually resorted to conduct the above transactions.

The Land (Duties and Taxes) Act , The Land Acquisition Act, The Landlord and Tenant Act, The Morcellement Act, The Non Citizen ( Property Restriction) Act, The Pas Géométrique Act, The Planning and Development Act, The Registration Duty Act, The State Land ( Alienation) act and The State Land Act.

B. Issues revolving fiscal matters pertaining to Mauritius real estate investments:
Investors surely will look for best fiscal opportunities. Investors will be advised to take the opportunity which is provided for under the double taxation treaty to benefit from relief there under. This has proved attractive to a number of major investors. Correctly structured and managed Mauritius GBL 1 companies may access Mauritius' network of 33 tax treaties. Neither capital gains nor withholding taxes are levied. Consequently, Mauritius GBL 1 companies are used by tax practitioners and businesses to structure investments into Mauritius' treaty partners, which include Belgium, Botswana, China, Croatia, Cyprus, France, Germany, India, Italy, Kuwait, Luxembourg, Madagascar, Malaysia, Mozambique, Namibia, Nepal, Oman, Pakistan, Rwanda, Singapore, South Africa, Sri Lanka, Swaziland, Sweden, Thailand, Uganda, UK , Zimbabwe and recently with the United Arab Emirates.
Companies under the ‘’Category 1 Global Business Licence’’ are liable to corporate tax at 15% but may claim foreign tax credit on foreign income with their tax reduced to 3%.
It is qualified to take protection of the tax treaties to which Mauritius is a party if it comes within the definition of a resident under the taxation laws.
GBL 2 Companies are exempt from corporate tax and are not entitled to treaty benefits. It is exempt from the provisions of the Income Tax Act and is declared as a non-resident for tax purposes
Low Tax compatible to international standards and benefits of doing business In Mauritius:
• 15% corporate tax,
• 15 % value added tax ,
• Low customs duties, and there are only 3 bands for customs duties except for motor vehicles, liquor, and tobacco.
• Tax free dividends.
• No capital gain tax.
• No inheritance tax.
• 100% foreign ownership.
• Free repatriation of profits, dividends and capital
• No currency exchange control
• No minimum foreign capital required for formation of the company
• 5% registration duty on acquisition of immovable property for business purposes.
• Annual allowance on capital expenditure for the acquisition , construction or extension of industrial premises …
• No restriction for the purchase of immovable property for business purposes by foreign controlled companies registered with the BOI.
Furthermore, it should be noted that there is no withholding tax on dividends, capital gains and interests.
C. Issues revolving financial matters pertaining to Mauritius real estate investments:
Banking system in Mauritius is regulated by the Bank of Mauritius Act and Banking Act and stringent provisions of law caters for the confidentiality of the information and opening of bank accounts. All application for the disclosure of any banking information is addressed to the Judge in Chambers before the Supreme Court.

The following banks are authorized by the Central Bank to operate in Mauritius:
Baroda Bank, Banque des Mascareignes Ltée, Barclays Bank Plc., Deutsche Bank (Mauritius) Limited, First City Bank Ltd, Habib Bank Limited, Indian Ocean International Bank Limited, Investec Bank (Mauritius) Limited, Mauritius Post & Cooperative Bank Ltd, P.T Bank International Indonesia, SBM Nedbank International Limited, SBI International (Mauritius) Ltd, South East Asian Bank Ltd, Standard Bank (Mauritius) Limited, Standard Chartered Bank (Mauritius) Ltd,. State Bank of Mauritius Ltd, Hong Kong & Shanghai Banking Corporation Ltd., Mauritius Commercial Bank Ltd. Recently Afrasia Bank and Islamic Bank. These Banks will be used as vehicles for the implementation of the investments.

I hope with the above, I have succeeded in my attempt to cover the topic and I now kindly request you to have a copy of the Information Brochure available at the BOI stand and wish to see you in Mauritius.

Potayya, S. 2011, The China International Luxury Property Show ( CILPS) 2007 ( 7 - 9 Septembre Shanghai, Pudong) Siv Potayya, Barrister.