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Tax Rulings
Under section 159 of the Income Tax Act any person who derives or may derive any income may apply to the Director General for a ruling as to the application of the Act to that income.
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| TR1 |
Whether the words "any bank
in Mauritius " include the Bank of Mauritius.
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| TR2 |
Whether the portion of the allowance
not exceeding the specified sum is exempt from tax as provided in
the second Schedule Part II Item 5 of the Income Tax Act 1995.
|
| TR3 |
Whether the accumulated tax losses
of the branch of the foreign company are transferable to the company
incorporated in Mauritius to take over the activities carried on
by the branch.
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| TR 4 |
(a) Whether fees received by a non-resident will attract tax in Mauritius; (b) Whether expense so
incurred by the local company is an allowable deduction. |
| TR 5 |
Whether the accumulated losses of the company
will be available for set-off against its future income should there
be a change in legislation rendering a company holding an Export
Enterprise Certificate taxable.
|
| TR 6 |
Whether profits/losses arising from sale of shares
which are not quoted on the Mauritius Stock Exchange or over the
Counter Market would be taxable and deductible respectively.
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| TR 7 |
Whether the tax treatment should follow the accounting
treatment i.e a transaction should be based upon its economic substance
where it differs from its legal form.
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| TR 8 |
(a) Whether an existing shareholder of the company who will be allotted shares in the Unit Trust Scheme will be entitled to investment relief under Section 36 of the Income Tax Act 1995. (b) Whether a corporate shareholder of the company will be entitled to an investment tax credit under Section 69 of the Income Tax Act 1995 in respect of units allotted to it. |
| TR 9 |
Whether a contractual agreement between a company
and its employee giving the latter an option to subscribe to a number
of shares at a price lower than their market value gives rise to
a taxable benefit.
|
| TR 10 |
Whether the activities and transformation processes
mean "manufacture" as defined in the Income Tax Act 1995 and accordingly
the company should be treated as a tax incentive company.
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| TR 11 |
Whether the pooling of foreign tax credit available
to a taxpayer under Regulation 6 of the Income Tax (Foreign Tax
Credit) Regulations 1996 includes both actual tax paid and deemed
tax under Regulation 9 and the aggregate amount will be available
for offset against the Mauritian tax liability.
|
| TR 12 |
Whether the management fee which the asset management
company will receive from the fund will be deemed to be foreign
source income and hence the company will be entitled to claim the
deemed foreign tax credit in accordance with Regulation 8 of the
Income Tax (Foreign Tax Credit) Regulations 1996.
|
| TR 13 |
Whether income derived from the sale of its products
to factories operating in the Export Processing Zone is exempt from
tax.
|
| TR 14 |
(a) Whether
the payment by the Mauritian offshore company to the foreign company
will be characterized as a "royalty" or a "service fee" and whether
that payment will be subject to tax in Mauritius. (c) Where the Mauritian offshore company receives foreign income from two different foreign sources, whether it may claim foreign tax credit on one source and the 90% deemed credit on the second source. (d) Having regard to the nature of the activities of the Mauritian offshore company and the circumstances of the case, if the spread, that is the net income after Service Provider Fees and administrative costs, is not less than one per cent (1%) of the net amounts received from the Service Providers and not more than five per cent (5%) of such amount, whether this will be regarded by the Tax Authorities as reasonable. |
| TR 15 |
Whether payments by the holding company for running
the subsidiary's office in Mauritius on a cost recovery basis is
acceptable to the Income Tax Department.
|
| TR 16 |
Whether the company is a tax incentive company
under item 22 of Part V of the First Schedule to the Income Tax
Act 1995 which reads as follows: "a company deriving at least
75 per cent of its gross income from agriculture, fishery and livestock".
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| TR 17 |
Whether the employee
is assessable to tax on the free shares? If in the affirmative |
| TR 18 |
Whether the proceeds from the sale of the lands
would constitute a chargeable income for Income Tax purposes.
|
| TR 19 |
Whether any gains from the sale of the lands
by the Mauritian company would be chargeable to income tax.
|
| TR 20 |
(i) Whether the offshore company is assessable to tax on the lease interest derived by it under the finance lease agreement entered into by it and the leasing partnership. (ii) Whether the lease interest paid by the leasing partnership to the offshore company is income derived from outside Mauritius. (iii) Whether the offshore company will, by virtue of Section 19 of the Income Tax Act 1995, be entitled to a deduction in respect of interest payable on loan taken from the non-resident bank for the acquisition of the brewery plant. (iv) Whether the offshore company is entitled to a deduction in respect of its administrative and other expenses which satisfy the requirement of Section 18(1) of the Income Tax Act 1995. (v) Whether the interest paid by the offshore company to a non-resident bank is exempt from tax under item 5 of Part III of the Second Schedule to the Income Tax Act 1995. |
| TR 21 |
(i) Whether the offshore bank will, by virtue of Section 19 of the Income Tax Act 1995, be entitled to deduct the accrued interest on the Zero Coupon Bonds. (ii) Whether the offshore bank will be required to withhold taxes on interest payments at maturity. (iii) Whether interest paid to the fund is chargeable to tax. |
| TR 22 |
Whether credit for underlying tax on a yearly
basis will be granted on the production of a certificate from the
tax authority of the foreign country that the company is subject
to tax on its profits at a certain rate.
|
| TR 23 |
(i) Whether existing shareholders of the company who will be allotted units in the unit trust will be entitled to investment relief under Section 36 of the Income Tax Act 1995. (ii) Whether a corporate shareholder of the company will be entitled to investment tax credit under Section 69 of the Income Tax Act 1995. |
| TR 24 |
Whether the company is entitled to carry forward
the unrelieved losses as at 30 September 1998 for set-off against
its net income for the income year ended 30 September 1999 and in
succeeding years.
|
| TR 25 |
Whether for the purposes of Section 36 of the
Income Tax Act 1995, the company would be regarded as a tax incentive
company as from the date the Ministry of Tourism and Leisure issued
the letter of intent.
|
| TR 26 |
Whether a Mauritian resident subscribing to Participating
Shares of that company will be entitled to Investment Relief thereon
pursuant to Section 36 of the Income Tax Act 1995.
|
| TR 27 |
Whether the receipt by the Mauritian company
constitutes a taxable income.
|
| TR 28 |
Whether the company is eligible to a tax sparing
credit under Regulation 9 of the Income Tax (Foreign Tax Credit)
Regulations 1996 in respect of profits tax which would otherwise
have been payable but for the exemption effectively given as a result
of the source basis of taxation in that country.
|
| TR 29 |
Whether the foreign company/its subsidiary may
be considered as having a branch or agency (or other form of permanent
establishment) in Mauritius or a source of income taxable in Mauritius.
|
| TR 30 |
(i) Whether the income from transactions with
the entities as described above will be classified as foreign source
income.
(ii) Whether the 80% presumed foreign tax credit will be available. |
| TR 31 |
Whether the application of a cost plus basis
method could be used for computing the company’s chargeable
income in Mauritius.
|
| TR 32 |
Whether the gains accruing from the sale of shares
are taxable in the hands of the seller.
|
| TR 33 |
Whether the exchange differences resulting from
the above would be considered as a deduction or income, as the case
may be, in computing the company’s chargeable income.
|
| TR 34 |
Whether the Mauritian citizen can be considered
as a specified Mauritian employee as defined at Item 14(b)(i) of
Part II of the Second Schedule to the Income Tax Act for the 50%
tax exemption on emoluments.
|
| TR 35 |
Whether the company engaged in the construction
of golf courses is liable to income tax at the rate of 15%.
|
| TR 36 |
Whether IAS 2 Inventories can be used to value
the monkeys held for sale.
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| TR 37 |
(i)Tax losses (a) Whether the unrelieved tax losses of the private limited company will be available for carry forward irrespective of the fact that such losses arose partly from sugar growing activities and were partly transferred to the company by a related sugar milling company. (b) Whether the change in the shareholding of the private limited company will impact on the availability of the unrelieved tax losses for carry forward. (ii) Profit on Sale of Land Whether the profit derived by the private limited company from parcelling and sale of some or all of its agricultural land is taxable. |
| TR 38 |
(a) Whether gains realized on the disposal of the shares held in PLC by partnership B and allocated to GBL 1 company in Mauritius will be treated as capital gains realized by the GBL 1 company. (b) Whether the GBL 1 company will be subject to income tax in Mauritius on the gains. (c) Whether in respect of dividends paid by PLC and allocated to the GBL 1 company, the latter company will be entitled to underlying tax credit for the tax paid by PLC on its profits.
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| TR 39 |
What would be the tax implications if: (i) the appointed agency will be remunerated with commission and all sales proceeds repatriated directly to the foreign airline company; (ii) the local branch office of the foreign airline is appointed as the agent of the foreign airline company and in that capacity is responsible for co-ordinating all activities of the foreign airline company in Mauritius. |
| TR 40 | Whether it can be confirmed that
(i) there is no limit on the number of expatriate employees who are entitled to claim 50% exemption (ii) each expatriate employee is entitled to the 50% exemption of income tax on his emoluments up to 30 June 2006. (iii)that further to the introduction of the Banking Act 2004, the 50% exemption up to 30 June 2006 will apply only to existing expatriate employees already benefiting from this exemption , and not to newly employed expatriates.
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| TR 41 | Whether it can be confirmed that
1. the payment made to offshore sellers by the GBC 1 company for the purchase of promissory notes, bills of exchange or other financial instruments will not be subject to any withholding income tax, stamp duties, value-added taxes and any other taxes or duties. 2. the gains arising to the GBC 1 from the purchase and sale of the above financial instruments will not be liable to tax whereas the coupon interest received under the purchased promissory notes, bills of exchange or other financial instruments will be subject to tax at the rate of 15%. 3. the gains arising to the GBC 1 if these financial instruments
are sold before maturity will not 4. the GBC 1 can apply for a certificate of residency in Mauritius through the Financial Services Promotion Agency if it satisfies the set criteria in order to benefit from lower withholding tax under the relevant Double Taxation Agreement between Mauritius and the country where the issuer is relevant. 5. the GBC 1 will be entitled to claim as tax deduction the interest
paid (at arm's length) for the 6. in cases where the financial instruments are issued by the GBC 1 at a discount, the difference between the issue price and the redemption price will not be allowed as a deduction for income tax purposes. 7. interest paid by the GBC 1 in paragraph 5 above will be allowed
as deduction even if the
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| TR 42 |
Whether interest payable on unsecured bonds that the bank is proposing to issue will be exempt from income tax under item 3(d) of Part III of the Second Schedule of the Income Tax Act.
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| TR 43 |
Whether the Societe is allowed to claim a deduction in respect of the costs of the land and construction of the villas against the lump sum payment received from the sale of the villas and the leasehold right.
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| TR 44 |
Whether the interest income and expenses can be accounted for tax purposes on a cash basis.
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| TR 45 | Whether it can be confirmed that
(i)the société's profits allocated to the partners will be taxed on the partners at an effective rate of 3 %. (ii)only the partners of the Société will be subject to Mauritius taxation on their respective share of income from the Société and that the Société itself will not be subject to taxation as an entity. (iii)the interest-free loans from the Mauritian Company to the South African Holding Company will be treated as equity and Mauritius will not seek to impute tax on the interest adjustments on the loans. (iv)repayments of share capital, share premium and interest -free loans by the South African Holding Company will be treated as of a capital nature and not be reclassified as dividend income on applying anti-avoidance legislation.
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| TR 46 | (a) Whether the foreign employees the GBC1 will be employing to
carry out work wholly outside Mauritius will be subject to PAYE.
(b) Whether the overseas contractors will be subject to income tax in respect of fees they will receive from the GBC1for consultancy work to be carried out from abroad.
|
| TR 47 |
Whether the amount of Rs5.6 m is emoluments under Section 98 of the Income Tax Act and therefore taxable, or whether it represents compensation payable for injury suffered by the plaintiff i.e damages for "abus de droit".
|
| TR 48 | (a) That the benefit payable from the Fund upon reaching the appropriate
retiring age will qualify for the exemption under Item 5 of Part II
of the Second Schedule to the Income Tax Act provided that all conditions
therein described are satisfied.
(b) That any income paid into the Fund will be, exempt from all taxes as provided for under Section 18(1) of the Employees Superannuation Fund Act.
|
| TR 49 | Whether it can be confirmed that
(i) the tax losses accumulated by Company A,the surviving company, can be carried forward against its future profits; and (ii)the transfer or sale price of plant or machinery will be deemed to be equal to their base value at the date of sale or transfer.
|
| TR 50 |
Whether the expenses incurred in the production of dividend income or gains on disposal of securities would not be disallowed.
|
| TR 51 | Whether the company can be considered as a tax incentive company
under item 24 of Part IV of the First Schedule to the Income Tax Act
which reads as fol1ows:
"A company deriving at least 75 per cent of
its gross
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| TR 52 | A ruling is being sought as to whether
(i) the appreciation of the bonds, of GBP 22.2 million; and (ii) the late payment fee of GBP 0.76 million will be subjected to income tax in the hands of the subsidiary.
|
| TR 53 |
Whether the benefits included in the monthly remuneration used as basis for the computation of the severance allowance should not be excluded in the calculation of the tax liability of the employee on the grounds that overseas passage is not taxable by virtue of Section 10 (1) (a) (i) of the Act, and benefits under items (ii) to (iv) are expenditure wholly, exclusively and necessarily incurred in performing the duties of employment.
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| TR 54 |
Whether item 3, that is the payment which according to the company was made to restrain the employees from competing in Mauritius with the related company, is taxable in the hands of the recipients.
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| TR 55 |
Whether under Section 73(a) of the Income Tax Act, for the purpose of considering a person resident in Mauritius, days of arrival and of departure are included for the calculation of 183 days or 270 days, as the case may be.
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| TR 56 | Whether it can be confirmed that:
i.
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| TR 57 |
Can it be confirmed that the lease payments made by the company to the South African company are not Mauritian sourced income and therefore outside the scope of the Mauritian tax system?
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| TR 58 | Whether it can be confirmed that the company
(i) is a tax resident of South Africa and therefore has to comply with South African tax filing and tax payment requirements; and (ii) is not a tax resident of Mauritius, which therefore means that it does not have to file a tax return or pay any tax in Mauritius.
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| TR 59 | (i) Whether it can be confirmed that the company which is a foreign
company will be taxable only on its Mauritian sourced income?
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| TR 60 |
Whether consequent to the effect of amalgamation, the "property, rights, powers and privileges" of the amalgamating companies under the Companies Act are also the property, rights, powers and privileges of the amalgamated company, and as such whether the tax losses accumulated by the amalgamating companies can be used for carry forward and set off against the net income of the amalgamated company.
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| TR 61 |
Whether "additions, extensions and substantial renovations to building", subsequent to the initial construction, are "works" as defined in Section 111A of the Income Tax Act and the "supply of labour" for the execution of works incidental to civil construction by Company B will, as such, fall under the TDS mechanism, i.e. under the provisions of Sub-Part BA of the Act.
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| TR 62 |
Whether in respect of the 'construction of sewer' contract in Mauritius, the company is involved in "construction activities" pursuant to item 24 of Part IV of the repealed First Schedule to the Income Tax Act , and therefore liable to tax at the rate of 15% for the year of assessment 2007/08.
|
| TR 63 | Whether contributions made by an employer to a personal pension
scheme subscribed by an employee
(i) is an allowable deduction to the employer? (ii) is a taxable benefit to the employee? |
| TR 64 | Whether any of the amounts, being either
(i) the repayment of the principal; or (ii) the payment of the amount linked to the performance of the
underlyings (if any) |
| TR 65 | Whether it can be confirmed that the Mauritian national who is resident in Dubai is not liable to tax in Mauritius by virtue of Article 15 of the Mauritius-United Arab Emirates Double Taxation Treaty. |
| TR 66 | Whether it can be confirmed that -
(a) by reason of L Ltd providing back office and advisory services to the HK Co, any profits arising at HK Co level through its selling activities will not be taxed in Mauritius; (b) L Ltd will be taxed only on the net service fee arising under the Service Agreement with the HK Co. |
| TR 67 | Whether, in the event of the sale of part or the whole of the shares
in the subsidiary in future:
(i) the sale of the shares will fall under paragraph 2 of Article 13 of the DTA between Mauritius and France, i.e. gains from the alienation of movable property, or under paragraph 4 of the Article, i.e. gain from the alienation of any property other than that referred to in paragraphs 1,2 and 3 of Article 13; (ii) the gains from the sale of the shares will be taxable only in Mauritius, and therefore exempt. |
| TR 68 | 1. Whether corporate taxes paid by A can be used as credit for foreign
tax against corporate tax of MU Co, and if so the extent of the credit;
2. What documents would be required to be produced in respect of corporate tax paid by A in order for MU Co to apply for foreign tax credit against Mauritius tax? |
| TR 69 | 1) Whether or not income tax payable by the operating
companies A and B in China, including the tax spared in case of tax
holidays, would be available for credit against Mauritius tax payable
by foreign company Z after passing through the number of intermediate
companies in the proposed structure;
(2) Whether, based on the proposed shareholding structure provided and the Double Taxation Agreement (DTA) between Mauritius and China which provides a special rate of 5 % tax on dividends payable by Chinese companies to Mauritius beneficial owners, company Z can avail itself of the DTA privileges in the capacity of beneficial owner of shares in the Chinese companies; (3) If answers to (1) and (2) are positive, (a) what documents would be required in respect of corporate income tax and tax sparing credit of the operating companies A and B for company Z to apply for credit against its Mauritius tax ?; (b) what documents or evidences would be required for company Z to substantiate its status as 'beneficial owner' of the Chinese companies? |
| TR 70 | Whether expenses incurred in the production of both dividend income and capital gains on disposal of securities, i.e. expenses that cannot be attributed directly to the sale of shares, would be allowed for income tax purposes? |
| TR 71 |
1. Corporate Status Whether it can be confirmed that (i) the income derived by B will be exempt from income tax for
the first five succeeding income years starting as from the first
year of operation; (ii) should the company incur a loss during the exemption period,
the loss would be allowable notwithstanding the provisions of Section
26 (1) (b) of the Income Tax Act; (iii) any loss incurred during the exemption period will be subject
to the restriction under Section 59 (b) of the Income Tax Act; (iv) losses attributable to annual allowance in respect of capital
expenditure incurred on or after 1 July 2006 will not be restricted
to the five- year time limit and therefore available for carry forward
indefinitely. 2. Capital Allowances Transitional Rules (i) Whether for the purpose of complying with Section 153 of the
Act, such documents as the supplier's invoice, the construction
contract, the leasing agreement and the maintenance contract are
sufficient evidences in as much as keeping of books and records
are concerned; (ii) Whether it can be confirmed that in the event the company
decides to exercise option to claim annual allowances under the
pre-FA 2006 regime, (a) this will apply to all class of assets and for the three years
of assessment 2007/08,2008/09 and 2009/10; (b) annual allowance would be available on the construction of
the hospital; (c) the irrevocable notice to be made to the Director-General should
at latest be at the time the company submits its return for the
year of assessment 2007/08. Qualifying Expenditure (a) whether B will be entitled to claim annual allowance at the
rate of 5% on the construction of the hospital under the provisions
of Section 63 of the Act; (b) whether it can be confirmed that the items of capital expenditure,
viz land development, landscaping and horticultural works and earthwork
will not attract annual allowances as they are excluded from the
definition of "industrial premises" ; (c) whether it can be confirmed that the capital expenditure incurred
by the company in respect of the construction of the road access
to the hospital will be eligible for annual allowance. 3. Payments made by B to A Whether it can be confirmed that: (i) the payment B will make to A for the services provided by the
latter company will be tax (ii) the royalty payment B will make to A will be considered as
Mauritian sourced income and therefore taxable in Mauritius at the
rate of 15 %; (iii) any other fees A will receive from B will not be subject
to tax; (iv) B will have to apply TDS on the royalties payable to A at
the time of the transfer of such amounts to the latter; (v) A will have to furnish an annual tax return to the MRA and
pay any residual tax at the rate of 5% on the gross amount of royalties
as, pursuant to the DTA, the tax rate on the royalties is 15%. 4. Emoluments derived by staff members of A seconded to B Whether it can be confirmed that the staff members seconded to B will be subject to income tax in Mauritius on their emoluments derived in Mauritius. |
| TR 72 | Whether it can be confirmed that as a result of subcontracting
of investment management by Company P to Company M, the mere management of part of or the majority or all of the AQ assets by Company M will not create a permanent establishment for AQ and Company P in Mauritius and AQ and Company P will not have any tax filing requirement with the Mauritian Tax Authorities. |
| TR 73 |
1. Expatriate Staff Whether (a) the Indian subcontractor should register with the MRA in respect
of the supply of labour for the project. (b) the members of the workforce are subject to PAYE. (c) the branch should apply tax deduction at source in respect
of the amounts made available to the Indian subcontractor for carrying
out works. (d) the members of the workforce are entitled to income exemption
threshold. 2. Cost of Materials Whether the actual amount expended as the cost of materials which
will be wholly and exclusively used on the project is deductible
as input cost. 3. Equipment Wear and Tear Whether wear and tear in respect of second hand heavy duty equipment
imported from overseas and used on the project can be claimed as
annual allowance under Section 24 of the Act. 4. Jack Up Whether the amount paid to subcontractors in India by Head Office
for dismantling the jack up used in the project can be claimed by
the branch as an allowable expense. 5. Transport of Equipment and Freight Charges Whether maritime freight and transport charges incurred by Head
Office are allowable expenses to the branch. 6. Air Transport Expenses Whether air transport expenses incurred by the branch for the technical
and administrative personnel can be claimed as allowable deductions. 7. Head Office Administrative Expenses and Transfer of Technical
Know-how Whether administrative expenses and services provided for the transfer of know-how by Head Office can be claimed by the branch as allowable expenses. |
| TR 74 | Whether it can be confirmed that the services of loss adjustment and/or investigations into suspected fraudulent insurance claims fall outside the scope of TDS under Section 111B (e) of Sub-Part BA of the Income Tax Act i.e. specified services under the Fifth Schedule to the Act. |
| TR 75 |
1A. Whether it can be confirmed that as the dividend income
G Inc. will receive from G LUX is 1B. Whether it can be confirmed that, as part of the dividend
distribution G Inc. will receive from G 2. Whether it can be confirmed that any dividend income
received by G Inc. from G TRUST LTD 3. Whether it can be confirmed that irrespective of G Capital Management Ltd holding a GBL1 licence, any dividend income received by G Inc. from G Capital Management Ltd will not be subject to withholding tax and be an exempt income. Also, as this will not be a foreign source income, G Inc. will not be able to apply for foreign tax credit and underlying tax credit in respect of this income. |
| TR 76 |
1. Whether the difference between the exercise price and the market
value of the shares in question would be taxed on the overseas investment
advisers as benefits- in- kind at the time the options are exercised. 2. Whether the profits made on the disposal of the exercised shares
vested on the overseas onresident investment advisers are subject
to taxation in Mauritius under the scenarios below: (i) Investment advisers are based in Treaty Countries; (ii) Investment advisers are based in Non-Treaty, Third Party Countries |
| TR 77 | Whether the proceeds of the sale will be subject to income tax. |
| TR 78 |
At what point in time is gain or loss on exchange realized by the
company: (a) when the amounts invoiced by V Ltd are settled by T and credited
in the Euro account? |
| TR 79 | Whether it can be confirmed that the tour operator company
will be entitled to a 200% deduction in respect of overseas marketing and trade fair expenses. |
| TR 80 | A guidance is sought as to what procedures should be
followed to get the companies registered as taxpayers in Mauritius. |
| TR 81 | Whether, in relation to the profits and gains derived by the Indian company from its business of developing a Special Economic Zone in India, P Ltd is eligible for a tax sparing credit under Regulation 9 (1) of the Income Tax (Foreign Tax Credit) Regulations 1996 in respect of Indian profits tax which would otherwise have been payable but for the exemption effectively given as a result of the enactment of Section 80-IAB and Section 115-O of the Indian Income Tax Act. |
| TR 82 | Confirmation as to whether preference share dividend should be treated as an allowable expense. |
| TR 83 | Whether the surplus realised will be taxable or not |
TR 1
Facts
A non-resident corporation has deposited
substantial sums of money with the Bank of Mauritius in the form of deposits
and bills.Theses balances yield substantial interest to the corporation.
Point
at issue
Whether the words "any bank in Mauritius"
include the Bank of Mauritius.
Ruling
The Bank of Mauritius does not fall within the ambit of "any bank in Mauritius".
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TR 2
A company proposed to launch a scheme to
induce members of the staff to leave its employ before reaching the normal
retiring age against payment of an allowance in view of redundancy. The
scheme known as the "Early Leavers Scheme" covered all members of the
pensionable staff with a minimum of 10 years continuous service.
The allowance payable to the early leavers was computed on the basis
of the number of completed years of service.
The members of the staff would also be entitled to their normal pension benefit available in accordance with the rules of their staff pension fund.
Whether the portion of the allowance not exceeding the specified sum is exempt from tax as provided in the second Schedule Part II Item 5 of the Income Tax Act 1995.
The portion of retiring allowance not exceeding the specified sum is exempt from income tax.
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TR 3
Facts
A foreign company has been operating a branch
in Mauritius. A new company was incorporated in Mauritius
to take over the activities of the branch. The branch had accumulated
losses as at the date of its take over.
Point at issue
Whether the accumulated tax losses of the
branch of the foreign company are transferable to the company incorporated
in Mauritius to take over the activities carried on by the branch.
Ruling
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TR 4
A resident company proposes to engage the
services of a foreign company for general overseas information sourcing,
inspection of goods before shipment, consultancy services etc. These
services will be provided from outside Mauritius and the local company
does not envisage that any representative of the service providers will
be required to come to Mauritius in connection with these services.
Point at issue
(a) Whether fees received by a non-resident will attract tax in Mauritius;
(b) whether expense
so incurred by the local company is an allowable deduction.
Ruling
Fees received by a non-resident for services
provided from outside Mauritius to a resident of Mauritius are not taxable
in Mauritius. The fees, however, will qualify as allowable deduction
for the resident provided that the expenses are exclusively incurred in
the production of gross income, the transactions are done at arm's length
and the parties are not related to each other in any way whatsoever.
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TR
5
Facts
A resident company holding an Export Enterprise
Certificate has accumulated losses up to the year of assessment 1996/97.
The Income Tax Act 1995 provides that:
(a) a company holding an Export Enterprise
Certificate is exempt from income tax as from the year of assessment 1997/98;
(b)
a company may carry forward its unrelieved loss to be set-off against
its net income derived in the following income year and in the succeeding
years.
Point at issue
Whether the accumulated losses of the company
will be available for set-off against its future income should there be
a change in legislation rendering a company holding an Export Enterprise
Certificate taxable.
Ruling
As the law stands, accumulated losses up
to the year of assessment 1996/97 of a company holding an Export Enterprise
Certificate are available for set-off against future taxable income of
the company.
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TR 6
Facts
A resident company deals in shares which
are quoted on the Mauritius Stock Exchange and Over the Counter Market.
However, it holds shares in companies whose shares are not quoted.
Such shares are held purely for capital growth and may be disposed of
in the future.
Point at issue
Whether profits/losses arising from sale
of shares which are not quoted on the Mauritius Stock Exchange or over
the Counter Market would be taxable and deductible respectively.
Ruling
Sale of shares, whether quoted or not, constitutes a transaction effected in the ordinary course of the company's business and any profits or losses arising from the sale of unquoted shares are taxable and tax deductible respectively, as one of the main objectives of the company is to invest and deal in shares.
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TR 7
Facts
An offshore company proposes to issue non-voting
redeemable fixed rate preference shares to a group entity and intends
to account for the transaction as a short term loan rather
than equity and accordingly treat dividends payable as interest under
the Financial Reporting Standard 5 (FRS 5).
Point at issue
Whether the tax treatment should follow
the accounting treatment i.e a transaction should be based upon its economic
substance where it differs from its legal form.
Ruling
The preference shares cannot be considered as a short term loan for tax purposes. The terms and conditions on which the preference shares will be issued may entitle them to be reclassified as a short term loan according to accounting standard. However, for tax purposes, any distribution will be treated as dividends and not as interest.
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TR
8
Facts
An investment company listed on the official list of the Stock Exchange proposes to transfer the significant differential between the market price and the underlying net asset value (NAV) of the company's shares to a Unit Trust Scheme (authorised under Unit Trust Act 1989) which will be an open-ended Fund (having no predetermined limit) and will invest primarily in listed and unlisted securities, bonds and deposits. Subsequently, the company will distribute a dividend equivalent to the "differential" to its shareholders who will be required to re-invest in the Unit Trust Scheme.
Points at issue
(a) Whether an existing shareholder of the company who will be allotted shares in the Unit Trust Scheme will be entitled to investment relief under Section 36 of the Income Tax Act 1995.
(b) Whether a corporate shareholder of the company will be entitled to an investment tax credit under Section 69 of the Income Tax Act 1995 in respect of units allotted to it.
Ruling
(a) An existing shareholder who will be allotted shares in the Unit Trust Scheme will be entitled to investment relief under Section 36 of the Income Tax Act 1995.
(b) Likewise, an existing corporate shareholder of the company will be entitled to an investment tax credit under Section 69 of the Income Tax Act 1995 in respect of shares allotted to it.
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TR 9
Facts
A company proposes to give to its employees shares in the company free or with an option to buy at a price less than their market value (Employees' share participation scheme). The option may or may not be exercised by the employee.
Point at issue
Whether a contractual agreement between a company and its employee giving the latter an option to subscribe to a number of shares at a price lower than their market value gives rise to a taxable benefit.
Ruling
The difference between the purchase consideration and the market value of the share is a benefit in kind accruing to the employee and is taxable under Section 10 (1) (a) (i) of the Income Tax Act 1995 (when the option to acquire the shares is exercised by the employee)
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TR 10
Facts
The main activity of a company is
airline catering. More than 90% of its gross income is derived from
sale of food processed by it. In its day to day operations, it purchases
locally raw materials which include semi-finished goods, chicken, fish,
lamb, beef, bacon, fresh fruits and vegetables. These are subsequently
sanitized, processed and stored at appropriate temperatures and are then
cooked/steamed/grilled/fried or baked according to set menus. The
prepared meals or salads are placed in appropriate containers which are
arranged in trays and blastchilled, ready for either continental breakfast
or dinner destined for passengers.
Point at issue
Whether the activities and transformation processes mean "manufacture" as defined in the Income Tax Act 1995 and accordingly the company should be treated as a tax incentive company.
Ruling
The processing activities of the company fall within the ambit of the word "manufacture" as defined in the Income Tax Act 1995. Hence, the company qualifies as a tax incentive company.
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TR
11
Facts
A foreign group
of companies is planning to restructure a number of subsidiaries worldwide
under a Mauritian offshore holding company and wishes to ensure maximum
foreign tax credit available against the Mauritian tax liability.
Point at issue
Whether the pooling of foreign tax credit available to a taxpayer under Regulation 6 (3) (a) of the Income Tax (Foreign Tax Credit) Regulations 1996 includes both actual tax paid and deemed tax under Regulation 9 and the aggregate amount will be available for offset against the Mauritian tax liability.
Ruling
The pooling of foreign tax credit available to a taxpayer under Regulation 6 (3)(a) of the Income Tax (Foreign Tax Credit) Regulations 1996 includes both actual tax paid and deemed tax under Regulation 9. The aggregate amount will therefore be available for offset against the Mauritian tax liability.
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TR 12
Facts
An offshore company incorporated in Mauritius as an asset management company will give investment advice to a fund also incorporated in Mauritius as an offshore company. The fund derives income through its investment activities abroad.
Point at issue
Whether the management fee which the asset management company will receive from the fund will be deemed to be foreign source income and hence the company will be entitled to claim the deemed foreign tax credit in accordance with Regulation 8 (3) of the Income Tax (Foreign Tax Credit) Regulations 1996.
Ruling
Since the asset management company is resident in Mauritius and will give investment advice to another company resident in Mauritius, the investment advisory fees are income derived from Mauritius. Moreover, as credit for foreign tax is given only in respect of foreign source income, the deemed foreign tax credit will not be available with regard to the investment advisory fees.
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TR 13
Facts
A resident company is licensed to operate
in the Mauritius Freeport Zone. It imports dyestuffs and textile
auxiliaries in bulk which it processes for re-export. It also sells
part of its products to factories operating in the Export Processing Zone.
Point at issue
Whether income derived from the sale of its products to factories operating in the Export Processing Zone is exempt from tax.
Ruling
The sale to factories operating in the EPZ constitutes an activity carried on outside the Freeport Zone. Income derived from such activities is therefore subject to tax in accordance with Section 49(2) of the Income Tax Act 1995.
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TR 14
Facts
A foreign company will operate a worldwide satellite-based digital telecommunications system that will deliver wireless telephone and other telecommunications services to users worldwide. It proposes to form a Mauritian offshore company which will provide access to the system to Service Providers in other countries pursuant to a contract. One such Service Provider will promote and provide access to the system to its customers (i.e the end users). Payment by that Service Provider to the Mauritian offshore company will be in the form of a monthly usage fee mainly based on the actual usage of the system by the Service Provider. To enable it to fulfill its contractual obligations towards the Service Provider, the Mauritian offshore company will contractually obtain access to the system from the foreign company in return for payment of fees.
Point at issue
(a)
Whether the payment by the Mauritian offshore company to the foreign company
will be characterized as a "royalty" or a "service fee" and whether that
payment will be subject to tax in Mauritius.
(b) Whether
the Mauritian offshore company will be subject to tax in Mauritius at
15% against which it may claim credit/90% deemed credit for foreign taxes
suffered on its foreign source income.
(c) Where the Mauritian offshore company receives foreign income from two different foreign sources, whether it may claim foreign tax credit on one source and the 90% deemed credit on the second source.
(d) Having regard to the nature of the activities of the Mauritian offshore company and the circumstances of the case, if the spread, that is the net income after Service Provider Fees and administrative costs, is not less than one per cent (1%) of the net amounts received from the Service Providers and not more than five per cent (5%) of such amount, whether this will be regarded by the Tax Authorities as reasonable.
Ruling
(a) The payment by the Mauritian offshore company to the foreign company will be considered as a service fee. Moreover, the foreign company will not be liable to tax in Mauritius on that service fee since it is a non resident company and the services provided to the Mauritian offshore company are performed from overseas.
(b) The Mauritian offshore company will be taxable at the rate of 15% and the Income Tax (Foreign Tax Credit) Regulations 1996 will apply in respect of its foreign source income.
(c) Where the Mauritian offshore company receives foreign income from two different foreign sources, it may claim foreign tax credit on one source and the 90% deemed credit on the second source in accordance with Regulation 6(3) of the Income Tax (Foreign Tax Credit) Regulations 1996.
(d) The income of the Mauritian offshore company for income tax purposes will have to be determined in accordance with the arm's length principles.
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TR 15
Facts
A wholly owned subsidiary of a foreign company which is itself part of a multinational group engaged in importing and distributing clothing for men, women and children in another country is incorporated in Mauritius and holds a Freeport Licence.
The subsidiary company will assist the holding company in procuring the stocks of garments and its role will include obtaining prices, pre-production and production information from factories/suppliers, carrying out quality inspections and following up orders to ensure that goods are exported on time. The subsidiary company will have an office in Mauritius and will employ the necessary staff, including expatriates, to carry out its functions.
Point at issue
Whether payments by the holding company for running the subsidiary's office in Mauritius on a cost recovery basis is acceptable to the Income Tax Department.
Ruling
The net income of the subsidiary will be determined by the Income Tax Department in accordance with arm's length principles.
Further, the activities of the subsidiary are considered to be carried out outside the Freeport Zone and the income derived from such activities will be subject to tax in accordance with Section 49(2) of the Income Tax Act 1995.
The above ruling would not be different if the subsidiary were a Mauritian offshore company.
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TR
16
Facts
The core activities of a company since its incorporation have been the provision of a wide range of contracting works to the sugar industry for the preparation, upkeep and enhancement of sugar cane fields. These activities have been extended to the mechanical loading and mechanical harvesting of sugar cane top.
Point at issue
Whether the company is a tax incentive company under item 22 of Part V of the First Schedule to the Income Tax Act 1995 which reads as follows: "a company deriving at least 75 per cent of its gross income from agriculture, fishery and livestock".
Ruling
The company is not engaged in agriculture but is providing services to the sugar industry for the preparation, upkeep and enhancement of sugar cane fields. The income derived by the company, although linked with agriculture, represents the return for the services provided to the sugar industry. Hence, the company does not qualify as a tax incentive company.
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Facts
A foreign bank is offering the opportunity to employees of its branch in Mauritius to subscribe to the share capital of the bank in view of the increase in its capital on the following conditions:-
For each share subscribed by the employee, the employer should subscribe to one free share in favour of the employee up to a maximum of 16 free shares per employee.
Shares subscribed by the employee and the employer cannot be released before five years.
Point at issue
Whether the employee is assessable to tax on the free shares? If in the affirmative
- when should the tax be paid?
- should the tax be paid under PAYE?
Ruling
The employee is assessable to income tax on the free shares as these are fringe benefits falling within the ambit of Section 10 (1)(a)(i) of the Income Tax Act 1995. The tax should be paid under the PAYE System at the time the employee receives the benefit in accordance with the provisions under Part VIII, Sub-Part A of the Income Tax Act 1995.
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TR 18
Facts
A group of companies engaged in sugar cane plantation have made applications for land conversion under Section 5(7)(f) of the SIE Act 1988 (as amended).
The companies propose to subdivide and develop
the lands into residential plots and sell same to the public. The
lands have been owned by the company for sugar cane plantation for a considerable
period of time. The companies have never in the past been engaged
in property development. The sale of lands by the group of companies
will be effected under the 1200 Arpents Land Conversion Scheme approved
by the Government whereby 25% of land will be sold to the Government at
nominal prices. The group has the obligation to plough back at least
60% of the proceeds and carry out the conversion within a specified period,
failing which the authority for land conversion will be withdrawn.
Point at issue
Whether the proceeds from the sale of the lands would constitute a chargeable income for Income Tax purposes.
Ruling
The profits to be realized by the group of companies from the sale of the lands will be considered as capital profits and hence not chargeable to income tax.
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TR 19
Facts
A consortium proposes to acquire shares held by a foreign company in a Mauritian company engaged in sugar cane plantation. Apart from 5 different companies holding each an equal percentage of share capital of the consortium, the Government will participate in the shareholding of the consortium. The proposed agreement between the Government and the consortium provides inter alia that the Mauritian company will:
sell to the Government some portions of land at a concessionary price;
be allowed to: -
(i) parcel out some other portions of agricultural lands to small planters as agricultural morcellements and sell part thereof on a going concern basis to an entity to be designated by Government;
(ii) rezone and parcel out other portions of land to be sold to the public.
Whether any gains from the sale of the lands by the Mauritian company would be chargeable to income tax.
Ruling
Any gains from the sale of the lands by the Mauritian company will be considered as capital profits and will not therefore be chargeable to income tax since the lands have been owned by the Mauritian company for sugar cane plantation for a considerable period of time. Moreover, the Mauritian company has never been engaged in property development.
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Facts
A foreign company intends to register itself with the Registrar of Companies as a foreign company to operate in the offshore sector. The offshore company (the lessor) will contract a loan with an offshore bank for the purchase of a new brewery plant which is being constructed abroad with a view to hire it to a leasing partnership (the lessee) established abroad which will in turn make the new brewery plant available to another company under a financial lease agreement. The lessee will pay a rental to the lessor during the first five years.
Point at issue
(i) Whether the offshore company is assessable to tax on the lease interest derived by it under the finance lease agreement entered into by it and the leasing partnership.
(ii) Whether the lease interest paid by the leasing partnership to the offshore company is income derived from outside Mauritius.
(iii) Whether the offshore company will, by virtue of Section 19 of the Income Tax Act 1995, be entitled to a deduction in respect of interest payable on loan taken from the non-resident bank for the acquisition of the brewery plant.
(iv) Whether the offshore company is entitled to a deduction in respect of its administrative and other expenses which satisfy the requirement of Section 18(1) of the Income Tax Act 1995.
(v) Whether the interest paid by the offshore company to a non-resident bank is exempt from tax under item 5 of Part III of the Second Schedule to the Income Tax Act 1995.
Ruling
(i) The offshore company, being a resident of Mauritius, is assessable to tax on the lease interest derived by it under the finance lease agreement entered into by it and the leasing partnership.
(ii) The lease interest paid by the leasing partnership to the offshore company is income derived from outside Mauritius.
(iii) The offshore company will, by virtue of Section 19 of the Income Tax Act 1995, be entitled to a deduction in respect of interest payable on loan taken from the non-resident bank for the acquisition of the brewery plant.
(iv) The offshore company is entitled to a deduction in respect of its administrative and other expenses which satisfy the requirements of Section 18(1) of the Income Tax Act 1995.
(v) Interest paid by the offshore company to a non-resident bank is exempt from tax under item 5 of Part III of the Second Schedule to the Income Tax Act 1995.
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TR 21
Facts
An offshore bank intends to facilitate the roll out of a capital guaranteed investment product on behalf of an international fund. The investment would be in three year Zero Coupon Bonds. The Zero Coupon Bonds do not pay interest during their term. However, the interest accrues annually and the value is paid at maturity.
Point at issue
(i) Whether the offshore bank will, by virtue of Section 19 of the Income Tax Act 1995, be entitled to deduct the accrued interest on the Zero Coupon Bonds.
(ii) Whether the offshore bank will be required to withhold taxes on interest payments at maturity.
(iii) Whether interest paid to the fund is chargeable to tax.
Rulings
(i) The offshore bank will, by virtue of Section 19 of the Income Tax Act 1995, be entitled to deduct the accrued interest on the Zero Coupon Bonds on an annual basis.
(ii) There are no withholding taxes on interest payments.
(iii) Interest paid to a non-resident by a corporation holding an Offshore Banking Licence issued under the Banking Act 1988 is exempt from income tax under item 5 of Part III of the Second Schedule to the Income Tax Act 1995.
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TR 22
Facts
An offshore company resident in Mauritius derives dividends from a foreign company in which it holds 50% of the shares.
Point at issue
Whether credit for underlying tax on a yearly basis will be granted on the production of a certificate from the tax authority of the foreign country that the company is subject to tax on its profits at a certain rate.
Ruling
The offshore company will be entitled to a credit for underlying tax on production of documentary evidence showing, in respect of the year for which credit is claimed, the following particulars:-
(a) the amount of corporate tax actually paid by the foreign company and
(b) the total profits of the foreign company out of which the dividends were paid.
The offshore company will still be able to claim an underlying tax credit in respect of a year where no tax has been paid by the foreign company if the dividends can be shown to have been paid out of a previous year's profits which have already been charged to tax. In such a case, the rate used in that previous year will apply for the purpose of calculating the underlying tax credit.
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TR 23
Facts
A new unit trust scheme will be constituted. It will be managed by a company which has the status of "Approved Investment Institution". The company will transfer part of its locally quoted investment portfolio and all its overseas investment portfolio to the unit trust in exchange for an equal number of units of that unit trust. These units will then be distributed by the company to its shareholders by way of dividends in species on a pro-rata basis. However, as the reserves of the company are not sufficient to enable a distribution of such an amount of dividends, it will proceed to a reduction of its capital.
Point at issue
(i) Whether existing shareholders of the company who will be allotted units in the unit trust will be entitled to investment relief under Section 36 of the Income Tax Act 1995.
(ii) Whether a corporate shareholder of the company will be entitled to investment tax credit under Section 69 of the Income Tax Act 1995.
Ruling
Since the gain on revaluation of investments to be transferred to the unit trust is not realized and the company does not have sufficient reserves to pay the required amount of dividends which its shareholders could have used to finance the acquisition of the units in the unit trust, the distribution by the company to its shareholders of the units to be acquired by the unit trust cannot be considered as new investments being made by the shareholders (individual or corporate) and they will not therefore be entitled to investment relief thereon under Section 36 of Section 69 of the Income Tax Act 1995, as the case may be.
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TR
24
Facts
A company engaged in the manufacture of animal and poultry feeds proposed to issue new shares due to expansion of the business and other factors. The change in the ownership of shares of the company as at 30 September 1999 did not exceed 50% while at the end of the income year ended 30 September 2000, less than 50% in the nominal value of the allotted shares in the company were held by or on behalf of the same persons.
Point at issue
Whether the company is entitled to carry forward the unrelieved losses as at 30 September 1998 for set-off against its net income for the income year ended 30 September 1999 and in succeeding years.
Ruling
In accordance with Section 59 of the Income Tax Act 1995 and the conditions prescribed in Regulation 19 of the Income Tax Regulations 1996, losses incurred by a company in an income year may be carried forward and set-off against its net income of the following year and in the succeeding years, provided that at the end of each of those years, not less than 50% in the nominal value of the allotted shares in the company are held by or on behalf of the same persons.
The company is therefore entitled to carry forward the unrelieved losses as at 30 September 1998 for set off against its net income for the income year ended 30 September 1999 as the change in the ownership of shares as at that date did not exceed 50%.
At the end of the income year ended 30 September 2000, less than 50% in the nominal value of the allotted shares in the company were held by or on behalf of the same persons. Any unrelieved losses as at 30 September 1999 cannot therefore be carried forward for set off against the company's net income for the income year ended 30 September 2000 and succeeding years.
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TR 25
Facts
On 21 July 1997, a company engaged in hotel industry applied for a Hotel Development Certificate. The Ministry of Tourism and Leisure subsequently issued a letter of intent dated 25 August 1998 informing the company that the Government has approved the grant of a Hotel Development Certificate, subject to certain conditions. The Hotel Development Certificate was duly issued on 8 December 2000.
Point at issue
Whether for the purposes of Section 36 of the Income Tax Act 1995, the company would be regarded as a tax incentive company as from the date the Ministry of Tourism and Leisure issued the letter of intent.
Ruling
The company became a tax incentive company as from 1 July 1999 under item 29 of Part IV of the First Schedule to the Income Tax Act 1995. Had it not been for that new provision enacted by the Finance Act 1999, the company would have qualified as a tax incentive company as from the date the Hotel Development Certificate was issued to it i.e. 8 December 2000.
The company cannot therefore be regarded as a tax incentive company for the purposes of Section 36 of the Income Tax Act 1995 as from the date the letter of intent was issued to it by the Ministry of Tourism and Leisure.
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TR 26
Facts
A resident company incorporated in Mauritius on 19 June 1998 hold an offshore certificate issued on 25 June 1998. The company continues to be governed by the Income Tax Act 1974 as it has not opted to be taxed under the Income Tax Act 1995.
Point at issue
Whether a Mauritian resident subscribing to Participating Shares of that company will be entitled to Investment Relief thereon pursuant to Section 36 of the Income Tax Act 1995.
Ruling
The company is governed by the Income Tax Act 1974 and it does not qualify as a tax incentive company. A Mauritian resident subscribing to shares in that company will therefore not be entitled to Investment Relief under Section 36 of the Income Tax Act 1995.
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TR 27
Facts
A Mauritian company is involved in the manufacture and sale of chemical products, water treatment equipment and spare parts for domestic and industrial use.
A foreign company has a royalty agreement with the Mauritian company to provide the latter with formulations for the production of water treatment chemicals.
A new company was incorporated to establish a joint venture between the Mauritian company and the foreign company.
A division of the Mauritian company was transferred to the newly incorporated company for a specific amount of money.
The transfer consisted of the existing staff of the division and the existing clients of the Mauritian company.
Point
at issue
Whether the receipt by the Mauritian company constitutes a taxable income.
Ruling
The receipt by the Mauritian company representing consideration for the sale of "goodwill" is not chargeable to income tax.
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TR 28
Facts
A company incorporated by continuation in Mauritius holds a Category 1 Global Business License since 1998.
The company is registered with the Companies Registry in a foreign country as an overseas company. The company has established a place of business in that country from where all the activities of the company are carried out.
The company maintains full time employees based in the foreign country to carry out its day to day business activities. The company has no employees outside the foreign country.
Under the tax law of the foreign country, income not sourced in that country is exempt from tax. However, where an overseas company carries on business in that country through a branch, it is required to declare all income (wherever sourced) attributable to the branch in that country even foreign source income is eventually exempt.
Point
at issue
Whether the company is eligible to a tax
sparing credit under Regulation 9(1) of the Income Tax (Foreign Tax Credit)
Regulations 1996 in respect of profits tax which would otherwise have
been payable but for the exemption effectively given as a result of the
source basis of taxation in that country.