The Mauritius Revenue Authority has issued a statement of practice (SoP) in relation to the newly introduced section 73A of the Mauritius Income Tax Act, 1995, which treats a company incorporated in Mauritius as “non-resident” for Mauritian income tax purposes if its place of effective management (POEM) is located outside Mauritius.
The SoP clarifies that in determining POEM all relevant facts and circumstances relating to the business activities of the company, including the use of information and communication technologies in the decision-making process of the company, must be examined.
Generally, a company will be deemed to have its POEM in Mauritius if: (1) the strategic decisions relating to the company’s core income generating activities are taken in, or from, Mauritius; and (2) any one of the following conditions is met: (a) the majority of the board of directors’ meetings are held in Mauritius; or (b) the executive management of the company is regularly exercised in Mauritius. Where a company incorporated in Mauritius does not meet these conditions, it will be treated as non-resident for Mauritian income tax purposes.
It may be noted that section 73A applies to any company incorporated in Mauritius, and so the POEM test is applicable to Mauritian companies holding global business licenses. The SoP is therefore likely to impact investment vehicles incorporated in Mauritius but controlled or managed from outside Mauritius. An entity whose POEM is found to be located outside Mauritius may also face challenges when claiming tax treaty relief under Mauritius’ tax treaties (including under the India-Mauritius Tax Treaty), which may result in potential double taxation in respect of any foreign sourced income earned by that entity.
The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bengaluru, Singapore, Silicon Valley, Munich and New York. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.