The small Indian-Ocean island of Mauritius has become extremely popular for many South Africans considering retirement or permanent residency.
Personal Finance has previously reported of the island’s attractive fiscal regime for individuals, which includes an effective income tax rate of up to only 15% and no capital gains tax, although property taxes apply. Dividend tax is only effective from over three million Mauritian Rupees (Rs. Rs1 = R0.40). The inheritance tax regime is far more generous as well.
South Africa established a double taxation agreement with Mauritius in 2015. Simply put, this means that the country of origin is entitled to tax, and individuals aren’t taxed in both countries.
But the cherry on the cake from a tax and business perspective must be the fact that Financial Action Task Force (FATF), an inter-governmental organisation that aims to prevent money laundering and terrorist financing, announced in October last year that Mauritius “no longer requires increased monitoring and, and as such, has been removed from the ‘grey list’.”
South Africa is potentially facing the opposite scenario, which will make doing business with the country and any foreign investment tougher to execute.
Rebecca Thomson, a senior associate at Allen & Overy, told CapeTalk recently that “if the country is deemed a high-risk jurisdiction, anyone wanting to do business with South Africa will need to jump through an additional layer of compliance hoops”.
Industry experts have warned that a greylisting could have potentially worse economic consequences than the junk listing by credit agencies. Thomson said it could also lead to an overall decline in GDP, “as seen in Mauritius when they were greylisted, and GDP dropped by 1% in the first year of its listing”.
In a recent webinar hosted by Brenthurst Wealth Management, which has a subsidiary on the island called Brent Wealth, head of the advisory arm on Mauritius, Gavin Butchart, said that the new income tax rates adjusted for inflation creep applicable from July 1 were:
- Not exceeding Rs700 000: 10%
- Exceeding Rs700 000 but not exceeding Rs975 000: 12.5%
- Exceeding Rs975 000: 15%
There are numerous other tax and investment incentives offered to individuals and companies, which include import duty an d VAT exemptions.
“An investment of US$375 000 in real estate developments comes with residency permits,” Butchart said.
Butchart showed statistics showing that the investment proposition goes much further than attractive and competitive tax rates.
He said that Mauritius is a politically and economically stable economy, and from a good governance and investor protection perspective, it is well regulated and on par with international norms, as proved by the country’s removal from the greylist in October 2021.
He said the cost of living on the island compares favourably with that of South Africa, and is much cheaper than most other popular investment destinations, and that the employment and crime rates, compared with South Africa, paint a vastly better picture.
Said Butchart: “Different permits and schemes are available to foreigners from residential and commercial property investment, investor, self employed and occupation and retirement and premium visas.”
Kashish Jadoo, member of the Economic Development Board (EDB) of Mauritius, who was also on the panel of speakers in the webinar, said that all non-citizens looking to reside or do business in Mauritius would have to apply to the EDB.
He said Mauritian authorities had embarked on a strong drive to attract foreign investment by showcasing the various key offerings of the island and positioning it an attractive destination to relocate businesses and, importantly, as a place for people to retire.
It is the crossroads between Asia and Africa, and is now recognised as an international financial hub of repute and substance, and is considered one of the most dynamic and robust economies in the region.
According to the World Bank’s Ease of Doing Business report, Mauritius is ranked first in Africa and features among the top 20 economies globally.
Jadoo said the government of Mauritius had worked very hard to position itself as compliant with global standards, and strengthen its financial sector to cater for compliance.
Having experience in the matter, Butchard added that being greylisted by the FATF drastically increases the costs of corporate activity and investment. “Mauritius now ticks all the right boxes, which lifts the burden for any foreign interested parties.”
Foreign investors tend to steer away from countries that feature on the greylist, he said.
PERSONAL FINANCE