Question 2

What are the needs of setting up an Offshore Company?

A company is called to be an offshore company in Mauritius when it is registered in

Mauritius and it has its business activities done outside the country. The transactions are
called to be under global business. Such a company still operates under the rules of the
Company Act and regulated under the Financial Commission Services Act of 2007.

Together to ensuring offer a high level of confidentiality, Global business companies are
called to operate in legal activies and which are not to the detriment public interests and
the country’s reputation. Among the activities which Global business companies can
operate in Mauritius are aircraft financing and Leasing, asset management, taxation,
consultancy services, financial services, fund management, IT,insurance, Logistics and
shipping among others.

There are two types of licences, notably GBC1 or GBC2, which the FSC provides to
open a global business company. Application for the said licence is done through a
management company approved by the Commission. Even the fact that the need to open
an global company is to conduct business outside Mauritius, offshore company under the
GBC1 category can be a branch of a foreign company or a locally incorporated one.I
englobes a foreign company who redomiciles and operates activities under the Mauritian
GBC1 Offshore regulation. It can as well business on the mauritian market to an extent of
10-15%. On the other hand, an offshore company falling under GBC2 category deals
with trade and investment falling outside Mauritius only under a well-established
offshore company and industry. In addition to the other laws, GBC2 is also ruled by the
Finance (Miscellaneous Provisions) Act 2012.

Important to note that both categories can express its share capital to any currency except
for mauritian rupee. However, for GBC1, there is no limit to capital requirements and
GBC2, there has a minimum capital requirement.

In terms of the trading aspects, GBC1 is called to conduct business in Mauritius, trade
with people who are residents of Mauritius and hold shares and interest in a company that
is resident in Mauritius whereas a GBC2 category company will transact and work for the
benefits of the non resident people only.

Taxation regulation and treatment is an important element in the need of setting up an

offshore company. While a GBL2 company is not taxable in Mauritius, a GBL1 company
is liable to tax on its income at a flat rate of 15 percent. However, a GBL1 company is
entitled to the higher of a deemed foreign tax credit of 8o percent on its foreign source
income or actual foreign tax suffered. Under the GBC1 category, the company will
benefit from the double taxation treaties of Mauritius with other countries. In its
investment, this company benefits from fiscal advantages like reduced withholding tax on
dividends, interest and royalties and no capital gains tax. To benefit from the tax treaty
network, a GBL1 company should prove that it is being managed and controlled from
Mauritius and obtain a Tax Resident Certificate from the MRA. Mauritius has secured at
least 46 tax treaties and a series of ones are still either under negotiation or awaiting
signature. Among the countries with which treaties have been ratified are Australia,
Botswana, Italy, Pakistan, China, France and India.

The Mauritian government through the board of development encourages Offshore

Companies through several schemes and regulations to attract foreign investors. The
main benefits for the country are that there is the presence of foreigners who bring their
knowledge, resources and capital. This brings along a global exchange of inputs and
outputs, sharing of ideas and experience for the benefit of local people. Similarly, there is
increased revenue with increased markets and an extensive customer portfolio for the
country while the country benefits from a promoting a diverse workforce and accessing
new talents.

Moreover, in a more specific way, the advantages attached to GBC1 are the following:

i. low income tax rate of 3%,

ii. exempt from all capital gains taxes, withholding tax on payment of dividends,
interests, and royalties.
iii. Only one shareholder is required to register the company.
iv. The required minimum share capital is only $1 USD.
v. There are several options available to register either as a company or a
corporation and the types of shares to issue.
vi. Strong governmental support for enforcing tax treaties
vii. No exchange controls
viii. Exemption from stamp duties, registration duties and other fees

Advantages under the GBC2 category are the following:

1)      The business owners are free from repatriation of income and profits.
2)      The offshore company is not forced to pay stamp duty or transfer shares.
3)      Mauritius offers high levels of data privacy and security.
4)      Foreigners can open companies in the country without the help of a local nominee.
5)      You need only one director and a single shareholder to start the offshore company.
6)      Mauritius doesn’t demand for accounting or reporting requirements from offshore
companies.
7)      If required, you can convert the offshore company to an onshore organization!

Finally, in terms of the operating side, as far as the two categories of Global Business
Companies are concerned, is to note that if no corporate directors is applicable for GBC1,
it is allowed for GBC2; if GBC2 is subject to standard licencing conditions, approval to
GBC1 will depend on the activity. If GBC1must have at least two directors, resident in
Mauritius, GBC2 must have at least one director non resident and corporate directors.
Besides, if GBC1 must be administered by a management company directly, GBC2 must
have a registered agent in Mauritius which must be a management company. However,
both categories must have a registered office in Mauritius and must hold an annual
meeting of shareholders.