Question 3

Critically assess the difference between an Offshore and a domestic company.

Several types of companies can operate within the Mauritian business environment,
notably, domestic company, Company holding a Category 1 Global business licence
and company holding a Category 2 Global business licence.

These companies may be:

- Company limited by shares

- Company limited by guarantee
- Company limited by shares and guarantee
- Unlimited company
- Limited Life Company
- Public Company
- Private Company
- Small private companies
- One-person company
- Dormant companies

A company is called to be an offshore or a global business company in Mauritius

when it is registered in Mauritius and it has its business activities done outside the
country. Such a company operates under the rules of the Company Act and regulated
under the Financial Commission Services Act of 2007. Prior operation, an offshore
company must be licenced by the Financial Services Commission under a Category 1
or a Category 2 Global Business Licence Company.

On the other hand, a domestic company, also known as a local company is a company
incorporated in Mauritius under the laws of Mauritius by the Registrar of Companies
and governed by the Companies Act 2001, Business Registration Act 2002, the
Income Tax Act 1995 and the Value Added Tax, amongst other legislations. A
domestic company can be set up for various activities with Mauritian residents such as
trading, consultancy services, investment holding, acquisition of immovable property
under the Property Development Scheme in Mauritius among others. A domestic
company can also apply for a Freeport Licence for warehousing, transhipment or
transformation of products in the Freeport Sector in Mauritius.
Global Business Companies are different to domestic companies at different levels:

1. Domestic companies have a no minimum stated capital requirement whereas

GBC1 and GBC2 have respectively a no limit and a minimum capital
requirement
2. Domestic companies must have at least one resident director while GBC1
model requires 2 local residents and GBC2 needs no local resident as director
3. While all types of business require a minimum of 1 shareholder to start the
business, a domestic must have a minimum of one shareholder who can be a
non-resident of Mauritius
4. Whether it is a domestic or an offshore company, it must all file
account at the Registrar of Companies given established in Mauritius
5. Any domestic company must file an annual return with the registrar
of companies
6. Whereby audited accounts are required for a domestic company if
turnover is greater than MUR 50 Million, audit requirements is
required for GBC1 Category companies and not required for those
listed under GBC2 category

In terms on main tax features, both domestic and Offshore companies

have access to the extensive network of Double Taxation Avoidance
Agreements (DTAAs) which Mauritius has with other countries. In
addition, if domestic companies are liable to corporate income tax of
15 %, even may be subject to exemptions, tax holidays or other
reductions, GBC1 global businesses are subject to an effective rate that
varies between 0 to 3% whereas GBC2 is completely exempted from all
taxation like income tax, corporate gains tax, transaction tax and stamp
duty Important to note that both types of companies are exempted
from capital gains tax.

With regards to tax residency, both GBC1 and domestic company can
appoint a resident secretary and an auditor, maintain its resident office
and statutory records in Mauritius and chair all board meeting in
Mauritius contrary to the GBC2 model.

In the light of this, the main benefits of operating a domestic company

are essentially that it is simply the best way to conduct business with
Mauritian residents and the no minimum capital requirement is the
main advantage.

However, Mauritius remains the best destination for foreigners in

setting business for the simplicity in setting up a company and start
activities.

Irrespective of the choice of the business model to trade, elements to

take into account while opening a company remain the following:

- The nature and scale of business activities

- Expected risk at opening stage
- Expected duration of the business activities
- Accounting and tax considerations
- Mauritius legal, compliance and reporting obligations
- Commercial considerations