Recent Mauritius tax changes

Article by: Regan van Rooy

In the last week there have been some notable tax announcements made in respect of Mauritius. We summarise these below.

Termination of the Zambia/Mauritius DTA

One unexpected announcement made was in respect of the termination of the Zambia/Mauritius double taxation agreement (“DTA”).On 22 June 2020, the Zambian Government announced that they approved the termination of the DTA with Mauritius. The reason for the termination appears to relate to a dissatisfaction by the Zambian Government of “losing” taxing rights in respect of business income which Mauritian residents earn in Zambia (where the Mauritian company has no taxable presence in Zambia). The current DTA allocates the taxing rights to the country of residence of the recipient of the income, i.e. Mauritius. As management fees are not specifically covered in the DTA, Zambia would also currently not be allowed to levy the management fee withholding tax where there is no physical presence in Zambia. This may form part of their reasoning for this unexpected action.
Zambia is required to provide notice of termination of the DTA to Mauritius by 30 June of a calendar year. Assuming this was done before 30 June 2020 in Zambia, the DTA will cease to apply in the last day of the calendar year, i.e. 31 December 2020. For Mauritian purposes, the DTA will apply until 1 July 2021.

The Zambian Government have indicated that they intend to initiate negotiations of a new DTA which will introduced shared taxing rights and anti-abuse clauses.

Clarification of the Mauritian solidarity levy

After the Mauritian budget speech on 4 June 2020, there was an outcry regarding the proposal to increase the solidarity levy from 5% to 25% and the fact that it appeared to apply only to Mauritian citizens and not to other Mauritian tax residents.

Due to this, the Mauritian Minister of Finance has now announced that the solidarity levy will apply to all Mauritian tax residents who earn “leviable income” greater than Rs3m.
“Leviable income” for this purpose is the sum of net income, plus dividends, less the dependents exemption allowed.

The Minister of Finance also clarified that the solidarity levy would be capped at 10%. This will result in no individual paying more than 25% tax in Mauritius on their total income. The legislation is still to be published and finalised despite it being expected to take effect from 1 July 2020.

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