The Mauritius debate: A matter of when it is beneficial, not if

The Mauritius debate: A matter of when it is beneficial, not if

The country is a good option to diversify your wealth and, in the process, get more favourable treaties than you would have in SA.

4 February 2022 /  By  Christiaan Wessels – Futurum Financial Group (Pty) Ltd.

It is a known fact that over the last couple of years we’ve seen an outflux of SA capital and even a lot of professional and successful individuals moving abroad. I won’t bore you with the figures and my intention is not to sketch a dire mood of all the negative things in SA. If you look closely, there are also positive things in SA. It depends if you want to look at something as a problem or an opportunity. However, if you look over the waters, there are also a lot of exciting opportunities.

Back to deciding on the Mauritius option. Mauritius is not a scheme or a place where you can evade taxes that would or should have been paid in SA. It is merely an option to diversify your wealth and, in the process, get more favourable treaties than you would have in SA.

When to consider Mauritius then?
* If you are generating an income outside of the borders of SA and running it through the SA Pty, then you can start considering setting up a GBC (Global Business Company) in Mauritius which is tax resident in Mauritius. There are certain costs involved in setting up this structure and usually, the funds that flow to that company should be used to expand your business outside of SA. Usually, these are companies or their subsidiaries that trade in the rest of Africa or globally.

* There are a few ways to set up the shareholding and where it should be held. Maximum tax rate of 15% in the GBC. In certain instances, income tax can be as little as 3%, depending on the service you render. Dividends declared in Mauritius are not taxable.

The list goes on with regards to the upside there is by having a GBC set up. The scope and detail on this are wide.

Having trust in Mauritius
* You can set up an offshore trust and invest anywhere in the world. This can range from offshore funds to artwork.

* Buying property in Mauritius can also be done through your offshore trust.

* Once a trust is set up, it can own companies and manage any family business or wealth.

* A Mauritian trust is not subject to exchange control – this means you don’t have to apply to take foreign capital out of the country and worry about bringing it back.

* If the trust has been settled by a non-resident settlor and has only non-resident beneficiaries, or the purpose of the trust is carried on outside of Mauritius, the trustee can elect to file a declaration of non-residence with the Mauritius Revenue Authority during an income year in order for the trust to be exempted from income tax in that respective year.

* A trust is also a good way of creating offshore wealth for your family and generations to come. It can serve well if a family member would want to study abroad or plan on emigrating permanently. It makes distributing wealth to them easier in the long run.

* Should you be looking to make offshore investments through the trust, I would recommend moving at least R5 million-R10 million over time into the trust to justify the management and set-up fees. Depending on the purpose of the trust, fees can range anywhere from $2 000 to $6000 per annum.

Offshore life insurance
* International life insurance can be beneficial in a few ways.

* If structured correctly there will be no estate duty payable on the insurable amount.

* You can use it for key person insurance or buy and sell agreements in your GBC.

* It is an easy way to create wealth in your offshore structure.

* In some instances, it can make sense to replace your rand life cover in SA with dollar/euro/pound cover and have it paid to your offshore trust.

There are also other ways to get residency in Mauritius by means of a retirement visa should you be over the age of 55, and the investment permit should you invest $ 375 000 or more.

First, decide if an offshore structure would fit in your framework before contemplating if you should go down that route. Do not complicate the structure, but most important of all, the structure should add value to your portfolio and must make sense.

By the way, Mauritius is a four-hour direct flight from OR Tambo which makes it convenient to travel between SA and Mauritius.