Mauritius introduces new form for tax residency with more disclosure
MUMBAI: The Financial Services Commission (FSC) of Mauritius, which is the regulatory body for the Mauritian non-banking financial services sector, has introduced a new application form for obtaining a tax residency certificate (TRC).
FSC verifies these applications and recommends issue of the Mauritius tax residency certificate by the Mauritius revenue authorities. From the India tax perspective, offshore Mauritius resident entities, such as foreign portfolio investors (FPIs) or funds, which wish to claim the benefits of the India-Mauritius tax treaty have to submit this TRC as evidence of being Mauritius residents.
“Following the amendments brought in Section 3 of Chapter 4 of the Guide to Global Business, the TRC application form was amended to cater to the additional substance requirements and further streamline the TRC application process. With effect from August 3, it is mandatory to make all new applications or applications for renewal of TRCs in the amended TRC application form,” said an FSC spokesperson.
The new TRC applicant form requires applicants to tick off those additional substance requirements it has complied with. These requirements (any one of which needs to be met), came into force from January 1, 2015, and range from holding the prescribed asset threshold in Mauritius to having an office in Mauritius. “The FSC may also require the TRC applicant to demonstrate compliance with the substance requirements which it has ticked off,” explain the revised procedures.
Indian tax professionals do not foresee any difficulty in complying with the new disclosure requirements. “For our FPI clients, we generally insist on obtaining a TRC every year and clients are able to obtain the TRC without significant difficulty. As the additional substance requirements had to be met by January, disclosure of the same at the time of renewal of the TRC should not pose any difficulties,” says Anish Thacker, tax partner at EY
Mauritius-based entities such as FPIs and funds which are engaged in investment activities typically opt for a Global Business Company-1 (GBL-1) licence, which is granted by the FSC. GBL-1 companies are covered by tax treaties, including the ‘investor friendly’ India-Mauritius tax treaty, under which India does not tax capital gains arising on sale of Indian securities. For a Mauritius-based entity seeking or holding a GBL-1, in addition to the existing requirements of maintaining its principal bank account and books of accounts in Mauritius and having at least two local directors on its board, FSC prescribed additional substance requirements which had to be met from January this year.
GBL-1 entity had to meet any one of these additional substance requirements: it should have an office premises in Mauritius; it should employ on a full-time basis at least one Mauritius resident individual at an administrative or technical level; its constitution document (akin to an Indian company’s Memorandum and Articles of Association) should provide for settlement of all disputes arising out of the constitution by way of arbitration in Mauritius; it should hold assets of at least $100,000 in Mauritius; it should be listed on a stock exchange licensed by FSC; or it should have a reasonable annual expenditure in Mauritius. If a group has more than one GBL-1 entity, it sufficed if only one of the GBL-1 entities met any one of the above criteria.
