The proposed partial exemption would also apply to companies that are not licensed with the FSC. Currently, companies holding a GBL1 are mandatorily required to comply with all the substance requirements in the FSA. For example, in the context of Indian-sourced dividend income, the Indian Dividend Distribution Tax is enough to eliminate the Mauritian tax arising on the Indian dividends. These conditions are summarized below: The amending legislation should also specify whether the special levy would be deductible for corporate tax purposes.
However, the amending laws should provide clarification on the methodology for relieving any foreign tax suffered. Although the special levy would continue to be computed on the net operating income of the bank, it will be governed by the VATA. It also appears that banks would not be able to claim any foreign tax credit against their special levy charge. It is not known whether all the incentives will be reviewed and the extent of any potential changes. Category 1 Global Business Licenses with domestic companies Companies currently holding a GBL1 would no longer be able to compute their foreign tax on the basis of the presumed foreign tax amount. This measure would be effective as from 31 December This measure seeks to tax all foreign income in the same manner for all resident companies, irrespective of the residence status of their shareholder. Moreover, banks will not be required to compute their taxable income for each segment separately. Other incentives that are specific to GBL1 companies are not specifically addressed: The credit system would continue to apply, in the event the partial exemption does not apply. Moreover, a company should be able to apply the credit system if this is to its advantage. For example, in the context of Indian-sourced dividend income, the Indian Dividend Distribution Tax is enough to eliminate the Mauritian tax arising on the Indian dividends. GBL2 companies are not allowed to transact within the Mauritian territory and are not considered to be resident in Mauritius for treaty purposes. In addition, they can elect to comply with one of the requirements specified in the guidelines the guidelines issued by the FSC on 4 September Moreover, these measures do not appear to have any VAT implications for banks. The potential limitations of the partial exemption system should be addressed so that it does not have unintended consequences especially in cases where companies have tax losses. The levy is not of the same nature as VAT and to the extent that it is based on the net operating income, the current legislative framework appears justified. Clarity is required on the interaction of the partial exemption with the credit system. Foreign dividends Profits attributable to foreign permanent establishments Interest and royalties Income from specified financial services Where the company is licensed by the FSC, it will be required to comply with a set of pre-defined substantial activities requirement to be able to benefit from the partial exemption. The other corresponding incentives, like exemptions on outgoing royalties, will also be reviewed. The amending legislation should also specify whether the special levy would be deductible for corporate tax purposes. Corporate tax rates for banks As from 1 July , banks will no longer be able to compute their foreign tax credit on the basis of the presumed foreign tax. This Alert summarizes the key changes. The book profit appears to be no longer relevant with this measure. A commencement date that relates to a year of assessment is desired.
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