Mauritius’ Financial Services Commission (FSC) has decided to adopt a new approach towards global business companies (GBCs) in order to encourage more economic substance.
This emerged from a communiqué published on 25 July 2014 by Mauritius’ premier non-banking financial services regulator concerning Global Business Companies of category 2 (GBC2), which encourages GBCs to be used as special purpose vehicles in group structures.
The FSC communiqué clarifies the circumstances under which Mauritian nationals, whether resident or not resident in Mauritius, may be allowed to hold shares in or be a beneficial owner of a GBC2.
GBC2s have their central management and control located outside Mauritius, and they are not liable to local tax, hence, they cannot be beneficially owned by Mauritian residents.
Indeed, the GBC2, contrary to the entities holding a licence of Global Business Companies of category 1 (GBC1), is not considered as a fiscal resident and consequently, does not benefit from advantages offered under double taxation avoidance agreements.
Besides, they might not bring much to the Mauritian economy because they cannot deal on the Mauritian territory or in the Mauritian currency, therefore Mauritian residents could not own stake in a GBC2 completely or partially so far.
However, as far as the new GBC2 rules are concerned, as long as the GBC2 demonstrates that the management, control and ownership are maintained outside Mauritius, Mauritian participation within a GBC2 can be considered.
For instance, the FSC will consider whether the proposal will generate revenue in Mauritius; whether the proposal is likely to create employment in Mauritius; or proposal has sizeable impact on the development of the country.
It may be noted that both GBC1 and GBC2 offer the highest degree of confidentiality and the choice between the two types will depend on a number of factors like the proposed activities of the company and the geographical area of operation.
GBCs can undertake activities ranging from investments in Africa and other parts of the world to trading.
While the GBC1 is resident for tax purposes in Mauritius and can thus avail itself of the benefits of the double taxation treaties signed by Mauritius, the GBC2 is tax exempt and is typically used where no tax treaty benefits are sought.
Image: Cruising Excursions): The FSC communiqué clarifies the circumstances under which Mauritian nationals, whether resident or not resident in Mauritius, may be allowed to hold shares in or be a beneficial owner of a GBC2.
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