Advantages of Mauritius for hedge funds – Umesh Shanmugam

Global business in Mauritius is active mainly in the area of investment in India, Africa and China. Mauritius is a leading provider of foreign direct investment in India due to favourable treatment under the double taxation agreement between the two countries.

Since the signing of the agreement, many investment and hedge funds have been (and continue to be) incorporated in Mauritius for the specific purpose of investment in India. The benefits of including Mauritius in investment in the Indian market are unparalleled, whether by way of a collective investment scheme, a closed-end fund or other investment vehicle.

Institutions, like individuals, are making more calculated decisions to maximize productivity and reduce risk and unqualified expenses. A more cautious period for hedge funds is thus envisaged, with international clients rethinking large-scale refinancing and extending timeframes for existing projects.

The advantages of setting up a hedge fund in Mauritius include:

  • the existence of double taxation treaties with countries in, among other places, Asia, Africa and Europe;
  • taxation benefits – funds are taxed at a rate of 15%, but benefit from a tax credit which is equivalent to the higher of any tax deducted at source or 80% of the tax liability. There is no capital gains tax and no withholding tax on dividends;
  • a favourable timezone;
  • its ranking as the 17th best economy of 183 economies in terms of business facilities, according to the “Doing Business Report 2010″;
  • a strong legal framework and regulations;
  • its qualified and experienced labour force;
  • excellent IT infrastructure and internet connections;
  • political stability and effective monetary policies; and
  • the presence of international banks, accounting firms and law firms.

The Financial Services Commission developed flexible guidelines for the regulation of collective investment schemes, adopting industry best practice from various long-established and well-regarded jurisdictions. This has resulted in the incorporation of more than 439 investment funds and assets worth in excess of $43 billion.

Mauritius remains committed to developing and maintaining conditions which are conducive to attracting international business and has hosted significant investments in India, China and Africa by global business companies. Many such companies (including fund management companies) were formed by large institutional players, attracted by Mauritius’s established reputation as a centre of excellence and innovation, supported by responsible asset protection laws and robust anti-money-laundering laws.

Mauritius benefits from its strategic location in the Indian Ocean between India and Africa and has double taxation agreements with several African countries.

The Mauritius Stock Exchange is one of the most stable and effective in the African region. Over the years its operational, regulatory and technical framework has been overhauled to reflect changing standards in the global stock market environment. It is a part of the World Federation of Exchanges.

The stock market was opened to foreign investors following the lifting of exchange control in 1994. Foreign investors need no approval to trade shares, unless investment is for the purpose of assuming legal or management control of a Mauritian company or acquiring more than 15% of a sugar company. Foreign investors benefit from numerous incentives (eg, revenue on sale of shares can be freely repatriated), and dividends and capital gains are tax free.

The opportunity exists to develop new types of instrument and investment vehicle and to plan education and training in relation to the development of new services.