taxand mauritius budget brief 2011

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Budget Highlights

19 Nov 2010



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CONTENTS

Page

Foreword 3

Fiscal Measures 4

Tax Administration 7

Other Measures 7

Selected Economic Indicators 10



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FOREWORD

The Honourable vice Prime Minister, Minister of Finance and EconomicDevelopment, Pravind Kumar Jugnauth, presented his first budget, of the current government, for the fiscal and calendar 2011, in the midstof the euro-zone crisis which has a direct and menacing impact on theexport sectors of the economy. The main thrusts of his budget are (i)rebalancing growth, (ii) making a great leap forward on productivity and(iii) consolidating social justice.

The measures announced under the first theme is about maximizing theemerging opportunities from the new global infrastructure, that is,

reducing dependence on the euro-zone countries whilst moving up to

higher value added activities. These activities include the tourism sectorcoupled with duty free shopping, strengthening the transformation of the sugar cane industry, giving a spur to information communicationtechnologies/business process outsourcing, as well as the financialservices sector. New pillars that are being looked at are the creation of knowledge and medical hub as well as a creative industry. On the theme

of making a great leap forward on productivity, his focus emanates fromland, marine and human resources, doing business environment,dissemination of information, physical infrastructure as well as a publicsector reform. Initiatives for consolidating social integration are built

around eradicating absolute poverty a program of social housing,welfare of children from vulnerable groups as well as taking care of theelders.

Electoral promises have been maintained by abolishing tax on interestincome and the national residential property tax.

In his review of the budget outturn for 2010, the Minister noted anoverall budget deficit of 4.5% of GDP with public debt is expected toincrease from 50.9% at the end of 2009 to 52.5%. With the measuresin the budget deficit will be contained at 4.3%, whilst public sector debtwill be 60.3% next year despite fiscal measures, interalia, taxation of profit or gains on sale of land and immoveable property and taxation of exempt income for high income earners at the rate of 10%. Taxation

rate for both individual and companies has remained at 15%.

We trust that this Special Edition dedicated principally to the measuresannounced in the 2011 budget will be of interest to you. The full budget

speech may be accessed on the Ministry of Finance website onhttp://www.gov.mu/portal/goc/mofsite/files/BudgetSpeech2011.pdf.



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FISCAL MEASURES

Taxation of interest income

Interest income is being reinstated as exempt income with effect

from 1 January 2010

Tax withheld at source during 2010 will be refunded in the form of

tax credit on the 2012 and 2013 tax return

Gains on sale of land and immovable property

Gains on sales on land and immovable property, including

morcellements, will be taxed at the rate of 15%. Accordingly, the

surcharge of 5% on land transfer tax will be removed

A reduced rate of 10% from gains on sale of land and immovable

property will apply to individuals and they will also benefit from an

exemption on the first MUR 2 million of the gains. No tax will apply

to land and immovable properties when received by way of

inheritance

Taxation of Sociétés involved in real estate business

To be taxed in their own name instead of in the name of individual

partners at the rate of 15%.

Freeport Sector

Application of normal tax rate of 15% which was scheduled for 1 July

2011 has been extended by a further two years.



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Sugar Cane Industry

Reintroduction of the tax exemption on the first 60 tonnes of sugar

for small planters with less than 15 hectares of land and who rely

solely on sugar income. They will not be required to submit a tax

return

Abolishment of the 15% income tax on the surplus generated from

sugar operations by Cooperative Credit Societies.

Individual Taxation

Income tax exemption for lump-sum on retirement and severance

has been increased from MUR 1 million to MUR 1.5 million.

Solidarity Income Tax of 10% on exempt income introduced for

taxpayers with total income of more than MUR 2 million.

Taxpayers with total annual income of less than MUR 2 million and

investing in a home for the first time will be provided for a deduction

of up to MUR 120,000 on interests paid on mortgage loans taken as

from1 January 2011. This facility will be extended to the original

mortgage taken since 1st July 2006 by first time home owners.

Taxpayers with total annual income less than MUR 2 million and

whose children, up to a maximum of 3 children, are following a non-

sponsored full-time undergraduate at a recognized tertiary education

institution will be provide with the following additional exemption:

MUR 80,000 for 3 consecutive years of study per child

following courses in Mauritius

MUR 125,000 for 3 consecutive years of study per child

following courses overseas

National Residency Property Tax is being abolished



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VAT

VAT will be applied on cosmetic surgery provided by Private Health

Institutions

VAT will be charged on goods and services supplied by the Mauritius

Turf Club and horse stables, and on the management services to

tote operators.

Excise duties

The rate of excise duty on cigarettes and tobacco will be raised by

25%.

Excise duty on rum and liquor will be increased by MUR 100 per

litre. For all other alcoholic products a 20% increase in excise duty

will apply.

Excise duty on PET bottles, plastic bags and cans increased from

MUR 1 to MUR 2.

MID levy on each litre of petroleum products and each kg of coal and

LPG will be increased to 30 cents

The specific rates of excise duty on petroleum products will be

increased by 10%

Others

The license fees for casinos and Gaming House ‘A’ increases from

MUR 500,000 to MUR 3.5 million. Other increases in license fees are

as follows:

License fees for Gaming slot machines will be raised to MUR

125,000

For Gaming House ‘B;, the license fees will be raised to MUR

50,000

For horse-racing, all bookmakers will have to pay an increase

of 67% of their license fees



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License fees of all other betting outlets, including totalisators,

football betting outlets and bookmakers operating through

remote control communications, will be increased by 100%

For sweepstake organizers, local pool promoters, agents of

foreign pool and operators of dart games, the license fees will

by increased by 50%

Pool betting duty on foreign football matches will be increased from

10% to 12%

The rate of tax on fixed odds betting football matches and horse

racing will be raised from 8% to 10%

TAX ADMINISTRATION

Capital allowances that can be claimed on motor cars has been

limited to MUR 3 million per motor car

The due date for submission of returns and payment of taxes

electronically by individuals have been extended by 15 days

OTHER MEASURES

Financial Services Industry

Encouraging regional headquarters incorporation and activities in

Mauritius by allowing corporations holding Category 1 Global

Business Licence to extend their operations to the domestic

economy

Trust Act will be amended to apply the rule of perpetuity to allow

unlimited duration of non-charitable purpose trusts

New economic diplomacy initiative will be used to position Mauritius

as the preferred gateway into Africa

Advice will be taken from international experts on the merging of the

Bank of Mauritius (BOM) and the Financial Services Commission into

one single institution.



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Statutory amendments will be made to allow the BOM to:

Issue a larger variety of instruments for the management of

liquidity

Allow the BOM to lengthen the maximum period for the which

the BOM can grant advances from 3 months to 6 months

Broaden the list of collateral which the Bank may accept

Give wider powers to the BOM to develop the forex and

derivatives market

Bring the legal framework for the banking sector in line with

insolvency legislation

Improving the doing business environment

Threshold for the Board of Investment to issue Occupation Permits

for professionals will be lowered to MUR 45,000 per month.

An on-line submission and e-payment of notary deeds will be

implemented

Mauritius to be developed as an international arbitration centre

Commercial disputes, where applicable, will be settled within a time

frame of 100 days

A digital recording system will be installed in the hearing rooms of

the Employment Relations Tribunal to ensure timely delivery if

awards, orders and rulings.

Mauritius duty-free shopping paradise

Blueprint on the development of Mauritius as a duty-free shopping

paradise is being updated

The Board of Investment will set up a dedicated desk for promoting

the duty-free shopping as a new sector of the economy



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Mauritius as a knowledge hub

Mauritius to boost up the number of foreign students and the

following facilities will be granted to the foreign students:

A new Student Visa Scheme will be introduced

The students will be allowed to work on a part time basis

The Ministry of Tertiary Education will set up a specialized

unit for processing applications of foreign students,

scholarships and visas.

Every education institution will be required to set up a facility

assisting its foreign students to find an accommodation

The Board of Investment will handle the Occupation Permits for

academic staffs in institutions registered by the Tertiary Education

Commission irrespective of the salary level

Growing the medical hub

An Assisted Human Reproductive Technologies legislation will be

introduced to facilitate the development of in-vitro donor egg and

donor sperm treatment

A framework to facilitate investment in stem cells research and

treatment in Mauritius will be developed

Removal of customs duty on cosmetic products and pharmaceuticals

imported as samples for testing purposes in Mauritius

Finalization of the draft Bill on Human Tissue (Removal, Preservation

and Transplant)

Salary compensation

Salary (MUR) Compensation amountUp to 5,000 3.2%

5,001 – 12,000 MUR 175

12,001 – 30,000 MUR 190

>30,000 Nil



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SELECTED ECONIMIC INDICATORS

Main Economic Indicators

(Source: BOM, CSO)

(Source: BOM, CSO)



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Year 2007 2008 2009 2010

Budget Deficit FY, % GDP -4.3 -3.3 -3.1/-4.1

-4.5

GDP (market prices) (Rs Bn) 235.0 265.0 274.0 291.0

Total employment (No.) 523,700 543,000 524,800 531,000

Unemployment rate (%) 8.5 7.2 7.3 7.5

(Source: BOM, CSO)

Other Economic Indicators

(Source: BOM)

30 June 2007 2008 2009 2010

Balance on current account (RsBn)

-17.4 -22.2 -24.9 -22.6

Current account / GDP (%) -7.39 -8.39 -9.05 -7.76

Overall BOP (Rs Bn) +6.6 +9.1 +2.5 +9.7

Bank rate (%) 10.05 8.83 4.45 3.71

(Source: BOM)



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Exchange Rates

2007 2008 2009 2010

Exchange Rates- End of Period

Rupees per USD 32.3 26.6 33.35 30.92

Rupees per Euro 42.745 45.886 44.73 42.11

Rupees per GBP 57.972 47.036 50.62 49.55

Rupees per 100 Yen 26.03 36.168 34.00 37.27

(Source: BOM)

Non-Financial Indicators

Year 2007 2008 2009 2010

Population- Republic of Mauritius

1,260,403 1,268,565 1,275,032 1,280,925

Tourist arrivals 906,971 930,456 871,356 915,000

(Source: CSO, BOM)

CONTACTS

If you have any queries about the Budget 2011, or if you would like to discussits implications and planning opportunities please contact us.

Cim Tax Services LtdRogers House5 John Kennedy StreetPort Louis

Email: [email protected]

DISCLAIMER

This Budget Summary is a copyright of Cim Tax Services Ltd. No reader should act on the basis of any statement contained herein without seeking professional advice. Cim Tax Services Ltd and itsofficers expressly disclaim all and any liability to any person who has read this Budget Summary,or otherwise, in respect of anything, and of consequences of anything done, or omitted to bedone by any such person in reliance upon the contents of this Budget Summary.Readers are advised that the budget proposals are subject to amendments during the

parliamentary debates. Once the measures are adopted, Cim Tax Services will make available the updated and or consolidated versions of the relevant acts on its website.

mailto:[email protected]




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