Tax Guide for US Expats Living and Working in Mauritius
Who Is Liable For Income Taxes in Mauritius
In general, individuals resident in Mauritius are taxed on their worldwide income. Income derived from outside Mauritius is taxed on a remittance basis. Nonresidents are taxed on Mauritian-source income only.
Individuals are considered resident if they meet any of the following conditions:
- They are present in Mauritius for at least 183 days during the tax year, which runs from 1 January to 31 December.
- They are present in Mauritius for an aggregate period of 270 days or more during the current tax year and the two preceding tax years.
- They are domiciled in Mauritius, unless their permanent place of abode is outside Mauritius.
Income subject to tax. The taxation of various types of income is described below. For a table outlining the taxability of income items.
Employment income. All income derived from employment is taxable, including salary, bonuses, commissions and fringe benefits. Housing, educational and other allowances are also taxable.
Any expenditure that is wholly, exclusively and necessarily incurred by an individual to perform the duties of an office or employment are deductible from gross emoluments. Passage benefits provided under an employment contract are not taxable to the extent that they do not exceed 6% of the basic salary of the individual. Exempt emoluments on termination payments received are restricted to an aggregate amount of Rs. 1,500,000 with respect to the following:
- Severance allowances determined in accordance with the Labor Act
- A lump-sum payment that results from the commutation of a pension or from a death gratuity or that represents consolidated compensation for death or injury, paid as a result of any Mauritian laws
- Payments from superannuation funds or personal pension schemes approved by the Director-General of the Mauritius
Revenue Authority
- Lump-sum payments under the National Savings Fund Act
- Retirement allowances
Self-employment and business income. Self-employed individuals carrying on a trade, business or profession are subject to tax on their business profits. Expenses are deductible to the extent they are exclusively incurred to produce gross income.
All income derived from business is taxed with other income at the rates.
Investment income. Interest income is taxable at a rate of 15%. Interest derived by nonresidents on deposits held with Mauritian banks is exempt from tax. Residents and nonresidents are exempt from tax on the following types of interest:
- Interest on savings or fixed deposit accounts with Mauritian registered banks or nonbanking institutions authorized to accept deposits
- Interest on government securities and Bank of Mauritius Bills Dividends paid by resident companies are exempt from tax.
Directors’ fees. Directors’ fees paid to residents are taxed in the same manner as employment income, regardless of whether the services are rendered in or outside Mauritius. Excessive remuneration is considered a distribution, which is fully taxable in the hands of the individual.
Capital gains. Capital gains are not generally taxable, except for gains on immovable properties located in Mauritius. The yearly gains of an individual are reduced by Rs. 2 million. The rate of capital gains tax is 10%. The following gains on immovable properties are exempt from tax:
- Gains derived by the heirs of a deceased person on the transfer between heirs of immovable property acquired by inheritance or from other heirs, or undivided rights of such immovable property, provided that the transfer is made within five years of the date of death of the person
- Gains derived from the transfer of immovable property from an ascendant to a descendant
- Gains derived from the sale or transfer of immovable property by an heir of a deceased person if the sale is the first sale made after 31 December 2010 and if the proceeds of the sale or transfer do not exceed Rs. 5 million.
Deductions. Resident individuals can benefit from an Income Exemption Threshold (IET). The IET is deductible in determining chargeable income. The IET depends on the number of the individual’s dependents. The following table shows the IET for the income year ending 31 December 2011.
Rates. An individual’s income tax liability is determined using a tax rate of 15%. A Solidarity Income Tax (SIT) applies to resident individuals if the sum of net income, exempt interest income and exempt dividend income is more than Rs. 2 million. The rate of the SIT is 10%. The tax base for SIT is the sum of exempt interest income and exempt dividend income.
Relief for losses. Losses in any amount may be offset against any source of income, except employment income. Losses may be carried forward to the following five income years. Losses that arise as a result of annual allowances for capital expenditure incurred on or after 1 July 2006 can be carried forward indefinitely.
B. Estate and gift taxes
No estate tax is levied in Mauritius. Gift tax rates range from 12.5% to 45%.
C. Social security
Employees in Mauritius must contribute to the National Pension Fund, which provides for employees’ old-age retirement. For the year ending 31 December 2011, the contribution rate for employees is 3% of gross salary, up to a maximum monthly contribution of Rs. 345. For employers, the rate is 6% of gross salary, up to a maximum monthly contribution of Rs. 688 per employee. The contribution rate to the National Solidarity Fund is 2.5% for the employer, with a maximum of Rs. 288, and 1% for the employee, with a maximum of Rs. 115. The contribution rate for the National Solidarity Fund is applied to the basic salary of the employee.
The employer must contribute to a levy computed at 1.5% of the total salary of the employee.
D. Double tax relief and tax treaties
Mauritius has entered into double tax treaties with the following countries.
Bangladesh
Luxembourg
Singapore
Barbados
Madagascar
South Africa
Belgium
Malaysia
Sri Lanka
Botswana
Mozambique
Swaziland
China
Namibia
Sweden
Croatia
Nepal
Thailand
Cyprus
Oman
Tunisia
France
Pakistan
Uganda
Germany
Qatar
United Arab Emirates
India
Rwanda
Italy
Senegal
United Kingdom
Kuwait
Seychelles
Zimbabwe
Lesotho
The agreements are based on the model treaties of the Organization for Economic Cooperation and Development (OECD) and the United Nations (UN).
The treaties provide the following relief:
- Dividends are taxed at a 0% to 15% rate.
- Royalties are taxed at a 0% to 15% rate.
- Income from shipping and air transport operations of enterprises resident in a treaty country is not taxed in Mauritius.
- Business profits of a nonresident are taxed only if the nonresident operates through a permanent establishment or a fixed base in Mauritius.
Mauritius is negotiating double tax treaties with Algeria, Burkina Faso, Canada, the Czech Republic, Ghana, Greece, Iran, Portugal, Saudi Arabia and Yemen.
Residents receive a credit for foreign tax paid on foreign-source income. The foreign tax credit also takes into consideration underlying taxes if the recipient owns, directly or indirectly, at least 5% M of the shares of the company paying the dividends. The Mauritian tax law also provides for a tax-sparing credit.
Regardless of any tax treaty, royalties and interest paid by a company that holds a Category 1 Global Business License (GBL1) to nonresidents are exempt from tax in Mauritius and are not subject to withholding tax in Mauritius if the payments are made out of the foreign-source income of the GBL1. This exemption does not apply to interest paid to nonresidents carrying on a business in Mauritius.
To learn more about the history, culture, economy and other information about Mauritius
We have been preparing US income tax returns for US Citizens and permanent residents living in Mauritius for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Mauritius and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed while working, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Mauritius.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a consultation by phone, skype or email