MAURITIUS
GLOBAL BUSINESS COMPANY WITH A CATEGORY I LICENSE
Type of Entity
Company holding a Category I Global Business License
Type of Income
Foreign Tax Credit
A company which has suffered a tax on its foreign source income
is entitled to the following tax credits as per the ITA 1995:
- A credit for foreign income tax paid on its Foreign Service
income.
- A sparing tax credit - a credit for tax deemed to have been
paid.
- In the case of dividend income, an underlying tax credit, i.e.
credit for tax paid on income out of which the dividends have
been paid under certain conditions.
- The foreign tax credits should not in the aggregate exceed that of the Mauritius tax payable on such foreign source income.
The Income Tax (Foreign Tax Credit) Regulation 1996 (under the Income
Tax Act 1995) allow for foreign tax credit on the foreign source
income of a Mauritian resident. These regulations had been amended
by the Income Tax Credit (Amendment Regulation) 1997 whereby the
presumed amount of foreign tax was increased from 80% to 90% of
the Mauritius tax chargeable. However, the Finance Act 2000 has
once again amended the regulations bringing back the presumed foreign
tax to 80% - this change will be effective as from 1st July 2003.
It is to be noted that such presumed foreign tax is available for
qualified corporations.
In drafting the Foreign Tax Credit Regulations, the approach has
been to be as generous as possible to the taxpayer with regard to
foreign tax credit. Mauritius wishes to avoid international double
taxation and not to have such double taxation operating as a block
to foreign investment. Thus, in number of matters, these Regulations
are as generous or more generous than provisions found in the laws
of other countries. The foreign tax credit is available for the
amount of income actually received in Mauritius and is treated as
a foreign tax which is of similar character to the Mauritian income
tax. In calculating the tax credits, the Regulations allow for the
grossing up of the foreign source income, and provide in respect
of foreign tax charged on dividend, credit for the underlying tax
charged in the foreign country on profits out of which the dividend
is paid. The underlying tax is available to all residents of Mauritius,
whether they are companies, individuals or trusts. However, a holding
of 5% of the share capital in the paying company is required. The
amount of foreign tax credit is limited to the lower of the actual
amount of foreign tax or the amount of Mauritius tax. If for example,
the foreign tax is at a rate higher than the Mauritius tax, the
surplus foreign tax cannot be credited. Moreover, the tax payer
can choose to compute the limit either on an item basis or on an
overall basis.
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