UAE. With more and more companies now becoming multinationals, instances of double taxation have skyrocketed. Double taxation is exactly what it sounds like, paying tax twice on the same income, same asset or same transaction depending on the type of tax in different countries.
To combat this double whammy tax bill on companies, countries have come to sensible agreements with each other to ensure that they agree on which of the taxes should be paid. These agreements are known as double tax treaties.
The term 'double taxation' is additionally used, particularly in the USA, to refer to the fact that corporate profits are taxed and the shareholders of the corporation are (usually) subject to personal taxation when they receive dividends or distributions of those profits.
This use of the term 'double taxation' is politically fraught since it selectively concatenates, out of all describable sequences of taxation, two particular taxes on two particular transactions.
India has comprehensive Double Taxation Avoidance Agreements (DTAA) with 82 countries. This means that there are agreed rates of tax and jurisdiction on specified types of income arising in a country to a tax resident of another country.
Included in these is a treaty between India and Mauritius, which states that capital gains arising from the sale of shares are taxable in the country of residence of the shareholder and not in the country of residence of the company whose shares have been sold.
Therefore, a company resident in Mauritius selling shares of an Indian company will not pay tax in India. Since there is no capital gains tax in Mauritius, the gain will escape tax altogether. This makes Mauritius an ideal location for operating foreign institutional investors who trade on the Indian stock markets.
The Indian and Cypriot tax treaty is the only other such Indian treaty to provide for the same beneficial treatment of capital gains.
It must be noted that India has and is making attempts to revise both the Mauritius and Cyprus tax treaties to eliminate this favourable treatment of capital gains tax. The Indian government periodically check for its DTAA with many countries and come up with amendments. A company like Atlas Corporate Services can assist with company formation in Mauritius, by setting you up as a GBC 1 (Global Business Category) firm.
o The GBC 1 may be a public or private company.
o It may be limited by shares, unlimited or a limited life company.
o Mauritian tax on offshore profits is 15% but with planning can be reduced to 3% - with the use of the tax credit system through the extensive DTA network.
o The company requires a minimum of 2 directors, 1 must be local (resident) but for the company to be considered resident and maximize tax benefits the company will need 2 resident directors, no corporate directors are allowed for a GBC1.
o The company requires a minimum of 1 shareholder, the shareholder does not have to be resident and can be corporate.
o Shareholders and Directors can be nominees.
o A local resident secretary and a local registered office are required.
o Only registered shares are allowed, bearer shares are not allowed.
o Shares can be held on behalf of the beneficial owners.
o Annual audited accounts must be filed with the FSC.
o Meetings must be held in Mauritius.
o The beneficial owner must be disclosed to the authorities but there is no publicly accessible records kept about the beneficial owner, the directors, shareholders or company annual return.
o Interest paid on bank deposits are tax exempt. Dividends paid by a GBC1 are tax exempt and royalties paid to non-residents are tax exempt.
o A GBC 1 is allowed to employ expatriate staff.
Mauritius companies now have a very attractive Mauritius laws on Mauritius business strengthening, Mauritius Investment and Mauritius Finance. For Indian expats in the UAE who are planning for the future and thinking about setting up businesses when they leave the UAE it is definitely worth considering setting up company headquarters in Mauritius.
Atlas Corporate Services Mauritius can help you with opening Bank Accounts in Mauritius hence helping you to deal with Mauritius Banking.
About Atlas Corporate Services
Atlas Corporate Services Group is a global corporate and trust service provider, with corporate and private clients. The Group manages onshore and offshore companies, trusts and other business structures to meet the individual demands of its clients, such as corporate re-structuring, wealth and asset protection, tax reduction, international expansion and the provision of secretarial services. Atlas Corporate Services JLT, based in Dubai, undertakes marketing functions for their Mauritius and Nevis based offices.
For more information, please visit www.atlas-corp.com