Investment Funds are often structured as Limited Partnerships. Under Mauritius tax laws, a Limited Partnership is tax resident in Mauritius if it has its seat in Mauritius and includes a Limited Partnership which has at least one limited partner resident in Mauritius.
A tax-resident Limited Partnership is treated as fiscally transparent and not subject to tax in Mauritius. Rather, every limited partner is subject to tax on its share of income at the rate of 15%. Where the limited partners are non-residents of Mauritius and the Limited Partnership only derives foreign source income, no tax liability should arise for the limited partners in Mauritius.
However, a Limited Partnership which holds a Global Business Licence (“GBL”) may elect to be subject to tax in Mauritius in the same manner as a company. Where a resident Limited Partnership is subject to tax in Mauritius, it may claim eligibility to preferential tax regimes on specified income streams, subject to satisfaction of economic substance requirements. Where the Limited Partnership holds a Collective Investment Scheme Licence or a Closed End Fund licence, for example, such preferential tax regime may imply an exemption of 80% of its non-interest income streams and 95% of its interest income. Alternatively, at its discretion, it may claim credit for foreign taxes suffered against its Mauritius tax liability.
A Limited Partnership is normally liable to a 2% Corporate Social Responsibility (“CSR”) levy based on its preceding year’s chargeable income. However, a Limited Partnership holding a GBL is not liable to CSR.
Under the recently enacted Corporate Climate Responsibility Levy (“CCR Levy”) legislation, a Limited Partnership is also liable to a 2% CCR levy on its chargeable income and such tax is required to be paid together with the annual tax return filed by the Limited Partnership. The CCR Levy is not applicable where the Limited Partnership has a “turnover” of less than MUR 50 million (approx. USD 1.1 million). There is no equivalent exemption, as for CSR, in respect of Limited Partnerships holding a GBL.
Unlike CSR, the CCR Levy falls under the definition of “income tax” under the Mauritius tax laws. The same tax laws also explicitly provide that that no resident Limited Partnerships shall be liable to income tax. Accordingly, it appears that the recently enacted CCR levy contradicts the original intention of the legislator, which was to exempt resident Limited Partnerships from income tax. We hope that the discrepancy between these two sections of the legislation will be addressed to the satisfaction of the relevant stakeholders soon.
Nonetheless, it is highlighted that, since the CCR Levy falls under the definition of income tax, where a Limited Partnership has suffered withholding tax or foreign tax on its taxable income streams, such taxes may be claimed as credit by the Limited Partnership against the CCR Levy.
If you wish to discuss these topics, please contact:
WTS Tax Consulting (Mauritius) Ltd.
