One of the most important decisions that multinational corporations face when investigating cross-border investment is where best to domicile their holding company. The same can be said for companies in Europe, the US and Asia that are exploring investment opportunities in India.
In this article, we’ll explore the numerous benefits of using Mauritius as a HoldCo jurisdiction and pathway to India.
Tried and tested
For decades, Mauritius has been a preferred jurisdiction for investors channeling investment capital into India, thanks in part to the double tax treaty. As such, service providers with experience along this investment route have developed a deep understanding of the Indian markets and can navigate tax and compliance considerations. Due to the depth and breadth of investor experience accessing India via Mauritius spanning three decades, setting up a Mauritius-based company is fast and simple.
Ease of doing business
Investors who base their operations in Mauritius will find no shortage of skilled and bilingual professionals within the workforce, including qualified professionals like accountants and lawyers. Mauritius is also well-placed in terms of time zone, only 1.5 hours behind India and two hours ahead of Central Europe. The country also boasts excellent telecommunication facilities, making it easy to stay connected. According to both a 2018 Forbes study and a 2020 World Bank study, Mauritius ranks as one of the best countries in the world for doing business.
Economic and political stability
Mauritius enjoys a level of economic, political and legal stability that is nearly hard to find on the global stage. There is robust rule of law and political stability in the country, overseen by a hybrid legal system, with the UK’s privy council as the ultimate court of appeal.
Mauritius ranks first in Africa on the Ibrahim Index of corporate governance, having taken steps to safeguard its credibility as a jurisdiction of choice. The jurisdiction upholds international AML standards and its regulatory framework is recognised by the International Monetary Fund, Financial Stability Board, and the Organisation for Economic Cooperation and Development (OECD).
Ease of financing and fund flow
There are no foreign exchange controls in Mauritius, ensuring a smooth movement of funds (and hence operations) for global corporations. Thanks to a buoyant banking system, fast movement of funds and easy access to financing are widely available. Banks in Mauritius have been financing credit-worthy investments in India for many years, and more than 200 foreign securities are listed on the Stock Exchange of Mauritius.
Tax efficiency and visibility
Though the corporate world has shifted its focus from tax planning to tax compliance, having a holding company in a jurisdiction like Mauritius helps ensure long-term visibility on tax implications and minimisation of tax leakages.
Further, given that the double tax treaty between India and Mauritius has been recently renegotiated to the satisfaction of both parties, there is minimal risk of future shifts in stance. And while the renegotiated treaty provides India with the right to tax capital gains, the withholding tax (WHT) on dividends and interest—the most important source of income for any going concern venture in a cross-border investment—is better for Mauritius than for any other treaty partner. Indeed, the WHT on dividend (for an equity holding of at least 10% in the Indian company) is only 5%, and the WHT on interest is just 7.5%—compared to 15% in other cases.
Crucially in relation to tax, Mauritius is on the FATF and EU whitelist. In fact, the island nation is among the few jurisdictions globally to be deemed ‘compliant’ or ‘largely compliant’ with all 40 of the FATF recommendations.
Access through IQ-EQ Mauritius
Renegotiated tax treaty notwithstanding, the Mauritius route remains one of the most widely used investor pathways to India. Having been active in Mauritius for more than 30 years and the first management company to be licensed, IQ-EQ has decades of experience facilitating access, with the global infrastructure, technical expertise and service delivery model to support international corporate aims. Our clients value our global connectivity, proven track record, and in-depth knowledge of regulatory practices.