The new Minister of Finance and Economic Development, Honorable Xavier Luc Duval,

presented his budget on the 4th of November 2011. The budget although carrying a certain

number of innovative measures mainly with respect to social integration and economic

empowerment, contains also a number of key measures relating to the Financial Services /

Global Business Sector. The implications of these measures are detailed hereunder:

“ The financial services industry will continue to be the linchpin of our economy. We have

taken it to great heights of success” said the Honorable Xavier Luc Duval on his Budget

speech last Friday. The 2012 Budget confirms the Government’s continued commitment to

the financial sector. The government affirmed it will provide strong support to the financial

services industry to weave new business links with the rest of the world, comply fully with

international norms and diversify its products.

FISCAL FRAMEWORK

Before the budget presentation, the Minister signaled that some fiscal reforms would be

forthcoming. A certain number of measures have thus been announced with a view to

eliminating some fiscal anomalies and revising the Taxation framework to reinstate the

status of Mauritius as a low tax jurisdiction. These measures, which attempt to promote

growth and FDI, include the following:

(a) Capital Gains Tax has been abolished on the

sale of immovable property effective as

from 5 November 2011.

(b) A Protected Cell Company is now required

to file financial statements with the

Registrar of Companies for each cell and pay

tax on a cell basis.

(c) Companies:

� may now offset their excess tax against any

future tax liability under the Advance

Payment System (APS).

� With a turnover below Rs2 Million per

annum are now exempted from filing

quarterly returns and pay tax under the

APS.

(d) Corporate Social Responsibility (CSR):

� Should now be computed on 2% of

chargeable income instead of 2% book

profit.

� Companies may now use their CSR fund

to provide free of charge, crèche and

kindergarten facilities for employees

earning less than Rs 12,000 per month.

(e) Individuals with an annual total income

exceeding Rs2 Million must now file income

tax return electronically.

The solidarity levy, which was applicable only to banks and telecommunication companies, is

now also applicable to Global business management companies at the rate of 10% of their

chargeable income for 2 years ending in 2013. This is a new measure, which will directly

impact those companies providing services in the Mauritius Financial Services Centre. The

existing solidarity levy on telecommunication companies has been extended to end 2013.

As from now, It will be possible for Global Business Companies and Domestic Companies to

pay their taxes in foreign currencies namely, Singapore dollar, South African rand, Swiss

franc and any other approved convertible foreign currency in addition to US dollar, Euro and

GBP.

Further measures on the fiscal front include the abolition of Solidarity Income Tax on

Dividends and Interest Income as from 2012. From a personal income tax angle, the Income

Exemption and Fringe benefits thresholds are being increased as from January 2012.

The Tax Deduction at Source mechanism has now been extended to the following:

� All payments made to non-residents for services performed in Mauritius except where

such persons are exempted from tax under a double taxation avoidance agreement.

� Interest paid by persons other than financial institutions and companies in the Global

Business sector to non-residents.

It is to be noted also that new administrative penalties have been introduced in addition to

fines for non submission of annual tax returns. In addition, Executive directors in a private

company will now be accountable and liable for non-payment of VAT to the Mauritius

Revenue Authority on same basis as income tax. Directors’ fees will also be taxed on an

accruals basis.

With regards the Value Added Tax, an Incentive Scheme for VAT Registration has been

introduced to run for the period January 2012 to June 2012 for persons in business, service

providers and professionals not already registered for VAT.

Concession includes payment of VAT due only for the last 2 years from the date of

registration after deducting input tax. No penalty will apply and no interest will apply if VAT

is paid before 30 June 2012.

Whilst previously a number of employees working in the informal sector like maids,

gardeners etc were not covered by the Social Security System, the new Annual Income Tax

return will now on provide for registration of household employee and payment of annual

NPF contribution in one go by employers without additional interest or penalty.

REGULATORY FRAMEWORK AND GLOBAL BUSINESS

The Regulatory framework has also been revisited to promote Mauritius as an investment

hub and to be more in line with global initiatives being taken to improve cross border

collaboration between regulatory bodies and enforcement agencies. In this respect, the

Financial Services Commission (FSC) will be empowered to sign the International

Organisation for Securities Commission Memorandum of Understanding.

Amendments will also be made to the Bank of Mauritius Act, Financial Services Act and

Securities Act to allow the disclosure of information to the FSC.

To further modernize the financial services sector, a new legal framework will be set up to

promote Foundations, Private Occupational Pensions and new concept of Trusts.

Furthermore, the legislation to promote Limited Partnerships has already been passed but

will be amended to clarify if the limited partnership can operate in or outside Mauritius or

both.

As regards the network of Double Taxation Avoidance Agreements and Investment

Promotion and Protection Agreements, the Government will wide the network further to

include African states starting with Algeria, Angola, Burkina Faso, Tanzania and South Sudan.

More emphasis will be laid down by the Government to safeguard the India/Mauritius

Double Taxation Avoidance Agreement which has so far been the growth engine of this

sector.

REAL ESTATE SECTOR

The legislation will be amended to allow Permanent Residence holders to purchase an

apartment in Mauritius. This will further improve accessibility to real estate by expatriates

under certain conditions.

The government is also encouraging projects in the real estate sector for the Mauritian

Middle Class through exemption of registration duty to first home buyers on the purchase of

a home within a housing estate comprising of at least 5 units, at a maximum price of MUR

2.5 Million.

To further promote activity in this sector and provide for new financial instruments, the

“Code Civil Mauricien” will be amended to govern leasing of both immovable and movable

property, especially finance leasing. In addition, Land transfer tax has been removed in the

case the Sale of immovable property within 12 months from acquisition date by financial

institutions relating to debt recovery.

INSURANCE AND BANKING

Further to the Insurance Act, which was passed earlier, the legislation pertaining to the

insurance sector, which previously would have allowed local assets to be, insured with an

insurance company abroad will be repealed in 2013. Government is also broadening access

to Private Health Insurance through allowing employees to use their monthly National

Solidarity Fund contributions towards payment of private health insurance.

The new Budget also includes a number of changes to be made to the Banking Act to

address the following:

• Financial institutions not having a website to publish financial statements in at least

3 daily newspapers

• Alignment with the Borrowers Protection Act with respect to disclosure of

information on credit facilities granted to an individual

• Alignment with the Companies Act regarding appointment of auditors at annual

meetings of a financial institution

• Service providers to make declaration of confidentiality

• Provision for "The Enforcement Authority” to be set up under the Asset Recovery

Act 2011 to allow financial institutions to disclose information to the Enforcement

Authority

• The Central Bank to apply penalties on non-bank deposit taking institutions

ICT AND CONNECTIVITY

The government understands that having a modern an efficient infrastructure is key to

attracting investment, generate activity and modernize the economy. Mauritius will thus

have access to a 2nd Undersea Fibre Optic Cable which will be operational by mid-2012 to

ensure continuity of service at all times in a globally connected environment. Another

submarine fibre optic cable will also be laid to connect Rodrigues to Mauritius.

The ICT Act will be amended to allow the ICT Authority to intervene more effectively to

ensure competitive pricing of services and lowering the price of Internet connectivity.

Furthermore, Long distance telecom operators will have the right of access to connect to

international gateways via two landing stations hence providing more options with the

target of further bringing down the cost of connectivity to those operators.

Occupation permits will be given to workers in the ICT/BPO sectors earning more than

Rs30,000 to encourage more inflow of human capacity in this sector.