A BVI IBC has the following characteristics:
GLOBAL BUSINESS COMPANY 1 (GBC1)
On 1st December 2001 the Mauritius Offshore Business Activities Authority Act was repealed and replaced by the Companies Act 2001 and the Financial Services Development Act 2001. The former Offshore Company is now known as a company with a Global Business Licence No. 1 or Global Business Company 1 (GBC1). The substantial advantage offered by the GBC1 is that it may be structured to be tax resident in Mauritius and may thereby access the taxation treaties signed by Mauritius. Treaties have been signed with Belgium, Botswana, China, France, Germany, India, Indonesia, Italy, Kuwait, Lesotho, Luxembourg, Madagascar, Malaysia, Mozambique, Namibia, Nepal, Oman, Pakistan, Russia, Singapore, South Africa, Sri Lanka, Swaziland, Sweden, Thailand, U.K., Zimbabwe. This makes it extremely attractive to invest in one of these countries through a GBC1 as taxation treaties provide that profits can then be withdrawn from that country either without the imposition of withholding tax or subject to a substantially reduced rate of withholding tax.
The terms of the taxation treaty, signed between Mauritius and India, are particularly advantageous and the levels of taxation paid by a GBC1 making profits in India are considerably reduced from the normal levels of taxation, which would be suffered by an individual or company investing directly in India.
India still imposes restrictions on investments in and out of the country and therefore requires that any investment into India by a foreign company or individual is approved by the Reserve Bank of India. Frequently the approval process takes a considerable length of time and results in onerous conditions being placed upon the investment. However, if a Mauritius auditor produces an Overseas Auditor's Certificate (OAC) stating that the investing company is an Overseas Corporate Body (OCB), which is defined as a company which is at least 60% owned by Non Resident Indians (NRI's), then the investment would normally be authorised speedily and without conditions. An NRI is defined as a citizen of India or a foreign citizen who has a parent or grandparent who was an Indian citizen and permanent resident of India at any time.
The benefits accruing to a GBC1 when used for investment in India may be summarised as follows:
DIVIDENDS paid to a GBC1 would be subject to a withholding tax of 5% if the Mauritius company owns more that 10% of the capital of the Indian company or 15% if less than 10% is owned.
CAPITAL GAINS made from the sale of capital assets in India (e.g. shares, property etc) would normally be taxed in India at the normal rates prescribed in the Indian Act, but Capital Gains made by a GBC1 in India are completely exempt from tax. Capital Gains made on assets held for less than 12 months in the case of shares in a company or 36 months in the case of other assets are classified as short term otherwise all gains are classified as long term.
ROYALTY payments made by an Indian company or individual to a GBC1 would be taxed at the rate of 15%.
INTEREST payments made to a GBC1 would be exempt from tax in India, provided that the Indian Government has approved the loan.
A GBC1 structured to take advantage of the taxation treaties signed by Mauritius must have the following characteristics:
TAXATION |
Offshore companies incorporated before 1 July 1998 shall be taxed on net income as “tax incentive companies” at 15% effective 1 July 2003. Between now and 30 June 2003, they can continue to elect their tax rate of 0 to 25% (the new maximum rate) on a retrospective basis or an irrevocable rate of 15%.
Entities including the new GBC1 registered after 30 June 1998 continue to be liable to tax at 15%.
The deemed foreign tax credit (granted where actual foreign tax paid is not proven or is lower) on foreign source income, currently 90% of the Mauritian tax rate of 15% will be reduced to 80% with effect from 1 July 2003.
The combined effect is that the maximum effective tax rate on assessable income for offshore corporations incorporated after 30 June 1998 (or those which opt for an irrevocable 15%) will be 1.5% for periods up to 30 June 2003 and 3% thereafter, subject to possible future reduction in the deemed foreign tax credit as a phasing out process. |
SHAREHOLDERS |
The company must have at least two shareholders unless it is a wholly owned subsidiary. Bearer shares are not allowed. Details of the shareholders must be reported to the appropriate authorities but these details are not available for public inspection so confidentiality is assured. Please note that references, copy passports and background information on the beneficial owners must also be forwarded to the appropriate authority. Where the beneficial owners are body corporates, latest audited accounts and corporate profile must be submitted. |
DIRECTORS |
A minimum of two directors is required and corporate directors are not permitted. A director is required to give his consent to act as director by filing Form 4 with the Registrar of Companies but these details are not available for public inspection and are protected by the confidentiality laws. It is important to note that if the company wishes to access the taxation treaties then two Mauritius resident directors, who are approved by the FSC, must be appointed. |
ANNUAL REPORTING |
A GBC1 must file audited accounts within six months from the close of its “financial year” and non-compliance may entail loss of the company licence. |
TIMESCALE |
Subject to name approval a GBC1 can be incorporated within 14 working days from receipt of acceptable documentation in Mauritius. Ready-made companies are not available because of the need to report the details of the beneficial owners to the FSC. |
RESTRICTIONS
ON NAME AND
ACTIVITY |
The following words cannot be used in English or any other language: National, Regional, State, Government, Authority, Corporation, Municipal, Chartered, Co-operative, Broadcast, Broadcasting, Diffusion, Rediffusion, Television and Chamber of Commerce. Banks and insurance companies must be licensed. |
SECRECY |
Section 33 of the Financial Services Development Act 2001 requires that all information and documentation received is kept secret and confidential. Failure to do so, except on proof beyond reasonable doubt that the confidential information is bona fide required for the purpose of any enquiry relating to drug trafficking, arms dealing and money laundering under the new Economic Crime and Anti-Money Laundering Act 2000, can attract a term of imprisonment. |
SUPERVISION |
The FSC is now empowered to carry inspection and audit of the books and records of management companies and corporate trustees, as he deems necessary to ensure compliance with the guidelines and codes of conduct issued by the FSC. |
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