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Set up Mauritius Trust
Tetra Consultants assists our international clients to set up Mauritius Trust. For a typical set up of a Trust, an individual or legal entity (Settlor), transfers the legal ownership of assets (Trust Property) to another person or persons (Trustees) to hold on behalf of other persons (Beneficiaries). The Trustees have an equitable obligation which bind them to hold and deal with the Trust Property in accordance with the terms of the Trust.
Simply put, a non-resident Settlor will set up Mauritius Trust. Incomes from dividends and interests will be paid to this Trust and distributed to its Beneficiaries. Contact us now for a free consultation. Our team of experts will revert within the next 24 hours.
Why set up Trust in Mauritius?
Advantages of Mauritius Trust
- Our international clients choose to set up Trust in Mauritius as it gives them the protection and ease for long-term wealth management. Family assets are well planned and preserved over generations while enjoying tax efficiency. Once the Mauritius Trust is successfully set up, you can own and manage any companies, family businesses or wealth.
- Simply put, a Mauritius Trust protects a person’s assets against personal liability, foreign exchange controls, risk of confiscation and high taxes. The information on the Settlor or Beneficiary is also confidential and inaccessible and there are no requirements for the Trust Deed to be registered with any Registrar. The main benefit of setting up a trust in Mauritius is the tax benefits accrued to non-resident Trusts.
Disadvantages of Mauritius Trust
- The main disadvantage is that the cost of setting up a Trust in Mauritius can be high due to the administration and maintenance costs. A Settlor may also be reluctant to relinquish control of the assets to the Trustees and this will lead to less effective management of the assets by the Trustees.
- A Trust can be revocable or irrevocable, but both have their disadvantages. An irrevocable Trust is inflexible and may lead to loss of control of assets while a revocable Trust or a Living Trust offers less asset protection and tax benefits.
Types of Trust available in Mauritius
According to Mauritius Trusts Act 2001, there are different types of Trusts in Mauritius, mainly Life Interest/Contingent interest Trust, Protective or Discretionary Trust, Employee Benefit Trust, Purpose Trust, Charitable Trust or Foreign Trust. In typical cases, Trust assets usually consist of company shares, investments, real estate, insurance policies and other assets.
Life Interest/Contingent Interest Trust
- Under a Life Interest Trust, the principal beneficiaries will receive interest income from the Trust throughout their lifetime. Upon their death, either the assets will be passed on to the other beneficiaries listed in the Trust or income earned from the assets in the Trust will be distributed based on the amount and conditions stipulated in the Trust Deed.
Discretionary Trust
- Under a Discretionary Trust, the Trustee has greater discretion to decide the time and amount of income to be distributed to the Beneficiaries. The Trustee can also decide which Beneficiaries will receive the income. A Discretionary Trust is helpful for Beneficiaries with creditors or with poor money-management skills.
Employee Benefit Trust
- An Employee Benefit Trust usually takes the form of a discretionary trust which main purpose is to benefit the employees of a particular company. Typically, the Settlor is the company, and the Beneficiaries are the employees.
Purpose Trust
- A Purpose Trust is formed for a non-charitable purpose and has no Beneficiaries. However, a Purpose Trust is required to have an Enforcer. A Purpose Trust has a maximum lifespan of 25 years in Mauritius.
Charitable Trust
- A Charitable Trust is considered a purpose Trust that is formed for charitable purposes. These includes poverty relief, improvement of education quality, conservation of the environment and any other purposes that benefit the general public. The charitable activities are not restricted to Mauritius or Mauritius locals. A Charitable Trust has an indefinite lifespan.
Foreign Trust
- A Foreign Trust is a Trust that is established in a foreign country that the Settlor does not reside in. A Foreign Trust will be subjected to the legislation and taxes of the jurisdiction in which it is located in.
Key Requirements
- Cannot have more than four Trustees
- Must have at least one local Qualified Trustee
- Must have an Enforcer if the Trust is a Purpose Trust
- Settlor cannot be the only Beneficiary of the Trust
- Assets in the Mauritius trust cannot include real estate located in Mauritius
- No disclosure of confidential information regarding the Trust, unless required by a court order
Key features
- Choice of proper law by the Settlor
- Possibility for the Settlor to leave on or before his death letters of wishes setting out how he/she would wish the Trust to be administered
- Anti-forced heirship rules
- Recognition of Purpose Trusts
- Duration of Trusts limited to 99 years, except for Charitable Trusts (indefinite) and Purpose Trusts (25 years)
- Possibility to accumulate income for any period during the duration of the Trust
- Possibility to migrate trusts from other jurisdictions
- No perpetuity rules for Charitable Trusts
- Trust instrument may contain power to vary terms of Trust
- No disclosure of the Trustee’s deliberations, the name of the Settlors and the Beneficiaries unless the latter is a resident of Mauritius or a body corporate resident in Mauritius
How to set up a trust in Mauritius?
Step 1: Registration of the Trust with the Mauritius Registrar (Optional)
- To protect the confidentiality of its clients, a Mauritius Trust is not required to be registered with any registrar. However, a Trustee may choose to register the Trust with the Registrar General if they wish to have an official date of creation.
Step 2: Preparation of the Trust Deed
- A Mauritius Trust is formed when the Settlor transfers the legal control of assets to the Trustees. To set up a Mauritius Trust, the Settlor will have to prepare the Trust Deed. The Trust Deed will clearly state the rights that the Trustee has with the assets and the obligations that need to be carried out by the Trustee for the benefit of the Beneficiaries. A Trust Deed can be either of the following document:
- Settlement: A deed signed by both the settlor and trustee.
- Declaration of trust: A deed signed and executed by the trustee.
- In essence, the Trust Deed will contain information about the names of the Trustees and the Beneficiaries, the intention of the Settlor to create a trust, the administrative power granted to the Trustees, the specific assets transferred to the Trust and the duration of the Trust. In cases where confidentiality is a concern, the Settlor may prefer Trustees to be bound by a Declaration of Trust instead.
Step 3: Transfer of legal control of assets from Settlor to Trustees
- The Mauritius Trust formation will be completed once the Settlor has transferred the legal control of the assets to the Trustees through the Trust Deed. The Trustees will handle the Trust assets according to the terms and conditions stated in the Trust Deed for the benefits of the Beneficiaries. All Trusts in Mauritius will be governed under the Mauritius Trusts Act 2001, that states that a Trust cannot be invalidated even if the Settlor has filed for bankruptcy and can only be voided by the Court if it is deemed that the Trust was created with the purpose to defraud or conduct illegal activities. The Trusts Act 2001 Act also stipulates a maximum duration of 99 years for trusts, with the exception of purpose trusts (25 years) and charitable trusts.
Step 4: Requirements of Mauritius Trust
- The number of Trustees in a Trust cannot be more than four and at least one out of the four Trustees must be a local qualified Trustee who is regulated and licensed by the Mauritius Financial Services Commission (FSC). A Mauritius Trust can have a Protector who will be in charge of appointing, removing, and advising a Trustee.
Tax obligations
Conditions for declaration of non-residency of Mauritius Trust
Under the Mauritius Trusts Act 2001, the Trustee can declare to the Mauritius Revenue Authority that the Trust is non-resident for an income year if:
- There are no resident Settlors or Beneficiaries in the trust.
- There are no resident Settlors and Beneficiaries hold a Category Two Global Business License under the Financial Services Act 2007.
Since a company that holds a Category Two Global Business License is an offshore company that is non-resident in Mauritius, it will be classified as a non-resident Beneficiary.
Tax rate for non-resident Mauritius Trust
- The declaration of non-residence must be submitted to the Mauritius Revenue Authority within three months before the end of the income year. This will allow both the Mauritius Trust and its non-resident Beneficiaries to be exempted from income tax for net income earned from the Trust in that income year. However, a non-resident Trust will not be able to enjoy the benefits of the vast number of Double Taxation Avoidance Agreements (DTAs) that Mauritius has negotiated with other countries.
Tax rate for resident Mauritius Trust
- In the case that the Trust has resident settlors or beneficiaries, it is considered to be a resident Trust. Income earned from the resident Trust is subjected to Mauritius income tax at a flat rate of 15%. However, if the Beneficiary is an offshore company that holds a Category One Global Business License, it can enjoy an 80% Deemed Foreign Tax Credit. This means that the Beneficiary company will only have to pay an effective income tax rate of 3%. A resident Trust will have to apply to be a tax resident in Mauritius through the Mauritius Revenue Authority and can enjoy the benefits of Mauritius DTAs.
Qualified Trustee
- To set up a Mauritius Trust, you are required to appoint a local Qualified Trustee who is regulated by the Mauritius FSC. Tetra Consultants advises our international clients on the setting up of a Mauritius Trust and provide customized solutions to achieve tax efficiency while protecting your assets.
Alternative Jurisdictions to set up a Trust
Seychelles
- Similar to a Mauritius Trust, a Seychelles Trust that does not have resident Settlors or Beneficiaries do not need to pay any income tax to the authorities. However, while the Mauritius Trust is required to make an annual declaration of non-residency to the authorities to be exempted from taxes, a Seychelles Trust is automatically exempted from taxes and annual filing once it is registered. A Seychelles Trust must be registered with the Seychelles Registry but does not need to register details about the Settlor or Beneficiaries unless the Beneficiary is a Seychelles resident.
Cook Islands
- Although a Cook Islands Trust is not required to pay taxes, it is required to pay an annual licensing fee. Nevertheless, the Cook Islands Trust is one of the most reputable jurisdictions for asset protection. Being the first jurisdiction to include measures to ensure asset protection, the corporate laws in the Cook Islands prevent creditors from filing claims on Trusts in the Cook Islands unless there is strong evidence that the Trust was created with the purpose of defraud.
Belize
- To protect the confidentiality of Settlors and Beneficiaries, a Belize Trust is only required to file information about the Trustees and the date of establishment of the Trust. A Belize International Trust is also exempted from tax and filing requirements. Belize is one of the only jurisdictions where asset protection is immediately available upon establishment of the Trust. In other words, there is no minimum requirement on how long the Trust must have been established for before the Trust is invulnerable to claims by creditors or direct family members. With the exception of cases where there is evidence of fraud, a Belize International Trust provides absolute and immediate asset protection for the Settlor.
Cayman Islands
- Cayman Islands is another reputable jurisdiction for individuals seeking to set up a Trust. Strong asset protections laws, tax exemption and no filing requirements are the key features that attract an individual to set up a Trust in Cayman Islands. Unlike most other International Trusts, it is not mandatory to have a local trustee for most type of Trusts in Cayman Islands. This provides greater flexibility and ease in the set up of a Trust in Cayman Islands.
Re-domiciliate Trust to Mauritius
Tetra Consultants can assist our international clients to migrate their already-established Trusts to Mauritius or from Mauritius. In the recent years, there is an upward trend of Trusts moving from overseas into Mauritius due to the multiple benefits available.
Contact us now for a free consultation on how to start business in Mauritius. Our team of experts will revert within the next 24 hours.
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