Setting up a Trust in Mauritius
Mauritius: the ideal jurisdiction for establishing a Trust
Mauritius has evolved into a trustworthy jurisdiction for establishing and operating Trusts. Offshore Trusts are especially used for the management, preservation and transmission of assets.
Choosing to set up a Trust in Mauritius allows investors around the globe to channel their investments within the African continent and benefit from the tax advantages the island offers. The benefits include:
- No Capital Gains Tax, Estate Duty nor Withholding Tax;
- In the case of a Settlor’s bankruptcy or liquidation, a Mauritius Trust will not be void or voidable;
- The Trust’s income is taxed at a fixed rate of 15%, thus this income is not subject to additional tax in the hands of Beneficiaries when distributed;
- Trusts created in Mauritius are exempt from forced heirship limitations, letting an owner to leave his/her money to people of his choice. Ultimately, the forced heirship rules of other countries will not be furthered by the courts in Mauritius;
- No inheritance tax;
- Estate planning;
- Discretionary Trust allowing for tax planning and wealth protection;
- Purpose Trust for non-charitable objective;
- No registration needed;
- Confidentiality: Trustees’ deliberations and name of the Settlors and Beneficiaries cannot be disclosed, unless the latter is a Mauritian resident individual or a corporate;
- Avoidance of probate;
- Asset protection;
- Succession planning; and
- Assets can be held and managed on behalf of minors.
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Types of Trusts in Mauritius
There are different types of Trust companies in Mauritius. These include:
- Discretionary Trust: Used in wealth protection and tax planning, the Discretionary Trust gives the Trustee the power to determine who are the Beneficiaries and the allocation of income and capital amongst them.
- Charitable Trust: Formed for purposes beneficial to the public in general (in Mauritius or another country), which include the relief of poverty, the advancement of education, the protection of the environment, or the advancement of human rights and fundamental freedoms.
- Protective Trust: A Protective Trust provides for the protection of vulnerable members of a family or certain Beneficiaries.
- Purpose Trust: A Purpose Trust is formed for advancing non-charitable purpose, such as holding an asset such as an aircraft.
- Sharia compliant Trust: A Trust that is compliant with Islamic law (Sharia) must observe Sharia principles, in particular restrictions on investment and rules of inheritance.
- Spendthrift Trust: A Spendthrift Trust limits the access of the Beneficiaries to the assets and properties of the Trust, and protects against bad spending habits and creditors. The Beneficiaries receive their inheritance in a controlled and incremental manner.
- Employee Benefit Trust: commonly used by businesses as a means to provide benefits to their employees (either in the form of cash or shares) in a tax efficient manner. The trust structure allows for the shares and other trust assets to be held at the discretion of the trustees.
Along with Foundations, Mauritian Trusts are a powerful tool for wealth management and structuring, as well as asset preservation and transmission.
Tax in Mauritius for Trusts
A Trust registered or having its Central Management and Control in Mauritius is considered to be locally resident and is liable to a 15% income tax on its chargeable (worldwide) income. A Trust holding a Global Business Company Licence may benefit from an 80% Partial Exemption Regime whereby specified sources of income (interest, dividend, etc.) are exempt from tax, provided it meets the substance requirements.
- The Trust is administered in Mauritius and a majority of the Trustees are resident in Mauritius;
- The Settlor of the Trust was resident in Mauritius at the time the instrument creating the Trust was executed or at such time as the Settlor adds new property to the Trust; and
- A majority of the Beneficiaries or the class of Beneficiaries appointed under the terms of the Trust are resident in Mauritius.
The non-resident Trust will be subject to source-based taxation only. Indeed, Trusts that have their Central Management and Control outside of Mauritius will not be subject to tax on their foreign source income in Mauritius, but only on income derived from Mauritius. The non-resident Trust will need to file an income tax return in order to declare and pay income tax (15%) on its Mauritius sourced income.
Charitable Trusts are not liable to tax.
Steps for setting up a Trust in Mauritius
Offshore Trusts are created by the enactment of a written document, which includes the name of the Trustee, the Settlor’s intention, the object of the Trust as well as the responsibilities and powers of the Trustees. Steps for setting up a Mauritius Trust include:
- Execution of Trust Deed (Can be done by a Settlement or Declaration of Trust);
- Provide Know Your Clients (KYC) documents on all the parties (Settlor, Protector and Beneficiaries);
- A Settlement is where both the Trustee’s and Settlor’s names are stated in the Trust Deed;
- A Declaration of Trust is where solely the Trustee’s name is cited; and
- Transfer of the Initial Trust Fund to the Trustee.
How Sunibel can accompany you in establishing a Mauritius Trust
Setting up a Mauritius Trust requires that you select a local Trusteeship services provider, who must be regulated by the Mauritius FSC. With a strong experience in the industry, Sunibel is legally allowed to act as Qualified Trustee and Company Secretary under the Mauritius Trusts Act 2001. We assist you in your Trust registration in Mauritius and offer tailor-made advice to help you meet your goals, ensure asset protection, and achieve tax efficiency while protecting your assets.
Sunibel can also assist international clients to redomicile their already-established Trusts to Mauritius. In the recent years, there is an upward trend of Trusts moving from overseas into Mauritius to avail the numerous benefits the jurisdiction offers.
As a member of Probus Pleion Group, we allow you to take advantage of our international expertise to provide you with a global solution for all your financial needs.
FAQs relating to Trust registration in Mauritius
1. Who is the Settlor?
A Settlor is the entity that registers the Trust. The main role of the Settlor is to facilitate the transfer of legal control of an asset to the Trustee. A Settlor ican therefore be a legal entity or an individual.
The Settlor may himself be a beneficiary of the Trust, but not the sole beneficiary.
2. Who is the Trustee?
A Trustee is the entity who receives legal ownership of assets from the Settlor. The Trustee (such as Sunibel, a licensed company allowed to act as Qualified Trustee) manages the Trust assets in a way that benefits the Beneficiaries according to the terms and conditions listed in the Trust Deed. Trustees are expected to act to the best of their abilities when managing the assets, and cannot use the assets to further their own interests.
3. Who are the Beneficiaries?
A Beneficiary of a Trust is the individual or group of individuals for whom the Trust is created.
4. Who is the Protector?
The Protector owes fiduciary duty to the beneficial owners. To ensure that the Trustee respects his wishes and to maintain control over the Trustee’s discretion, the Settlor may proceed to the appointment of a Protector, other than himself. Unless otherwise provided in the Trust Deed, the Protector can remove the Trustee and appoint new or additional Trustees.
5. What is the Trust Deed (or Deed of Trust) ?
Written at the creation of the Trust, the Trust Deed sets out the duties and powers of the Trustee, how the Trustee is to administer the Trust, and how the Beneficiaries can benefit from the Trust.
6. Which projects require the creation of a Trust?
A Trust is ideal for if you want to:
- preserve your assets or your family assets against uncertainty (whether political, economic or family)
- transfer assets to your heirs tax-efficiently
- plan your estate to maximise the benefits of your wealth for family members and other Beneficiaries
- transfer assets to your heirs in accordance with the terms set out in your wishes and not in accordance with the laws of the country where you live
- consolidate the ownership of assets owned throughout the world in one location
- have centralised reporting
- minimise or eliminate estate taxes arising on the death of the Settlor
- Hold investments, real estate, shares in companies, investment funds
- Carry out charitable and philanthropic projects.
7. What are the fiduciary responsibilities associated with the Trustee?
The responsibility of a Trustee differs depending on the type of Trust, and their responsibilities, or duties, are set out in the Deed of Trust. The main duties of Trustees include:
- The duty to invest in a prudent and reasonable manner
Under the Trust Deed, the Trustee has a duty to refrain from taking irrational financial risks with the Trust’s assets. The Trustee must therefore invest in a manner that balances risk and reward through portfolio diversification appropriate to the nature of the Trust in question. The Trustee may, or shall (depending on the circumstances), obtain advice on the investment of Trust property.
- Duty of impartiality
The Trustee must act fairly and impartially towards each of the individual Beneficiaries. Although differences in treatment may result from the Deed of Trust, the Trustee must treat the benefit of the Beneficiaries fairly.
- Duty to inform and report
The Trustee has a duty to keep accounts of the administration of the Trust. He must also report to the Beneficiaries on the management of the properties of the Trust for which he is responsible.
The Beneficiaries’ right to information is a necessary element of the Trust relationship. Without this right, the Trustee’s duty of loyalty cannot exist. This right cannot therefore be excluded by the Deed of Trust.
- Duty to act personally
The Trustee has the power to delegate certain tasks to a third party, such as obtaining advice on the investment of the Trust’s assets. However, the Trustee is personally responsible for the performance of his duties, and cannot delegate some of his responsibilities to a third party.
- Avoiding conflicts of interest
The Trustee shall at all times protect the interests of the Beneficiaries of the Trust, and shall avoid any personal gain from his duties as Trustee, except as permitted by the Trust Deed or by the clear and unequivocal consent of all the Beneficiaries.
- Letter of Wishes and Memorandum of Wishes
The Settlor may indicate to the Trustee his intentions with regard to the Trust and its management through the ‘Letter of Wishes’ or ‘Memorandum of Wishes’.
Depending on the terms of the letter of wishes and the circumstances in which it was written, it may be considered legally binding on the Trustee, in which case it forms part of the Trust’s governing documents, legally significant or morally binding.
8. What are the Letter of Wishes and Memorandum of Wishes?
Through a Letter of Wishes, the Settlor can state a number of wishes on how the assets should be managed and distributed to the Beneficiary(ies). A Letter of Wishes is when the Settlor himself writes down his wishes in a letter to the Trustee. A Memorandum of Wishes is when the Trustee records the wishes expressed to him by the Settlor and which the Trustee should take into account.
9. What is the duration of a Trust?
- The duration of non-charitable Trusts must not exceed 25 years
- Charitable Trusts can be perpetual.
- All other Trusts must have a duration not exceeding 99 years.
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