Central Management and Control in Mauritian Tax

The First Step to Unlocking Mauritian Tax Benefits

So, you’ve heard about Mauritius – and yes, it’s all it’s cracked up to be. But if you’re eyeing this island paradise for its tax benefits, there’s a bit more to it than lounging on the beach. You’ll have to wrap your head around some intricate tax legislation. As we mentioned in our previous blog post, you will have to meet Central Management and Control (CMC) and assess the possible impact of Place of Effective Management (PoEM) requirements, which may be applicable if your business has any international influence. But what exactly is CMC, and what does it entail? Let’s dive in…

CMC may only be the first step…

To meet local tax requirements, a company incorporated in Mauritius must satisfy specific criteria centred around the concept of Central Management and Control (CMC) in order to be considered a tax resident of Mauritius. This, however, may just be the first step when it comes to many international businesses incorporated in Mauritius. If you have any international influence such as foreign shareholders and/or directors, Place of Effective Management (PoEM) may need to be assessed, where applicable. But don’t worry, you don’t have to navigate these tricky waters alone – CFO Insight Mauritius is here to help. Let’s unpack this concept of CMC…

What is CMC?

CMC is not about the day-to-day management – rather, it’s where the big decisions are made. In very basic terms, the CMC can be seen as where the Board of Directors sits and where they execute the powers vested in them. It’s essentially where the key strategic decisions are made that determine the direction of a business. Think of a boardroom filled with suits, strategising and making important decisions. It is in these deliberations where CMC can be found. This nucleus of decision-making ultimately needs to be in Mauritius.

In terms of fancy tax jargon, CMC is defined as “where key strategic, management, and commercial decisions that are necessary for the conduct of the business as a whole are in substance made.” In layman’s terms, it’s where the bigger decisions are made that determine the company’s future i.e. The Board of Directors.

Requirements

The Mauritius Income Tax Act doesn’t exactly stipulate a clear-cut set of checkboxes for establishing CMC, they like to keep us on our toes. The Mauritius Revenue Authority will rely on International Tax principles of other jurisdictions, such as the UK, whose tax legislation also considers CMC as a tax residency test. Below is a basic outline to assist in determining the CMC of a Company from a Mauritius perspective:

• Board meetings need to take place in Mauritius, with the board of directors controlled by Mauritian resident directors

• Board meetings should be sufficiently frequent to enable the Directors to exercise control over the strategic affairs of the company

• A board must consist of directors with sufficient knowledge, experience, and expertise to manage the strategic affairs of the company.

• Board meeting minutes should be comprehensive, documenting debates on a decision making, demonstrating that Directors applied their minds.

• All other administrative documents and records should be in Mauritius, including accounting records, finance documents and bank accounts

• There should be sustainable company infrastructure in Mauritius (an office and personnel) in Mauritius

  
  

For a comprehensive list, refer to our detailed document: Mauritian Substance and Tax Residency Advice.

In many cases, CMC isn’t everything

Though adhering to CMC may be an essential first step in many international cases when it comes setting up in Mauritius, where many foreign business owners fall short is the assumption that once CMC is obtained, they’re good to go. This is not always the case. It is essential to also assess whether PoEM requirements need to be met, specifically in cases where there is any kind of international influence from stakeholders, directors, etc.

Take Dave, for example. Dave met all the necessary CMC requirements: he incorporated his business in Mauritius and even has a management company in place diligently adhering to all local laws. He attended regular board meetings in Mauritius, and as a result he thought he’d checked all the boxes. But Dave didn’t assess PoEM and how this affected his business because of his foreign influence. Because Dave is South African and was effectively managing his Mauritius entity from South Africa, he faced the possibility of his Mauritius entity being considered a tax resident in South Africa.

Luckily, Dave found CFO Mauritius just in time! With our help, Dave was primed for PoEM. As a result, we put structures into place that ensured that his company is effectively managed from Mauritius and therefore remained a tax resident of Mauritius.

The Solution

With the help of CFO Insight Mauritius, you can ensure that your business is set up for success in Mauritius. We’ll provide you with a crucial understanding of all the requirements, and implement structures for compliance, so that you don’t miss a step. Click the link below if you’d like to be primed for PoEM on your way to success in Mauritius!

Get Primed for PoEM