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Mauritius offshore investment fund: Overview.

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Mauritius offshore investment fund: Overview

Mauritius has emerged as a prominent player in the offshore investment fund industry, attracting interest from investors worldwide. This article dives into the key advantages of establishing funds in this jurisdiction, examining the two main fund types, their attractive tax benefits, the robust regulatory framework overseen by the Financial Services Commission (FSC), and Mauritius’ strategic location for accessing dynamic emerging markets. It also explores the ease of setting up and managing funds alongside strategies for mitigating risks like currency fluctuations.

Key takeaways

  • The Mauritius offshore fund operates as a specialised financial vehicle under the jurisdiction of Mauritius, typically structured as a global business company (GBC). It provides flexibility and efficiency in international transactions.
  • The Mauritian Legislation encompasses two main types of investment companies: open-ended funds (Collective Investment Schemes) and closed-end funds (Private Equity Funds). These are regulated under the Securities Act of 2005 and the Securities (Collective Investment Schemes and Closed-end Funds) Regulations of 2008.
  • Tax advantages include exemptions from capital gains tax, no withholding or dividend tax, and double taxation avoidance agreements (DTAAs) with various countries. The regulatory framework is overseen by the Financial Services Commission (FSC), which ensures compliance with international standards.

Understanding the Mauritius offshore fund

The Mauritius offshore fund is a specialised financial vehicle for pooling and managing investments. Operating under the jurisdiction of Mauritius, it is typically structured as a global business company (GBC), enjoying a legal framework that ensures flexibility and efficiency in international transactions.

Two types of investment funds

The Mauritian legislation encompasses two primary types of investment companies, commonly referred to as funds: open-end funds, also known as collective investment schemes (CIS), and closed-end funds, most widely recognised as private equity funds. These entities are established in accordance with the Securities Act of 2005 and the Securities (Collective Investment Schemes and Closed-end Funds) Regulations of 2008.

Open-end funds

A collective investment scheme (CIS), alternatively known as an offshore or global fund, is explicitly defined under the Securities Act of 2005. It is structured as a company, trust, or any other legal entity, such as a limited partnership, prescribed or approved by Mauritius’s Financial Services Commission (FSC). The key characteristics of a CIS include its sole purpose of collectively investing funds in a diversified portfolio of securities, financial assets, real property, or approved non-financial assets. Furthermore, the CIS operates based on the risk diversification principle, obligates securities redemption at their net asset value upon request and ensures participants lack day-to-day control over property management, regardless of their consultation or directional rights.

It is important to note that closed-end funds, whose shares or units are listed on a securities exchange, fall within the scope of collective investment schemes. However, certain specified schemes in Part II of Schedule SA 2005 are excluded.

Closed-end funds

On the other hand, a closed-end fund is described as an arrangement or scheme, distinct from a CIS, to invest funds collected from investors or sophisticated investors in a diversified portfolio of securities, financial or non-financial assets, or real property. Additionally, the term “Global scheme” is defined under the Securities Regulations of 2008 (collective investment schemes and closed-end funds) as a company or any approved legal entity by the FSC holding a global business license (GBC) and authorised to engage in activities falling within the collective investment scheme definition.

Key benefits of a Mauritius offshore fund

Tax advantages

  • Capital gains tax exemption: Mauritius does not levy capital gains tax on profits from securities.
  • No withholding or dividend tax: Investors benefit from zero withholding tax on dividends, interest and royalties.
  • Double taxation avoidance agreements (DTAAs): DTAAs with numerous countries enhance tax efficiency for cross-border transactions.

Regulatory framework

The Financial Services Commission (FSC) oversees the regulation, ensuring compliance with international standards and providing a secure and transparent investment environment.

Strategic location

Positioned strategically, Mauritius is a gateway for investments into rapidly growing African and Asian markets, offering a well-established platform for global businesses.

Geographic and sectoral diversification

Investors in a Mauritius offshore fund benefit from the ability to explore diverse opportunities across various geographies and sectors. This flexibility enables them to spread risk and capitalise on growth prospects in different markets, contributing to a well-rounded and resilient investment portfolio.

Access to emerging markets

The Mauritius offshore fund is a strategic gateway to emerging markets, providing investors access to high-growth opportunities. By tapping into these markets, investors can potentially enhance their returns and participate in developing economies with significant growth potential.

Real estate and infrastructure

Mauritius offers attractive investment opportunities in real estate and infrastructure projects, aligning with the nation’s broader development goals. Investors in the offshore fund can contribute to the growth and sustainability of the Mauritian economy while diversifying their portfolio with tangible assets. This presents a unique avenue for both financial returns and positive socio-economic impact.

Setting up a Mauritius offshore fund

Registration process

Establishing a Mauritius offshore fund entails submitting essential documentation to the Financial Services Commission (FSC). Investors must provide offering documents, comprehensive business plans and details outlining the fund’s investment strategy. This initial step is crucial in gaining regulatory approval and setting the foundation for the fund’s operations within the offshore financial framework.

Compliance and reporting

Ongoing compliance is paramount to maintain the integrity of the offshore financial system. Mauritius offshore funds are subject to annual audits to ensure transparency and adherence to regulatory standards. Strict compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations is also imperative. These measures safeguard against illicit financial activities and foster confidence among investors and regulatory bodies in the fund’s legitimacy and ethical practices.

Risks and mitigation strategies

  • Currency risks: The offshore fund’s exposure to currency risks requires careful evaluation and the implementation of effective hedging strategies. This involves actively managing and mitigating potential losses stemming from fluctuations in currency values, ensuring a more stable and predictable financial performance.
  • Diversification: Investors can adopt a diversified approach by spreading their investments across multiple currencies to mitigate currency risks further. This strategy minimises vulnerability to the adverse effects of currency fluctuations, enhancing the fund’s resilience in varying market conditions.
  • Market and regulatory risks: Given the dynamic nature of global financial regulations, continuous monitoring is essential. Staying informed about changes in regulatory frameworks enables the fund to adapt swiftly and proactively comply with evolving requirements, reducing the impact of unforeseen regulatory challenges.
  • Expert guidance: Engaging with local legal and financial experts is crucial for effectively navigating potential market and regulatory risks. These experts provide valuable insights and guidance, ensuring the Mauritius offshore fund remains compliant and well-positioned in the ever-changing landscape of financial regulations.

Set up and manage an offshore fund in Mauritius with Acclime

The Mauritius offshore fund emerges as a strategic and versatile financial vehicle, offering investors many benefits and opportunities. Its unique positioning as a global business company governed by Mauritius’s robust regulatory framework ensures flexibility and efficiency in international transactions.

In navigating the complexities of setting up and managing a Mauritius offshore fund, the support of experienced partners like Acclime becomes invaluable. Our expertise can aid investors in navigating regulatory landscapes, implementing robust compliance measures and maximising the fund’s potential within the ever-evolving global financial arena. As investors seek financial agility and strategic positioning, the Mauritius offshore fund stands out as a compelling choice, offering a harmonious blend of tax efficiency, regulatory stability and diverse investment opportunities.