A Gateway to Africa

Africa’s services sector holds tremendous economic promise. It contributes to almost half of the continent’s output, and a number of African countries have emerged as services-oriented economies.

The services economy in Africa is a vital source of income and employment. In some countries, as much as two thirds of the workforce is engaged in services.

The rising continent of Africa as a whole will continue to see resilient economic growth and development in 2015.

As many African countries take steps to break the cycle of corruption and poverty by moving towards political stability and economic openness, this will result in economic and social advancement as well as an unprecedented inflow of foreign direct investment (FDI).

Industries such as mining and energy are attracting massive FDI, a large chunk of which is coming through private equity investments. Mauritius can play an important role in channelling those investments in a tax efficient manner and is increasingly being used as the preferred domicile for structuring acquisitions and new business opportunities in Africa.

Why? Firstly, Mauritius is the only financial services centre which is a member of all the major African regional organizations, such as the African Union, Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA) and Indian Ocean Commission (IOC).In fact, its neighbours consider it simply as an African country rather than a so called tax haven, and this makes it the preferred, recognized and tax efficient route for investments into Africa. In fact, all the funds co-invested by the IFC and sovereign funds are structured through Mauritius entities.

The membership of Mauritius in the various regional African trading blocs gives access to a considerable range of consumers, creating a regional market worth of over US$350 billion. Thus, Mauritius opens doors to huge opportunities for trade and services in all fields and investments, making it a natural gateway to African countries.

Secondly, Mauritius combines the traditional advantages of an international financial centre (no capital gains tax, no withholding tax, no capital duty on issued capital, confidentiality of information, no exchange controls and free repatriation of profits and capital) with the distinct advantages of it being a treaty-based jurisdiction, with a substantial network of Double Taxation Avoidance Agreements with over 40 countries including 13 with SADC and COMESA members namely Botswana, Lesotho, Madagascar, Mozambique , Namibia, Rwanda, Senegal, Seychelles, South Africa, Swaziland, Uganda, Zimbabwe and Congo. Under these treaties, there will be no capital gains tax implication in the African states irrespective of the introduction of any eventual capital gains tax if the recipient of the gains is a Mauritius company.

Furthermore, almost all African nations impose some withholding tax on dividend paid to non-residents, the rate of such imposition ranging generally between 10 to 20%. All Mauritius tax treaties limit the withholding tax on dividend. The treaty rates are generally 0% or 5% or 10%, thereby creating a potential tax savings of 5% to 20% depending on the country. As for capital gains tax, the treaties guarantee the maximum effective withholding tax rate in the face of potential changes in fiscal policy in the investee countries.

Thirdly, Mauritius has signed an IPPA with some 15 African member states.
The main purpose of an IPPA is to protect foreign investments from government interference with property rights in the form of expropriation, nationalization and compulsory purchase without proper compensation.

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