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Mauritius Revenue Authority issues guidance regarding place of effective management

Executive summary

On 28 November 2018, the Mauritius Revenue Authority (MRA) issued a Statement of Practice (SOP) regarding section 73A of the Income Tax Act (the Act) on the place of effective management (POEM).

The SOP sets forth the following provisions:

  • All the relevant facts and circumstances should be examined.
  • Consideration will be given to the impact of the use of Information and Communication Technology.
  • The strategic decisions on the company’s core activities should be taken in Mauritius for any Mauritian resident company.
  • Either a majority of the Board of Director’s meetings should be held in Mauritius or the executive management should be regularly exercised in Mauritius.

Detailed discussion

Section 73A of the Act effectively overrides the central management and control test for a Mauritian incorporated company: further to the changes made by the Finance (Miscellaneous Provisions) Act 2018 (FMPA 2018) to the Act and the Financial Services Act, section 73A of the Act applies to any Mauritian incorporated company. Hence, it also apples to a company that holds a Global Business License as well as a domestic company.

It is encouraging to note that the SOP refers to the business activities of the company and also specifically highlights the impact of information and communication technologies.

For any Mauritian company to be considered to be tax resident in Mauritius all its strategic decisions relating to its core income generating activities should be made in Mauritius. Depending on the business activities of the company, it may have income generating activities in more than one country. The SOP refers to the decision making and not the place of such income earning activities.

The SOP also provides that the majority of the Board of Director’s meetings should be in Mauritius or its executive management is regularly exercised in Mauritius. This is in addition to the fact that the strategic decision on the core income generating activities of the company should be in Mauritius.

We do not foresee any practical challenge on the place of Board meetings being in Mauritius. The fact that the requirement is for a majority of Board meetings to be in Mauritius implies that the tax residence of a company would not be jeopardized if for example it is compelled to have a Board meeting outside of Mauritius for commercial reasons. This may, for example, arise in the context of the acquisition of the shares of a foreign company.

The regular exercise of the management of the company in Mauritius is not required, though in practice it should not pose any practical challenge for a number of companies. For example, a company that has a distribution center in Mauritius will have its executive team in Mauritius though its activities may involve the trading of goods in international waters.

It is important to highlight the fact that the requirement to submit a tax return still applies even though a company is considered to be resident outside of Mauritius on the basis that its POEM is outside of Mauritius. The tax laws of the country where the POEM is situated should be assessed to reach a meaningful conclusion on the direct tax consequences.

It is anticipated that the SOP will also be used by the Financial Services Commission in the context of an authorized company where it is a mandatory requirement for the company to have its POEM outside of Mauritius.

The concept of POEM is no longer used in the Organisation for Economic Co-operation and Development (OECD) Model Commentary further to Action 6 of the OECD/G20 Project on treaty abuse. The 2017 version of the OECD Model Commentary provides that the case of dual resident companies is relatively rare and provides that there have been a number of tax avoidance schemes involving dual resident companies. It is for this reason that the question of a dual resident company is left to the two Contracting States.

Irrespective of the SOP, a foreign tax authority may argue that the POEM of a Mauritian incorporated company is not in Mauritius according to its domestic law and/or the fact that the key management and commercial decisions are in substance taken in another country.


  1. Mauritian controlled entities should not generally be affected by this SOP.
  2. Mauritian incorporated companies should carefully assess the impact of this SOP: this assessment should not be confined to companies that hold Global Business Licenses.
  3. Considering the amendment made to the FSA, robust procedures should be implemented to address any challenges from any foreign authority.
  4. Notwithstanding this SOP, the laws and practice of the other jurisdiction is required to ensure the desired tax outcome is achieved.
  5. A Mauritian incorporated company that considers its POEM to be outside of Mauritius should assess the tax implications in the country where its POEM is situated. The other country may have a tax treaty with Mauritius: in such a case it is possible for both Mauritius and another country to tax the profits of the company. Any Mauritian sourced income may be subject to double taxation.

EYG no. 012068-18Gbl

Download this Tax Alert as a PDF file.

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