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Amendment to Non-Citizens (Property Restriction) Act generates Rs 6.6 billion for Government
The Mauritius government has managed to generate Rs 6.6 billion in revenue based on changes made to the Non-Citizens (Property Restriction) Act - these amendments were implemented in April 2021.
The amendments to the Act were to prevent foreigners from being able to acquire, hold or dispose of property in Mauritius through a foundation - as well as ensuring foreigners owning property in Mauritius required authorization from the office of the Prime Minister before disposing of the asset. The main change - removing the ability of foreigners to hold and transfer property in foundations has closed a loophole that previously allowed property transfers to take place without the payment of transfer fees and applicable taxes. Mauritius already has a low transfer fee of only 5%, but it was found that the number of trusts operating in this loophole to avoid taxes payable on transfer of ownership had grown significantly and therefore warranted a change to the Act to avoid continued losses of taxable income as per the Financial Services Regulation within Mauritius.
Tracing roots back to the problem is that the financial regulations of Mauritius contained a glaring loophole when it came to foundations; it did not actually regulate them very much. Gaming the system in this way had other benefits too. According to Dwarka, “this loophole about foundations distorted competition by allowing such people to easily buy property and then sell their beneficial interest in the foundation without having to pay registration duties or taxes, while those buying those same properties via the EDB (Economic Development Board) had to pay a five percent registration duty.” The other problem was that, unlike other foreign buyers who could only buy in some luxury housing developments, to prevent inflating a housing bubble everywhere else for Mauritians, foreign buyers buying properties through foundations could technically buy anywhere in the country. Precisely undermining what the Non-Citizens Act was set for.
Therefore, the Mauritian government has now successfully implemented a change to the Act that forces individuals, institutions and corporations to follow the correct procedure in the disposal of real estate assets - and in doing so has generated Rs 6.6 billion in additional revenue in the past 18 months alone.
