Mauritius vs Singapore As An Offshore Financial Centre

Mauritius offers a free market, attractive tax regime and is one of the most developed countries in Africa. The country is reportedly trying to become the “new Singapore,” and this being done through an easy business formation process.

Low tax rates are also in effect, offering an attractive alternative as an offshore financial centre.

Let’s see how Mauritius compares to Singapore.

Mauritius as an Offshore Financial Centre

Mauritius wants to be a trade and investment hub, and it’s looking to guide African investors to its shores. The plan will be to cater to the elite in Africa, with tax treaties and benefits that are too advantageous to overlook.

Setting Up a Business in Mauritius

Often ranked as the easiest country in the region to do business, there are numerous benefits of a financial centre in Mauritius:

  • English and French are widely spoken
  • The island is politically stable
  • User-friendly legislation exists

Multiple business types exist:

  • Domestic Company
  • Authorized Company
  • Company holding a Category 1 Global Business Licence (GBC1)
  • Company holding a Category 2 Global Business Licence (GBC2)

Companies may be limited by:

  • Shares
  • Guarantee
  • Shares and guarantee

There are public and private companies as well as a limited life company and an unlimited company. A one-person company may also be formed, but within a six-month period, a secretary must be appointed in the event that the sole shareholder dies.

Companies wanting to reduce global earning taxation will often opt to create a GBC2 company, but a GBC1 entity may be a good option in certain situations.

When creating a GBC1, the fees and requirements are more stringent, but there are benefits.

Mauritius allows double taxation avoidance treaties as well as options for financial services, which are tax-beneficial.

Forming a GBC2

GBC2 companies can be setup as an offshore entity with:

  • US$1 in capital
  • One director
  • One shareholder
  • Resident registered agent

GBC2 are set to become abolished in 2019, but the entity does allow for legal exemption of the following in Mauritius:

  • Corporate tax
  • Capital gains tax
  • Withholding tax

Forming a GBC1

The GBC1 entity is a great option for holding activities, and this would include financial services. This entity type requires:

  • US$1 in capital
  • One shareholder
  • Two resident directors
  • Corporate bank account

The GBC1 entity can trade with locals, while the GBC2 cannot. Taxation is very low for this entity, much lower than in most countries.

Authorized Company

An authorized company is not considered a resident company, so there are no corporate taxes assessed on net profits. The business can be created with just:

  • US$1 in capital
  • One director
  • One shareholder
  • Resident registered agent

Limited Liability Company

A limited liability company, LLC, is a great option for some, and this will require:

  • One shareholder
  • US$1 in capital
  • One resident director

LLC companies are restricted in the tourism industry, and this entity is often optimal when businesses are going to operate a local business with staff that is local and trade is with residents. Otherwise, GBC1 will be the optimal choice.

Yearly Corporate Compliance

Yearly compliance requires a resident registered agent in the country, and requirements change depending on the type of business formed. A GBC2 entity does not require:

  • Annual financial statements
  • Corporate tax
  • Capital gains tax
  • Withholding tax

But the GBC2 entity must provide a financial summary every year to the Mauritius Financial Services Commission.

Authorized companies will need to file an income return with the Mauritius Revenue Authority and also maintain a resident registered agent.

LLCs will have to file annual statements and will have to pay Mauritius corporate tax.

Taxes               

Taxes will vary greatly by entity, and they are as follows:

GBC2

  • Exemption from corporate, capital gains and withholding tax

GBC1

  • 3% taxation on global earnings

Authorized Company

  • Does not pay corporate tax on net profits

LLC

  • 15% flat tax rate

Resident companies, as well as an LLC, will pay the traditional corporate tax rate of 15%.

Ease of Doing Business

Starting and doing business can take just hours after registering, and annual requirements are minimal. The island is very open to making it easy for companies to operate, and they have made legal reforms that allow small and medium-sized entities grow faster.

Lack of capital gains tax and low tax rates, along with online filing options make doing business easy in Mauritius, especially when compared to mainland Africa.

Trained Workforce

Mauritius is a very welcoming country, and nearly a million tourists visit the country annually. Finance and business outsourcing are becoming a large source of GDP, and it’s a cultural melting pot.

The multilingual workforce makes the country a great choice for a financial centre, with French and English widely spoken. Financial and legal personnel are in abundance. Men account for around 66% of the workforce, and female employment is on the rise.

Unemployment was 7.3% in 2016, and youth and women have the highest unemployment rate.

There is a shortage of middle management and technical employees, but a National Program was enacted to help fill the gap.

Singapore as an Offshore Financial Centre

Singapore is known for offering a business-friendly environment, and the government has worked to make the country one of the top offshore financial centres in the world.

Setting Up a Business in Singapore

Singapore makes it easy to start a business, and the process is straightforward. The country’s double taxation avoidance agreements and free trade agreements make business affordable in the country.

All entities need to have:

  • Entity names approved before incorporation
  • One resident director
  • Registered Singapore address
  • S$1 in paid-up capital
  • Professional firm formation (required for non-residents)

All non-residents must have a professional firm in Singapore form their business. This step, while it may add to the cost of incorporation, allows for a fast, law-abiding means of starting a business in Singapore.

Owners that move to the country will need to obtain an Entrepreneur or Employment Pass

Licenses may be required, depending on the business being conducted.

Yearly Corporate Compliance

Corporate compliance is also very easy, and this will include the following:

  • Chargeable income filing
  • Annual tax return filed with the IRA
  • Annual return filed with the ACRA
  • Annual general meeting
  • Financial statements
  • Financial statement audits
  • Qualified company secretary appointed within six months of incorporation

Companies may also need to register for Goods and Services Tax (GST) if the turnover exceeds the one-million mark. Depending on the business activity, the business may be required to obtain and maintain certain licenses.

Taxes

Taxation is low in Singapore, and the first S$300,000 will have a tax rate of less than 9%. When profits exceed this amount, a flat rate of 17% is assessed. GST tax rates are 7%, and this would be what other countries pay as VAT or sales tax.

The low tax rate is still higher than Mauritius in many cases, especially when net profit is over S$300,000.

Ease of Doing Business

Singapore has a very well-developed government, and the country's business environment is very robust. It's easy to do business in the country, and this is due to the country establishing three main agencies for business:

  • Legal Services Regulatory Authority
  • Monetary Authority of Singapore
  • Enterprise Singapore

Yearly compliance requirements are minimal, and the flat tax rate is a key reason for many companies starting an offshore financial centre in Singapore. The robust business environment in the country is one of the key reasons that Singapore has grown into one of the top places of incorporation for an offshore financial centre.

Trained Workforce

Businesses that will keep a physical presence in Singapore and leverage the workforce will benefit from one of the best education systems in the world. Singapore is known for being on the top of the world’s education rankings, and this is due to strict education requirements for all youths.

Math, reading and science remain the three subjects that the country excels in.

A population of 5.79 million makes Singapore’s available workforce much higher than Mauritius, and this allows for a higher number of potential employees. The country has what many consider a vibrant workforce, and this is a workforce that is known to:

  • Innovate quickly
  • Change and add new technology
  • Focus on productivity

Over 50% of the country’s population has a diploma or degree, and there is more than 67% of people in the workforce. This is advantageous to businesses that will be looking to hire locals to fill their ranks.

Low tax rates and a well-educated population means that the country’s workforce can fill most positions with ease.

Mauritius and Singapore both have their advantages. While the different types of business entities are beneficial in Mauritius, this also leads to confusion when not using a professional firm for incorporation.

Singapore’s straightforward incorporation is very beneficial, but the incorporation process, while fast, is still not as quick as it is in Mauritius.

Workforce-wise, Singapore has the advantage, but Mauritius has the lower overall tax structure even at the highest corporate tax rate of 15% versus Singapore’s 17% top tax rate. The optimal location to incorporate an offshore financial centre will depend on a variety of factors, including double taxation avoidance agreements with an owner’s resident country.

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