Holding company

Definition

A holding company is an entity whose main activity consists of holding interests in other companies — subsidiaries or related companies — rather than carrying on an operating activity itself. It is typically used to centralise the holding of shares, to organise the governance of a group, to facilitate the transfer or protection of assets, or to structure investments spread across several jurisdictions. The holding company generally receives dividends, interest or capital gains from the companies it holds, and may also provide them with centralised management services.

Framework in Mauritius

In Mauritius, a holding company may be set up under one of two regimes, governed by the Companies Act 2001 and, for internationally oriented structures, supervised by the Financial Services Commission (FSC). The Domestic Company is tax resident in Mauritius and falls under the standard corporate tax regime; it is suited to a holding company whose activity is connected with Mauritius. The Global Business Company (GBC) is also tax resident, but is aimed at internationally oriented structures: it gives access to the Mauritian double taxation agreement network and may benefit from a partial exemption on certain foreign-source income, subject to compliance with economic substance conditions — effective management activities, qualified staff and expenditure proportionate to activity in Mauritius. The GBC must be administered by a management company licensed by the FSC, the only entity authorised to handle its management and regulatory compliance.

In practice

The choice between a Domestic Company and a GBC depends in particular on where the assets held are located, whether or not access to tax treaties is of interest, and the profile of the investors involved. A Mauritian holding company is frequently used to bring together interests located in several countries, simplify the governance of a family or business group, or prepare for a transfer of wealth, alongside a trust or a foundation. Access to the GBC's tax benefits remains conditional on actual compliance with the substance requirements; its scope is assessed case by case, according to each group's own situation, and no outcome can be guaranteed. Setting up and administering a Mauritian holding company in every case involves a management company licensed by the FSC.

Related terms

Global Business Company (GBC): the structure generally favoured for an internationally oriented holding company. Authorised Company (AC): a non-tax-resident alternative, without access to double taxation agreements. Economic substance: a condition for access to the GBC's tax benefits. Double taxation agreement: the treaty network accessible via the GBC. Management Company: the entity licensed by the FSC in charge of administering the chosen structure.

Related terms