Economic substance: an imperative for GBCs in Mauritius
Since the major reforms of 2019, aligned with the recommendations of the OECD (BEPS Action 5), the Global Forum on Transparency and the EU Code of Conduct Group, economic substance requirements have become a central pillar of the Mauritian regulatory framework for Global Business companies.
These requirements ensure that Mauritius's tax advantages — in particular the 3% effective rate via the DFTC — correspond to genuine economic activity on the territory. Compliance with these obligations is essential to maintain the GBL licence of a Global Business Company, benefit from the deemed foreign tax credit, and preserve Mauritius's reputation as a compliant financial centre.
Strategic stake: Failure to comply with substance requirements can lead not only to the loss of the GBL licence and the DFTC, but also to the spontaneous exchange of information with the country of residence of the shareholders/beneficial owners, potentially exposing them to double taxation.
Regulatory framework
Legislative sources
- Financial Services Act 2007 (amended 2018-2019) — General framework for substance requirements applicable to FSC-licensed entities
- Income Tax Act (Section 73A and following) — Substance conditions to benefit from the deemed foreign tax credit (DFTC)
- FSC Guidelines on Substance Requirements (last updated 2023) — Detailed guidance on the levels expected by type of activity
- OECD BEPS Action 5 — International substance standards to which Mauritius has committed to comply
- EU Code of Conduct Group criteria — European good tax governance criteria, which conditioned Mauritius's continued place on the white list
The four fundamental principles
| Principle | Description | Indicators verified |
|---|---|---|
| Management and control from Mauritius | Strategic decisions must be taken by competent persons present in Mauritius | Board meeting minutes, agendas, decision notes, evidence of physical attendance |
| Qualified staff in Mauritius | The entity must employ (directly or through outsourcing) staff sufficiently qualified for its activity | Employment contracts, CVs, proof of residence, payslips, social contributions |
| Operating expenditure in Mauritius | Expenditure incurred in Mauritius must be proportionate to the volume of activity | Local invoices, leases, bank statements, financial statements |
| Premises in Mauritius | The entity must have physical premises adapted to its activity | Commercial lease, photos of the premises, operational address distinct from the PO box |
Requirements by type of activity
Pure Equity Holding Company (pure holding)
Pure holding companies whose activity is limited to holding equity interests benefit from lighter requirements, though not non-existent ones:
- At least two resident directors in Mauritius (qualified natural persons, understanding the holding's activity)
- Regular board meetings in Mauritius (at least 2 per year, 4 recommended) with detailed minutes
- Registered office in Mauritius via a registered office in Mauritius (physical address, not a mere PO box)
- Keeping of records and accounts in Mauritius, accessible for inspection
- Decisions to acquire and dispose of equity interests must be documented as having been taken in Mauritius
- No obligation for dedicated staff or specific operational offices
Service and trading companies (non-holding)
Companies carrying out service, trading or management activities must meet enhanced requirements proportionate to their activity:
- Qualified employees in Mauritius — Competent staff in sufficient numbers for the activity: analysts, accountants, compliance officers, traders as applicable
- Operational offices — Equipped premises (workstations, IT, telephony) adapted to the number of employees and the activity
- Frequent board meetings — At least 4 per year, with a majority of directors physically present in Mauritius
- Local decision-making — Key strategic decisions (contracts, investments, budgets, recruitment) documented in the minutes
- Proportionate expenditure — Salaries, rent, professional services, travel: the whole must be consistent with turnover
- IT infrastructure — Computer systems accessible and operated from Mauritius
Substance levels by activity
| Activity | Level | Key requirements | Indicative annual budget |
|---|---|---|---|
| Pure equity holding | Light | Resident directors, board meetings, records | USD 5,000 - 15,000 |
| Trading | Standard | Sales staff, offices, local decisions | USD 20,000 - 50,000 |
| Fund management (CIS Manager) | Enhanced | Management team, compliance, IT infrastructure | USD 50,000 - 150,000 |
| Treasury management | Standard | Qualified financial staff, treasury decisions | USD 25,000 - 60,000 |
| Headquarters / HQ services | Enhanced | Management team, coordination functions | USD 40,000 - 100,000 |
| Shipping / maritime | Standard | Fleet management staff, offices | USD 20,000 - 50,000 |
| Licensing (IP) | Standard | Qualified staff, R&D or IP management | USD 20,000 - 60,000 |
Our economic substance services
Initial setup
Substance diagnosis
Assessment of your GBL entity's current substance level against the FSC requirements applicable to your type of activity. Identification of gaps and risks.
Compliance plan
Tailored recommendations: number and profile of employees required, type of offices, frequency of board meetings, projected budget, implementation timeline.
Operational implementation
Appointment of qualified resident directors, provision of equipped offices, recruitment or secondment of staff, IT configuration, opening of local bank accounts.
Documentation and processes
Implementation of local decision-making processes, board meeting minutes templates, approval workflows, archiving of substance evidence.
Ongoing services
- Organisation of board meetings — Logistics (room, videoconferencing), preparation of files, drafting of detailed minutes documenting decisions taken in Mauritius
- Support for strategic decisions — Preparation of analyses, recommendations and decision files for the board
- Substance reporting — Preparation and filing of the annual substance declaration with the FSC
- Regulatory monitoring — Tracking of developments in FSC guidelines and OECD standards, particularly regarding international compliance (FATCA/CRS)
- Preparation for FSC inspections — Organisation of files, inspection simulation, briefing of staff and directors
- Management of outsourced staff — Payroll, social contributions, employment contracts for seconded staff
Annual substance declaration
Every GBL company must submit an annual economic substance declaration to the FSC, with the following information:
- Nature and detail of the activities carried out (core income generating activities - CIGA)
- Number of qualified employees in Mauritius, their roles and qualifications
- Amount of operating expenditure in Mauritius (breakdown by category)
- Description of the premises and infrastructure (address, surface area, equipment)
- Number, dates and locations of board meetings held in Mauritius
- List of strategic decisions taken in Mauritius with references to the minutes
- Detail of outsourced activities and identification of the service providers concerned
- Income generated and its link with the activities carried out in Mauritius
Best practices
Document everything
Keep agendas, detailed minutes, analysis reports, decision emails, evidence of attendance (boarding passes, attendance registers). The FSC requires tangible evidence.
Avoid empty shells
The FSC identifies and penalises structures without genuine activity. Directors must understand the activity and be able to justify the decisions taken at board meetings.
Proportionality
The level of substance must be proportionate to the volume of activity and income. A GBC with USD 10M of income and USD 5,000 of local expenditure will raise questions.
Anticipate inspections
Maintain an up-to-date and easily accessible substance file. The FSC may carry out unannounced inspections. Prepare your staff to answer questions about the company's activity.
Assess your economic substance
Whether you have a simple holding or an operating company, our experts assess your current substance level and put in place the measures needed for full compliance with FSC and OECD requirements.