MAURITIUS Law and Practice Contributed by: Johanne Hague, Ashwin Mudhoo, Medina Torabally and Yushrah Bayjou, CMS Prism – in association with CMS
3.2 Recognition of Trusts A trust set up and administered in Mauritius is rec - ognised and regulated by the Trusts Act 2001. Such Act also recognises trusts settled and administered abroad. 3.3 Taxation of Trusts, Foundations and Similar Entities Located in Other Jurisdictions Under Mauritian law, a settlor may also be a ben - eficiary and a trustee of a trust (but they cannot be the only settlor, beneficiary and trustee). Similarly, a founder may be a council member or the beneficiary of a foundation. If a Mauritius resident is a trustee of a foreign trust or foundation, there should be no adverse tax conse - quences in Mauritius (assuming the Mauritius resident is not also a beneficiary). Since Mauritius taxes on the basis of residency (as opposed to citizenship), citizen - ship status (generally) does not have any impact on the taxability of an individual. If a Mauritius-resident beneficiary receives a distri - bution from a foreign trust or a foundation, the tax treatment of the distribution will (partly) depend on the treatment of the foreign trust/foundation. Any income distributions from a trust/foundation which is opaque under its law of establishment will typically be treated as a foreign-sourced dividend and be taxable in the hands of the resident beneficiary as per the applicable tax band under the progressive tax system effective from 1 July 2023. If the trust/foundation is transparent under its law of establishment, the underlying character of the dis - tribution will usually be respected in Mauritius – ie, income distributions will be taxable and capital dis - tributions will normally be treated as exempt in the hands of the resident beneficiary. 3.4 Tax Consequences of Fiduciary and Beneficiary Roles Mauritian trust and foundation law allows consider - able flexibility regarding the persons who may hold fiduciary and beneficiary positions. For example, a settlor may also be a trustee and beneficiary of a trust, provided that they are not the sole trustee and sole beneficiary at the same time. Similarly, a founder of
a foundation may also act as a council member or beneficiary. Domestic Structures In the context of a Mauritius trust or foundation, the mere fact that a beneficiary, settlor or founder also serves in a fiduciary capacity does not, of itself, trig - ger adverse tax consequences under Mauritian law. A trust or foundation is generally taxed as a sepa - rate taxable person. Accordingly, the tax treatment is determined by the residence and activities of the trust or foundation itself rather than by the overlap of functions performed by particular individuals. Distributions made by a Mauritius-resident trust or foundation to a Mauritius-resident beneficiary are gen - erally exempt from income tax in Mauritius. Practical Considerations Although there are generally no specific tax conse - quences arising solely because a beneficiary or donor also acts as a fiduciary, practitioners commonly ensure that governance arrangements demonstrate genuine fiduciary oversight and proper decision-making. This helps preserve the integrity of the structure and avoid challenges based on sham, agency or similar doc - trines in foreign jurisdictions. The most popular method for asset protection plan - ning in Mauritius is through the establishment of trusts or foundations. For a trust to be created, the parties will be required to transfer their assets into the trust by way of a deed of settlement, and the assets will cease to form part of their estate after such transfer. A trustee will be appointed to hold the assets on behalf of the beneficiaries, the heirs of the parents. Once the property is settled into a trust, the property no longer forms part of the estate of the settlor. However, a trust may be declared void if it was established with the intent to defraud persons who are creditors of the settlor at the time when the trust property was vested in the trustee. 4. Family Business Planning 4.1 Asset Protection
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