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MAURITIUS


Port Louis


those making their way to the island. Law firm Bedell moved there early in 2011, offering a full law and fiduciary-services business. According to Mark Dunlop, who heads its Mauritian office, Bedell’s work there is similar to that in the Channel Islands, only replacing Jersey and Guernsey’s focus on Europe and the US with India and Asian companies moving into Africa. “Channel Islands companies are setting


up in Mauritius as it offers business-friendly platforms in a low-cost environment,” says Mike Bird, Chief Country Officer at Deutsche Bank (Mauritius). “New businesses can easily settle in and be operational in just three days. Doing business there is easy, as Mauritius complies with best practice in terms of transparency, good governance and ethics.” The key difference, however, is the


Taxing times


Vodafone, India and Mauritius When Vodafone picked up the Indian telecoms assets of Hong Kong’s Hutchison Whampoa for $11bn in 2007, the company thought it would avoid a hefty tax bill. The deal had taken place between two offshore corporations – Vodafone and Hutchison – and the acquired entity was registered in the Cayman Islands. But the Indian government had other ideas, and slapped the mobile giant with a bill for 112bn rupees ($2.5bn) in capital gains tax, suggesting that any transaction involving Indian assets was now subject to local taxation – even when such deals were made overseas.


Five years on, the case has taken another twist, with India’s highest court ruling in Vodafone’s favour in January. This is good news for the likes of Cadbury’s, AT&T, SAB Miller and GE – who are all in a similar predicament – and for Mauritius itself. The island is currently responsible for 42 per cent of foreign direct investment into India, and the country has been absolutely critical to its success to date. India is clearly keen to prevent foreigners using vehicles to buy and sell its companies via offshore routes, and to stop ‘round-tripping’, whereby Indian residents avoid capital gains tax by going via offshore structures. Again, Mauritius is currently top choice.


But despite the ruling, the question marks still remain. The Indian government has since introduced the Direct Tax Code, effective from 1 April 2012, which will tighten the tax net on offshore share acquisitions and help steer the large chunk of tax currently lost to offshore vehicles back into India’s needy public purse. While Mauritius’ double tax treaty is unlikely to be abolished, its financial community will be watching developments closely.


30 businesslife.co February/March 2012


maturity of the market. “The banking industry has developed a lot in the past 10 years, but the legal side hasn’t moved at the same pace,” says Dunlop. “They don’t have the international connections or the support staff. That was good for us – the idea was to set up and establish a market. The regulator has been encouraging, and the likes of HSBC were saying that if we moved over they’d have work for us. So the move has been somewhat client-driven too.”


Small fish, big pond But you may not want to pack your sun block and BlackBerry just yet. Mauritius still has a long way to go. Its transport and infrastructure remain behind that of more established rivals, and it’s facing some stiff competition. In April 2011, Singapore trumped Mauritius as the single biggest source of foreign direct investment into India for the first time. Singapore boasts an enviable double tax treaty with India, as well as equally strong cultural links (a third of the population are Indian). It also has its sights set on challenging the likes of Switzerland for financial might, leaving Mauritius looking a comparative minnow. “It’s difficult to see how it could credibly


compete with places like Singapore in the current environment,” says Sean Cheong, Director of Collas Crill’s Singapore office. “Mauritius isn’t on the same level as the Channel Islands or Singapore. Yes, it has developed incredibly quickly and has a lot going for it, but if you’re looking to package funds in a way that will attract European investors, you wouldn’t use a Mauritian structure. It’s still a long way behind.”


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