Mauritius tightens over offshore funds
- April 21, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Mauritius tightens over offshore funds
Subject: Economy
Sec :External Sector
Increased Scrutiny:
- Mauritius imposes stricter scrutiny on offshore fund structures, leading to longer timelines and higher compliance burdens for India-focused funds.
- Recent amendments to the India-Mauritius tax treaty and tax notices from Indian authorities to Mauritius-based funds contribute to the tighter regulatory environment.
- Emerging alternatives like GIFT City may deter funds from choosing Mauritius as their jurisdiction.
Image Makeover:
- Mauritius, having exited the FATF grey list in October 2021, seeks to distance itself from its reputation as a quasi-tax haven.
- Enhanced KYC measures and routine audits by the Financial Services Commission aim to align with international tax norms.
Intensified Scrutiny Process:
- The time required for fund setup has increased to 6-9 months due to intensified scrutiny.
- Greater emphasis on beneficial owner experience, fund sources, commercial substance, and compliance measures.
- Background checks on fund sponsors and managers conducted by the FSC to verify antecedents.
Challenges and Impact:
- Compliance requirements lead to changes in management company pricing, driven by rising costs and scarcity of skilled talent.
- Reluctance among institutional investors to provide personal information required for compliance.
- Mauritius emphasizes its commitment to eliminating the tax haven image but faces challenges in dispelling this perception.
Exploring Alternatives:
- Larger funds consider alternative jurisdictions like GIFT City, Singapore, and Cayman Islands due to difficulties in setting up funds in Mauritius.
GIFT City (Gujarat International Finance Tec-City):
- Location:
- GIFT City is situated in Gandhinagar, Gujarat, India.
- It is strategically positioned to leverage the state’s infrastructure and connectivity advantages.
- Components:
- GIFT City comprises a multi-service Special Economic Zone (SEZ) with two main components:
- India’s first International Financial Services Centre (IFSC)
- An exclusive Domestic Tariff Area (DTA)
- Vision:
- GIFT City is envisioned as an integrated hub for financial and technology services, not only catering to India but also serving global markets.
- It aims to provide a conducive environment for businesses to thrive and innovate in the fields of finance and technology.
- Regulatory Framework:
- The International Financial Services Centre Authority (IFSCA) serves as the unified regulator responsible for the development and regulation of financial products, services, and institutions within IFSCs in India.
- It ensures a robust regulatory environment conducive to the growth of financial services in GIFT City.