Introduction
Foundations are one of the latest legal entities to which it is possible to resort to organize one’s assets and property for business purposes or otherwise. The Foundations Act pursuant to which Foundations can be created under Mauritian law came into operation on the 1st of July 2012.
General
i. Place of Formation
Foundations can be created in Mauritius or abroad. In the latter case they can be redomiciled in Mauritius.
ii. Mode of Formation
Foundations can be either created by a charter or a will.
iii. Name, Purpose and Objects
There are specific provisions regulating the issue of the name of the Foundation. The Purpose and Objects of the Foundation will be specified in the Charter. Those objects can be for a charitable purpose or a non charitable purpose or both of these. The objects of a Foundation can also be for the benefit of a person or a class of persons or both of these. A Foundation can be used for business purposes.
iv. Articles of Foundation
In case the Charter states that Articles must be made, these shall be made and will inter alia contain provisions as to the distribution of assets made by the Council.
v. Regulator
The Regulator as regards Foundations is the Registrar of Companies.
vi. Registration and Separate legal personality
A Foundation will be conferred with a separate legal personality upon the procedure of Registration set out under the Act being completed. This means that the Foundation can have dealings with third parties in its own name. For these purposes it will be represented by its officers who will be able to bind it to contracts.
vii. Records and documents
A Foundation has a statutory duty to keep specified records and documents at its registered office.
viii. Removal from and Restoration to Register
The circumstances in which this may be done are specified under the Act.
ix. Winding up
Winding up of a Foundation may either be voluntary or by petition to the Court.
Internal Structure
(i) Persons involved
a. Founder
He is the one who initially endows the Foundation with Property. He may be a citizen or a non citizen. A Founder may also be a beneficiary.
b. Secretary
The Secretary of a Foundation may be a Management Company or such other person resident in Mauritius as may be authorized by the Commission.
c. Beneficiary
He is a person entitled to benefit under the Foundation. He is also someone in whose favour a power to distribute any Foundation Property may be exercised.
The property of the Foundation is managed by a Council. The Council also carries out the objects of the Foundation. The Council is set up in accordance with the rules contained in the Articles of Foundation and provisions of the Act.
Taxation
A Foundation will be taxed at the rate of 15 % on its chargeable income. A Foundation will be exempt from paying income tax in an income year where:
i. The Founder is not resident in Mauritius during that year or is a company holding a Category 1 Global Business License from the Financial Services Commission.
ii. The Beneficiaries are non resident throughout the year or hold a Category 1 Global Business License from the Financial Services Commission.
iii. The Foundation deposits a declaration of non residence within three months of the expiry of that income year. Fees payable to the Registrar of Companies These are set out in the Schedule to the enactment.
Taxation of Foundations
The Mauritius Foundations Act 2012 offers one of the most versatile and dynamic Foundations available from any jurisdiction and further promote the jurisdiction as a platform for wealth management services, succession and estate planning. Contrary to a Trust, a Foundation may have legal entity with hybrid features of a company and a trust, and can be established inter vivos (by charter) or by will, for (a) the benefit of beneficiaries/class of beneficiaries and (b) for charitable or non-charitable purposes or both.
Legal personality is established when the foundation is registered with the Mauritius Registrar of Foundations, which shall then issue a certificate of registration to the Foundation. Trusts and Foundations face a more or less similar tax regime.Foundations shall be liable to income tax on its chargeable income at the rate of 15% per annum and are required to submit annual tax returns not later than 31 March of each year.
Foundations holding a category 1 global business licence, shall be subject to an effective income tax rate pf 0-3%. Such foundations shall have access to tax treaty network of Mauritius.
A foundation of which the founder and beneficiaries are non-residents in any income tax year or hold a Category 1 Global business licence can annually elect to be non-resident in Mauritius for tax purposes, hence not liable to income tax in Mauritius.
Any distribution from a foundation is deemed to be dividend, hence not taxable in the hands of the beneficiaries in Mauritius.
Offshore Foundations, Private Interest Foundation
A foundation is a legal entity, with no members or shareholders. A foundation is established to reflect the wishes and requirements of the Founder, who may be an individual or a corporate entity. The Founder`s wishes and requirements are found in the Foundation`s Deed of Incorporation, Articles of Association and By Laws.
Foundations can be established for a fixed or definite period of time and can be used for charitable, commercial or for family purposes.
Foundations are very important when structuring the ownership of family and corporate assets.
Practical Uses of Offshore Foundations:
Substitute of the testament or will Provide for the educatioin, housing, maintenance or profit sharing of family members Protect family business and provide continuity to future generations Protect minors, disable personas and persons unable to administer their assets Administer payments, distribution of assets to family members Protect assets from high taxes, claims by creditors, political instability or forced heirships Operate bank accounts worldwide
Assets that can be help by an Offshore Foundation
Assets that can be help by an Offshore Foundation
- Bank deposits
- Investment portfolios
- Real and intellectual property
- Life assurance policies
- Shares and stocks in quoted and private companies
