Common pitfalls to avoid when setting up a business in Mauritius

Choosing the right legal structure

Launching a business in Mauritius can be a pivotal and rewarding step in your professional journey. However, it also comes with its share of complexities, especially when it comes to choosing the appropriate legal structure. A decision made too hastily or without understanding the legal and fiscal implications can lead to unforeseen costs, regulatory complications, or even setbacks that could have been avoided. C&S Secretarial Services outlines the key legal structures available in Mauritius, along with their pros, cons, and the most common mistakes to avoid.

Legal structures available in Mauritius

Mauritius has carved a reputation as a trusted business destination for international investors. Its tax efficiency, sound legal framework, and administrative simplicity make it an appealing jurisdiction.

Your legal structure will shape how your company is taxed, how it operates day to day, and how it interacts with both local and international markets.

Global Business Company (GBC)

Tailored for international operations, the GBC is well-suited for companies looking to leverage Mauritius’ network of tax treaties. It enables entities to reduce their tax burden significantly when structured correctly.

Advantages:

• GBCs leverage Mauritius’ double taxation agreements, significantly reducing tax liabilities in partner countries.
• GBCs are ideal for businesses involved in export or offshore services, offering a robust legal and fiscal framework.
• The GBC structure grants a level of confidentiality and asset protection attractive to international stakeholders.

Disadvantages:

• GBCs involve higher operating costs due to regulatory compliance and the requirement to appoint a licensed management company.
• They may not be practical for businesses focused solely on the domestic Mauritian market.

Authorised Company (AC)

More flexible than a GBC, the Authorised Company is intended for offshore operations. While it does not qualify for double taxation agreements, its simplicity and lower compliance requirements make it attractive for certain business models.

Advantages:

• Unlike GBCs, an Authorised Company offers a streamlined and cost-efficient structure for companies not reliant on tax treaties.
• The structure has lower regulatory burden and makes it suitable for startups and smaller operations.

Disadvantages:

• An AC does not benefit from Mauritius’ tax treaties, limiting its appeal for businesses seeking global tax optimisation.
• The structure is not suitable for engaging with Mauritian clients or operating locally.

Domestic Company

For entrepreneurs focused solely on the local Mauritian market, the Domestic Company offers a straightforward and accessible business structure.

Advantages:

• The Domestic Company offers simpler administration and fewer legal complexities.
• It is also tailored to local tax regulations, easing compliance.

Disadvantages:

• Domestic companies are not intended for international business expansion.
• They lack the tax advantages associated with a GBC.

What would choosing the wrong company structure mean for your business?

Selecting the wrong legal framework can have lasting financial and operational consequences. Here are a few of the most common missteps:

1. Opting for a domestic company for global operations

Choosing a Domestic Company while pursuing international business objectives can result in missing out on tax treaty benefits. This often leads to higher tax exposure, particularly problematic if your partners or clients are based in high-tax jurisdictions.

2. Underestimating the cost of managing a GBC

While a GBC offers attractive tax perks, it also comes with regulatory requirements that are not negligible. If the cost of compliance, such as licensing, audits, and local management, isn’t factored into your budget, financial strain may follow.

3. Misusing an Authorised Company for local business

ACs are designed for offshore activities. Using this structure to interact with clients or operate within Mauritius can trigger complications with local tax authorities and create unnecessary legal hurdles.

How to choose the right business structure for your company in Mauritius?

The key is to align your structure with your long-term goals and business model. Here’s how to approach it wisely:

Assess your business scope

Are your operations focused on Mauritius, or are you looking beyond? For local business, a Domestic Company works well. For international dealings, a GBC or AC may be more suitable.

Consult with C&S Secretarial Services

With years of experience supporting companies across multiple sectors, the team at C&S offers tailored guidance for setting up and managing businesses in Mauritius. They will walk you through every step, ensuring full legal and fiscal compliance.

Consider long-term costs

Even though GBCs offer attractive fiscal incentives, managing them requires sustained investment. Assess your financial capacity to maintain compliance over time.

Understand regulatory obligations

Each structure comes with its own set of legal duties. Take the time to fully grasp what’s required, both at the setup stage and for ongoing operations.

Conclusion

Choosing the right legal framework for your Mauritian business is a strategic decision that impacts everything, from taxation to operational flexibility. By understanding the available options and seeking expert advice from professionals like C&S Secretarial Services, you can avoid costly missteps and set the foundation for long-term success. Their expertise will ensure your setup is compliant, your structure is aligned with your goals, and your launch is both swift and secure.