The Income Tax Act 1995 of Mauritius provides companies with various tax credits to alleviate the burden of foreign income taxes:
Credit for Foreign Income Tax Paid
Companies can claim a credit for foreign income taxes paid on their foreign source income. This credit offsets the Mauritius tax liability attributable to the same income, ensuring that companies are not subject to double taxation on their foreign earnings.
Sparing Tax Credit
Under the Income Tax Act 1995, companies may also qualify for a sparing tax credit. This credit compensates for tax deemed to have been paid on certain types of income, enhancing the attractiveness of Mauritius as a jurisdiction for international business operations.
Underlying Tax Credit on Dividend Income
In cases involving dividend income, companies may be eligible for an underlying tax credit. This credit applies to the tax paid on the income out of which dividends are distributed, subject to specific conditions outlined in the regulations.
Limits on Foreign Tax Credits
It’s important to note that the total foreign tax credits claimed by a company should not exceed the amount of Mauritius tax payable on its foreign source income. This limitation ensures that while double taxation is mitigated, companies do not use foreign tax credits to reduce their overall tax liability below what is owed in Mauritius.
Evolution of Regulations
The Income Tax (Foreign Tax Credit) Regulation 1996, as amended, governs the administration of these tax credits. Amendments over the years have adjusted the presumed amount of foreign tax eligible for credit, reflecting Mauritius’ ongoing efforts to align its tax policies with international standards and promote foreign investment.
Mauritius Tax Policy
Mauritius’ approach to foreign tax credits aims to be generous to taxpayers, facilitating international business and investment by avoiding double taxation. These regulations are designed to prevent fiscal barriers that could deter foreign entities from operating in Mauritius, enhancing the jurisdiction’s appeal as a competitive global financial hub.
Conclusion
In conclusion, the Foreign Tax Credit provisions under the Mauritius Income Tax Act 1995 play a critical role in supporting companies with foreign operations. By providing relief from foreign income taxes through various credits, Mauritius promotes economic growth and ensures a fair and attractive tax environment for international investors and businesses operating within its jurisdiction.