Set up Mauritius Trust
Tetra Consultants assists our international clients to set up Mauritius Trust. For a typical set up of a Trust, an individual or legal entity (Settlor), transfers the legal ownership of assets (Trust Property) to another person or persons (Trustees) to hold on behalf of other persons (Beneficiaries). The Trustees have an equitable obligation which bind them to hold and deal with the Trust Property in accordance with the terms of the Trust.
Simply put, a non-resident Settlor will set up Mauritius Trust. Incomes from dividends and interests will be paid to this Trust and distributed to its Beneficiaries. Contact us now for a free consultation. Our team of experts will revert within the next 24 hours.
Why set up Trust in Mauritius?
Advantages of Mauritius Trust
- Our international clients choose to set up Trust in Mauritius as it gives them the protection and ease for long-term wealth management. Family assets are well planned and preserved over generations while enjoying tax efficiency. Once the Mauritius Trust is successfully set up, you can own and manage any companies, family businesses or wealth.
- Simply put, a Mauritius Trust protects a person’s assets against personal liability, foreign exchange controls, risk of confiscation and high taxes. The information on the Settlor or Beneficiary is also confidential and inaccessible and there are no requirements for the Trust Deed to be registered with any Registrar. The main benefit of setting up a trust in Mauritius is the tax benefits accrued to non-resident Trusts.
Disadvantages of Mauritius Trust
- The main disadvantage is that the cost of setting up a Trust in Mauritius can be high due to the administration and maintenance costs. A Settlor may also be reluctant to relinquish control of the assets to the Trustees and this will lead to less effective management of the assets by the Trustees.
- A Trust can be revocable or irrevocable, but both have their disadvantages. An irrevocable Trust is inflexible and may lead to loss of control of assets while a revocable Trust or a Living Trust offers less asset protection and tax benefits.
Types of Trust available in Mauritius
According to Mauritius Trusts Act 2001, there are different types of Trusts in Mauritius, mainly Life Interest/Contingent interest Trust, Protective or Discretionary Trust, Employee Benefit Trust, Purpose Trust, Charitable Trust or Foreign Trust. In typical cases, Trust assets usually consist of company shares, investments, real estate, insurance policies and other assets.
Life Interest/Contingent Interest Trust
- Under a Life Interest Trust, the principal beneficiaries will receive interest income from the Trust throughout their lifetime. Upon their death, either the assets will be passed on to the other beneficiaries listed in the Trust or income earned from the assets in the Trust will be distributed based on the amount and conditions stipulated in the Trust Deed.
- Under a Discretionary Trust, the Trustee has greater discretion to decide the time and amount of income to be distributed to the Beneficiaries. The Trustee can also decide which Beneficiaries will receive the income. A Discretionary Trust is helpful for Beneficiaries with creditors or with poor money-management skills.
Employee Benefit Trust
- An Employee Benefit Trust usually takes the form of a discretionary trust which main purpose is to benefit the employees of a particular company. Typically, the Settlor is the company, and the Beneficiaries are the employees.
- A Purpose Trust is formed for a non-charitable purpose and has no Beneficiaries. However, a Purpose Trust is required to have an Enforcer. A Purpose Trust has a maximum lifespan of 25 years in Mauritius.
- A Charitable Trust is considered a purpose Trust that is formed for charitable purposes. These includes poverty relief, improvement of education quality, conservation of the environment and any other purposes that benefit the general public. The charitable activities are not restricted to Mauritius or Mauritius locals. A Charitable Trust has an indefinite lifespan.
- A Foreign Trust is a Trust that is established in a foreign country that the Settlor does not reside in. A Foreign Trust will be subjected to the legislation and taxes of the jurisdiction in which it is located in.
- Cannot have more than four Trustees
- Must have at least one local Qualified Trustee
- Must have an Enforcer if the Trust is a Purpose Trust
- Settlor cannot be the only Beneficiary of the Trust
- Assets in the Mauritius trust cannot include real estate located in Mauritius
- No disclosure of confidential information regarding the Trust, unless required by a court order
- Choice of proper law by the Settlor
- Possibility for the Settlor to leave on or before his death letters of wishes setting out how he/she would wish the Trust to be administered
- Anti-forced heirship rules
- Recognition of Purpose Trusts
- Duration of Trusts limited to 99 years, except for Charitable Trusts (indefinite) and Purpose Trusts (25 years)
- Possibility to accumulate income for any period during the duration of the Trust
- Possibility to migrate trusts from other jurisdictions
- No perpetuity rules for Charitable Trusts
- Trust instrument may contain power to vary terms of Trust
- No disclosure of the Trustee’s deliberations, the name of the Settlors and the Beneficiaries unless the latter is a resident of Mauritius or a body corporate resident in Mauritius
How to set up a trust in Mauritius?
Step 1: Registration of the Trust with the Mauritius Registrar (Optional)
- To protect the confidentiality of its clients, a Mauritius Trust is not required to be registered with any registrar. However, a Trustee may choose to register the Trust with the Registrar General if they wish to have an official date of creation.
Step 2: Preparation of the Trust Deed
- A Mauritius Trust is formed when the Settlor transfers the legal control of assets to the Trustees. To set up a Mauritius Trust, the Settlor will have to prepare the Trust Deed. The Trust Deed will clearly state the rights that the Trustee has with the assets and the obligations that need to be carried out by the Trustee for the benefit of the Beneficiaries. A Trust Deed can be either of the following document:
- Settlement: A deed signed by both the settlor and trustee.
- Declaration of trust: A deed signed and executed by the trustee.
- In essence, the Trust Deed will contain information about the names of the Trustees and the Beneficiaries, the intention of the Settlor to create a trust, the administrative power granted to the Trustees, the specific assets transferred to the Trust and the duration of the Trust. In cases where confidentiality is a concern, the Settlor may prefer Trustees to be bound by a Declaration of Trust instead.
Step 3: Transfer of legal control of assets from Settlor to Trustees
- The Mauritius Trust formation will be completed once the Settlor has transferred the legal control of the assets to the Trustees through the Trust Deed. The Trustees will handle the Trust assets according to the terms and conditions stated in the Trust Deed for the benefits of the Beneficiaries. All Trusts in Mauritius will be governed under the Mauritius Trusts Act 2001, that states that a Trust cannot be invalidated even if the Settlor has filed for bankruptcy and can only be voided by the Court if it is deemed that the Trust was created with the purpose to defraud or conduct illegal activities. The Trusts Act 2001 Act also stipulates a maximum duration of 99 years for trusts, with the exception of purpose trusts (25 years) and charitable trusts.
Step 4: Requirements of Mauritius Trust
- The number of Trustees in a Trust cannot be more than four and at least one out of the four Trustees must be a local qualified Trustee who is regulated and licensed by the Mauritius Financial Services Commission (FSC). A Mauritius Trust can have a Protector who will be in charge of appointing, removing, and advising a Trustee.
Conditions for declaration of non-residency of Mauritius Trust
Under the Mauritius Trusts Act 2001, the Trustee can declare to the Mauritius Revenue Authority that the Trust is non-resident for an income year if:
- There are no resident Settlors or Beneficiaries in the trust.
- There are no resident Settlors and Beneficiaries hold a Category Two Global Business License under the Financial Services Act 2007.
Since a company that holds a Category Two Global Business License is an offshore company that is non-resident in Mauritius, it will be classified as a non-resident Beneficiary.
Tax rate for non-resident Mauritius Trust
- The declaration of non-residence must be submitted to the Mauritius Revenue Authority within three months before the end of the income year. This will allow both the Mauritius Trust and its non-resident Beneficiaries to be exempted from income tax for net income earned from the Trust in that income year. However, a non-resident Trust will not be able to enjoy the benefits of the vast number of Double Taxation Avoidance Agreements (DTAs) that Mauritius has negotiated with other countries.
Tax rate for resident Mauritius Trust
- In the case that the Trust has resident settlors or beneficiaries, it is considered to be a resident Trust. Income earned from the resident Trust is subjected to Mauritius income tax at a flat rate of 15%. However, if the Beneficiary is an offshore company that holds a Category One Global Business License, it can enjoy an 80% Deemed Foreign Tax Credit. This means that the Beneficiary company will only have to pay an effective income tax rate of 3%. A resident Trust will have to apply to be a tax resident in Mauritius through the Mauritius Revenue Authority and can enjoy the benefits of Mauritius DTAs.
- To set up a Mauritius Trust, you are required to appoint a local Qualified Trustee who is regulated by the Mauritius FSC. Tetra Consultants advises our international clients on the setting up of a Mauritius Trust and provide customized solutions to achieve tax efficiency while protecting your assets.
Alternative Jurisdictions to set up a Trust
- Similar to a Mauritius Trust, a Seychelles Trust that does not have resident Settlors or Beneficiaries do not need to pay any income tax to the authorities. However, while the Mauritius Trust is required to make an annual declaration of non-residency to the authorities to be exempted from taxes, a Seychelles Trust is automatically exempted from taxes and annual filing once it is registered. A Seychelles Trust must be registered with the Seychelles Registry but does not need to register details about the Settlor or Beneficiaries unless the Beneficiary is a Seychelles resident.
- Although a Cook Islands Trust is not required to pay taxes, it is required to pay an annual licensing fee. Nevertheless, the Cook Islands Trust is one of the most reputable jurisdictions for asset protection. Being the first jurisdiction to include measures to ensure asset protection, the corporate laws in the Cook Islands prevent creditors from filing claims on Trusts in the Cook Islands unless there is strong evidence that the Trust was created with the purpose of defraud.
- To protect the confidentiality of Settlors and Beneficiaries, a Belize Trust is only required to file information about the Trustees and the date of establishment of the Trust. A Belize International Trust is also exempted from tax and filing requirements. Belize is one of the only jurisdictions where asset protection is immediately available upon establishment of the Trust. In other words, there is no minimum requirement on how long the Trust must have been established for before the Trust is invulnerable to claims by creditors or direct family members. With the exception of cases where there is evidence of fraud, a Belize International Trust provides absolute and immediate asset protection for the Settlor.
- Cayman Islands is another reputable jurisdiction for individuals seeking to set up a Trust. Strong asset protections laws, tax exemption and no filing requirements are the key features that attract an individual to set up a Trust in Cayman Islands. Unlike most other International Trusts, it is not mandatory to have a local trustee for most type of Trusts in Cayman Islands. This provides greater flexibility and ease in the set up of a Trust in Cayman Islands.
Re-domiciliate Trust to Mauritius
Tetra Consultants can assist our international clients to migrate their already-established Trusts to Mauritius or from Mauritius. In the recent years, there is an upward trend of Trusts moving from overseas into Mauritius due to the multiple benefits available.
What is a Settlor?
- A Settlor is the entity that creates the Trust. The main role of the Settlor is to facilitate the transfer of legal control of an asset to the Trustee. A Settlor can be an individual or a legal entity.
What is a Trustee?
- A Trustee is the entity who receives legal ownership of the assets from the Settlor. A Trustee will manage the assets in the Trust in a way that benefits the Beneficiaries according to the terms and conditions listed in the Trust Deed. Trustees are expected to act to the best of their abilities when managing the assets and cannot utilise the assets to further their own interests.
What is a Trust Property?
- A Trust Property refers to the asset that has been placed in the Trust by the Settlor and is currently controlled by the Trustee. When a Trust is formed, the Settlor will transfer the legal ownership of assets to the Trustee to hold on behalf of the Beneficiaries. The assets transferred are also known as the Trust Property. The Trustees will manage the Trust Property in accordance with the terms stipulated in the Trust Deed.
How do I set up a Trust account?
- You can easily open a Trust account with a financial institution by submitting the required documents to the institution. You will have to approach the institution to find out the specific requirements and documents needed for the Trust account, as well as the procedure to draft the Trust Deed.
How much money do you need to set up a Trust?
- Although there is no minimum amount required by the law, it is not financially beneficial to set up a Trust if you do not have many assets. This is because you will have to pay a fee to draft the Trust deed and a percentage of your earnings in the Trust will be paid to the Trustees. Most Trust agreements also have minimum requirements for the net worth of a Settlor. Depending on the Trustee you employ, it can range from a few hundred thousand dollars to a few million dollars.
How much does it cost to set up a Mauritius Trust?
- The engagement fee depends on the services you require from Tetra Consultants. Prior to each engagement, our team will fully understand your business needs and inform you of the exact services you require.
- Tetra Consultants’ fees include the fees to draft the Trust Deed and other miscellaneous fees.
Are there any hidden fees throughout the engagement?
- Tetra Consultants believes in transparency between our firm and our international clients. All terms and conditions will be stated clearly within the appointment letter to ensure that there are no hidden fees.
- Our engagement fees consist of the government fees for company formation. However, it does not include third-party fees such as notarization, translation, or legalization.
Is a Mauritius trust taxable in Mauritius?
- This depends on the residency status of the Mauritius Trust. A Mauritius Trust can file for non-residency with the Mauritius Revenue Authority if the Trustees and Beneficiaries in the Trust are non-residents. A non-resident Trust will not be required to pay taxes on any income earned in the Trust.
- If the Trust does not file for non-residency, it will automatically be considered a resident Trust. A resident Mauritius Trust will have to pay taxes of up to 15% on income earned in the Trust. In the case that the beneficiary in the resident Trust holds a Category Two Global Business License, it will only be required to pay an income tax of 3%.
What is a trust and how do you set one up?
- A trust is a legal agreement between the Settlor and the Trustee to give the Trustee the right to hold and manage the assets in a way that benefits the Beneficiary. A Trust is commonly held to manage real estate, minimise taxes, protect assets from bankruptcy and distribute wealth to the beneficiaries.
- You can set up a Trust as the Settlor by drafting a Trust Deed that stipulates the purpose of the Trust, the names of the Trustees and the Beneficiaries, the rights that the Trustee has with the assets and the duration of the Trust. The Trust will officially exist once the Settlor has transferred the legal control of the assets to the Trustees through the Trust Deed.
Can you withdraw money from a trust account?
- A Trustee can only withdraw money for the benefit of the Trust based on the terms and conditions stated in the Trust Deed.
- A Beneficiary can withdraw money from the Trust account if the Trust is a Living Trust. The Beneficiary will have to request permission from the Trustee to withdraw the money. If the Trust is an irrevocable one, then the Beneficiary may not be able to withdraw money from the Trust account.
Is it worth setting up a trust?
- It depends on your purpose in setting up the Trust. A Trust provides you with asset protection, greater control over the distribution of assets, lower taxes, and greater confidentiality. It is usually more advisable to set up a Trust if you have a high net worth or wish to clearly stipulate the distribution of your assets after your death.
Why would a person set up a trust?
- If you are a high net-worth individual, you may wish to consider setting up a Trust because a Trust can protect your assets from creditors. Since you have transferred the ownership of your assets to a Trustee, the assets you have in the Trust will not be liquidated in the case of bankruptcy.
- Alternatively, an individual may wish to set up a Trust to determine when and who the assets will be transferred to when he/she passes away. This will allow the individual’s family members to gain income from the assets without increasing their tax liability. It also prevents dilution of the ownership of a family business if the shares of the business are placed in the Trust.
What is the duration of a trust?
- The duration of the Trust will depend on the duration stipulated in the Trust Deed. The maximum duration of the Trust will vary depending on the jurisdiction the Trust is set up in. In Mauritius, a Trust can only exist for a maximum of 99 years, with the exception of purpose Trusts which can only last for 25 years and charitable Trusts which can last indefinitely.