Company Services

Economic Substance in Mauritius

Understanding and implementing the substance requirements for Mauritius GBC companies — the cornerstone of treaty access and regulatory credibility.

Request a confidential assessment

Economic substance requirements are among the most important compliance obligations for any Global Business Company in Mauritius. Following the OECD/G20 Base Erosion and Profit Shifting (BEPS) initiative and the EU's assessment of Mauritius as a jurisdiction of concern in the early 2000s, Mauritius introduced strengthened economic substance requirements to ensure that entities claiming the benefits of Mauritius tax residency — including access to the treaty network and the partial exemption regime — are genuinely managed and controlled from Mauritius. The requirements are not merely administrative box-ticking: the FSC and the Mauritius Revenue Authority actively assess whether the level of substance is commensurate with the nature and scale of the GBC's activities. Failure to satisfy substance requirements can result in loss of treaty benefits, reassessment of tax residency claims, FSC sanctions and reputational damage. Our team has extensive experience designing and implementing practical, proportionate substance programmes for GBC entities across a wide range of activities.

Core elements of economic substance

Management and Control in Mauritius

The most fundamental substance requirement is that the central management and control of the GBC must be exercised in Mauritius. This means that the board of directors must make genuine strategic and operational decisions at board meetings held in Mauritius, the majority of board members must be present in Mauritius, and the company's strategic direction must demonstrably emanate from Mauritius — not from a foreign parent, shareholder or adviser.

Resident Director Participation

At least two resident directors are required for a GBC, and their participation must be genuine. The FSC assesses substance by reviewing board minutes, which must reflect real deliberation — including review of financial information, consideration of strategic options, risk assessment and informed decision-making — not merely ratification of pre-determined instructions. Thin or formulaic minutes are a red flag.

Adequate Infrastructure and Expenditure

A GBC must maintain adequate infrastructure in Mauritius commensurate with its activities. For a holding company with limited activity, this may be a modest office arrangement and a small management fee. For a fund manager or active trading company, a higher level of local expenditure, staffing or contracted services will be expected. The principle is proportionality: the substance must be real, not simulated.

Core Income-Generating Activities

For entities claiming the partial exemption on specific income streams (such as income from collective investment schemes, qualified IP income or peer-to-peer lending income), Mauritius applies sector-specific substance tests. These require that the relevant core income-generating activities are conducted in Mauritius by people with appropriate expertise. Outsourcing these activities to a third party in Mauritius is permitted, provided adequate oversight is exercised.

Implementing a substance programme

Substance gap analysis

We review the GBC's current governance arrangements, board composition, decision-making processes and documentation to identify any gaps between the current position and the requirements for genuine substance. We assess the risk profile and prioritise the most material areas for improvement.

Governance and documentation framework

We design and implement a governance framework that ensures all strategic and material operational decisions are made at board level in Mauritius. This includes a board charter, meeting calendar, decision-making protocols and a template for comprehensive board minutes that properly evidence deliberation.

Infrastructure and expenditure review

We assess whether the GBC's current level of local expenditure, office arrangements and staffing is proportionate to its activities and income levels, and recommend practical enhancements where needed — including office space, contracted local services or additional director hours.

Ongoing substance monitoring

We monitor the GBC's substance position on an ongoing basis, reviewing board minutes for quality, tracking meeting frequency, maintaining records of local expenditure and preparing the annual substance assessment that may be required by the FSC or the Mauritius Revenue Authority.

What genuine substance requires

At least two resident directors actively participating in board decisions
Board meetings held in Mauritius (in person or by video conference with quorum in Mauritius)
Detailed, substantive board minutes evidencing real deliberation
Registered office and adequate physical infrastructure in Mauritius
Local expenditure proportionate to the scale of the GBC's activities
Core income-generating activities conducted in or from Mauritius
Annual Tax Residency Certificate application supported by substance evidence
Compliance with FSC monitoring and reporting requirements

Indicative costs

Substance implementation costs vary widely depending on the nature and scale of the GBC's activities and the current gaps in its substance position. The following are indicative ranges for common service components.

Item	Indicative range
Substance gap analysis and implementation plan	USD 1,500 – 3,500
Resident director service (per director per annum)	USD 2,500 – 5,500
Board meeting facilitation and substantive minutes	USD 500 – 1,500 per meeting
Annual Tax Residency Certificate application	USD 500 – 1,200

Frequently asked questions

What does the FSC look for when assessing economic substance?

The FSC examines the quality and content of board minutes, the physical presence and active participation of resident directors, the existence of an adequate registered office, the level of local expenditure relative to the company's income and activities, and whether the company's core decision-making genuinely occurs in Mauritius. Substance assessments are conducted during licence renewals and as part of FSC supervisory visits.

Can the substance requirements be met through outsourcing?

Yes, in part. Certain functions — including compliance, secretarial, accounting and even some core income-generating activities — can be outsourced to licensed Mauritius service providers. However, the board must exercise genuine oversight of outsourced activities and must not simply delegate all decision-making. The Management Company cannot substitute for an engaged and informed board.

Does a holding company with no employees need the same level of substance as an active trading company?

No. The substance requirement is proportionate to the nature and scale of the entity's activities. A passive holding company with a single investee company and modest annual income will have lower substance expectations than an active fund manager or trading company. However, even a passive holding company must have resident directors who genuinely participate in decisions about the holding and any distributions.

How does substance affect treaty benefit claims?

A GBC that cannot demonstrate genuine management and control from Mauritius risks losing its Mauritius tax residency status, which would invalidate any treaty benefit claims. The Mauritius Revenue Authority issues Tax Residency Certificates only to companies that are managed and controlled from Mauritius. If a treaty-partner jurisdiction challenges the residency claim — increasingly common under BEPS-informed anti-avoidance rules — inadequate substance can result in treaty benefits being denied and income being reassessed in another jurisdiction.

The information on this page is provided for general guidance only and does not constitute legal, tax or regulatory advice. Always seek professional advice specific to your situation.