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A Trust is an arrangement for the holding and administration of property under which property or legal rights are vested by the owner of the property (the Settlor) in a person or persons (the Trustees). The Trustees then hold the property for or on behalf of other persons (the Beneficiaries). It is essential that the transfer is gratuitous otherwise the transaction takes on the characteristics of some other legal entity.
A trust may therefore be defined as an equitable obligation which binds the trustees to hold and deal with the trust assets for the benefit of the beneficiaries in accordance with the terms of the trust. Acting as trustee, Alliance Trust Co. (Mauritius) Limited administers the trusts assets and distribute them to the beneficiaries in accordance with the terms of the trust deed and the proper law of the trust.
The flexibility and protection afforded by trust arrangements are such that they have become an important part of long term wealth management.
Through the use of trusts it is often possible for family assets to be preserved over succeeding generations substantially free from taxation, probate requirements, succession laws, expropriation and foreign exchange controls. There is no requirement in Mauritius to register trusts, thereby maintaining confidentiality.
A corporate structure allows its shareholders to have business conducted, own assets and limit liability. The ability to manage assets through a combination of trusts and companies is proving increasingly valuable and the legislation in force in Mauritius provides an effective framework for the conduct of international fiduciary activities and providing services in that respect.
How is a Trust created?Trusts in Mauritius are governed by the Trusts Act, 2001. A trust can only be created by an instrument in writing which should state its object, subject, intention and duties and powers of the trustees. It can be formed by a resident or non-resident of Mauritius . There is no register of Trusts in Mauritius nor is there any disclosure of beneficial owner to any authority.
Trust created by written documents will generally take two forms:
It is sometimes more convenient to create a trust by declaration of trust rather than by settlement, for example, the settler may not be available to sign the document, when it is prepared.
Types of TrustMost offshore trusts fall into four broad categories:
Discretionary TrustsThe most common and flexible type of offshore Trust is the discretionary trust and it is used in wealth protection and tax planning.
The discretionary trust is commonly used when, at the time the trust is established, no decision has been taken as to what portion of the trust's income and capital should be reserved for each beneficiary, and when it is desirable to maintain flexibility in that respect. Under the provisions of a discretionary trust, the trustees are given the power to select which person or persons are to receive a benefit from the trust and the extent of such benefit. They may also have the power to decide whether to distribute income or accumulate it. The trustees very often have the power to add or remove beneficiaries and this gives considerable flexibility to the trust.
Whilst the trustees of the discretionary trust will usually have the power to determine the beneficiaries of both the capital and income of the trust, and the amounts which they are to receive, the settlor will have given the trustees guidance as to how they should administer the trust, both during the settlor's lifetime and after his death; which will be set out in the "letter of wishes". This letter can be varied from time to time during the settlor's lifetime to meet changing circumstances.
A discretionary trust can also include extensive investment powers to meet the requirements of international clients and it can hold all manner of assets both esoteric or otherwise. As this type of trust is very often used in combination with a Global Business company(ies), there will be power for the trustees to establish wholly-owned companies, not withstanding this, the terms of the trust may provide that the trustees do not need to interfere in the management of such companies.
Duration, Protector, Asset Protection Trusts
ProtectorThe Trust Act permits the appointment of a Protector, who owes fiduciary duty to the beneficial owners. Unless otherwise provided in the Trust Deed, the Protector can remove the Trustee and appoint new or additional Trustees. The Protector may also be the Settlor, the Trustee or the Beneficiary of the Trust but in his capacity as Protector he is not accounted or regarded as a Trustee.
Asset Protection Trusts
Taxation of TrustsA trust is liable to income tax at the rate of 15% if the settlor and beneficiaries are non-residents or hold a Category 1 or 2 Global Business license or is a purpose trust.
However, such trust will be entitled to the presumed foreign tax credit of the higher rate suffered or 80% of its chargeable income, or may deposit a declaration of non-residence within 3 months after the expiry of the income year, it will then be exempt from income tax.
Chargeable income shall be the difference between the net income derived by the trust and the aggregate income distributed to the beneficiaries under the terms of the trust. Any amount of income distributed to the non-resident beneficiaries shall be exempt from income tax in the hands of the beneficiaries.
To be tax resident, a Trust has to apply for a Tax Residence Certificate with the Commissioner of Income Tax, which is delivered under the following conditions:
The local Trustee is a party to all decisions pertaining to the Trust.
Main features of Mauritius Trusts
A resident trust may benefit from the network of Double Tax Treaties.