A trust is not a legal person but rather a fiduciary arrangement in which a settlor transfers property or assets to a trustee or trustees who hold and manage them for the benefit of designated beneficiaries. Upon the creation of the trust, the legal ownership of the assets is transferred from the settlor to the trustee(s) and the settlor relinquishes all legal rights of ownership of the assets or property.

A trust can be defined as an equitable obligation which requires trustees to hold and manage trust assets for the benefit of  beneficiaries in accordance with the terms set out in  the trust instrument.  Alliance Financial Services Ltd, a licensed service provider offers trust administration services to private clients and has a proven track record of delivering high quality services. 

Trust arrangements offer significant flexibility and protection making them a key tool in  long term wealth management.

Through the use of trusts it is possible to preserve family assets over generations while mitigating exposure to taxation, probate requirements, succession laws and expropriation.  Additionally, there is no requirement in Mauritius to register a trust, thus ensuring confidentiality.

 

How is a Trust created?

Trusts in Mauritius are governed by the Trusts Act, 2001. A trust must be created through a written trust  instrument which should outline the trust’s  object, subject, intention, duties and powers of the trustees. Trusts can be established by both residents and  non-residents of Mauritius. Importantly, there is no register of Trusts in Mauritius. 

Trust are created by written instruments and are essentially in two forms:

• Settlement: a trust deed is entered into and signed by both the settlor and the trustee providing clear evidence of the intentions of both parties and of the obligations undertaken by the trustee.
• Declaration of Trust: this document is executed solely by the trustee recording that the trustee has received certain property, specified in the document, to hold in accordance with the terms set out therein.

In many cases, a trust may be created more conveniently through a declaration of trust particularly when the settlor is unavailable to sign the declaration of trust.

 

Types of Trust

The common types of trusts are :

• Discretionary trust
• Fixed interest trust .
• Charitable trust .
• Purpose: trust.

Discretionary Trusts

In a  discretionary trust, the trustee under the terms of the trust instrument is given discretionary powers to effect a distribution to the beneficiaries on such amount and at such time that the trustee considers appropriate in accordance with the trust instrument and the letter of wishes set forth by the settlor.  

The  letter of wishes may be reviewed and varied by the settlor during his lifetime. 


Fixed Interest Trust

Under a fixed interest trust, the principal beneficiary is typically granted a vested interest in the income generated by the trust fund for their lifetime. The discretion of the trustee in managing or distributing the trust assets is generally limited, as the terms of the trust dictate specific entitlements for the beneficiary.


Charitable Trust

A charitable trust in Mauritius is a type of trust established for purposes that benefit the public or a section of the public. Such a trust is governed by the Trusts Act 2001 and can  serve charitable purposes such as the relief of poverty, the advancement of education, the promotion of health, or other purposes beneficial to the community. Unlike other types of trusts, a charitable trust in Mauritius can have perpetual existence, meaning it is not bound by a fixed duration. Additionally, charitable trusts enjoy certain tax exemptions and legal protections, as long as they comply with the relevant statutory requirements. These trusts are not required to name specific beneficiaries, as they are intended to serve the broader public interest.

Purpose Trust

A purpose trust is a type of trust created to advance a specific non-charitable purpose, such as holding assets like aircraft. Unlike traditional trusts, a purpose trust does not have beneficiaries. Instead, it is required by law to appoint an enforcer in Mauritius to ensure that the trust's purpose is carried out. Under Mauritian law, a purpose trust is limited to a maximum duration of 25 years.

 

Duration, Protector, Asset Protection Trusts

Duration

• Non-charitable purpose trusts :  These trusts have  have a maximum duration of  exceeding 25 years.
• Charitable purpose trusts :  These trusts can exist in  perpetuity. 
• All other trusts :   The maximum duration for all other types of trusts is  99 years.

Protector

The Protector of a trust plays an important role in overseeing the actions of the trustees to ensure that the trust is managed in accordance with the settlor’s wishes and in the best interests of the beneficiaries.

The Trusts Act permits the appointment of a Protector, who owes a fiduciary duty to the beneficiaries. Unless otherwise provided in the trust deed, the Protector has the authority to remove trustees and appoint new or additional trustees. Although the Protector may also be the settlor, a trustee, or a beneficiary of the trust, in their capacity as Protector, they are not regarded or treated as a trustee.


Asset Protection Trusts

Trusts are widely recognized as a reliable mechanism for protecting assets from various risks, including potential liabilities faced by the settlor or beneficiaries. In contemporary settings, they serve as a vehicle for safeguarding assets within stable political environments and shielding them from financial claims, such as those arising from marital disputes or punitive actions.

Asset protection trusts also provide a defence against strategic risks, such as confiscation or expropriation by the state in the settlor's country of domicile or nationality.

Key provisions under the Trusts Act include:

• In the absence of intent to defraud, a trust is neither void nor voidable as a result of the settlor’s subsequent bankruptcy or due to actions taken by the settlor’s creditors.
• The courts may declare a trust void or voidable only if a creditor can prove beyond reasonable doubt that the settlor's intention was to defraud creditors.
• No action may be brought against the trust assets more than two years after the assets were settled into the trust.

Taxation of Trusts

A trust established in Mauritius may elect to be taxed in Mauritius and can upon application to the FSC hold a Global Business Licence.  A trust is liable to income tax on its chargeable income at the rate of 15%.It may upon satisfying the specified substance requirements be able to benefit a partial exemption of 80% of 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 Mauritius Revenue Authority, which is delivered under the following conditions:

• At least one Trustee is resident in Mauritius
• A bank account is maintained in Mauritius, through which all cash movements are routed.
• All accounting records are kept with the local Trustee.
• The local Trustee is a party to all decisions pertaining to the Trust.

A Trust is considered to non-resident if any of the following conditions are satisfied:

• The settlor of the trust was non-resident at the time the instrument creating the trust was executed or at such time the settlor adds new property to the trust
• A majority of beneficiaries or class of beneficiaries appointed under the terms of the trust are non-resident

Main features of Mauritius Trusts

• There is no requirement to register trusts in Mauritius ensuring confidentiality.    
• A trust can have up to 4 trustees with at least one qualified trustee being resident of Mauritius. 
• There is no forced heirship rules.in Mauritius allowing greater flexibility in estate planning in Mauritius.
• A trust established in another jurisdiction can change its proper law and forum of administration to Mauritius and vice-versa. 
• Trusts can appoint a managing trustee and a custodian trustee. 
• Charitable Trusts are exempt from taxation in Mauritius.
• The proper law of the trust is determined  by the Settlor’s choice, or if not specified  the law specified  in the Trust Deed. If no law is chosen, the one which is most closely connected at the time of creation of the Trust will be treated as the proper law.

A resident trust may avail itself of tax treaty benefits. 

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