The Mauritian tax authority issued a Statement of Practice (SOP) on meaning and application of the ‘Place of Effective Management’ test to decide corporate tax residence. The Finance Act, 2018 of Mauritius introduced new rules on corporate tax residence. A new section 73A has been inserted which provides that a company incorporated in Mauritius shall be treated as a tax resident of Mauritius if its place of effective management is situated in Mauritius.
The SOP clarifies the meaning and applicability of ‘Place of Effective Management (POEM)’ test to decide the residential status of a Company incorporated in Mauritius.
The Statement provides that the Mauritius Revenue Authority (MRA) shall examine all relevant facts and circumstance while determining the POEM of corporate taxpayers. These factors shall relate to the business activities of the company and the use of information and communication technologies in the decision making process.
MRA has clarified that a company shall be deemed to have its place of effective management in Mauritius if the strategic decisions relating to the company’s core income generating activities are taken in, or from, Mauritius. Further, while deciding the residential status of a company in Mauritius it shall also be considered where majority of the Board of directors’ meetings are held or the executive management of the company is regularly exercised.
The OECD, as part of its work on base erosion and profit shifting, recommended countries to use the mutual agreement procedure – an in-built treaty mechanism to resolve double tax disputes – to resolve conflicts relating to corporate tax residence. According to the OECD, a company’s “place of effective management” is one of the factors that countries should look at while deciding corporate tax residence.
The proposal is included in Article 4 of the Multilateral Instrument to implement tax treaty-related BEPS measures (BEPS MLI). A total of 84 countries have signed the BEPS MLI till date. Mauritius signed the BEPS MLI on July 5, 2017.
Source : Economic Times