Mauritius Trusts

Trusts

Why Create a Trust

Trusts are legal arrangements used for various purposes such as asset protection, inheritance planning and wealth management. Essentially, property or assets, whether tangible or intangible, are transferred by the Settlor of the trust to the Trustees, in accordance with terms of the trust instrument, for the Trustees to hold and administer either for and on behalf of specified beneficiaries or for specific purposes or both. The Trusts Act 2001 governs the law of trusts in Mauritius.

A trust is created when the owner of property (Settlor) vests the legal ownership of the property to another person (Trustee). The Settlor may appoint a Protector who can have wide powers to control the administration of the trust. The Settlor may give a letter of wishes to the Trustee as guidance to his wishes during his lifetime or after death.

Main Features

A trust in Mauritius is commonly set up as part of a long term wealth management strategy, helping to preserve wealth through the generations without the problems usually created by taxation, probate requirements, succession laws, expropriation and foreign exchange controls.

A trust is liable to income tax at the rate of 15%, however with the use of foreign tax credits (through the Double Taxation Agreement Network) this can be reduced or even made tax-exempt.

Any tax-resident trust needs at least one trustee resident in Mauritius, keep accountancy records with the local trustee and must have a bank account maintained in Mauritius through which all cash is routed.

  • No registration & minimum/no filings
  • Appointment of Protectors
  • Possibility to put in place letters and memorandum of wishes
  • Anti-forced heir ship rules
  • Confidentiality of trustee deliberations as registration of the trust is not compulsory
  • Concept of managing and custodian trustee
  • Possibility to accumulate income for any period within the duration of the trust
  • May hold a GB 1 licence and benefit from the network of DTAs
  • Migration from other Jurisdictions

Uses

  • Tax Planning
  • Asset Protection
  • Confidentiality
  • Protection of Minor’s Rights
  • ­Protection from Potential Creditors
  • Preservation of the family fortune
  • Protection from family members

Types of Trusts

Asset Protection Trust

The settlement of assets in a trust has become an important part of long term wealth management. A trust has been traditionally viewed as being used primarily for family inheritance planning.

Asset protection trusts can also provide continuity in ownership of assets by:

  • Providing protection against aggressive governments
  • Providing against forced heirship rules
  • Providing for the maintenance of a spouse and education of minor children and
  • Avoiding or mitigating inheritance taxes

An asset protection trust can also be used to shelter assets from any type of future claim including creditors’ claims or claims in a divorce settlement and judgment. Asset protection trusts can hold all types of assets ranging from real estate to intellectual property.

Charitable Trust

In order for a Charitable Trust to be set up, the purposes of the trust must fall within one of the areas recognized as charitable by Mauritius law. There is also a requirement of public benefit where the trust must benefit a significantly large section of the public and not exclusive individuals or groups of people. A Charitable Trust may be set up under one of the traditional 6 heads of charity:

  • ­the relief of poverty
  • the advancement of education
  • the advancement of religion
  • the protection of the environment
  • the advancement of human rights and fundamental freedoms
  • any other purpose beneficial to the public in general

Characteristics

  • ­A charitable trust may be set up for an express purpose with no specified human beneficiaries
  • Charitable trusts are perpetual, existing long beyond the limits imposed on a private trust
  • The trust is exempt from income tax as long as the income is applied solely for the charitable purpose

The charitable purposes may be perused in Mauritius or elsewhere and are beneficial to the community in Mauritius or elsewhere

Discretionary Trust

A discretionary trust is the most common and flexible type of trust mainly used in wealth protection and tax planning. High net worth individuals and professionals use discretionary trusts to hold assets to protect them from potential claims.

The discretionary trust is normally used when at the time of setting up the trust; the settlors have not reached a decision as to which portion of the trust’s income and capital/assets should be reserved for each beneficiary. The trustees are generally provided with a Letter of Wishes which guides them as to how the settlor(s) would like them to administer the trust and manage the assets.

Trading Trust

The majority of trusts are created in one form or another to enable trustees to hold and administer the trust assets. They are asset holding trusts in their various forms. The trustee of such a trust would be a trust company with specific power to provide administration services to the trust. The assets of the business would be assets of the trust. The business would be managed by employees of the trust company and all invoices and correspondences would be conducted through the trust company. The business would be held on a discretionary trust in favor of a specified class of beneficiaries.

Uses of Trading Trusts

It would be more common for the trading activities to be conducted within an underlying company, but a trading trust may be useful to avoid registration of the company and also to avoid the reporting requirements normally associated with a trading company.

Purpose Trust

A Purpose Trust is a discretionary trust set up for a specific purpose, clearly stated in the deed which must be both reasonable and possible. The purpose cannot be unlawful, immoral or against public policy. A Purpose Trust may be set up for a variety of situations such as:

  • To hold a particular asset
  • To hold shares in a company to secure funds required to complete a development or leasing project
  • To hold shares of a company in a high risk industry to separate these from other assets of a parent company
  • ­Any other purpose

In such type of trust, an enforcer should be appointed. Such enforcer should be capable of enforcing the trust and the appointment of a successor to an enforcer. At least one trustee must be a qualified trustee. If the purpose trust is created by a Mauritian national, the appointment of the enforcer shall require prior approval of the FSC.

Unit Trust

A Unit Trust is an investment vehicle that allows investors to purchase units of investments which are managed by trustees specifically for the purposes of providing a profit for each investor on his unit.

A Unit Trust allows funds to hold assets and pass profits through to the individual owners, rather than reinvesting them back into the fund. The investment fund is set up under a trust deed. The investors are effectively the beneficiaries under the trust.

The advantage of using a Unit Trust is that the investors get direct access to its wealth creation and they do not need expert knowledge in order to invest in a Unit Trust.

A Unit Trust can also be used as a family trust whereby the husband and wife have the discretion of distribution. It serves a different purpose to a discretionary Family Trust.

A Unit Trust has:

  • negotiability (you can buy and sell units)
  • ­fixed annual entitlements to income and capital (the trustee cannot reduce your entitlements)

About Us

Founded in 2010 and licensed by the FSC Mauritius, GFin Corporate Services Ltd., a Mauritius management company, provides legal, tax, fiduciary, investment and fund administration services to private, corporate and institutional clients. We provide administration, corporate secretarial, accounting and management services to Mauritius-formed entities.

We deliver tailor-made solutions to our privileged clients whether they are an entrepreneur or an established international group.

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