Mauritius: Guidance on interest income and dividends subject to partial exemption

Mauritius: Guidance on interest income and dividends

The Mauritius Revenue Authority on 27 January 2021 issued a “statement of practice” clarifying the definition of “core income generating activity” (CIGA) and regarding the conditions that companies must satisfy to be eligible for a partial exemption on certain qualifying income.



Effective 1 January 2019, the deemed foreign tax credit was replaced by the 80% tax partial exemption. Companies that were issued a global business license on or before 16 October 2017, were “grandfathered” and allowed to claim the deemed foreign tax credit until 30 June 2021.

The 80% tax partial exemption is available on certain qualifying income streams such as foreign-source dividend income, interest income, and income derived by “collective investment schemes” (CIS), on satisfying certain pre-defined criteria under the Income Tax Act 1995 and the Income Tax Regulations 1996. 

Partial exemption, interest income and dividend income

A company can claim the partial exemption on interest income if the core activity (or one of its core business activities) is money lending, debt financing, and investing in debt instruments. Moreover, the company will have to satisfy pre-defined conditions that include the CIGA test, the minimum expenditure test, and the minimum employment test. CIGA for a company deriving interest income includes “agreeing funds, setting the terms and duration of any financing, monitoring and revising any agreements, and managing any risks.”

Companies that provide loans to their related entities generally can claim the 80% partial exemption on interest income generated through related-party loans, provided that the provision of loans to their related entities is one of their main activities and that they also satisfy other conditions such as the minimum employment and local expenditure tests.

Regarding interest income from banking activity, the 80% partial exemption normally applies with regard to interest earned on bank deposits, provided an entity can establish that these deposits arose from its central business activity and have already been entitled to partial exemption.

The rules for partial exemption on dividend income provide that for “pure equity” holding companies (companies that only hold equity participations in other entities and only earn dividends and capital gains), the 80% partial exemption will be granted on dividend income, provided that the companies:

  • Comply with all applicable corporate law filing requirements
  • Have adequate human resources and adequate premises in the country for holding and managing equity participations in other entities

Moreover, it must be demonstrated that companies have sufficient presence and comply with good governance standards to claim the partial exemption on dividend income.

Read a February 2021 report [PDF 375 KB] prepared by the KPMG member firm in Mauritius 

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