A critical analysis of economic substance rules of Mauritius: a comparative study with Cayman Islands

Abstract

Various low-tax jurisdictions including Mauritius, have been often accused of usurping the just share of taxes of other countries. Given the adverse impact on the reputation of the ‘tax havens’, the country has implemented in 2019 the economic substance requirements to ensure a minimum substance for resident companies to be taxed in Mauritius. The aim of this research is to assess the efficiency and robustness of the economic substance rules of Mauritius in combatting harmful tax practices including base erosion and profit shifting. A doctrinal approach and a comparative analysis with the corresponding substance rules of Cayman Islands were adopted to achieve the research objective. The findings demonstrate that there is still room for improving the economic substance rules of Mauritius in terms of an enhanced interpretation of the rules, reporting requirements and imposition of the relevant sanctions.