Already a popular destination with South Africans, recent developments in Mauritius promise to make this tiny island paradise more accessible to expatriates than ever.

However, those considering Mauritius as their future home will want to ensure their idyllic lifestyle is not rudely interrupted by SARS and unforeseen tax concerns. 

"To protect your future income earned abroad from South African tax, you need to objectively prove to SARS your intention to leave the country permanently, for which best practices require a professionally compiled roadmap," says Thomas Lobban, Legal Manager: Cross-Border Taxation at Tax Consulting South Africa. Lobban holds a Master of Laws (LLM) in Tax Law.

What makes Mauritius attractive, how do South Africans qualify, and what should they do to ensure a smooth transition, free from tax troubles?

Incentives for Mauritius

On 7 June 2022, the Hon. Minister of Finance delivered Mauritius' Finance Budget Speech 2022-23, revealing a number of initiatives that are more welcoming to expatriates. This is on top of the initiatives taken in the 2021-22 year.

Aditi Boolell, Director of Temple Group in Mauritius, identified the below as the most prominent initiatives for South Africans to take note of:

1. The Economic Development Board (EDB) aims to attract 50,000 foreign retirees this year and launched a dedicated online portal to provide them with information on property, lifestyle and amenities in Mauritius.
2. The EDB also set up an exclusive concierge service for investors and retirees.
3. The Bank of Mauritius will ensure business or personal accounts can be opened within one week.
4. There is also no cost at all to start and incorporate a business, and corporations are taxed at a flat rate of 15 percent.
5. Personal income is taxed at 10 percent up to Rs 700,000; 12.5 percent between Rs 700,001 and Rs 975,000; and 15 percent above Rs 975,000.

There are many more lifestyle and business incentives, and the government is focused on building up the economy through industry.

What options are available?

South Africans have several main residency options available to them. According to Zainab Bouziane, Head of Africa Desk at Xpatweb, the most popular options seen in practice include:

1. Investor's Permit that requires one to invest a minimum of USD 50,000 in a company in Mauritius.
2. The Retired Permit, available to those over 50 who can prove they have USD 1,500 monthly to finance their lifestyle.
3. The Property Acquisition option whereby foreign applicants can purchase property within the government's scheme. Previously, the required value of the property was USD 500,000 but this has been reduced to USD 375,000.

All three permit types allow for dependents to accompany the applicant.

“The Retired Permit is by far the most used option by our clients, and we foresee this trend will continue over the next few years as South Africans look for more favourable destinations to retire to,“ said Bouziane. 

What to do about tax

All South African tax residents are required to declare their annual worldwide income to SARS and pay tax on it; unless one claims a qualifying tax exemption. So when relocating to Mauritius, they need to carefully consider their options for cutting ties with SARS regarding their foreign income.

Unfortunately, this is not as easy as simply emigrating from the country. SARS continues to treat expatriates as residents for tax purposes unless they follow a formal process to be recognised as a non-resident.

"This comes down to an applicant's ability to objectively prove their intention to leave South Africa permanently. ‘Objective’ is the key word here, meaning that SARS will require proof in the form of documentary evidence that supports the position of being tax non-resident," says Lobban. If they cannot, they will have to meet their yearly tax obligations, even from Mauritius, and risk paying double tax.

Getting the best assistance

Emigrating South Africans should avoid being tangled up in matters of international taxation. 

Without professional assistance in dealing with SARS and compiling evidence for their roadmap, things can go horribly wrong and cost more in the long run.

"It is always advised to engage a tax partner that knows SARS' processes and the depth of information that will satisfy their requirements – preferably a firm with a strong legal component," says Lobban.

Gone for good

The excitement of moving to Mauritius and experiencing all the country has to offer needs to be tempered with the acknowledgement that one's tax affairs will always come first.

The good news is that South Africans can start afresh there, free from the worry that SARS will come looking for them.

"For peace of mind, start getting your roadmap together sooner rather than later, with the right help, and you'll never have to look back," says Lobban.

Written by Tax Consulting South Africa