A trust is a tool whereby an individual, also called a settlor, will transfer his/her personal assets – property, cash, shares – to be properly managed by a trustee. The reason why the settlor would generally do so would be to cater for his/her personal needs and/or ensure that there is a smooth transfer of these assets to his/her heirs after his/her lifetime. Once transferred into the trust, the assets will be taken care of by the trustee for the benefit of a list of beneficiaries, which may include the settlor.
In 2001, Mauritius promulgated its Trust Act, which is recognised as a modern piece of legislation by lawyers and other professionals specialising in this area of practice. The features and benefits of the Mauritius Trust are comparable to those found in other jurisdictions such as Jersey and Guernsey. However, the main difference is that on setting up a Mauritius Trust, one of the trustees must be qualified by the local regulator, the Financial Services Commission. This should be seen as an added-value, providing an element of comfort to the settlor.
A Mauritius Trust can elect to be tax resident in Mauritius and thus avail itself of treaty benefits, with the result that capital gains tax on disposal of assets in a country with which Mauritius has a double taxation avoidance treaty can be eliminated. Also, the income of a Mauritius charitable trust, which may be of perpetual duration, is exempt from income tax as long as its purposes fall within the different heads of charities approved under the Trust Act.
Mauritius also allows for the setting up of private trust companies (PTCs), which are useful vehicles to consider in the planning and establishment of trust structures for wealthy families. Rather than transferring assets to a professional trustee company, certain families may prefer to establish their own corporate trustee (a PTC) to act as the trustee of the trusts which they plan to create. The PTC is set up as a company (in Mauritius either a Global Business Company Category 1 [GBC1] or a Global Business Company Category 2 [GBC2] and its sole purpose is to act as trustee of a trust or a few trusts for a wealthy family. However, a PTC cannot be set up for multiple families.
There are many reasons why one would set up a trust, including: confidentiality and asset protection; protection against political uncertainty; pre-emigration planning; probate relief; flexible inheritance planning; separation of personal and business assets; discrete inheritance planning for complex families; providing financial maintenance for an infirm dependent and for philanthropic reasons.
A trust is often considered by foreign nationals when buying property in Mauritius. The property can be purchased through a trust and the trustee will then take care of all the administrative procedures, the registration and also apply for residence permits for the settlor and the family if applicable. If, as is often the case, the Mauritius property will be used mainly for holiday purposes, the trustee will look into renting the property and ensuring a regular income is generated. The trustee will also ensure that all maintenance charges are met and tax returns are filed on time.
Other than to hold property in Mauritius, a high net-worth individual (HNWI) can set up a trust to consolidate other of their personal assets, e.g. shares or a portfolio of investments. This is a very effective way to plan for one’s succession, ensuring that the family’s needs are taken care of. Very often, the trustee will also take care of such things as paying for school fees, accommodation fees and personal expenses of the children during their studies.