Mauritius, traditionally seen as a hub for India-focused funds due to its advantageous tax treaty with India, is undergoing significant regulatory changes that could influence global investment flows. Recent developments have seen Mauritius enhance its scrutiny of offshore fund structures, significantly impacting the operational timelines and compliance burdens for funds. This increased scrutiny comes alongside amendments in the India-Mauritius tax treaty and heightened activity from Indian tax authorities, all pointing towards a sterner regulatory environment.
The Mauritius Financial Services Commission (FSC) is now demanding more detailed background checks, enhanced due diligence, and greater operational transparency from funds. These changes have extended the time required to set up a fund in Mauritius from a few months to potentially up to nine months. Factors such as the experience and background of beneficial owners, the sources of funds, and the qualifications of independent directors are under closer examination.
Moreover, the cost implications for management companies in Mauritius are rising due to the higher compliance requirements and a shortage of skilled professionals in the financial services sector. As a result, the pricing of fund management services in Mauritius has seen adjustments.
In response, fund managers are increasingly considering alternatives. GIFT City in India, along with Singapore and the Cayman Islands, are becoming attractive options due to their regulatory frameworks and potentially lower compliance hurdles. Despite its cost advantages, Mauritius’s changing regulatory landscape might shift the balance in favor of these emerging financial centers.
As Mauritius strives to reform its image from a quasi-tax haven to a compliant jurisdiction under international tax norms, the offshore fund industry faces a pivotal transformation. The island’s efforts to align with global standards may redefine its role in the international financial system but could also lead to a redistribution of funds to jurisdictions perceived as more favorable.
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