The Financial Services (Special Purpose Fund) Rules 2013 applicable to collective investment schemes and closed-end funds (schemes) authorised by the FSC were recently revamped on 6 March 2021 by the proclamation of the Financial Services (Special Purpose Fund) Rules 2021 (the Rules).
The regime was designed for schemes which sought to be treated as non-resident in Mauritius for tax purposes. Hence any interest, rent, royalties or other amounts paid by a SPF to a non-resident were exempt from tax in Mauritius.
The FSC approved schemes as SPFs provided that those schemes did not hold a GBC1 licence (for obvious reasons as holders were tax-resident in Mauritius) and where the scheme met one of the following criteria:
- The purpose of the scheme was to conduct investments solely in countries which did not have any tax arrangements with Mauritius;
- The purpose of the scheme was to invest mainly in securities whose returns were exempt from tax; or
- The investors of the schemes were pension schemes or other persons entitled to tax exemption.
Whilst SPFs remain non-resident in Mauritius for tax purposes with the advent of the Rules, the limitations on the purpose of the scheme and the restriction on the category of investors are removed entirely.
Instead, the FSC has a discretion to grant authorisation as a SPF on conditions as it deems fit. In addition to complying with any discretionary conditions imposed by the FSC, the SPF is subject to the following obligations:
- The SPF must offer its shares solely by way of private placements to investors having competency, significant experience and knowledge of fund investment. With this wider categorisation, authorisation is open to a more diversified range of schemes;
- A maximum of 50 investors can be admitted in the SPF and each investor must subscribe for a minimum amount of USD 100,000;
- At all times, the SPF must be managed by a CIS manager and administered by a CIS administrator; and
- The SPF must file its audited financial statements with the FSC within 6 months after the end of its financial year.
The SPF, its CIS manager and its CIS administrator must also ensure that their relevant core income generating activities are carried out in or from Mauritius and in that respect, must employ directly or indirectly an adequate number of suitably qualified persons to conduct such core income generating activities, and incur a minimum expenditure proportionate to the level of such activities. For example, a CIS manager is expected to incur at least USD 30,000 per year and to employ between 1 and 3 persons depending on the value of the assets under management.
The FSC has the power to withdraw the SPF authorisation from a scheme where the SPF no longer satisfies the aforementioned conditions, it is undesirable in the interests of the potential or actual participants that the scheme to continue as a SPF, or the FSC has reason to believe that the scheme has knowingly submitted false and misleading information in its application for the SPF authorisation.
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