A MAURITIUS TRUST
Introduction
A Mauritius Trust is one of the most flexible instruments available in the financial services landscape. It is based on a fiduciary relationship arising from the distinction between person who at law holds the title to property (Legal owner) and the one or the ones that are beneficially entitled to it (beneficiaries). Under a Trust, the legal title will be vested in the Trustees and the beneficial/equitable interest in the beneficiaries under the Trust.
This unique arrangement allows an individual (the “Settlor”) to transfer assets to a third party (the “Trustee”) to be administered for the benefit of person(s) chosen by the Settlor (the “Beneficiaries”) strictly in accordance to the provisions of the letter or memoranda of wishes (the “Declaration of the Trust”).
A Trust allows the Settlor to make long-term plans for the distribution of wealth after his/her lifetime. By transferring assets into a Trust, the Settlor can ensure that the management of the assets will not be interrupted upon death, by the probate or other formalities since the Trust assets will continue to be held and administered by the Trustee in accordance with the provisions of the Declaration of the Trust.
A Trust is set up to hold the assets settled by Settlor in a secure manner and for the Beneficiaries identified by the client without having excessive changes against the assets.
The proper law of the Trust is the one chosen by the Settlor, or the one implied in the Trust Deed. If no law is chosen, the one which is most closely connected at the time of creation of the Trust will be treated as the proper law.
Main Features of a Trust incorporation in Mauritius
• Confidentiality of Trustee’ deliberations, identity of Settlor and Beneficiaries
• Possibility to establish letters and memorandum of wishes
• Anti-forced heir ship rules
• Migration of Trust possible
• Concept of managing and custodian Trustee (up to four Trustees)
• Charitable Trusts are exempt from tax
• The trust can be migrated to another jurisdiction should the financial need arise.
• The trust is not subject to exchange control.
TYPES OF TRUST
Trusts can be used inter alia for:
- Asset Protection
- Estate and Succession Planning
- Protection from forced heirship rules
- Holding of Investments and Property
- Investment Funds
- Charitable & Philanthropic Purposes
There are several types of Trust namely:
- Purpose Trust
- Charitable Trust
- Discretionary Trust
Purpose Trust
Purpose Trusts are established with a specific purpose rather than the general benefits for beneficiaries. Purpose Trusts must clearly specify how the purposes will be fulfilled. The deed of trust must specify how surplus assets will be distributed when the trust terminates.
The purpose Trust must be: specific, reasonable and capable of fulfilment; and not immoral, unlawful or contrary to public policy as per the Trust Act 2001.
The terms of a purpose trust must also provide for the appointment of an enforcer who is capable of enforcing the trust and for the appointment of a successor to an enforcer. The purpose trust must also have at least one trustee which is a qualified trustee.
Under the Trust Act 2001, there shall be appointed under the terms of a purpose trust, an enforcer whose duty shall be to enforce the trust in accordance with its terms and purposes. No person shall at any time act as both trustee and enforcer of the same trust.
An appointment as enforcer shall be of no effect unless the appointment has been accepted by enforcer, and in the case of a purpose trust created by a Mauritian national, the appointment has been approved by the Financial Services Commission.
Charitable Trust
Charitable trusts have as their exclusive purpose or object one or more of either: the relief of poverty; the advancement of education; the advancement of religion; the protection of the environment; the advancement of human rights and fundamental freedoms; or any other purpose beneficial to the public in general.
Discretionary Trust
A discretionary trust is one where the Beneficiaries and/or their entitlements to the Trust are not fixed, but are determined by the criteria set out in the trust instrument by the Settlor.
Some of the characteristics of a discretionary trust are:
The deed of Trust will include the beneficiary only as a member of a class of potential beneficiaries, which is usually wide.
The Trustee will have discretion in the choice of the Beneficiary among the members of the class as well as in the allowance of the capital or the income. Thus, a Beneficiary will not have an interest in the Trust at the time of its establishment but only a “hope” of interest.
Consequently, until the trustee decides to exercise his discretionary powers, the beneficiary can legitimately declare that it does not hold any interest in the Trust and that it does not derive any advantage from it.
Such types of the Trust can be favourable for tax planning;
- The Trust instrument will describe the discretionary powers and will give the Trustee guidance on the conditions and rules that apply when exercising these powers;
- The discretionary powers of the Trustee can be very wide or can be very limited. The Trustee will have the power to decide what amount and the proportion of capital to income that can be distributed to a Beneficiary.
- The Trustee may also have the discretionary power to appoint Beneficiaries; and
- The Settlor can guide the Trustee by providing a letter of wishes that sets out his intention and wishes.
KEY DEFINITIONS
Beneficiaries
Beneficiaries are those who will derive the benefit, both capital and/or income, from the Trust. The Beneficiaries hold the beneficial ownership of the assets. Beneficiaries may be described in terms of classes, i.e., a group, for example, “Children of the Settlor”. The Trustee is not allowed to benefit from the Trust.
The Protector
The Trust Act permits the appointment of a Protector, who owes fiduciary duty to the beneficial owners. A Protector may be appointed to oversee the decisions of the Trustee. His duty, as the name suggest, is to protect the interest of the Beneficiaries. His powers are described in the Trust instrument. Unless otherwise provided in the Trust Deed, the Protector can remove the Trustee and appoint new or additional Trustees. The Protector will normally represent the interests of a class of beneficiaries and can have the capacity to change the place of residence of the Trust or can remove and appoint new trustees. The Protector may also be the Settlor, the Trustee or the Beneficiary of the Trust but in his capacity as Protector he is not accounted or regarded as a Trustee.
The Settlor
The Settlor creates a Trust by laying out his assets to a Trustee on Trust for the latter to hold it for the benefit of a certain beneficiary(ies). Once a Trust is established, additional assets can be transferred on trust to the Trustee in various manners which can be discussed in details with our advisors. By transferring the assets into the Trust, the Settlor gives up his legal ownership to the assets and the Trustee becomes the legal owner of the assets. By law, it is the duty of the Trustee to hold the assets on Trust on behalf of the Beneficiaries.
The Trustee
The Trustee is the person who holds the legal title of all the assets forming part of the Trust. JurisTax is licensed by the FSC to act as a Corporate Trustee. As the legal owner of the assets, the Trustee can act in relation to the assets. However, it is responsible to safeguard and manage the capital of the Trust according to terms of the Trust, which will be defined in a deed of Trust between the Settlor and the Trustee and of the law. Whilst the Trustee is the legal owner of the assets transferred to the Trust, the Beneficiaries have simultaneous rights of property based on principles of equity.
The relation which binds the Trustee, the Settlor and the Beneficiary is a fiduciary relationship and the Trustee has thus a fundamental duty to always act in the best interest of the Beneficiaries. The Trustee is obliged to hold and manage the assets of the Trust in the way legally prescribed by the deed of Trust, or in the absence of the specific provisions, according to maxims of equity and of the law.
MAIN FEATURES
Confidentiality
There is no register of trusts in Mauritius nor is there any need for any disclosure of beneficial owner to any authority.
A Trustee has a requirement under the Trust Act 2001 to keep confidential all information concerning the trust. Under exceptional circumstances, a trustee may be required to give confidential information to authorised body or authorised persons under anti-money laundering, prevention of terrorism or prevention of corruption legislation or under the Financial Services Act 2007.
Asset Protection Features
The Trust Act 2001 includes the following features:
- In the absence of intent to defraud, a trust shall not be void or voidable as a consequence of a subsequent bankruptcy of the settlor nor in consequence of any action taken against the settlor by his creditors.
- Where the creditor has been proven beyond reasonable doubt that the trust was made with the intent to defraud creditors of the settlor, the court may declare a trust to be void or voidable.
- No action may be brought to the above more than two years from the transfer of assets into the trust.
ADVANTAGES OF A MAURITIUS TRUST
- Assets are invested in the name of the Trust and not the name of the settlor. This is similar to a custodian arrangement and the involvement of the Settlor is kept confidential as far as possible;
- The assets do not form part of the estate of the settlor as it has been gifted to the Trust;
- Protection from claims of creditors in certain situations;
- The assets are protected for the benefit of the Beneficiaries and therefore, on the demise of the Settlor, the investments are not interrupted;
- The assets of the Trust are protected from spendthrifts of the family after the demise of the Settlor;
- Orderly transfer of wealth to the next generations on the demise of the Settlor;
- Trust assets can be used to promote charities or certain causes;
- Tax savings: mechanism for income tax saving – by transferring assets to a Trust, the assets cease to be owned by the Settlor, which then makes it possible to minimise taxes that would have become payable on that property if the Settlor had continued personal ownership; and
- To manage the application and effect of exchange control, the Trust will be in a jurisdiction with no application of exchange control.
TAXATION
A Trust is deemed non-resident if their central management and control takes place outside Mauritius.
A Trust would have its central management and control in Mauritius when:
- The Trust is administered in Mauritius and a majority of the trustees are resident in Mauritius;
- The settlor of the trust was resident in Mauritius at the time the instrument creating the trust was executed or at such time as the settlor adds new property to the trust; and
- A majority of the beneficiaries or the class of beneficiaries appointed under the terms of the trust are resident in Mauritius.
Non-resident trust will be subject to source-based taxation only, i.e only on income derived from Mauritius.
HOW CAN WE ASSIST?
- Incorporation of a Trust in Mauritius
- Bank account opening and application for internet banking services
- Compliance and regulatory services
- Acting as trustee