Double taxation | Understanding the Franco-Mauritian Tax Convention

Mauritius is a popular tourist destination for the French, and is attracting more and more investors to its real estate market. So why is such a small island in the heart of the Indian Ocean so attractive? Its lifestyle, picturesque landscapes, welcoming population, strategic geographical location at the crossroads of Africa, Europe and Asia, and above all its attractive tax system thanks to the Franco-Mauritian tax treaty.

The Franco-Mauritian Tax Convention

Signed for the first time on December 11, 1980 (then amended and enacted in June 2011), the tax treaty between Mauritius and France aims to eliminate double taxation of the income of an individual whose sources of income are in a country other than his or her country of tax residence, and also to prevent tax evasion.

This bilateral tax treaty is considered a crucial agreement for French investors wishing to venture into real estate or business in Mauritius. In this article, we will explore the ins and outs of this treaty, highlighting the benefits it offers to French investors and the opportunities it creates in Mauritius.

The treaty covers various aspects, including employment income, real estate income, dividends, interest and capital gains.

What are the advantages for French investors?

Elimination of double taxation: The Franco-Mauritian tax treaty guarantees that French residents deriving income from Mauritian sources will not be subject to double taxation, as they can deduct taxes paid in Mauritius from their taxes in France.

Reduced tax rates: Certain types of income, such as dividends and interest, may benefit from reduced or exempt tax rates under the treaty.

Investment protection: The treaty provides a sound legal framework for French investors in Mauritius, guaranteeing the security and protection of their assets and income.

As a general rule, all individuals resident in France are subject to French tax legislation, regardless of their nationality. This implies that all assets held in France or abroad, as well as the income generated by their use (rental, sale, inheritance), are taken into account in the calculation of their taxes and are taxable in France. However, thanks to the double taxation treaty signed with Mauritius, it is possible to benefit from a number of tax advantages.

As a result of the ratification of a double taxation agreement with Mauritius, property acquired by a French citizen on Mauritian territory is only subject to taxation in Mauritius. Investing in real estate in Mauritius therefore enables French taxpayers to reduce their wealth tax liability. Property purchased in Mauritius is not included in the French taxable real estate assets, especially as Mauritius has no wealth tax. As a result, the French investor benefits from a substantial tax reduction.

In accordance with Article 6 of this tax treaty, income from the rental of a property purchased in Mauritius by a French citizen is only subject to taxation in Mauritius. Since Mauritius applies a single tax rate of 15% on all types of income, including rental income from real estate acquired on its territory, no comparison can be made. This rate is considerably lower, if not negligible, than the maximum 45% tax bracket applied to property income in France. Investing in real estate in Mauritius is therefore considerably more advantageous for French investors.

There is no capital gains tax on real estate in Mauritius, with a maximum rate of 34.5% in France. Thus, investing in real estate in Mauritius offers French citizens the possibility of realizing a total profit of 100% in the event of resale.

As far as inheritance tax is concerned, the tax treaty between Mauritius and France does not specifically address this issue at present. Consequently, all assets acquired in Mauritius by a French citizen are subject to French inheritance tax, unless both the owners and their direct heirs are Mauritian residents. In this scenario, only inherited assets located in France are subject to tax in France.

Investment opportunities in Mauritius :

Real estate: With its idyllic landscapes, tropical climate and growing tourist appeal, Mauritius offers a flourishing and diversified real estate market. French investors can take advantage of the tax treaty to invest in residential properties and benefit from attractive returns. Tailor-made real estate schemes have been set up by the Mauritian authorities to enable foreign nationals to invest here (Integrated Resort Scheme – IRS, Real Estate Scheme – RES, Property Development Scheme – PDS, Invest Hotel Scheme – IHS, Smart City Scheme, R+2 apartments).

Discover the real estate properties available to foreigners in Mauritius.

Entrepreneurship and business: Mauritius is also a dynamic financial hub, offering an environment conducive to business and entrepreneurship. French investors can explore opportunities in diverse sectors such as finance, technology, tourism and many others.

In short, the Franco-Mauritian Tax Convention plays a crucial role in promoting investment between France and Mauritius. For French investors, this agreement offers substantial tax advantages, facilitating access to a dynamic and attractive market. By fully understanding the provisions of this agreement and exploring investment opportunities in Mauritius, investors can maximize their returns and contribute to the economic prosperity of both states.