Section 90A: Controlled foreign company rule

90A. Controlled foreign company rule (1) (a) Subject to subsection (2), where a resident company carries on business through a controlled foreign company and the Director-General considers that the non-distributed income of the controlled foreign company arises from non-genuine arrangements which have been put in place for the essential purpose of obtaining a tax benefit, that income shall be deemed to form part of the chargeable income of the resident company. (b) For the purpose of paragraph (a) – (i) an arrangement or a series thereof shall be regarded as non-genuine to the extent that the controlled foreign company would not own the assets or would not have undertaken the risks which generate all, or part of, its income if it were not controlled by a company where the significant people functions, which are relevant to those assets and risks, are carried out and are instrumental in generating the controlled company’s income; (ii) “tax benefit” means the avoidance or postponement of the liability to pay income tax or the reduction in the amount thereof. Acts 2019 331 (2) (a) This section shall not apply to a controlled foreign company where in an income year – (i) accounting profits are not more than EUR 750 000, and non-trading income is not more than EUR 75 000; (ii) accounting profits amount to less than 10 per cent of its operating costs for the tax period; or (iii) the tax rate in the country of residence of the controlled foreign company is more than 50 per cent of the tax rate in Mauritius. (b) For the purpose of paragraph (a)(ii), the operating costs shall not include the cost of goods sold outside the country where the entity is resident for tax purposes and payments to associated enterprises. (3) The income under subsection (1)(a) shall be determined in such manner as may be prescribed. (4) The Minister may make such regulations as he thinks fit for the purpose of this section. (5) In this section – “associated enterprise” means – (a) an entity in which the company holds directly or indirectly a participation in terms of voting rights or capital ownership of 25 per cent or more or is entitled to receive 25 per cent or more of the profits of that entity; (b) an individual or entity which holds directly or indirectly a participation in terms of voting rights or capital ownership in the company of 25 per cent or more or 332 Acts 2019 is entitled to receive 25 per cent or more of the profits of the company, where an individual or entity holds directly or indirectly a participation of 25 per cent or more in the company and one or more entities, all the entities concerned, including the company, shall also be regarded as associated enterprises; “controlled foreign company” – (a) means a company – (i) which is not resident in Mauritius; and (ii) in which more than 50 per cent of its total participation rights are held directly or indirectly by the resident company referred to in subsection (1) or together with its associated enterprises; and (b) includes a permanent establishment of the resident company. (s) in section 106(2), by adding the following new paragraph, the full stop at the end of paragraph (b) being deleted and replaced by the words “; or” and the word “or” at the end of paragraph (a) being deleted – (c) his gross income for the preceding year does not exceed 10 million rupees and he is engaged in activities specified in the Thirteenth Schedule. (t) in section 111B, by repealing paragraph (a) and replacing it by the f d (b) includes a permanent establishment of the resident company. (s) in section 106(2), by adding the following new paragraph, the full stop at the end of paragraph (b) being deleted and replaced by the words “; or” and the word “or” at the end of paragraph (a) being deleted – (c) his gross income for the preceding year does not exceed 10 million rupees and he is engaged in activities specified in the Thirteenth Schedule. (t) in section 111B, by repealing paragraph (a) and replacing it by the following paragraph – (a) interest, other than – (i) interest falling under Sub-part B of Part II of the Second Schedule payable by any person, other than an individual, to any person, other than a company resident in Mauritius; and Acts 2019 333 (ii) interest payable to a person in respect of money lent by that person through a Peer-to-Peer Lending platform operated under a licence issued by the Financial Services Commission under the Financial Services Act; (u) in section 111(O), by inserting, in the appropriate alphabetical order, the following new definition – “given date” means a period of 24 hours starting at 10 o’clock in the morning on a day and ending at 10 o’clock in the morning on the following day; (v) in section 111P(2), by deleting the words “amount payable as winnings” and replacing them by the words “total cumulative winnings paid to a person on any given date”; (w) in Part VIII, by inserting, after Sub-part BC, the following new Sub-part – Sub-Part BD – Presumptive Tax on Small Enterprise