A Trust is created when the person creating the trust (the Settlor) transfers the legal ownership of his assets to another person or a company (the Trustee) to be held for the benefit of certain specified persons (the Beneficiaries) in accordance with the terms of the trust deed. Due to the special nature of the trust, the Settlor is able to divest himself of legal ownership of his assets, whilst still being able to benefit from them by being included as a beneficiary. A key benefit of a Trust is confidentiality, in that besides achieving many of the objectives normally covered in a Will, there are no statutory or public disclosure requirements.
Trust assets can include money, securities, real property or other assets located anywhere in the world, provided that the Trustees are able to obtain legal title to, and control over the assets. A Trust can be either Fixed or Discretionary. A Fixed Trust provides very little flexibility in respect of how the Trust assets are dealt with. Under a Discretionary Trust, the Trustee has more flexibility and discretion with regard to the distribution of the trust assets to its beneficiaries. This allows the Trustee to take changing family circumstances into account during the life of the Trust. A Letter of Wishes from the Settlor to the Trustee facilitates this process and this Letter of Wishes may be revised at any time by the Settlor.
The Mauritius Trust
The Mauritius Trust is governed by the Trust Act 2001, which allows for Protective and Discretionary trusts, Charitable trusts, Purpose trusts, Commercial and Trading trusts. The main characteristics of the Mauritius Trust are:
• There is no disclosure requirement in respect of the name of the Settlor or Beneficiaries.
• The Settlor and beneficiaries are not residents of Mauritius during the life of the Trust.
• The beneficiary has to be identifiable by name or ascertainable by reference to a class.
• There must be at least one resident Trustee in Mauritius at all times.
• The Trust assets do not include any property in Mauritius.
• The duration of a Mauritius Trust other than a purpose Trust is up to 99 years.
• Guidance from the Settlor may be given to the Trustees via Letters of Wishes.
• A Protector of the Trust may be appointed.
• Foreign rule of forced heirship cannot invalidate a Mauritius Trust.
• Mauritius Trusts are deemed to be irrevocable.
• Asset Protection, where the Trust offers legal protection against illegitimate interference by overseas authorities intent on repatriation, freezing or confiscation.
• Estate and Tax Planning, especially when used in conjunction with an international business investment holding company, where special regard must be paid to an individual’s residence and domicile, his geographical source of income and the location of his assets. A Trust may be created in another jurisdiction to own a controlling interest in a trading or investment holding company, to own patents, trademarks or copyrights and to receive royalties.
• Centralised Administration, mainly for wealthy families owning securities and other assets in various parts of the world for various legal and fiscal reasons.
• Income received by the Non-resident Trusts and distributions to Non-resident beneficiaries are completely exempt from taxation in Mauritius. Non-resident trusts, however, can not benefit from Double Tax Treaty Agreements.
• Resident trusts can access the Double Tax Treaty Agreements, but they are liable to a tax rate of 15% on their chargeable income. Provided they apply for a Global Business Licence(Category 1) they will be able to claim “presumed” foreign tax credits (currently 80%) which will result in an effective tax rate of 3%. Non-resident Beneficiaries of a Resident Trust are completely exempt from taxation on distributions.