Trust in Mauritius

What is a Mauritian trust?

A trust is a legal arrangement originating from the English common law tradition, whereby a person -- the settlor -- transfers ownership of assets to another person -- the trustee -- who undertakes to hold and manage those assets for the benefit of one or more beneficiaries, in accordance with the terms of the trust deed.

In Mauritius, the trust is governed by the Trust Act 2001, which codifies common law principles while adapting them to the Mauritian context. The Act defines the rights and obligations of the trustee, the powers of the settlor, the rights of beneficiaries, the rules for variation and termination of the trust, and the supervisory mechanisms.

The fundamental mechanism of the trust rests on a separation between legal ownership and beneficial ownership. The trustee holds the assets in legal ownership, but administers them for the exclusive benefit of the beneficiaries who hold the beneficial ownership. The trust assets constitute a separate estate, distinct from the personal estate of both the trustee and the settlor.

The Mauritian trust must be registered with the Registrar of Trusts in Mauritius. When the trustee is an FSC-licensed Management Company, additional compliance and governance requirements apply.

Uses of the Mauritian trust

The Mauritian trust is a versatile instrument used in numerous estate, commercial and philanthropic contexts. It integrates within the broader framework of company structuring in Mauritius.

Asset protection

Assets transferred to an irrevocable trust leave the personal estate of the settlor. This mechanism can offer protection against future creditors, provided that the transfer is not made in fraud of existing creditors' rights. Asset protection is one of the most common uses of the trust, particularly for entrepreneurs and professionals exposed to liability risks.

Estate planning

The trust allows for the organised transmission of wealth, avoiding probate procedures that are often lengthy and costly. Individuals establishing their tax residency in Mauritius benefit from the absence of inheritance tax in the jurisdiction. The settlor can provide for distributions phased over time, conditions linked to age or education of beneficiaries, and protection mechanisms for vulnerable beneficiaries. Mauritian law does not provide for forced heirship rules for trusts established under the Trust Act.

Holding structures

The trust is frequently used as a holding vehicle at the top of an investment or corporate group structure. A purpose trust can hold the shares of a holding company, creating a so-called "orphan structure" where no natural person directly holds the shares of the holding company. This structuring is common in securitisation, structured finance and private equity operations.

Philanthropy

The charitable trust offers a structured framework for philanthropic initiatives, with clear governance, asset segregation and continuity beyond the settlor's lifetime. It can endow scholarships, fund social programmes or support environmental and cultural causes.

Employee benefit plans

The trust can serve as a vehicle for Employee Benefit Trusts (EBTs), enabling a company to set up employee share ownership plans, deferred bonus schemes or supplementary pension arrangements. The trust holds shares or funds for the benefit of employees according to the conditions set by the employer.

Advantages of the Mauritian trust

• No forced heirship: Mauritian trust law does not provide for forced heirship rules, offering complete freedom in the disposition of assets. This point is particularly relevant for settlors from civil law jurisdictions where forced heirship limits testamentary freedom.
• Structural flexibility: the trust deed can be drafted with great latitude, allowing the trustee's powers, distribution conditions and governance mechanisms to be tailored to the settlor's specific needs.
• Confidentiality: although the trust must be registered with the Registrar, information relating to beneficiaries is not publicly accessible. The details of the trust deed remain confidential.
• Asset segregation: trust assets constitute a separate estate, protected from the trustee's personal creditors and, subject to conditions, from those of the settlor.
• Multi-generational planning: with a maximum duration of 99 years, the trust allows for planning over several generations.

Taxation of the Mauritian trust

The tax treatment of a Mauritian trust depends on its classification as a transparent or opaque trust.

A transparent trust (in which income is considered as accruing to the beneficiaries) is generally not taxed at the trust level in Mauritius. Income is taxed in the hands of the beneficiaries, according to the tax rules applicable in their jurisdiction of residence.

An opaque trust (in which income is accumulated at the trust level) may be subject to income tax in Mauritius at the rate of 15%, with the possibility of access to the Partial Exemption Regime subject to conditions. See our guide on corporate taxation in Mauritius for more details on this regime.

Disclaimer: the tax treatment of trusts is a complex area that depends on multiple factors, including the tax residence of the settlor, the beneficiaries and the trustee, the nature of the assets and income, and the tax legislation of each jurisdiction involved. A personalised tax analysis is essential before any structuring decision.