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 these 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, as well as 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's assets constitute a separate estate, distinct from the personal estate of the trustee and that of 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 fits 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 the rights of existing creditors. 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 makes it possible to organise the transmission of wealth in an orderly manner, avoiding probate procedures that are often lengthy and costly. Persons establishing their tax residency in Mauritius benefit from the absence of inheritance tax in the jurisdiction. The settlor can provide for distributions staggered over time, conditions linked to the 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 vehicle for holding at the top of a structure of investment or a group of companies. A purpose trust can hold the shares of a holding company, creating a so-called "orphan structure" in which no natural person directly holds the shares of the holding company. This structuring is common in securitisation, structured finance and private equity transactions.

Philanthropy

The charitable trust offers a structured framework for philanthropic initiatives, with clear governance, segregation of assets and continuity beyond the life of the settlor. It makes it possible to endow scholarships, fund social programmes or support environmental and cultural causes.

Employee incentive plans

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

Advantages of the Mauritian trust

• Absence of 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 coming from civil law jurisdictions where forced heirship limits testamentary freedom.
• Structural flexibility: the trust deed can be drafted with great latitude, making it possible to adapt the trustee's powers, the conditions of distribution and the governance mechanisms to the settlor's specific needs.
• Confidentiality: although the trust must be registered with the Registrar, information relating to the beneficiaries is not accessible to the public. The details of the trust deed remain confidential.
• Segregation of assets: the trust's assets constitute a separate estate, protected against the trustee's personal creditors and, subject to conditions, against those of the settlor.
• Multigenerational 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 regarded as accruing to the beneficiaries) is generally not taxed at the level of the trust 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 level of the trust) 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.