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Mauritius 2022 Finance Act includes Pillar Two Top-Up Tax

The Finance (Miscellaneous Provisions) Bill 2022 (subsequently enacted with very minor amendments in the Finance (Miscellaneous Provisions) Act 2022 on August 2, 2022) which implements provisions of the 2022 Budget in Mauritius includes mention of a qualified domestic minimum top-up tax for Pillar Two purposes. 

It’s a relatively brief mention. Section 31(b) of the Bill includes an amendment to the income tax act, which states:

‘…in section 4, by adding the following new subsection –

(3) Notwithstanding the other provisions of this Act, a company forming part of an MNE group which is liable to a Top-up Tax in a year, may be required by the Director-General to compute and pay a Qualified Domestic Minimum Top-up Tax in such form and manner as may be prescribed…’

Section 31(a) of the Bill includes definitions of MNE Group, Qualified Domestic Minimum Tax and Top-Up Tax which all revert back to the relevant articles in the OECD Model Rules.

There has been no draft legislation to actually implement the Pillar Two GloBE rules yet, although this would be separate legislation and not something that would be included in their Finance Bill anyway. It seems like they are waiting to see how things develop internationally before releasing legislation for this.

There is no commencement date in the enacted legislation and Article 85(2) states that that it shall come into operation on a date to be fixed by Proclamation.

The heavy reliance in the Finance Bill on the definitions in the  OECD Model Rules may mean that unlike the UK draft Pillar Two legislation, Mauritius may rely on the definitions in the Model Rules more when drafting their legislation.

They may not take the Swiss approach of simply transposing the GloBE rules directly into domestic law by way of a static reference, but adopt a balanced approach with some local drafting (particularly for the QDMTT elements).

The inclusion of the qualified domestic minimum tax in the Finance Bill is interesting.

Firstly, it sounds like Regulations will be put in place to govern the calculation and application of the qualified domestic minimum top-up tax. Given this is effectively a separate tax based on the calculation provisions of the Model Rules, you’d usually expect to see this as legislation. But international approaches to the implementation will vary a lot.

Secondly, the inclusion of this in the income tax act is also interesting. Section 4 of the Income Tax Act (which is amended by this new provision in the Finance Bill) relates to the imposition of income tax. Again, this new tax is not really tied to the income tax act. The method of its calculation (taxable income base etc) is different to the income tax act taxable base.

For more information on the domestic implementation of Pillar Two, see Pillar Two – Domestic Implementation.