Withholding Tax on Payments Made by a Mauritius Company

Withholding tax in Mauritius is a question every company meets the day it pays someone outside the ordinary supplier relationship: a lender abroad, a licensor of intellectual property, a foreign consultant, a shareholder. The idea of deduction at source is simple: the payer keeps back part of the payment and accounts for it to the tax authority. The difficulty is knowing which payments are caught, which are exempt, and who bears the filing duty.

This guide looks at the four payments that raise the question most often (dividends, interest, royalties and fees) and at the reporting that follows. It gives general information, not advice: the answer for a given payment depends on who receives it, where the income comes from and how the paying company is classified.

What deduction at source means for a company

When a Mauritius company pays an amount that the Income Tax Act treats as subject to deduction, it becomes a collector for the Mauritius Revenue Authority (MRA). It must hold back the correct amount, pay it over and report it. If it fails to do so, the shortfall can fall on the company itself rather than on the recipient.

Three questions decide the outcome of any payment:

1. Who is the payer? An ordinary domestic company, a company holding a Global Business Licence, or an Authorised Company are not treated alike.
2. Who is the recipient? A resident or a non-resident, an individual or a company, a business carrying on activity in Mauritius or not.
3. Where does the money come from? Several exemptions depend on the payer having earned the underlying income from a foreign source.

The Income Tax Act defines a "global business entity" as including a company holding a Global Business Licence from the Financial Services Commission (FSC) and an Authorised Company under section 71A of the Financial Services Act. That classification matters because many of the reliefs below are written for these entities.

Payment-by-payment overview

The table reflects the exemptions found in the consolidated Act as updated up to the Finance Act 2026. An exemption is not an automatic outcome: it applies only if its conditions are met and documented.

Dividends: usually no withholding on the way out

Dividends paid by a company resident in Mauritius are exempt from income tax for the person who receives them, and the Act does not provide for withholding on them. For a domestic shareholder or a foreign parent, this is often the cleanest payment in the group.

Two points deserve attention:

• Distribution to a trust beneficiary. Under section 46(4), any distribution to a beneficiary of a trust is deemed to be a dividend in that beneficiary's hands.
• Dividends are a decision of the board, not a tax event alone. Before paying one, directors must be satisfied the company can do so. See Paying a Dividend From a Mauritius Company and What Is the Solvency Test.

Dividends received from abroad are a separate topic. A company may benefit from a partial exemption of 80 % of foreign-source dividends, provided the dividend was not deducted in the source country and the company meets the prescribed substance requirements. That relief concerns income coming in, not payments going out.

Interest paid to a non-resident

Interest is where the status of the payer counts most. The Second Schedule exempts interest paid to a non-resident who carries on no business in Mauritius when the payer is a Global Business Licence holder and the interest is paid out of foreign-source income. A company that is not in that position cannot assume the same treatment.

In practice, the following should be on file before a payment leaves:

• the loan agreement and the interest calculation;
• evidence that the lender is non-resident and carries on no business in Mauritius;
• a note showing the foreign-source character of the income used to pay.

Interest that the company receives may also qualify for a partial exemption of 80 %, with exclusions for banks, non-bank deposit-taking institutions, foreign exchange dealers, insurers, leasing companies and factoring or credit companies, and subject to substance conditions.

Royalties paid to a non-resident

Royalties paid to a non-resident by a company out of its foreign-source income are exempt (Second Schedule, Part II, Sub-part A, item 5). The wording ties the exemption to the origin of the income, not to the nature of the licence alone. A Mauritius operating company that pays a royalty out of income earned in Mauritius should not borrow the logic of the foreign-source exemption without checking the text.

Typical files to keep: the licence agreement, the invoice, and a short memo explaining how the company concluded that the income used for payment is of foreign source.

Fees paid to non-residents

Management, consulting, directors' and technical fees are the grey zone. Whether deduction at source applies depends on the type of service, where it is performed, the recipient's status and the way the payment is booked. The exemptions listed above do not cover service fees as such, so do not extend them by analogy.

Two practical habits help:

• Describe the service precisely in the contract and invoice. A vague "fee" is harder to classify than a described service.
• Decide before payment, not after. Correcting a missed deduction later is slower and more expensive than checking once. A fee paid to a director raises separate points, covered in How to Pay a Director Properly.

Residence of the paying company

Tax residence drives much of the analysis. Under section 73, a company is resident in Mauritius if it is incorporated there or if its central management and control is there. Under section 73A, however, a company incorporated in Mauritius is treated as non-resident if it is centrally managed and controlled outside Mauritius, and it must nonetheless file a return under section 116.

A company run from abroad should therefore not assume it has no obligations. If you manage a Mauritius company from another country, read Running a Mauritius Company From the United Kingdom or the equivalent page for your country, and look at the board's real decision-making place alongside Resident Director in Mauritius.

Where a counterparty asks you to prove residence, the Director-General can issue a Tax Residence Certificate once the required return has been filed and the fee paid. The Income Tax Regulations 1996 (article 20A) set that fee at USD 200 in cases other than an individual or a CIS.

How to decide: a short route

Reporting and filing

Deduction is only half the duty. The other half is showing it to the MRA.

The annual income tax return

Every company, taxable or not, must file its income tax return with the Director-General no later than 6 months after the end of the month in which its financial year closes (section 116(1)). For a year ending in June, the deadline is 2 working days before the end of December; for a year ending in December, 2 working days before the end of June. Filing and payment are made electronically. The mechanics are explained in Filing With the MRA Online and Corporate Income Tax Return Filing.

This duty applies even to a company treated as non-resident under section 73A, and even when the company's own tax charge is nil.

Supporting records

Keep, for each cross-border payment: the contract, the invoice, proof of payment, the recipient's details and the working that supports the decision to deduct or not. These are the documents an MRA reviewer asks for first. See Company Records and Preparing for an MRA Tax Review.

Who does the filing

If the company has an FSC-licensed corporate service provider (Management Licence) acting as its registered agent, the agent's statutory duties include filing the returns and documents required under the Income Tax Act and passing on communications from the MRA. The directors keep responsibility for the accuracy of what is filed. Compare providers in How to Choose a Corporate Services Provider.

Checklist before any cross-border payment

• Identify the recipient and confirm whether they are resident or non-resident
• Classify the payment: dividend, interest, royalty, service fee or other
• Confirm the paying company's status (domestic, Global Business Licence, Authorised Company)
• Check whether the income used to pay is of foreign source
• Verify each condition of the exemption relied upon, in writing
• Obtain board approval and, for a dividend, record the solvency test
• Keep the contract, invoice and proof of payment
• Reflect the payment in the next income tax return
• Ask an adviser when the classification is unclear

Mistakes seen most often

• Treating an exemption as a default. Each one is conditional on foreign-source income, on the recipient's status or on the payer's licence.
• Ignoring section 73A. A company managed abroad still files a return.
• Paying first, classifying later. The record of reasoning should predate the transfer.
• Mixing up payroll and cross-border payments. Deduction on employee pay follows its own rules, covered in PAYE in Mauritius for Employers.

Penalties for late or missing compliance are summarised in Penalties for Non-Compliance, and the wider yearly rhythm is in the Compliance Calendar. Treaty relief on cross-border income is a separate subject handled elsewhere. If you want a provider to review a specific payment, send a request through the contact form.