Gabon and Mauritius, two nations situated in diverse regions of Africa, exhibit unique attributes that contribute to their positions in the global landscape.
Mauritius, in particular, combines the inherent benefits of an offshore financial centre with the added advantage of being a treaty-based jurisdiction. It boasts a favourable tax environment, including exemptions from capital gains tax, withholding tax, and capital duty on issued capital. Moreover, the confidentiality of company information, exchange liberalization, and the ability to freely repatriate profits and capital further strengthen its appeal as an international tax planning jurisdiction. The presence of a robust network of Double Taxation Avoidance Agreements (DTAAs) enhances the jurisdiction’s reputation as a reputable International Financial Centre.
In contrast, Gabon possesses its own distinct advantages that contribute to its unique position in Africa. While it may not have the same offshore financial centre status as Mauritius, Gabon boasts other notable attributes. The country is rich in natural resources, particularly oil and minerals, which have played a crucial role in its economic development. Additionally, Gabon has made significant strides in diversifying its economy, with a focus on sectors such as agriculture, tourism, and renewable energy. These efforts contribute to the country’s image as a promising investment destination and a gateway to opportunities in the African continent.
While Mauritius and Gabon differ in their approaches and advantages, both countries exemplify the potential for economic growth and development in Africa. Their unique attributes and strategic positioning create opportunities for investors, businesses, and individuals seeking to tap into the continent’s potential. By recognizing and leveraging these distinctive qualities, stakeholders can forge mutually beneficial partnerships and contribute to the continued progress of these nations and the broader African region. For example:
Trade: Gabon’s main exports to Mauritius include petroleum products, wood products, and iron ore while Mauritius exports to Gabon mainly consist of textiles, clothing, and electrical equipment. In 2020, the total trade volume between the two countries was approximately US$35 million.
Investment: There have been increasing bilateral investments between Gabon and Mauritius in recent years. Gabonese companies have invested in sectors such as finance, hospitality, and real estate in Mauritius while Mauritian investment in Gabon primarily focuses on sectors such as telecommunications, banking, and infrastructure.
Tourism: Mauritius is a popular tourist destination among Gabonese travellers. Many Gabonese tourists visit Mauritius for its pristine beaches, water sports activities, and luxury resorts. In 2019 for example, around 4,500 Gabonese tourists visited Mauritius.
Diplomatic Relations: Gabon and Mauritius established diplomatic relations on December 8, 1975.The Gabonese embassy in Mauritius is located in Port Louis, while the Mauritian embassy in Gabon is in Libreville.Both countries have signed various agreements focusing on cooperation in areas such as trade, tourism, education, and healthcare.
Double Taxation Avoidance Agreement: Gabon and Mauritius have signed a double taxation avoidance treaty that will prevent both parties from being taxed twice on the same income. This agreement will apply to taxes on income and profits earned in Gabon and Mauritius.
Language: While French is the official language in Gabon, in Mauritius English, French and Creole are widely spoken.
Aside that there are several connecting flights available through major African airline hubs such as Addis Ababa, Johannesburg, or Nairobi.
For the purpose of this article, we will focus mainly on the DTAA between Mauritius and Gabon.
DTAA between Gabon and Mauritius
On July 18, 2013, Gabon and Mauritius entered into a Double Taxation Avoidance Agreement (DTAA), which is currently pending ratification by both nations. This agreement aims to eliminate the possibility of double taxation on the same income for both parties involved.
It is important to note that Gabon does not provide foreign tax credits. However, the tax responsibilities of non-residents may be influenced by a tax treaty between Gabon and the taxpayer’s country of residence.
Gabonese nationals or Gabonese companies investing through the Mauritius investment vehicle may benefit from maximum tax rates on income declared from the Mauritius entity, such maximum tax rates to be published at time of ratification of the DTAA.
The benefits arising from a Double Tax Avoidance Agreement (DTAA) between these nations extend beyond tax advantages and the avoidance of double taxation on the same income. This agreement not only provides greater certainty in terms of tax obligations and reduces the cost of conducting business in both countries but also fosters:
Increased investment: The DTA agreement will remove the barriers that might discourage investors from conducting business between Gabon and Mauritius. This way, it will increase the flow of foreign direct investment into both countries, which can eventually lead to economic growth and job creation.
Enhanced economic cooperation: By removing tax barriers, the DTA agreement between Gabon and Mauritius can foster greater economic cooperation between the two countries. This can lead to the development of new trade relations and the expansion of existing ones, which can be beneficial for both nations. This will also strengthen the relationship between the two nations.
Improved transparency: The DTA agreement requires both countries to exchange information on tax matters. This will help prevent tax evasion and improve the effectiveness of tax enforcement. It will also promote greater transparency in the financial dealings of businesses and individuals in both countries.
The Mauritius-Gabon DTAA will also bring the competitiveness of Gabonese companies at par with other African countries already having already ratified a DTAA with Mauritius. The agreement will encourage cross-border investment and enhance bilateral cooperation in tax matters between the two countries. It will enhance cooperation in tax matters and will allow Gabonese investors to enjoy more favourable tax rates than under the domestic law.
Effects of Double Taxation Avoidance Agreements
It is not unusual for a business or an individual who is resident in one country to make a taxable gain (earnings, profits) in another – by using the Mauritius Global Business Company (GBC) to invest in opportunities in other jurisdictions. This person may find that he/she is obliged by domestic laws to pay tax on that gain locally and pay again in the country in which the gain was made thus leading him/her to incur double taxation. Because this is inequitable and may discourage cross border investments, many nations enter into bilateral DTAAs with each other. DTAAs are international tax agreements which aim at reducing or eliminating the unfair burden of double tax on the same income and for identical or overlapping periods due to connecting factors.
The Exemption Method is for the residence country to exclude foreign income from its tax base and the exclusive right to tax such incomes goes to the source country. This is known as complete exemption method and is sometimes followed in respect of profits attributable to foreign permanent establishments or income from immovable property.
The Credit Method reflects the underlying concept that the resident remains liable in the country of residence on its global income, however as far as the quantum of liabilities is concerned credit for tax paid in the source country is given by the residence country against its domestic tax as if the foreign tax were paid to the country of residence itself.
With Tax Sparing the investor is allowed to preserve to himself benefits of tax incentives available in the country of investment for such investments. Where the credit is allowed by the country of its residence, not only in respect of taxes actually paid by it in the country of investment but also in respect of those taxes the country of investment foregoes due to its fiscal incentive provisions under its tax legislation.
Lastly, a DTAA will also often provide a reduced rate of withholding tax than is otherwise applicable in the source country. They also provide the resident state with the right to tax capital gains (subject to certain restrictions).
In summary, the Double Tax Avoidance Agreement (DTAA) between Gabon and Mauritius holds significant importance as it has the potential to bring about positive outcomes for both nations. Once ratified, this agreement can facilitate increased foreign direct investment, eliminate barriers to trade, and enhance transparency in tax-related matters.
The DTAA serves as a crucial tool for promoting economic cooperation between Gabon and Mauritius. By providing clear guidelines on taxation, it instils confidence in investors and encourages them to explore business opportunities in both countries. The elimination of double taxation ensures that businesses and individuals are not burdened by multiple tax liabilities, thus reducing costs and promoting a more favourable investment climate.
Furthermore, the DTAA paves the way for improved trade relations. By removing tax obstacles, it facilitates smoother cross-border transactions, encourages bilateral trade, and strengthens economic ties between Gabon and Mauritius.
Transparency in tax matters is another significant aspect of the DTAA. The agreement establishes a framework for exchanging information and cooperating in tax-related investigations. This fosters a more open and accountable environment, deterring tax evasion and promoting fair taxation practices.
While the DTAA is currently awaiting ratification, it is hoped that both countries will expedite the process. Once ratified, the agreement can unlock its potential benefits, boosting economic growth, attracting foreign investments, and fostering mutually beneficial partnerships between Gabon and Mauritius.