Trust

A Trust is most commonly set up as part of a long -term wealth management strategy, helping to preserve wealth through the generations without the problems usually created by taxation, probate requirements, succession laws, expropriation and foreign exchange controls. All Mauritian Trusts are governed by the Trust Act 2001.

The main objective behind the trust structure is the separation of legal and beneficial ownership whereby the property is legally owned by the trustees but is held and administered for and on behalf of specified beneficiaries. It is the obligation of the Trustees to meet the terms of the Trust.

Key Benefits of a Trust?

• Reduced estate taxes
• Allocation of assets into the desired hands
• Avoiding court fees and probate
• Protection from creditors
• Protection of assets among family members themselves (for conflicts or underage recipients)
• Used for privacy (to keep wills private) or estate planning
• Avoidance of high estate taxes or gift taxes

Main parties for a Trust arrangement

A Trust allows the holding and administration of property under which property or legal rights are vested by the owner of the property (the Settlor) in a person or persons (the Trustees). The Trustees then hold the property for or on behalf of those the trust benefits (the Beneficiaries).

Trustor

The trustor is the person who grants the trustee control over their assets, estate, or property, and who creates the agreement.

Trustee

The trustee is responsible for managing the trust that the grantor (trustor) has appointed them over. They are the person who is in charge of managing the property or assets the trustor gives them to keep, and are titled in the agreement.

Beneficiary

The beneficiary or beneficiaries are the people who receive the benefits of the trust agreement. They are given the property or assets by the trustee from the trustor according to the terms of the agreement.

A Mauritian Trust can be established without the disclosure of the Beneficiaries or Settlor details to the authorities, no register of trusts is maintained in Mauritius. The deliberations of the Trustees also remain private.

Types of Trust

Revocable versus irrevocable trust

In a revocable trust arrangement, the settlor retains the right to cancel the trust and regain control of the trust assets. Under these circumstances, the settlor is considered as the legal owner of the trust assets for tax purposes and is responsible for the tax payments and reporting on the trust’s investment returns.

With an irrevocable trust, the settlor can’t alter or revoke the trust relationship. The trustee is responsible for the tax payments and reporting tax information for trust assets. In this case, the trustee is the owner of the trust.

Fixed versus discretionary trusts

The assets in a fixed trust are distributed at certain times or in certain amounts. The terms of the distributions of a fixed trust are specified in the trust documentation.

If distribution of the trust assets is at the sole discretion of the trustee, then the trust is called a discretionary trust. The settlor can make his or her wishes known in the trust documentation so the trustee has an idea of what the settlor wants, but the trustee is not bound by these wishes.

Other Kinds of Trusts

There are many other kinds of trusts with each different kind having its own uses and purposes. But in principle most follow the same basic structure of a traditional, three-party trust, involving the Trustor, Trustee & Beneficiaries.

Tax Provisions for Trust

A trust is liable to income tax at the rate of 15%.

However, a trust shall be exempt from income tax if:

• the settlor is a non-resident or holds a Global Business Licence (GBC) or a Category 2 Global Business Licence (GBC 2)
• if all the beneficiaries appointed throughout an income year are nonresidents or holds a GBC Licence; or
• if it is a purpose trust and the activities are carried out outside Mauritius.

To note that there is no withholding tax on distribution from a Trust (ii) Distribution from a Trust is not taxable in Mauritius

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