Fair Share Contribution: Rules Affecting 3% Rate for Dividend-Receiving Companies

The newly proposed Finance Bill has adjusted the Fair Share Contribution (FSC) income threshold, addressing concerns from businesses about the taxation of dividends and increased fiscal pressure on high-net-worth individuals.

However, the changes have sparked debate over transparency and legal consistency, particularly regarding exemptions for Global Business entities.

Under the revised framework, the FSC income threshold—the point at which individuals become liable for the contribution—will now be calculated based on Net personal income; Dividends from resident companies or locally registered cooperatives; An imputed share of dividends from companies or estates, calculated as if all profits had been fully distributed.

Crucially, dividends from Global Business (GB) entities—such as those under the Global Business Licence (GBL) regime—are excluded from the calculation.

Business Concerns and Lobbying Efforts

Ryan Allas, General Manager of the Tax Department at Rogers Capital, confirmed that private sector stakeholders had submitted formal objections to several fiscal measures in the Bill.

“Many of our concerns were reflected in the final draft, but key issues remain unresolved,” Allas said.

Despite intense lobbying, the government proceeded with the introduction of a Qualified Domestic Minimum Top-Up Tax (QDMTT), even as the European Union re-evaluates Pillar 2 of its global tax reforms.

Partial Exemption Regime Faces Legal Scrutiny

The Bill also introduces stricter substance requirements for companies seeking partial tax exemptions, a move that directly contradicts a recent Supreme Court ruling.

In Alteo Energy v ARC & Anor (2025 SCJ 47), the court held that partial exemption could apply even if the income in question (such as interest) was not the company’s primary revenue stream, provided substantial economic activity was demonstrated.

“This amendment effectively nullifies the court’s decision,” Allas argued. “If this is a policy shift, it should be openly debated—not disguised as a technical clarification.”

Potential Impact on Global Business Sector

The changes could strip many companies, including Global Business Companies (GBCs), of their preferential 3% effective tax rate, raising concerns about legal certainty and investor confidence.

Critics argue that the Bill’s ambiguous language creates uncertainty, particularly for businesses that relied on previous judicial interpretations.

Government’s Stance

The Ministry of Finance has yet to issue an official response to the criticisms. However, insiders suggest the amendments aim to align Mauritius with evolving international tax standards while maintaining competitiveness.

What’s Next?

The Bill is expected to undergo further parliamentary debate before final adoption. Businesses, particularly in the financial services and global business sectors, are closely monitoring developments, with some considering legal challenges if the provisions are enacted as drafted.

Source: Defi Media