For their generational planning, South Africans trust in Mauritius

South Africans determined to look after their children and grandchildren are going offshore – not to emigrate but to set up family trusts that limit taxation effects and protect assets.

The favoured destination is not the Caribbean, the Channel Islands or the Isle of Man, but an island closer to home … Mauritius.

Yogesh Gokool, Head of International Banking at AfrAsia, the Mauritius-based financial services group with representative offices in Johannesburg and Cape Town, reports a sustained increase in trust business from high net worth South Africans.

The trend was evident two years ago, he says. The trigger was the relaxation of exchange control regulations by the South African Reserve Bank that allowed individuals to place up to R4 million a year offshore for investment purposes.

The uptick has continued into 2013 as Mauritius’s reputation as an offshore international financial centre has grown.

Gokool notes: “Some offshore centres are extremely small and have a limited pool of relevant skills. In contrast, the pool of financial and administrative skills in Mauritius has reached critical mass in recent years and there is greater understanding internationally that groups like AfrAsia have the ability to deliver world best practice in financial services .

“Service levels are high, yet fees in Mauritius have remained very attractive when compared with those in alternative locations in Europe and perhaps the Caribbean.”

Several factors drive the growth in trust business, including:

• Tax advantages – in Mauritius there’s no donations tax, inheritance tax or capital gains tax. If needed, a Mauritius trust can apply for a licence in order to benefit from double taxation treaty benefits.

• Liberal currency regulation – Mauritius has no exchange controls.

• Confidentiality – there are no registration or filing obligations for trusts.

• Investment choice – a broad range of international investments is easily accessed from Mauritius.

• Security of assets – creditors may bring no action later than two years from the date assets are placed in a trust.

• Legal protections – Mauritius trust law does not recognise foreign judgments.

Red tape is kept to a minimum, says Gokool. One key stipulation is that a minimum of one trustee must be resident in Mauritius and must be licensed by the Mauritian Financial Services Commission.

He adds: “It is so convenient we have cases where settlors and beneficiaries fly in for a meeting with the professional trustee and banker here in Mauritius and fly out that evening.

“Mauritius is only four hours’ flying time from Johannesburg. Proximity like that means families are not distanced from generational planning. They are right on top of it.”