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A Safe Harbor

A Safe Harbor

Casasola is a complex of luxury villas in Pereybere, a town on the north coast of Mauritius enclosed by the dense-green of palm trees and paper-white beaches that melt into the Indian Ocean’s crystal blue. Its units are understated, with clean, modern lines; they’re private too, with manicured lawns and secluded infinity pools. The units sell for US$500,000 and up – or they did. Casasola, which means Sun Home, was the first project to take advantage of the Real Estate Scheme, an expansion of Mauritius’s Integrated Resort Scheme that allows foreigners to purchase residential and resort property on the island, and it quickly sold out. Casasola Two was built next, then Casasola Three, and all across the island luxury residences are popping up, along with foreign investors who have come to buy. 

Until 2002, Mauritian law prevented foreigners from buying property on the island. The country, which has been governed by broadly socialist coalitions since it gained independence from the United Kingdom in 1968, started to open up its economy in 2000, by initiating a series of market-oriented reforms. Among these was the Integrated Resort Scheme (IRS), which allows luxury residences to be sold to foreign investors. The properties must go for at least US$500,000; in exchange, the buyer qualifies for residency and can take advantage of Mauritius’s strong asset protection laws, favorable tax environment and extensive network of double taxation agreements. 

Initially, IRS projects were only permitted on ten or more hectares of land. As a result, many were done on a jaw-dropping scale, like the Anahita Sanctuary on the island’s east coast, where facilities include a golf course designed by Ernie Els, a double infinity swimming pool, tennis courts, a boat house with PADI - certified diving instructors and a Four Seasons resort. Anahita’s developers were not overestimating demand: 70 waterside homes built for a subproject at the sanctuary, called L’Adamante, sold out in a single day.

Encouraged by the success of the scheme, the Mauritian government has expanded on it. The Real Estate Scheme (RES), introduced by lawmakers in 2007, allows small landholders to take equal advantage of overseas demand by selling what are referred to as “RES villas” on plots of between one arpent – or almost one acre – and ten hectares. Like IRS homes, RES villas must sell for at least US$500,000, on top of a fixed land registration duty of $70,000, if the buyer wants to qualify for residency in Mauritius. RES developments must also include facilities similar to those found at Anahita, on a more modest scale. Both schemes are now so widely understood by foreign buyers that Mauritian realtors list IRS and RES villas separately, among more typical distinctions like commercial, residential and office property.

At this point, the residency permit granted when investors buy IRS and RES villas is not permanent. Villa owners can only reside in Mauritius, with their families, for as long as they hold the property, and are also eligible for tax residency. The country does not impose any annual minimum stay and investors are allowed to lease the property. 

The Indian Ocean islands, which was used as a stopover between the Cape and India by first the Portuguese and then the Dutch, French and British, is once again a place to shelter from storms. As a result of its government’s investment focused policies, the Mauritian economy is amongst the fastest growing in the region: it grew by 5.5 percent in 2008 and continued to expand during the financial crisis, at a rate of 3.1 percent in 2009 and 4.1 percent in 2010 and 2011. The country has superb infrastructure, a stable, democratic government, a sophisticated financial sector, an excellent system of sea and air transport, as well as top-notch international schools and a highly educated workforce. It is also putting the final touches on two ambitious projects that will cement its place as an Indian Ocean trade hub, ideally positioned between emerging economies in Asia and Africa.

The first is the Jinfei Economic and Trade Cooperation Zone. Loosely modeled on the special economic zones that have played a central role in China’s spectacular growth, Jinfei is being built with a US$2.5 billion Chinese loan. It will function as a base for Chinese companies in the region, and greatly improve Mauritius’s manufacturing capacity and importance as a port. The second is the Ebene Cyber City, which is modeled on the IT and outsourcing hubs that are the dynamos of India’s fast-growing economy. It was built with the assistance of the Indian government, to the extent that the most important building on the site, Ebene Cyber Tower One, was inaugurated by the country’s prime minister, Manmohan Singh.

Mauritius is a member of both the COMESA and Southern African Development Community trading blocs and has a network of 33 double taxation treaties, including one with China. Owners of IRS and RES villas can use these treaties to offset taxes in one of two ways, by either opting to pay a country-based tax, subjecting all of their assets to Mauritius’s income tax, or an international tax, by which only money brought into Mauritius is taxable in Mauritius. The country has no capital gains or inheritance taxes and allows for the gratis repatriation of profits, bonuses and funds.

A low tax burden and robust economy are both important facets of the island’s appeal – particularly to the high net-worth individuals interested in buying seaside homes – but an island lifestyle, buffeted by the trade winds between Africa and Asia, is Mauritius’s ultimate allure. Mark Twain visited in 1896, on his way to South Africa after an Indian lecture tour. A resident told him that “Mauritius was made first, and then heaven; and that heaven was copied after Mauritius.” Twain was understandably skeptical, but perhaps you have to be a resident to understand.

By Iain Manley 

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