Legal Framework and Scope of Services
Section 61 of the Finance Act 2025 amends the VAT Act to define “digital or electronic service” and “foreign supplier”. A digital or electronic service is broadly defined as any service listed in Part III of the Tenth Schedule that is supplied over the internet or an electronic network and is heavily dependent on information technology. This definition covers a wide range of services – for example, streaming media, e-books, software-as-a-service, online advertising, cloud services, and other digital content. A foreign supplier is defined as any person with no permanent establishment in Mauritius (or residing abroad) who supplies such digital services to a person in Mauritius. In effect, any non-resident company or individual providing digital services to Mauritian customers (B2C or B2B) falls under the new VAT regime.
To determine if a customer is “in Mauritius,” the law adopts common international practice by using multiple indicators. If any two of the following non-contradictory criteria are met, the customer is deemed to be in Mauritius: (a) the billing address is in Mauritius; (b) the payment originates from a bank in Mauritius; (c) the customer’s device IP address or geolocation is in Mauritius; (d) the country code of the customer’s phone is Mauritian; or (e) any other commercially relevant info indicating local presence. This approach prevents ambiguity in determining the place of supply. Notably, if the supply qualifies as an imported service under section 14 of the VAT Act (i.e. subject to reverse charge by a VAT-registered local customer), the foreign supplier should not charge VAT. In other words, business-to-business digital supplies to fully taxable Mauritian businesses remain handled via the reverse charge mechanism, whereas business-to-consumer supplies are taxed by the foreign provider at sale.
Mandatory VAT registration for foreign providers
One of the most consequential changes is the mandatory VAT registration for all foreign digital service suppliers serving Mauritius. The VAT Act’s registration section 15(2) has been amended to add a new category of compulsory registrant – any person supplying digital or electronic services to Mauritius, irrespective of turnover. This means no minimum sales threshold will apply – even a single digital transaction in Mauritius triggers the VAT registration obligation. Foreign providers must register for Mauritius VAT even if they have modest revenues or only occasional sales in the country. (By contrast, domestic businesses currently face a MUR 3 million annual turnover threshold for VAT registration.) The effective date is 1 January 2026, giving companies a short lead time to comply. The Mauritius Revenue Authority (MRA) is expected to provide an online registration platform to facilitate non-resident registrations.
Key Highlights of the New VAT Rules for Foreign Digital Services:
- VAT registration required for all foreign digital service suppliers (no turnover threshold)
- No input VAT credit permitted for the foreign supplier (VAT on these digital services cannot be claimed back)
- Mandatory appointment of a local tax representative in Mauritius for suppliers exceeding MUR 3 million in annual Mauritian digital service sales
- VAT returns allowed in foreign currency if payment for the service is received in that currency
Compliance obligations and representative requirement
The Finance Act 2025 details several compliance obligations to accompany this expanded VAT scope. Foreign suppliers must charge VAT at 15% on digital services provided to Mauritian customers, the same rate applicable to domestic supplies. They are required to issue tax invoices and submit periodic VAT returns electronically to the MRA. A special rule allows non-resident suppliers to file returns and pay the VAT in foreign currency if their sales are billed in one of the approved foreign currencies (as per section 6(5) of the Income Tax Act). Where revenues are received in multiple currencies, the supplier may choose one of those currencies for reporting and payment purposes. This flexibility eases the compliance burden by avoiding exchange rate complications for businesses transacting in USD, EUR, etc.
However, unlike local businesses, foreign digital service providers are not entitled to any input tax credits on their Mauritius VAT returns. The law explicitly disallows input VAT deduction for these suppliers. This means the VAT charged on digital services is a final tax on consumption in Mauritius, and the foreign company cannot recover Mauritian VAT on any expenses. It simplifies administration since mostsuch suppliers have minimal local costs, but it is a notable deviation from the usual VAT principle of input credit.
Another key obligation is the appointment of a Mauritius-based tax representative. The law requires that a foreign supplier “shall appoint a tax representative who has a permanent establishment in Mauritius” if the supplier’s turnover of taxable digital services to Mauritius exceeds or is likely to exceed the amount specified in the Sixth Schedule (currently MUR 3 million). The local representative will be responsible for filing the VAT returns, paying the tax due, and generally ensuring the foreign business fulfills all VAT compliance requirements on Mauritian soil. In practice, this means larger overseas providers (e.g. major online platforms or streaming services) must engage a local agent or affiliate to handle VAT obligations. Smaller foreign providers below the threshold may register and comply on their own, but once their sales approach the threshold, a local representative becomes mandatory. The MRA can also enforce compliance by targeting intermediaries (such as app stores or marketplaces) if a supplier fails to appoint a representative or to comply.
Finally, the new rules set filing and payment deadlines tailored to foreign suppliers. Every foreign supplier must file an electronic VAT return and pay any tax within 20 days after the end of each taxable period (the period can be monthly or quarterly as prescribed). Along with the return, the supplier must submit a detailed list of all taxable supplies made to persons in Mauritius for that period. This additional reporting (schedule of local sales) will enable the tax authorities to monitor compliance and reconcile consumer data. The strict 20-day deadline (earlier than the standard one-month delay for domestic VAT returns) underscores the urgency placed on timely compliance by non-residents.
Implications for cross-border businesses
For businesses providing digital services into Mauritius, these changes mark an important shift toward global VAT alignment. Mauritius is joining countries like Kenya, Nigeria, South Africa, and Tanzania in taxing digital services at consumption point. Foreign firms (from SaaS vendors to streaming media platforms) should urgently review their operating models, pricing, and invoicing systems in light of the new requirements. Key steps include determining if their services fall within the Part III Tenth Schedule list, assessing whether any supplies are B2B (and thus handled via reverse charge) or B2C, and preparing to register for Mauritius VAT by the effective date. Affected companies may need to update their websites or apps to start charging 15% VAT to Mauritian consumers at checkout. They should also decide whether to appoint a local representative (for larger providers, this is compulsory) and set up processes for filing Mauritius VAT returns in the required format.
From a policy perspective, Mauritius’ expanded VAT regime ensures that foreign e-service providers collect and remit tax just as local businesses do, preventing any competitive advantage from tax-free digital supplies. It also broadens the tax base to capture revenues from the digital economy, in line with OECD and regional efforts to modernize VAT systems. In summary, the Finance Act 2025’s VAT amendments bring Mauritius into sync with international best practices and send a clear signal: if you’re profiting from the Mauritian market through digital services, you must play by Mauritian tax rules. Affected businesses should seek professional advice and gear up for compliance to avoid penalties, as 1 January 2026 is fast approaching.
For more information, please contact office@rosemont.mu
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