Tax on Distributions to Beneficiaries

When a trustee pays money or assets out to a family member, the first question is usually whether the recipient owes anything. For tax on trust distributions in Mauritius, the starting point is a single provision of the Income Tax Act, and it is simpler than many readers expect. This guide sets out what that provision says, what it leaves open, and how beneficiary tax in a Mauritius trust fits with the tax paid by the trust itself.

This is general information, not advice. The result for a given beneficiary depends on the trust deed, the nature of the assets and the beneficiary's own circumstances.

The rule: a distribution is deemed to be a dividend

Under section 46(4) of the Income Tax Act, any distribution made to a beneficiary of a trust is deemed to be a dividend for that beneficiary. The consolidated text, current to the Finance Act 2026, no longer contains the former paragraphs 5 and 6, which dealt with deducting distributed income and with exempting a non-resident beneficiary.

Two practical consequences follow from the wording:

• The law does not ask the beneficiary to trace each payment back to trust income or trust capital in order to decide its character. The label is applied to the distribution as a whole.
• The older mechanics that once let a trust deduct what it distributed, or let a non-resident beneficiary stand outside the charge, are gone from the current text.

Whether a particular dividend ends up taxed in the beneficiary's hands is a separate step. Mauritian law treats dividends paid by a resident company as exempt for the person who receives them, with no withholding provided on those dividends. The consolidated Act does not, however, tell a beneficiary that every deemed trust dividend is automatically exempt on the same footing. That point should be confirmed with an adviser against the actual facts rather than assumed.

How the trust's own tax interacts with the distribution

The trust is a taxpayer in its own right. Under the consolidated Income Tax Act, a trust is taxable on its taxable income at the Part IV rate of the First Schedule, which is 15%. Our page on the tax rate applied to a trust explains how that figure is reached, and the wider picture is in how trusts are taxed in Mauritius.

So there are two layers to keep apart:

1. Tax at trust level, charged on the trust's taxable income.
2. The treatment of the payment when it reaches the beneficiary, governed by the deemed-dividend rule.

Section 46(2) still describes a trust with a non-resident settlor (or a Global Business Licence holder) and only non-resident beneficiaries, as well as a purpose trust whose purpose is carried out outside Mauritius. That trust, however, remains taxed at the same 15% Part IV rate. The former exemption for a non-resident trust that filed a declaration, section 46(3), was repealed by the Finance Act 2021 with deemed effect from 1 July 2021. It does not exist in the version consolidated to the Finance Act 2026, so older guidance that relies on it should be treated as out of date.

Capital and income received from a trust

Readers often ask whether a payment of capital is treated differently from a payment of income. Under the rule above, the statute speaks of "any distribution", and that is deemed a dividend. The words do not create a separate regime for capital.

That does not make the distinction irrelevant in practice:

• The deed and the trustee's accounts still record what a payment is drawn from, and the trustee must keep those records.
• A beneficiary's home country may apply its own classification, which can differ from the Mauritian label.
• Some payments are not distributions at all, for example a repayment of a genuine loan, or a payment for services rendered to the trust. These depend on their own documents.

If you are expecting a large capital payment, ask for the trustee's written explanation of how it was characterised before the payment is made.

Summary table

Foundations follow the same pattern

For a foundation, section 49A taxes the foundation on its taxable income at the Part IV rate of 15%, and treats any distribution to a beneficiary as a dividend. The exemption for a foundation whose founder and beneficiaries were all non-resident, which sat in sections 49A(2) and (3), was repealed by the Finance Act 2021 with deemed effect from 1 July 2021. See how foundations are taxed in Mauritius for the detail, and trust vs foundation if you are still choosing between the two.

Beneficiaries who also pay tax elsewhere

Many families have members living in different countries. Mauritius has a network of double taxation avoidance agreements, which the Mauritius Revenue Authority describes as 45 treaties in force; its page carries an update note dated 24 August 2021, so check the current list before relying on a specific treaty. The Mauritius–India convention, for instance, was amended by a protocol brought into Mauritian law through Government Notice No. 136 of 2026.

The Income Tax Act also gives a credit for foreign tax paid on income taxed abroad, set against the Mauritian tax due on that income (section 77). No credit is given on foreign-source income for which a partial exemption from Part II of the Second Schedule has been claimed. Whether a credit or a treaty rule helps depends entirely on the beneficiary's own tax position, which is outside the scope of this page. For the position of someone living abroad, see tax for non-resident beneficiaries.

What the trustee does and what you can ask for

The trustee has duties that bear directly on distributions. Under section 38(3) of the Trusts Act 2001, the trustee must keep up-to-date accounts and documents, and an alphabetical register of the names and last known addresses of each beneficiary and settlor. Accounting records must be kept for at least 5 years after the operations they concern are completed.

As a beneficiary, you can reasonably expect to:

• receive a written note with each distribution saying what it is drawn from and how the trustee has treated it;
• be told whether any tax has been paid at trust level that relates to the payment;
• be given the figures you need for your own return, in the period your home authority requires.

How far a beneficiary may demand documents depends on the deed and the circumstances. The rights and expectations of beneficiaries are covered separately, and so is the question of how trust assets are distributed.

Discretionary and fixed interests

In a discretionary trust the trustee decides who receives what and when, so a beneficiary may not know in advance whether a payment will be made. That affects planning, not the label: once paid, the sum is a distribution and the same rule applies. If your interest is fixed, the deed itself sets the entitlement. The differences are set out in discretionary trust vs fixed trust, and discretionary trusts in Mauritius explains the trustee's powers.

A protective or spendthrift provision under section 18 of the Trusts Act 2001 can also limit when and how a beneficiary's interest is paid, for example on the beneficiary's insolvency. That bears on timing and on who can reach the money, not on how the payment is labelled for tax.

Filing and record-keeping

Most of the filing burden sits with the trust. The trustee should therefore keep the supporting papers for each payment: the resolution, the amount, the date and the recipient. For the trust-level side, see trust tax returns and filing. Beneficiaries should keep the trustee's notes with their own tax papers, since a home-country authority may ask for them years later.

Checklist before accepting a distribution

• Ask the trustee how the payment is characterised under the Income Tax Act
• Check whether any tax has already been paid at trust level
• Keep the trustee's written note and the resolution
• Find out how your home authority treats the same payment
• Check whether a treaty or a foreign tax credit may apply
• Take advice before any large or unusual payment