Can a Trust Reduce Tax?

If you are searching for trusts to avoid taxes in Mauritius, the short answer is that a trust is a way to organise ownership, not a way to make tax disappear. The law taxes the trust itself, treats what it pays out in a specific way, and looks through arrangements that exist only to create a tax result. This page separates what the statute actually says from the myths that circulate about trust tax avoidance in Mauritius.

It gives general information only. How the rules apply depends on where the settlor and the beneficiaries live, what the trust holds and how it is run, so any plan needs the analysis of a qualified adviser.

What the myth gets wrong

The idea that a trust "removes" assets from tax rests on a half-truth. A trust does move legal ownership from the settlor to the trustee. But ownership is not what the Income Tax Act 1995 taxes; it taxes income. Income produced by trust property still has to be accounted for, and the Act decides who accounts for it.

Three common beliefs are worth testing:

• "Trusts are exempt if the family lives abroad." That used to be arguable for non-resident trusts. It is no longer the position.
• "If I give the assets away, I owe nothing on them." Whether a transfer is taxed depends on the asset and the transaction, and a transfer that is a sham gives no protection at all.
• "The trustee can pay out tax-free." Distributions have their own treatment, described below.

How a Mauritius trust is taxed

Under the Income Tax Act 1995, as consolidated by the Mauritius Revenue Authority up to the Finance Act 2026, every trust is taxable on its taxable income at the Part IV rate of the First Schedule, which is 15%. The same 15% is the standard corporate rate.

The non-resident exemption was repealed

Until 2021, a non-resident trust could escape tax by filing a declaration of non-residence within 3 months of the end of the income year. The Finance Act 2021 repealed section 46(3) of the Income Tax Act, with effect deemed from 1 July 2021. That exemption does not exist in the current consolidated text. Any article or sales pitch that still presents it as available is out of date.

Section 46(2) is not an exemption

Section 46(2) still describes a trust whose settlor is non-resident (or holds a Global Business Licence) and whose beneficiaries are all non-resident (or hold a Global Business Licence), as well as a purpose trust whose purpose is carried out outside Mauritius. It is sometimes quoted as if it gave relief. It does not: such a trust is still taxed at the same 15% rate.

Distributions are treated as dividends

Under section 46(4), any distribution to a beneficiary is deemed to be a dividend in the beneficiary's hands. The older provisions that allowed the distributed income to be deducted, and that exempted a non-resident beneficiary, have been removed. What that means in practice for a given beneficiary depends on their own residence and tax position; see tax on distributions to beneficiaries and tax for non-resident beneficiaries.

Lawful treatment versus avoidance myths

The last row is the one real exemption in the table, and it is narrow. A charitable institution, charitable Foundation or charitable trust appears among the exempt bodies in the Second Schedule, Part I. A family trust for relatives is not charitable and does not fall within it.

Foundations follow the same logic

Because people compare the two structures, it helps to note that the position is parallel. Section 49A of the Income Tax Act taxes every Foundation on its taxable income at the Part IV rate of 15%, and treats any distribution to a beneficiary as a dividend. The exemption that once existed for a Foundation whose founder and beneficiaries were all non-resident, under paragraphs 49A(2) and (3), was also repealed by the Finance Act 2021, deemed from 1 July 2021. For more detail, see how foundations are taxed and the trust versus foundation comparison.

Where legitimate planning actually happens

Saying a trust is not a shelter does not mean it has no role in a family's financial planning. Its value lies elsewhere, and tax is one factor among several rather than the reason for it.

Control and continuity

A trust can keep family assets together, spread benefits across generations and avoid dependence on one person's capacity. Those aims are legitimate whatever the tax result.

Matching the structure to the facts

A trustee with discretion over who benefits and when produces a different tax profile from a fixed entitlement. Taxation is only one reason to choose between a discretionary trust and a fixed one, and the family trust page shows how the usual arrangement is laid out.

Understanding the entry point

Putting assets into a trust can itself be a taxable event for certain assets, depending on the nature of the property. The page on tax when you transfer assets into a trust covers that stage separately.

Filing correctly

A trust that is taxable must report. Understanding who files, and when, is part of lawful compliance; see trust tax returns and filing. The detailed rate and computation rules are collected on the page about the tax rate on a trust.

Anti-abuse rules and the limits of avoidance

Tax avoidance and lawful planning are not the same thing, and the boundary is where most problems arise. Three limits are worth knowing.

The structure must be real. A trust that the settlor in fact still controls, with the trustee following instructions mechanically, risks being treated as a sham. The more control the settlor keeps, the harder it is to argue that the assets have really left their hands; the reserved powers page explains where that line sits.

Residence is decided on facts. For a company, section 73(1)(b) makes it resident in Mauritius if it is incorporated there or if its central management and control is there, and section 73A treats a Mauritian company controlled from abroad as non-resident while still requiring a return under section 116. The general lesson for a trust holding companies is that labels do not decide tax residence; where decisions are actually taken does.

Substance matters. Rules on minimum tax and on substance for specialised entities exist because arrangements built only for a tax outcome attract scrutiny. A family trust that holds assets for genuine family reasons is in a very different position from one designed around a tax result.

A short test before relying on a trust for tax reasons

Practical points for families

• Ask which residence each person has (settlor, trustee, beneficiaries). It drives most of the outcome.

• Do not rely on a pre-2021 explanation of non-resident trust tax.

• Treat any claim that a structure is free of tax as a reason to ask for the statutory reference.

• Keep records of why the trust was set up and how the trustee reached decisions.

• Check the position again after a change of residence, a major transfer or a change in the law.

• Identify the residence of the settlor, trustee and each beneficiary

• Confirm the current text of sections 46 and 49A against the consolidated Act

• Check how distributions will be treated for each beneficiary

• Confirm filing responsibilities with the trustee

• Record the non-tax reasons for the trust

For the wider picture of how the regime fits together, read how trusts are taxed in Mauritius. If your situation is specific, you can send a request through the contact form and have it looked at by an FSC-licensed corporate service provider (Management Licence).