Mauritius has given indicative timelines for clearing applications of offshore funds and advisory services, providing relief to Indian offshore funds that had come under the country’s regulatory glare and were waiting longer to get approvals for new funds.
The country’s financial services regulator Financial Services Commission (FSC) has said it would process all applications within two months, provided the applicants fulfil all legislative obligations that include meeting know-your-customer (KYC), anti-money laundering, counter-terrorist financing, and substance requirements, among other things.
The funds will have to respond within 15 days to the FSC’s initial queries and a further 10 working days for subsequent queries.
“FSC is emboldening its commitment to be a progressive and transparent regulator by fixing a shorter time frame for its own internal processes,” said Neha Malviya, director, Wilson Financial Services.
FSC had recently announced rigorous norms for processing India-based applications, thereby increasing scrutiny, cost, and deferring timelines. The regulator has been combing through KYC information of new fund applications as well as undertaking extensive background checks on fund sponsors and fund managers, said sources.
FSC is also reaching out to regulators of countries in which these sponsors or managers are based to verify their antecedents.
“The 60-day turnaround time comes as a relief for Indian investors looking to park their funds in the country. That said, FSC may not relax its rigorous norms for India-based applications,” said Manish Shah, senior partner, Sudit K Parekh & Co.
Applicants will still have to meet the fitness and propriety requirements, and respond promptly to FSC’s queries. “The FSC takes very seriously any non-disclosure or misleading information that could impact its assessment,” the regulator said in a note.
Mauritius remains a preferred destination for Asian investors, especially those wanting to invest in debt and derivatives instruments, as there is no tax to be paid on investments in these asset classes except for the interest part in the debt instrument.
The country mainly provides for two types of investment vehicles for offshore funds: Collective investment schemes, which can invest across asset classes, and closed-ended or private equity funds via an investment holding company.
In a recent note, the Economic Development Board Mauritius observed that the country is compliant with all the Organisation for Economic Co-operation and Development norms, including the Global Forum on Transparency and Exchange of Information for Tax Purposes, the Base Erosion and Profit Shifting project, and the Common Reporting Standard.
Companies operating in Mauritius are subject to stringent substance requirements, including minimum number of resident directors and full-time employees, according to the communiqué.
Late last year, Mauritius had amended its Income-Tax Act and inserted a clause for determining the place of effective management, making it difficult to establish residency in the country and posing a new headache to Indian private equity as well as portfolio investors putting money into the country.