Maintaining POEM of a Mauritius GBC – Why It Matters for South African Promoters?
Why It Matters for South African Promoters?
The Mauritius International Financial Centre (IFC)
The IFC, now over 30 years old, is internationally regarded as a trusted and efficient jurisdiction for cross-border structuring. It continues to be recognized by African and other businesses and families seeking legal, tax-efficient, and administratively simple structures for international expansion.
The latest edition of the Global Financial Centres Index (GFCI 37), which evaluates the competitiveness of financial centres worldwide, released in March 2025, reaffirms Mauritius’ status as a leading International Financial Centre (IFC) in the region.
Mauritius has achieved a commendable 58th GFCI 37 ranking globally, out of 119 centres. Notably, Mauritius is now the second-best performing IFC in Africa after Casablanca. Cape Town and Johannesburg rank in the late 80s while Nairobi is 100th.
GFCI 37 also identifies financial centres that are expected to grow in prominence over the next two to three years. Mauritius features 6th among the top 15 centers globally likely to become more significant. This recognition underscores Mauritius’ increasing appeal as a financial hub
South African promoters and advisors have long used Mauritius Global Business Corporations (GBCs) for international trading, investment holding, investment funds and intellectual property (IP) structures.
However, as tax authorities across Africa increase enforcement, the question arises: is your GBC truly tax resident in Mauritius, or does its Place of Effective Management (POEM) lie elsewhere?
Understanding POEM and the South African Revenue Service (SARS) Interpretation Note 6 (Issue 3) of 30 June 2023 (“SARS IN”)
This article provides an overview of the application of the POEM concept by SARS to foreign companies to determine tax residence, in terms of the SARS IN and is not meant to be a detailed guidance. Please consult your tax advisor before taking any action whatsoever.
The SARS Interpretation Note (IN) 6 (Issue 3), issued on 30 June 2023, offers detailed guidance on the application of the POEM test. Under this note, a foreign company such as a GBC may be deemed to be a South African tax resident if its POEM is found to be in South Africa, regardless of its legal incorporation.
Understanding POEM and the Risk of Dual Residency
The SARS IN defines POEM as the place where key management and commercial decisions that are necessary for the conduct of the entity’s business are made. In practice, this includes decisions related to the company’s overall direction, strategy, and management. SARS specifically outlines a number of factors to determine where a company’s POEM is located.
If your GBC is effectively managed from South Africa, SARS may challenge its Mauritian tax residency and seek to tax its income in South Africa.
Key POEM Risk Indicators for South African Promoters (non exhaustive)
POEM is a factual, case-by-case test. However, common risk factors include:
- Location of Board Meetings – Where strategic decisions are typically made. If most meetings occur outside Mauritius or decisions are made informally in South Africa, this may raise concerns.
- Composition of the Board – Directors are based in South Africa and actively run the GBC from South Africa, with Mauritian directors playing a passive or administrative role.
- Central Control and Decision-Making – Day-to-day operations, financing, or investments are directed from South Africa.
- Delegation of Authority – Important decisions are made by South African shareholders or group executives, not the Mauritius board of the GBC.
- Where Commercial Decisions Are Made – The place where significant commercial decisions regarding contracts, business operations, or strategic direction are made. If these decisions are predominantly made in South Africa, this may create a risk that the company’s POEM is deemed to be in South Africa.
- Location of Senior Executives – Where the Chief Executive Officer (CEO) and other senior executives, if any, are located and where they perform their day-to-day executive duties.
- Accounting Records – Merely storing accounting records in Mauritius, while the substantive work is done elsewhere, may not suffice.
- OECD and BEPS Action 6 Factors – SARS also refers to the OECD’s Commentary on Article 4 of the OECD Model Tax Convention, which includes additional considerations such as the company’s activities, its staff, and where its core income-generating activities (CIGA) are performed. Mauritius has enacted appropriate provisions in this regard in the Mauritius Income Tax Act.
Why does POEM matter?
The importance of POEM cannot be overstated.
A GBC that fails the POEM test may be deemed to be a South African tax resident, resulting in the loss of Mauritius tax benefits, exposure to South African corporate tax, and significant penalties. Promoters must ensure that the management and control of the company are substantively exercised in Mauritius—not merely on paper. The SARS IN clearly conveys that the location of POEM will trump the place of incorporation when determining tax residency.
Thus, simply incorporating a company in Mauritius is not sufficient to avoid South African tax residency.
Why Mauritius Is Still the Right Choice — If Managed Properly
Despite the POEM challenges, Mauritius remains a top jurisdiction for international structuring—provided it is used properly. A well-governed Mauritius GBC can still benefit from:
- Attractive Tax Incentives – A 15% corporate tax rate, with an effective rate as low as 3% on certain specified fee income. International trading is taxed directly at 3%. Certain recently introduced levies may apply.
- Extensive DTA Network – Including South Africa, India, China, and many African nations.
- Extensive IPPA Network – Protects international investments
- Robust Legal & Regulatory Framework – Regulated by the Financial Services Commission (FSC). Mauritius is only one of five jurisdictions globally that has achieved the status of compliant/largely compliant with all 40/40 score of the Financial Action Task Force (FATF) recommendations on anti-money laundering.
- Substance-Friendly Environment – Mauritius encourages physical presence, qualified directors, and transparent governance.
Mauritius–South Africa DTA: POEM Disputes and the Mutual Agreement Procedure
The Mauritius–South Africa DTA contains a POEM-based tie-breaker clause and a Mutual Agreement Procedure (MAP). If both Mauritius and South Africa claim tax residency over a GBC, the MAP allows for resolution between the two tax authorities. The MAP can be complex, lengthy, and cumbersome, making it less than ideal for promoters seeking swift and efficient resolution.
Notably, Mauritius and South Africa signed a Memorandum of Understanding (MoU) in 2015 to provide guidance to the MAP process in POEM disputes. This MoU provides an avenue for affected taxpayers to avoid double taxation where dual residency is contested.
The existence of this MoU is rare among African DTAAs and is a significant benefit for GBCs with South African links.
Under the MoU, where a company is considered a resident of both Mauritius and South Africa under Article 4(1), the Competent Authorities shall endeavour to determine the country of residence by considering the following factors:
- Place of effective management
- Place of incorporation or legal constitution
- Where board meetings are usually held
- Where the CEO and senior executives operate
- Where day-to-day management occurs
- Location of headquarters
- Governing legal framework
- Where accounting records are maintained
- OECD Commentary and BEPS Action 6 factors
In the absence of agreement, no treaty benefits may be granted — underscoring the importance of aligning operational and governance practices with Mauritian substance and Core Income Generating Activities requirements.
Maintaining POEM in Mauritius: Practical Tips for South African Promoters (non-exhaustive)
South African promoters and directors of GBCs must be especially cautious in ensuring, through their actions or lack thereof in certain circumstances, that the POEM is located in Mauritius.
- Board Composition – Appoint qualified and experienced resident directors who actively participate in governance.
- Board Meetings – Schedule, hold and chair strategic meetings in Mauritius with proper notice and record of deliberation.
- Documentation – Detailed board minutes, capturing the substance of deliberations and decisions, provide stronger evidence than standard resolutions alone.
- Decision-Making Processes – Ensure key decisions are initiated and finalised in Mauritius—not simply ratified there.
- Avoid Over-Delegation – Substantive decisions should not be pre-decided in South Africa or by external group executives.
- Engage Professionals – Work with your Management Company and local advisors to review governance, substance, and record-keeping.
How GWMS Ltd Can Help
GWMS Ltd is a licensed Management Company based in Mauritius with a proven track record of assisting South African clients in establishing and maintaining compliant GBC structures, since 22 years.
Our MD is a CA(SA) with extensive experience in Global Business and the international aspects of South Africa taxation laws which may apply to such GBC, among other structures.
At GWMS Ltd, we assist clients in navigating these complexities through bespoke structuring, qualified directorships, board support services, and POEM-focused reviews.
Conclusion
The POEM risk is real—and growing. But with proper structuring, governance, and guidance, Mauritius remains a compliant, efficient, and tax-effective base for cross-border operations.
South African promoters using Mauritius GBCs should act early to review and adjust their structures to avoid potential challenges from SARS.
Contact us to safeguard your structure and preserve the tax benefits of Mauritius residency, for your peace of mind.
Disclaimer: This article offers general information and not tax advice. Readers should consult a tax professional for specific guidance.
