CHOOSING THE RIGHT OFFSHORE JURISDICTION FOR YOUR BUSINESS OR INVESTMENT FUND
BY SEUN TIMI-KOLEOLU & EFE OKPARAVERO
Introduction
For businesses seeking international expansion and investors establishing offshore investment vehicles, choosing the right jurisdiction can facilitate access to international investors, provide regulatory certainty, streamline cross-border transactions, and offer an efficient platform for holding assets and managing investments.
Mauritius, Delaware in the United States, and Seychelles are among the jurisdictions frequently considered for these purposes, each offering distinct corporate structures, tax regimes, and regulatory frameworks.
This newsletter examines the requirements for establishing and operating businesses and investment funds in these jurisdictions, highlighting their respective tax treatments, regulatory environments, and key considerations for businesses and investors when selecting a suitable jurisdiction.
1. Mauritius
Mauritius has an established international financial services framework and is particularly relevant to cross-border investments involving Africa and Asia.
The general corporate income tax rate is 15%. Qualifying entities may benefit from partial exemptions on specified income, subject to statutory conditions. These include a 95% partial exemption for qualifying interest income and an 80% partial exemption for certain other qualifying income, corresponding to effective tax rates of 0.75% and 3%, respectively, on that income.
Mauritius generally does not impose capital gains tax or withholding tax on dividends paid by a Mauritius-resident company.
Key Information
| Category | Details |
| Business vehicles | Global Business Company (GBC) holding a Global Business Licence; Authorised Company (AC). |
| Tax rate | 15% general corporate rate; 80% or 95% partial exemptions on qualifying income. |
| Capital gains/dividends | Generally no capital gains tax or dividend withholding tax, subject to applicable rules. |
| Double Taxation Agreement (“DTA”) network | 45 DTAs concluded. |
| Regulator | Financial Services Commission (FSC). |
| Principal legislation | Companies Act 2001; Income Tax Act; Securities Act 2005; Securities (Collective Investment Schemes and Closed-End Funds) Regulations 2008; Variable Capital Companies Act 2022. |
| Indicative incorporation time | 2–6 weeks, depending on the structure and approvals. |
Governance and Fund Requirements
A Global Business Company (“GBC”) may be appropriate where Mauritius tax residence, treaty access and regulated financial services are important. Requirements generally include at least two suitably qualified Mauritius-resident directors, a principal bank account in Mauritius, board meetings involving at least two resident directors, accounting records maintained at the registered office and statutory financial statements prepared and audited in Mauritius.
An Authorised Company (“AC”) must have its central management and control outside Mauritius, appoint a Mauritius-licensed registered agent and submit financial summaries and returns. It generally does not enjoy Mauritius treaty access and is unsuitable where a regulated financial-services or investment-fund licence is required.
Mauritius offers several fund structures and depending on the fund and its classification, requirements may include FSC authorisation, a licensed administrator and management company, a custodian, an auditor, regulatory filings and AML/CFT reviews.
Commercial takeaway: Mauritius is particularly relevant where treaty access and a developed fund regulatory framework justify the costs of local substance and compliance.
2. Delaware, United States
Delaware is a United States (“US”) corporate and investment-fund jurisdiction with its principal advantages being sophisticated corporate law, contractual flexibility, an established judicial system and familiarity among international investors. It is widely used for venture capital, private equity, hedge funds and US-facing businesses.
A Delaware C-Corporation is generally subject to 21% US federal corporate income tax and may also incur Delaware corporate income tax at 8.7% on income apportioned to the state.
Limited Liability Companies (“LLCs”) and partnerships may qualify for pass-through treatment. A single-member LLC is generally disregarded for federal income-tax purposes unless it elects otherwise, while a multi-member LLC is generally treated as a partnership. Profits are consequently attributed to the owners rather than taxed as corporate profits at entity level. Therefore, a Delaware LLC may have no federal corporate income tax at entity level under pass-through treatment.
Key Information
| Category | Details |
| Business vehicles | Limited Liability Company (LLC); C-Corporation; Limited Partnership (LP). |
| Tax rate | C-Corporations generally pay 21% federal corporate income tax. Delaware’s corporate income tax is 8.7% on taxable income apportioned to the state. |
| LLC/partnership tax treatment | May qualify for pass-through treatment i.e the business pays 0% tax, depending on tax classification. |
| Annual entity tax | Generally, US$300 for LLCs and LPs, payable by 1 June. Corporate franchise-tax and reporting rules differ. |
| Treaty network | The United States has an extensive income-tax treaty network. Treaty benefits depend on the applicable treaty and eligibility conditions. |
| Governance | A registered agent with a physical Delaware address is mandatory. Generally, no US residency requirement or minimum capital is required for ownership or formation. |
| Regulators and legislation | Delaware Division of Corporations; Delaware Court of Chancery; Delaware LLC Act; Delaware Revised Uniform Limited Partnership Act; SEC; IRS; Investment Advisers Act 1940; Securities Act 1933; Investment Company Act 1940, where applicable. |
| Indicative incorporation time | 1–2 business days for standard formation, subject to filing and processing. |
Delaware is commonly used for private funds established as Limited Partnerships (“LPs”) or LLCs. An LP typically has a General Partner responsible for management, often structured as a separate LLC to help limit the liability exposure of the persons behind it. LLCs and LPs generally do not file annual reports with the Delaware Division of Corporations but must satisfy their annual tax obligations.
Commercial takeaway: Delaware is attractive where legal flexibility, investor familiarity and access to the US investment ecosystem outweigh the associated tax and regulatory obligations. It should not be treated as a zero-tax jurisdiction.
3. Seychelles
Seychelles provides a framework for international holding companies, trading businesses and certain investment structures. Its principal international corporate vehicle is the International Business Company (“IBC”). A Company Special Licence (“CSL”) may be considered where Seychelles tax residence and potential treaty access are relevant.
An IBC may benefit from Seychelles’ territorial tax regime, under which qualifying foreign-source income may generally fall outside Seychelles taxation, subject to the applicable source-of-income, tax and economic-substance rules. A CSL is generally subject to Seychelles’ ordinary business tax regime.
Key Information
| Category | Details |
| Business vehicles | International Business Company (IBC); Company Special Licence (CSL). |
| Jurisdiction profile | International holding, trading and investment jurisdiction. |
| IBC tax position | Qualifying foreign-source income may benefit from the territorial tax regime, subject to applicable rules. |
| CSL tax rate | Generally 15% on the first SCR 1 million of taxable income and 25% on taxable income exceeding SCR 1 million. |
| Capital gains tax | Generally no separate capital gains tax, although disposal profits may be subject to business tax. |
| Dividend withholding tax | Depends on applicable rules and circumstances. |
| Regulator | Financial Services Authority (FSA). |
| Principal legislation | International Business Companies Act 2016; Mutual Fund and Hedge Fund Act 2008; Companies (Special Licences) Act 2003; Beneficial Ownership Act; Business Tax Act; applicable AML/CFT legislation. |
| Indicative incorporation time | Approximately 24 hours to one week for a straightforward IBC; regulated funds generally take longer. |
An IBC may generally be incorporated with at least one director and one shareholder. A Seychelles-licensed registered agent is mandatory. Companies must maintain prescribed accounting records and comply with applicable beneficial-ownership disclosure and filing requirements.
Commercial takeaway: Seychelles may suit cost-conscious international holding and trading structures, as well as certain private or professional funds, where operational simplicity is a priority and extensive treaty access is not essential.
Comparative Tax and Structuring Snapshot of the Three Jurisdictions
| Consideration | Mauritius | Delaware, United States | Seychelles |
| Headline tax position | 15% corporate rate; qualifying income may benefit from 80% or 95% partial exemptions. | 21% federal corporate rate for C-Corporations, plus applicable state taxes. | Qualifying IBC foreign-source income may benefit from the territorial tax regime; CSLs generally face ordinary business tax rates. |
| Potential low effective rate | 0.75% on qualifying interest income or 3% on certain other qualifying income. | LLCs may have no corporate-level income tax under pass-through treatment, but owners may be taxable. | Potentially 0% Seychelles tax on qualifying foreign-source income of an IBC, subject to applicable rules. |
| DTA position | 45 DTAs concluded. | US treaty network applies; Delaware has no separate treaty network. | Smaller treaty network than Mauritius. |
| Fund considerations | FSC authorisation and local service providers may be required. | US securities and investment-management laws apply where relevant. | FSA licensing and fund administration may be required. |
4. Four Key Questions to Consider When Selecting a Jurisdiction for Incorporation
- Where will the business actually be managed and operated: The location of management, personnel, expenditure and income-generating activities may affect tax residence, substance requirements and eligibility for treaty benefits.
- Who are the intended investors: US, institutional, African and Asian investors may have different requirements. Familiarity with the jurisdiction and its legal framework can influence fundraising and transaction execution.
- Is a regulated fund licence required: Holding investments through a company is not necessarily equivalent to operating a regulated investment fund. The proposed activities, investor base and offering must be assessed against the relevant regulatory framework.
- What is the actual tax position: Headline rates may not reflect the effective tax burden. Consider the nature and source of income, entity classification, eligibility for exemptions, withholding taxes, economic substance and the tax consequences in investors’ home jurisdictions.
Conclusion
Effective offshore structuring requires alignment between the entity’s legal form, tax treatment and commercial purpose. Mauritius may suit cross-border investment structures requiring treaty access and a developed fund regulatory framework. Delaware offers a sophisticated legal environment for businesses and funds connected to the US market. Seychelles may suit certain international holding and trading structures where operational simplicity and cost are priorities
The appropriate choice should follow a considered assessment of the proposed activities, investor requirements, tax exposure and compliance costs. Whatever choice is ultimately made, our law firm, through its global network of lawyers, can assist with establishing your business or investment fund in Mauritius, Delaware or Seychelles, including advising on the appropriate structure and navigating the applicable incorporation and regulatory requirements.