Paying Yourself From an Offshore Company

Dividends from an offshore company look simple on paper: the company earns profit, the board declares a payment, the shareholder receives it. In practice, the way an owner takes money out of an Authorised Company shapes the tax position at home, the bank's view of the account and the company's own legal standing in Mauritius.

This guide compares the three routes owners usually consider (dividend, salary and loan), explains what changes depending on which one you choose, and flags the points where the answer depends on your country of residence. It is general information, not advice on your particular situation.

The three ways to take money out

An Authorised Company is a separate legal person. Its bank balance belongs to the company, not to you, even if you are the only shareholder and the only director. Moving money from the company to yourself therefore needs a legal basis, and there are three common ones.

None of these is better in every case. The right mix depends on where you live, how much the company earns and how you intend to run it.

Dividends from an offshore company

A dividend is a share of the company's profit paid to its shareholders in proportion to their shares, as set out in the company's constitution and the rights attached to each class of share.

What the Mauritian side says

The Income Tax Act exempts dividends paid by a Mauritius-resident company from income tax in the hands of the recipient, with no withholding foreseen on those dividends. A company is tax-resident in Mauritius if it is incorporated there or if its central management and control is there (section 73). An Authorised Company, however, is required to have its central management and control outside Mauritius, so the position of dividends it pays should be checked with the company's registered agent rather than assumed from the resident-company rule. For how the company itself is treated, see Authorised Company taxation in Mauritius.

The Mauritian rules also work in the other direction. Foreign-source dividends received by a company can benefit from a partial exemption under the Second Schedule, provided the dividend was not deducted in the source country and the company meets the prescribed substance conditions. That matters if your Authorised Company holds shares in other businesses.

What the home-country side says

For most owners, the decisive question is not Mauritian but local: how is a dividend from a foreign company taxed where you live? Some countries tax it at a specific rate, some add it to ordinary income, and some apply anti-avoidance rules when the company is closely held and low-taxed. Our guide on how the owner is taxed at home explains the general mechanics, and the controlled foreign company rules describe the regimes that may attribute the company's profit to you even before any dividend is paid.

That last point surprises many owners. In some jurisdictions, leaving profit inside the company does not defer anything: the profit can be taxed on you as if it had been distributed. A dividend plan therefore cannot be designed in isolation from the CFC analysis.

Practical conditions for a valid dividend

A dividend is not just a bank transfer. Before paying one, a careful owner will:

• check the constitution and any shareholder agreement for restrictions on distributions;
• confirm from the accounting records that profits exist and that the company can still pay its debts afterwards;
• have the directors approve the distribution in writing, with a dated resolution;
• record the payment in the books and keep the resolution with the company records held by the registered agent.

The accounting records of the company are what justify the distribution. A dividend paid out of a company with no bookkeeping is difficult to defend, whether to a bank, to a tax authority or to a buyer later on. A simple routine, such as the one in our bookkeeping guide, makes this much easier.

Salary or director's fee

Instead of (or in addition to) dividends, an owner who works for the company can be paid for that work. The company deducts a fee or salary as a cost, and the owner reports it as employment or directorship income where they live.

The location problem

The legal requirement that an Authorised Company have its central management and control outside Mauritius cuts both ways. The company is meant to be run from abroad, so a director who lives and works abroad is consistent with the structure. But the place where you perform the work also matters for tax. Carrying out the company's business from your home country may create a taxable presence there; see permanent establishment risk and the guide on managing an Authorised Company from abroad.

If you move to Mauritius and run the company from there, its central management and control could shift to Mauritius, which would undermine the basis of the Authorised Company status. That is a question to put to an adviser before you relocate, not after.

Why owners combine salary and dividends

A modest, documented director's fee for real work gives the owner a regular income and a paper trail that banks and landlords recognise. Dividends can then be paid when profits justify them. The ratio between the two is a tax-planning decision that depends entirely on home-country rules, so no single split can be recommended here.

This page does not cover Mauritian payroll, PAYE or social contributions; those are matters for a local payroll specialist.

Loans between owner and company

Lending money from the company to its owner is the most flexible and the most scrutinised route.

When it can be legitimate

A loan can be reasonable as a short-term bridge, for example when the owner advances funds personally and the company reimburses, or the reverse. To hold up, it needs:

1. a written agreement stating the amount, the term and any interest;
2. actual repayments, recorded in both sets of books;
3. consistency with the company's own financial records.

When it becomes a problem

A "loan" that is never documented, never repaid and keeps growing can be recharacterised by a tax authority as a dividend or as remuneration, with the tax consequences of that label. Banks reviewing the account may also read large unexplained transfers to the owner as a warning sign; see why banks refuse offshore company accounts.

Choosing a route: a quick decision guide

What the company must still do

Paying the owner does not replace the company's own obligations. The Authorised Company must keep its registered agent, a FSC-licensed corporate service provider (Management Licence), in place at all times, and that agent handles filings, communications with the authorities and record-keeping. The company must also file a financial summary with the FSC each year within six months of the end of its financial year, and every company files an income tax return within six months of the end of its financial year. Payments to the owner should be visible and consistent in the records behind those filings. The full list is in annual obligations of an Authorised Company.

Mauritius also keeps a Beneficial Ownership Register, accessible to competent authorities but not described as public in the Companies Act. Your name as ultimate owner is therefore on record with the authorities, which is one more reason for payments to you to be transparent and well documented. See whether the owner of an offshore company is private.

Getting money to your personal account

Even a lawful, well-documented dividend can stall at the bank if the paperwork does not travel with it. Practical habits that help:

• send the transfer with a clear reference (for example "dividend, resolution of a given date");
• keep the resolution and the relevant accounts ready to show on request;
• avoid irregular, round-sum withdrawals with no explanation;
• use a business account in the company's name, not a personal one, for all company income.

For the account itself, see banking options for an offshore company and multi-currency accounts.

When you should speak to an adviser

Three situations call for professional advice before the first payment:

• you live in a country with CFC or controlled-company rules;
• you intend to move country, or to move to Mauritius, while owning the company;
• the company has several shareholders with different rights to dividends.

If you want your situation reviewed by a licensed provider, use the contact form.