Critique My Lean US - Mauritius Structure (2.1% Effective Tax Rate)

[Leo Vanguard]

Good day Gentleman.

After wrestling with a UAE freezone/US LLC setup that turned into a compliance and AML audit nightmare (9% UAE tax, anyone?), and after spending some time in Georgia before realizing the political vibes weren’t for us (Hello Putin...), we’ve finally think we have found our sweet spot in Mauritius.

Why Mauritius?

Two words: tax perks and lifestyle.

It's by far the best run island I've ever been to - seems to have the chilled beach life when you want it, futuristic infrastructure in the built up areas as well as some high-end, modern villas with epic sunset mountain and sea views.

We’ve decided to strip down the complexity of our previous ideas and UAE structure, and , after flirting with a Trust Owned GBC company (more complexity??) we've landed on what we think is a leaner and smarter setup that works for taxes, pricing, simplicity and overall lifestyle.

---

Context (Quick Overview):​

• Wife’s US LLC (C-Corp): My wife is the sole shareholder of a US LLC, elected and taxed as a C-Corp, which generates $1.5M to $3M in royalties annually from US sources.
• Me, as a sole proprietor/contractor: I provide high-level consultancy, including full management, key decision-making, business strategy, and IP creation and marketing management, as well as contractor hiring/recruiting services.
• Non-US Citizens/Resident Status: We’re both non-US citizens and maintain non-resident alien (NRA) status for US tax purposes.
• We do not have the same surname - and plan t keep it that way.
• Mauritius Residency: We’re on a Premium Visa in Mauritius, and after spending over 183 days here, we are tax residents.
• Mauritian Tax System: Mauritius uses a territorial tax system, meaning only income remitted into Mauritius is taxable. Foreign-sourced income (or even income considered local-sourced by PE) remains untaxed unless remitted to the country.

---

The Structure and Capital Flow:​

1. Wife’s US LLC (C-Corp):​

• The LLC receives a total of around $1.5M - $3M in royalties annually from US sources, paid monthly.
• General business expenses like marketing platforms and software are observed.
• The LLC is taxed as a C-Corp (8832 form) and pays 21% corporate tax on retained earnings. But before that, I get paid...

2. My Role (Contractor & IP Sales):​

• I work as a contractor for the LLC, providing high level management and marketing services, business strategy, and key decision-making from Mauritius. (rent a CEO style)
• Additionally, I sell high-value intellectual property (IP) to the LLC as part of our business arrangements.
• As an NRA, all my earnings from consulting, management, and IP sales are classified as foreign-sourced income and are not subject to US taxation.
• My wife’s LLC then pays me around 90% of the company’s profits(after the marketing and other expenses), which I receive in my non-resident US bank account (opened with my ITIN).
• The remaining 10% stays in the LLC and is taxed at 21% to keep Uncle Sam happy.
• This results in an effective tax rate of 2.1%.
• To add, a 10% profit rate in our industry is very common.
• My earnings remain untaxed in both the US (because they’re foreign-sourced) and Mauritius (as long as they aren’t remitted). I can defer taxes indefinitely and, when needed, remit strategically to trigger only the 10% tax rate by staying under the Mauritian threshold for remitted income.

3. Why Not a Disregarded Entity?​

• A disregarded entity wasn’t an option because there’s no tax treaty between the US and Mauritius.
• By using the C-Corp structure, we separate personal and corporate income, limiting US tax exposure to 21% on retained profits, while my income from contracting, management, and IP sales remains foreign-sourced and untaxed.

---

Potential Vulnerabilities:​

• Transfer Pricing and Arms Length payments: I think the main issue is to ensure that the fees paid for management, consultancy, and IP sales reflect fair market value to avoid raising any red flags with the IRS. However, with a revenue lower than $5M I'm wondering if they would even bat an eye? Ive read that they only audit 0.7% of businesses under $10M - but could be wrong.

---

Solution:​

We maintain meticulous documentation to keep everything legit, including time tracking, detailed reports, minutes from meetings, and IP valuations. This ensures we can justify the payments as being fair and in line with market rates.
In short - I am legitimately running her business as a contractor, and she it just pretty much a shareholder.

---

Why This Works:​

• US Taxes: We avoid personal US taxes by being non-resident aliens. Only the 10% retained profits are subject to 21% corporate tax, giving us a low effective tax rate of 2.1%.
• Mauritius Taxes: Since we don’t remit income to Mauritius, we can defer taxation indefinitely. When we do need to remit, we control how much to remit and can stay under the threshold to trigger the 10% tax rate, or stagger payments when we need bigger amounts.
• Offshore Flexibility: I can invest the untaxed income in brokerages, real estate, or other global assets without triggering tax as long as the funds stay outside Mauritius.

---

My Questions:​

1. Is there anything I’m overlooking in general - but also in terms of transfer pricing or fair market value rules when it comes to payments between me as a contractor and her LLC?
2. Possible Gaps in Compliance: Are there any compliance issues that could arise with the IRS that I might not have considered?
3. Further Optimization: Is there a way to further optimize this structure for even better tax deferral or efficiency?
4. Longevity: How resilient do you think this structure is in the long run?
5. Other Considerations: Are there any other red flags or potential vulnerabilities that I should watch out for?

Lastly - is this entire thing just completely stupid, and is there a better way of doing it? I'm open to some divergent thinking.

---

Would love to hear your thoughts and suggestions, or if you think any other structures may be better suited to my situation.

Have a good one gentleman!

 

[Don]

Context (Quick Overview):

• Wife’s US LLC (C-Corp): My wife is the sole shareholder of a US LLC, elected and taxed as a C-Corp, which generates $1.5M to $3M in royalties annually from US sources.
• Me, as a sole proprietor/contractor: I provide high-level consultancy, including full management, key decision-making, business strategy, and IP creation and marketing management, as well as contractor hiring/recruiting services

A company not incorporated in Mauritius is resident in Mauritius if it is centrally managed and controlled in Mauritius.

Resident corporations are taxed on their worldwide income.

 

[Sols]

Just to add to what @Don wrote, Mauritius is one of those few tax havens that actually enforces its tax laws. It doesn't have the best bureaucracy and the tax department is understaffed. But the risk of getting busted in Mauritius is somewhat higher than many of its peers.

This whole structure would crumble as soon as someone looks at critically.

Wife’s US LLC (C-Corp): My wife is the sole shareholder of a US LLC, elected and taxed as a C-Corp, which generates $1.5M to $3M in royalties annually from US sources.

Why not just form a C Corp then?

Mauritian Tax System: Mauritius uses a territorial tax system, meaning only income remitted into Mauritius is taxable. Foreign-sourced income (or even income considered local-sourced by PE) remains untaxed unless remitted to the country.

That's not what territorial tax system means. Mauritius is not a territorial tax system, nor is it universally a remittance-basis tax system, for corporate income tax.

I work as a contractor for the LLC, providing high level management and marketing services, business strategy, and key decision-making from Mauritius. (rent a CEO style)

This is where, as @Don points out, the US company becomes a Mauritian tax resident company.

My wife’s LLC then pays me around 90% of the company’s profits(after the marketing and other expenses), which I receive in my non-resident US bank account (opened with my ITIN).

Look into BEPS: Base Erosion and Profit Shifting. If you don't, the IRS might give your wife a lesson in what it means.

 

[saintjohnny]

• My wife’s LLC then pays me around 90% of the company’s profits(after the marketing and other expenses), which I receive in my non-resident US bank account (opened with my ITIN).
• The remaining 10% stays in the LLC and is taxed at 21% to keep Uncle Sam happy.
• This results in an effective tax rate of 2.1%.

I would get advice from a US CPA yesterday if I were you. This is neither lean... nor legal. I don't know about Mauritius but what you're describing here is tax fraud in the eyes of the IRS.

However... you seem OK with the fact that the IRS only audits 0.7% of co's doing under 10M so I guess your risk-appetite is pretty (insanely) high.

P.S. Territorial taxation doesn't work that way. If your wife operates this LLC from Mauritius then it's a Mauritius company.

 

[aniglo22]

Don't Rely on the figure that only 0.7% of businesses get audited . This figure is outdated . Especially with a questionable expense structure .
The IRS got a lot of funding Funding from the Inflation Reduction Act improves taxpayer service with modern online tools | Internal Revenue Service .
They significantly expanded their audit capabilities and increased enforcement efforts across the board.
https://www.pbs.org/newshour/econom...id-taxes-from-wealthy-tax-dodgers-yellen-saysAudit rates could rise up even further if the IRS improves its performance metrics. This would lead to additional funding, expanding their auditing capabilities.

 

[daniels27]

How about adding a director in Monaco and then just getting a salary it dividends in Mauritius?

Or how about transferring the rights to a nominee recipient in Georgia who then gifts the payouts back to you? (Needs to be a person in order to remain tax free.)

Just a word of warning. I would not recommend changing the corporate structure to often. Foreseeable royalties are a form of goodwill, which is taxable in many countries when such company leaves. There is very little room for discussion as it is often crystal clear how much is expected to come. Even countries like Switzerland would tax the hell out of your company if you leave. Also many countries already have strict rules on decreasing withholding taxes and would tax at the higher rate if you try to reduce on all disbursable amount.

And @aniglo22 is totally right, tax authorities are very unlikely to audit you if you keep paying 100k to 1m in taxes each year. But they quickly come when it gets fishy. It is like with police checks, only 1 out of 100 is checked at the border in Schengen, but 1 out of 1 black guy. There is a bias who gets checked.

 

[Leo Vanguard]

A company not incorporated in Mauritius is resident in Mauritius if it is centrally managed and controlled in Mauritius.

Resident corporations are taxed on their worldwide income.

Correct. However from what I have found, the worldwide income is only taxed when remitted. Could be wrong, just haven’t seen a source that’s says otherwise.

 

[aniglo22]

Correct. However from what I have found, the worldwide income is only taxed when remitted. Could be wrong, just haven’t seen a source that’s says otherwise.

Your confusing individual taxation with corporate .
Individual Taxation :

Mauritius residents are taxed on Mauritius-source income and foreign income remitted to Mauritius. Nonresidents are taxed only on Mauritius-source income

Corporate Taxation :

Residents are taxed on worldwide income; nonresidents are taxed only on Mauritius-source income. Branches are taxed in the same way as subsidiaries.

Company Residency :

A company is resident if (i) it is incorporated in Mauritius, or (ii) it has its central management and control in Mauritius. However, a company incorporated in Mauritius will be treated as nonresident if it is centrally managed and controlled outside Mauritius

TLDR:
Company will be Mauritius-resident .You will be liable for taxes
Source:
Deloitte
https://www2.deloitte.com/content/d...nts/Tax/dttl-tax-mauritiushighlights-2024.pdf

 

[Leo Vanguard]

Your confusing individual taxation with corporate .
Individual Taxation :

Corporate Taxation :

Company Residency :

TLDR:
Company will be Mauritius-resident .You will be liable for taxes
Source:
Deloitte
https://www2.deloitte.com/content/d...nts/Tax/dttl-tax-mauritiushighlights-2024.pdf

So in this case, I, as an individual, will be receiving 90% of profits as income from the c-corp on a personal basis.

Therefore my personal income is not taxed if not remitted, correct?

Only 10% of the profits in my wife’s LLC will be due for 15% tax from my understanding?

What am I missing?

Here’s the link to the official source from the MRA:
https://www.mra.mu/index.php/individuals/foreign-income

 

[Clank]

I suggest you to get a consultancy on transfer pricing and international taxation by a lawyer.

If you don’t want to spend that much money, there are many in Upwork that work for the big 4 but offer their services much cheaper.

Answers here are usually good but I wouldn’t trust a stranger.

 

[JackAlabama]

Good day Gentleman.

After wrestling with a UAE freezone/US LLC setup that turned into a compliance and AML audit nightmare (9% UAE tax, anyone?), and after spending some time in Georgia before realizing the political vibes weren’t for us (Hello Putin...), we’ve finally think we have found our sweet spot in Mauritius.

Why Mauritius?

Two words: tax perks and lifestyle.

It's by far the best run island I've ever been to - seems to have the chilled beach life when you want it, futuristic infrastructure in the built up areas as well as some high-end, modern villas with epic sunset mountain and sea views.

We’ve decided to strip down the complexity of our previous ideas and UAE structure, and , after flirting with a Trust Owned GBC company (more complexity??) we've landed on what we think is a leaner and smarter setup that works for taxes, pricing, simplicity and overall lifestyle.

---

Context (Quick Overview):​

• Wife’s US LLC (C-Corp): My wife is the sole shareholder of a US LLC, elected and taxed as a C-Corp, which generates $1.5M to $3M in royalties annually from US sources.
• Me, as a sole proprietor/contractor: I provide high-level consultancy, including full management, key decision-making, business strategy, and IP creation and marketing management, as well as contractor hiring/recruiting services.
• Non-US Citizens/Resident Status: We’re both non-US citizens and maintain non-resident alien (NRA) status for US tax purposes.
• We do not have the same surname - and plan t keep it that way.
• Mauritius Residency: We’re on a Premium Visa in Mauritius, and after spending over 183 days here, we are tax residents.
• Mauritian Tax System: Mauritius uses a territorial tax system, meaning only income remitted into Mauritius is taxable. Foreign-sourced income (or even income considered local-sourced by PE) remains untaxed unless remitted to the country.

---

The Structure and Capital Flow:​

1. Wife’s US LLC (C-Corp):​

• The LLC receives a total of around $1.5M - $3M in royalties annually from US sources, paid monthly.
• General business expenses like marketing platforms and software are observed.
• The LLC is taxed as a C-Corp (8832 form) and pays 21% corporate tax on retained earnings. But before that, I get paid...

2. My Role (Contractor & IP Sales):​

• I work as a contractor for the LLC, providing high level management and marketing services, business strategy, and key decision-making from Mauritius. (rent a CEO style)
• Additionally, I sell high-value intellectual property (IP) to the LLC as part of our business arrangements.
• As an NRA, all my earnings from consulting, management, and IP sales are classified as foreign-sourced income and are not subject to US taxation.
• My wife’s LLC then pays me around 90% of the company’s profits(after the marketing and other expenses), which I receive in my non-resident US bank account (opened with my ITIN).
• The remaining 10% stays in the LLC and is taxed at 21% to keep Uncle Sam happy.
• This results in an effective tax rate of 2.1%.
• To add, a 10% profit rate in our industry is very common.
• My earnings remain untaxed in both the US (because they’re foreign-sourced) and Mauritius (as long as they aren’t remitted). I can defer taxes indefinitely and, when needed, remit strategically to trigger only the 10% tax rate by staying under the Mauritian threshold for remitted income.

3. Why Not a Disregarded Entity?​

• A disregarded entity wasn’t an option because there’s no tax treaty between the US and Mauritius.
• By using the C-Corp structure, we separate personal and corporate income, limiting US tax exposure to 21% on retained profits, while my income from contracting, management, and IP sales remains foreign-sourced and untaxed.

---

Potential Vulnerabilities:​

• Transfer Pricing and Arms Length payments: I think the main issue is to ensure that the fees paid for management, consultancy, and IP sales reflect fair market value to avoid raising any red flags with the IRS. However, with a revenue lower than $5M I'm wondering if they would even bat an eye? Ive read that they only audit 0.7% of businesses under $10M - but could be wrong.

---

Solution:​

We maintain meticulous documentation to keep everything legit, including time tracking, detailed reports, minutes from meetings, and IP valuations. This ensures we can justify the payments as being fair and in line with market rates.
In short - I am legitimately running her business as a contractor, and she it just pretty much a shareholder.

---

Why This Works:​

• US Taxes: We avoid personal US taxes by being non-resident aliens. Only the 10% retained profits are subject to 21% corporate tax, giving us a low effective tax rate of 2.1%.
• Mauritius Taxes: Since we don’t remit income to Mauritius, we can defer taxation indefinitely. When we do need to remit, we control how much to remit and can stay under the threshold to trigger the 10% tax rate, or stagger payments when we need bigger amounts.
• Offshore Flexibility: I can invest the untaxed income in brokerages, real estate, or other global assets without triggering tax as long as the funds stay outside Mauritius.

---

My Questions:​

1. Is there anything I’m overlooking in general - but also in terms of transfer pricing or fair market value rules when it comes to payments between me as a contractor and her LLC?
2. Possible Gaps in Compliance: Are there any compliance issues that could arise with the IRS that I might not have considered?
3. Further Optimization: Is there a way to further optimize this structure for even better tax deferral or efficiency?
4. Longevity: How resilient do you think this structure is in the long run?
5. Other Considerations: Are there any other red flags or potential vulnerabilities that I should watch out for?

Lastly - is this entire thing just completely stupid, and is there a better way of doing it? I'm open to some divergent thinking.

---

Would love to hear your thoughts and suggestions, or if you think any other structures may be better suited to my situation.

Have a good one gentleman!

it doesnt work, how did you come up at these conclusions?

Just the first source to be consulted gives a very clear answer.
https://taxsummaries.pwc.com/mauritius/individual/taxes-on-personal-income
Income from employment duties performed in Mauritius is deemed to have been derived from Mauritius, even if the related remuneration is received outside Mauritius.

Correct. However from what I have found, the worldwide income is only taxed when remitted. Could be wrong, just haven’t seen a source that’s says otherwise.

its only that case if you have lets say a fully staffed us company which pays you dividends but you dont work for it.

 

[Leo Vanguard]

A company not incorporated in Mauritius is resident in Mauritius if it is centrally managed and controlled in Mauritius.

Resident corporations are taxed on their worldwide income.

So just to clarify:

My wifes company is due for 15% tax on 10% of the profits.

Then my personal income that is not remitted remains untaxed.

This correct, or is there something I am missing?

 

[Xshore]

Is there anything I’m overlooking in general - but also in terms of transfer pricing or fair market value rules when it comes to payments between me as a contractor and her LLC?

You're forgetting withholding taxes on the dividends paid from the C-corps to a NRA shareholder. It's 30% when there is no tax treaty.

 

[Sols]

Overall, the plan is full of weaknesses and its successful execution relies 100% on neither the IRS nor the MRA (Mauritius Revenue Authority) looking too closely at it.

The amounts are high enough that a tax authority might spot it.

In conclusion, I give it two out of five stars. It's not the worst, but it's ultimately illegal and only protected by being convoluted and relying on non-enforcement.

 

[Leo Vanguard]

Income from employment duties performed in Mauritius is deemed to have been derived from Mauritius, even if the related remuneration is received outside Mauritius.

Okay

You're forgetting withholding taxes on the dividends paid from the C-corps to a NRA shareholder. It's 30% when there is no tax treaty.

its not a dividend. Its active income paid from a c-corp to a NRA.

 

[daniels27]

Income from employment duties performed in Mauritius is deemed to have been derived from Mauritius, even if the related remuneration is received outside Mauritius.

Exactly. But what about my Monaco or Georgia proposition? For that amount it could be feasible.

Its not a dividend. Its active income paid from a c-corp to a NRA.

I think he was referring to the 10% you retain in the US. In addition to the 21% you have withholding tax. Of course you can keep it in the US and then move to Ireland one day to get it out for less than 30%. But in the worst case the tax would be 5.1% and not 2.1%.

 

[Leo Vanguard]

Overall, the plan is full of weaknesses and its successful execution relies 100% on neither the IRS nor the MRA (Mauritius Revenue Authority) looking too closely at it.

The amounts are high enough that a tax authority might spot it.

In conclusion, I give it two out of five stars. It's not the worst, but it's ultimately illegal and only protected by being convoluted and relying on non-enforcement.

Haha, two stars?! Come on, I thought I at least deserved two and a half for creativity and effort alone!

Appreciate the feedback though, and I get it—definitely wouldn’t want to put all my chips on the hope that the IRS and MRA just stay blissfully unaware of what we’re doing. You're right, it's not exactly bulletproof.

So, in a nutshell (and speaking in broad terms), how do you think this plan could be brought up to a solid 4 or 5-star rating, while keeping Mauritius as the base?
open.

The other option we were looking into is setting up a GBC (Global Business Company) with a Trust layer in Mauritius. However, we wouldn’t qualify for the 3% partial exemption rule (since that’s only for income like dividends, interest, etc), and unfortunately, royalties and active income don’t fit that category.

I also still have my UAE freezone (wife and I are 50/50 shareholders), but to be honest, I’ve been thinking of closing it up, since we don't live there anymore and I'm thinking PE and substance is going to be a lot more strict with the 9% CT now.

If you think it could still come in handy though, I might consider keeping it.

That said, I don't mind paying some tax—just not more than around 15ish% and, more importantly, a straightforward structure.

At the end of the day, the primary source of capital is in the form of royalties that are earned in the USA, and we’re just trying to be as tax-optimized as possible while being flexible with both the location and the structure.

Curious to hear how you’d tighten up this setup and take it to the next level—or whether you'd recommend scrapping the whole location/setup entirely for something more optimized and makes more sense in our situation.

Thanks again for the critique, gave me a good laugh!

P.S we elected the US LLC to be taxed as a c-corp and not just incorporating a standard c-corp for the flexibility of changing it back to a pass though if needed in the future.

 

[Sols]

Haha, two stars?! Come on, I thought I at least deserved two and a half for creativity and effort alone!

"Mom, can we get tax planning?"
"We have tax planning at home."
Tax planning at home: [this thread]

So, in a nutshell (and speaking in broad terms), how do you think this plan could be brought up to a solid 4 or 5-star rating, while keeping Mauritius as the base?

Hire a professional.

I say this with no ill intention but while you have demonstrated a good ability to do cursory research, you still don't understand several key concepts. You haven't fully considered BEPS-type regulations, corporate tax residence, the difference between personal and corporate tax, and probably a few more things. I think that you risk making decisions that save you tax short term but carry heavy penalties and repercussions if someone comes asking uncomfortable questions.

If you're confident about Mauritius as a home base (which makes a lot of sense), speak with someone like Juris Tax, RSM, BDO, Andersen, and other tax advisors in Mauritius.

For example, maybe all you need to do is to establish genuine substance somewhere outside of Mauritius, so that your role is just that of a passive shareholder. You can fly overseas for board meetings for added assurance.

At the end of the day, the primary source of capital is in the form of royalties that are earned in the USA, and we’re just trying to be as tax-optimized as possible while being flexible with both the location and the structure.

So maybe you should also speak to a US tax advisor, in addition to ones in Mauritius, or work with a multinational firm that can help you with both.

Curious to hear how you’d tighten up this setup and take it to the next level - or dispose of the entire location/setup completely for a more optimized one.

See, I wouldn't. I would consult with reputable service providers and qualified advisors.

 

[celizo]

That said, I don't mind paying some tax—just not more than around 15ish% and, more importantly, a straightforward structure.

So why not use a company incorporated in Mauritius (15% CIT)?

 

[Leo Vanguard]

So why not use a company incorporated in Mauritius (15% CIT)?

There’s no DTA with the USA. That’s where the main issue lies, and why we have a LLC elected to be taxed as a c-corp to begin with. We’d be subject to 30% withholding tax and then get taxed another 15% when the funds hit our MUR company. Not fun.