Mauritius is a country you mostly see in footnotes: “investment routed via Mauritius,” “special purpose vehicle domiciled in Mauritius,” “treaty benefits claimed under the Mauritius agreement.” For years, its role in the global economy was clear and comfortable. It was the place where capital stopped on the way to somewhere else — to Indian equities, African infrastructure, or emerging-market private equity. Low taxes, thin but predictable regulation, and a dense network of double-tax treaties made the island a preferred conduit. That model is now under siege. A world of global minimum tax rates, public country-by-country reporting, and blacklists does not sit easily with a jurisdiction built around being more accommodating than everyone else.

How a Small Island Became a Big Conduit

The Mauritian financial hub grew out of two ingredients: legal engineering and geopolitical timing. In the 1990s and early 2000s, as India cautiously opened its capital account and African economies liberalised, investors wanted routes that combined legal certainty with fiscal efficiency. Mauritius offered both. Its double-tax treaty with India, signed in 1982 and interpreted generously, allowed capital gains on Indian shares to be taxed in the country of residence — which, for a fund vehicle with no real activity, effectively meant taxed nowhere.

Global business companies, thinly staffed but carefully structured, sprang up by the thousand. The island gained a reputation as a “treaty gateway” rather than a secrecy jurisdiction. Money flowed from New York, London, and Singapore through Port Louis into Mumbai, Johannesburg, Lagos, Nairobi. The headlines focused on beaches and tourism. The balance sheets told a different story: an economy increasingly shaped by flows that never intended to stay.

The New Offensive: BEPS, Blacklists and Minimum Tax

That comfortable equilibrium began to fracture when the OECD’s Base Erosion and Profit Shifting (BEPS) agenda gathered steam. Anti-treaty abuse clauses, principal-purpose tests, and substance requirements travelled from communiqués into domestic law. Countries that had long watched profits book themselves in Mauritius while factories and offices sat on their own soil began to renegotiate deals.

India was the turning point. The 2016 protocol to the India–Mauritius treaty ended the automatic capital-gains exemption on Indian shares for new investments and phased it out for old ones. What had been an almost frictionless tax bridge became a more conventional route. At the same time, the Financial Action Task Force and the European Union sent their own signals. When Mauritius found itself on a grey list of jurisdictions with strategic deficiencies in anti–money laundering controls, the message was blunt: upgrade your regime or lose correspondent banking and reputational access.

The Substance Era: Companies That Have to Actually Exist

In response, Mauritius has layered substance requirements onto its global business regime. Boards are expected to meet on the island. Directors must have real oversight rather than rubber-stamping. Staff, office space, and decision-making need to be located in Port Louis, not outsourced entirely to law firms in Mumbai or Sandton. Banks, fund administrators, and management companies have adjusted with varying enthusiasm, building up compliance teams and offering bundled “substance packages” to clients.

This shift matters. A jurisdiction that once monetised its legal code is being asked to monetise real economic activity: analysts, risk managers, lawyers, auditors, and technologists who live and work on the island. For some funds, that is an acceptable cost of doing business. For others, it tilts the calculation toward alternative hubs.

Competition on All Sides: Dubai, Singapore, Kigali

Mauritius does not operate in a vacuum. Dubai offers liberal residence policies, deep connectivity, and an increasingly sophisticated financial ecosystem. Singapore provides regulatory credibility and scale. Even within Africa, emerging hubs such as Kigali and Nairobi market themselves as gateways with cleaner reputations and more obvious onshore activity. The traditional pitch — “we are the door to India and Africa” — now faces a crowded field of doors.

In this environment, Mauritius is trying to reposition from pure tax arbitrage to “international financial centre” in the broader sense: fund administration, arbitration, fintech, blended finance for climate and infrastructure. That evolution is conceptually attractive but requires patient capacity-building in skills, courts, regulators, and digital infrastructure — not just the tweaking of tax schedules.

Where the Numbers Still Work — and Where They Don’t

Despite reputational knocks and treaty changes, the island still hosts a large share of outward investment into parts of Africa and India. For many mid-sized funds, Mauritius remains a known quantity: English-language law, a hybrid of common law and civil influences, and a regulator that is firm but accessible. The effective tax rate on certain structures, while higher than in the past, can still be attractive once compliance costs are spread across assets under management.

The pressure point is at the lower end of the market. Smaller vehicles with modest fee pools are finding that the added cost of substance, reporting, and due diligence erodes the margin that once justified setting up in Port Louis at all. At the top end, large asset managers can afford to reposition structures toward multi-hub models, using Mauritius as one node among several rather than the single critical gateway of old.

The Politics of Being an Offshore State

For Mauritius, financial-centre strategy is not a technical issue; it is core to the political economy. The sector contributes a disproportionate share of high-skilled jobs and foreign-exchange earnings. It underpins the island’s aspiration to escape the constraints of size and geography. A disorderly erosion of the hub would not just dent GDP statistics; it would narrow the future paths available to a small state surrounded by much larger neighbours and far from the major capitals that set rules.

That is why successive governments have adopted a pragmatic stance toward global transparency pushes. They do not have the leverage to resist OECD initiatives, and they cannot afford to be seen as obstructive. Instead, they have tried to stay just ahead of blacklists while preserving as much flexibility as possible for legitimate capital routing. It is a delicate, constantly renegotiated line.

From “Offshore” to “Clean IFC”: A Realistic Rebrand?

The official narrative now emphasises Mauritius as a rules-based, cooperative, “clean” international financial centre. The hope is to swap a reputational premium for the tax differential it is losing. That requires convincing not just regulators in Paris or Brussels, but also asset allocators in London, Johannesburg, Mumbai, and Dubai that the island adds value beyond tax engineering.

Achieving that will depend on more than slogans. It means improving court efficiency so that disputes can be resolved credibly on the island; upgrading the regulator’s capacity to handle complex products; and fostering a larger domestic ecosystem of professionals who treat Mauritius as home, not as a booking office they fly through. It also means leaning into new niches — such as climate and blended finance for African infrastructure — where geography and network relationships still confer an edge.

What Survival Looks Like

Survival for Mauritius does not mean returning to the hyper-favourable treaty landscape of the early 2000s. That world is gone. Instead, it means stabilising as a mid-tax, high-compliance hub that offers investors a combination of regulatory predictability, African and Indian know-how, and decent operational capacity. It will never be Singapore in scale, nor Dubai in connectivity. But it can remain the preferred node for certain types of African and India-linked capital if it executes the transition with discipline.

The alternative is drift: a slow erosion of mandates as funds quietly redomicile, leaving behind an infrastructure of offices, regulators and professionals built for flows that no longer come. In that scenario, the island would have absorbed the political costs of being an offshore centre without reaping enough of the next-stage benefits.