Aircrafts are capital intensive assets and therefore it is necessary that the acquisition of an aircraft be effected through a tax-efficient structure. Certain means of aircraft utilisation or acquisition would be through charter, share ownership, leasing, and outright aircraft purchase. Mauritius emerges as an excellent jurisdiction for aviation finance and leasing structures due to its robust legal system, tax advantages, and extensive network of tax treaties.


Why Mauritius?

Mauritius positions itself as a jurisdiction of choice for aviation finance leasing structures for the following reasons: 

  • Low tax jurisdiction;
  • Extensive network of 46 tax treaties and 30 investment promotion and protection agreements;
  • No licensing requirement by the Mauritian Civil Aviation department for aircraft ownership or leasing;
  • Dynamic financial services industry with qualified professionals in diverse fields such as accounting, law, banking and finance;
  • Absence of exchange control and free repatriation of funds; and
  • Well reputed as an established financial services centre, particularly for Asian and African investments; and
  • Mauritius has a respected judicial system with the Privy Council of the United Kingdom being the final court of appeal.

Possible Structures

The most cost-efficient way to structure financing to acquire an aircraft or to pay for its lease is through a Mauritius special purpose vehicle typically involves using a Global Business Corporation (GBC), or an Authorised Company (each referred to as a “Mauritius SPV”). A GBC is a tax resident company and can benefit from double taxation avoidance treaties (tax treaties) which Mauritius entered into with several countries, while an Authorised Company is a non-resident company for tax purposes and is therefore tax-exempt in Mauritius; however, it cannot have access to treaty benefits due to its non-residency status. The choice of which vehicle to choose depends on various factors, adding flexibility to the structure.

There are two basic structures that are commonly used in aircraft financing and leasing transaction: (i) an on-balance sheet direct ownership structure and (ii) an off-balance sheet, insolvency remote or orphan trust structure.

In the typical financing structure, Mauritius SPV is incorporated to act as owner and lessor or as lessee of the aircraft (being leased to the Mauritius SPV by an operating lessor) and as sub-lessor of the aircraft leasing it to an airline.

In an ‘on-balance sheet’ structure, the relevant party e.g the airline or the operating lessor will establish the Mauritius SPV and the aircraft is directly owned by the Mauritius SPV in its own name and eventually leased by the SPV to an airline. The acquisition of the aircraft by the Mauritius SPV or the lease from an operating lessor will most commonly be financed by way of a loan from a third-party lender. The Mauritius SPV will form part of the airline/operating lessor's group structure and be included on the group's balance sheet.

In an ‘off-balance sheet’ structure, the airline or the operating lessor will establish a Mauritius SPV which will be the corporate owner of the aircraft and will be held and fully owned by a separate entity, which is not part of the airline’s or the operating lessor’s corporate group. The entity is a purpose trust with the trustee acting on behalf of the trust. A purpose trust is normally established by way of a declaration of trust (i.e. there is no stated settlor) to carry out stated purposes and although there are no beneficiaries under such type of trust, the law requires an enforcer for a purpose trust. The purpose trust will have no control over the Mauritius SPV. Hence such structure will be regarded as an orphan trust structure since the Mauritius SPV will not have an ultimate beneficial owner. 

An ‘off-balance sheet’ financing structure is most desirable when it comes to aircraft financing and leasing. With an ‘off-balance sheet’ financing structure, the Mauritius SPV will be legally separate from the other transaction parties, including the airline or the operating lessor deriving income from the aircraft and hence bankruptcy remoteness is established; the separate corporate personality of the Mauritius SPV shall be ignored only in specific cases (for example where there is evidence of fraud) so as to allow creditors of the Mauritius SPV to start proceedings against its shareholder or to allow creditors of the shareholder of the Mauritius SPV to start proceedings against the Mauritius SPV. The ‘off-balance sheet’ financing structure ensures that the Mauritius SPV will not be consolidated on the balance sheet of the lender (providing the loan for the acquisition or lease by the Mauritius SPV), the airline, the trustee, meaning that the aircraft can be held off their respective balance sheets.

The primary purpose of a bankruptcy remote structure is to avoid any risk of the assets held by the Mauritius SPV from becoming subject to insolvency proceedings in the event one of the transaction counterparties become subject to such proceedings. On the other hand, such structure would also protect the other transaction parties in the event of insolvency proceedings against the Mauritius SPV itself. 

As security for the financing, the trustee will usually grant a share pledge over the shares held in the Mauritius SPV, which the lender can enforce upon the occurrence of an event of default and therefore take control of the Mauritius SPV and the underlying aircraft asset. This enables the lender to either transfer the Mauritius SPV as a going concern or directly sell the aircraft.

Lenders' Security

Securities provided to the lenders providing financing to the Mauritius SPV may include a fixed and/or floating over the aircraft, a security assignment and a bank account charge, a share pledge by the trustee of the purpose trust over the shares held in the Mauritius SPV. Security interests under Mauritius law would also include liens and pledges as well as the civil law sureties such as the “hypothèque” (mortgage). 

As mentioned above, a lenders will have the ability of taking security on the aircraft directly and can structure this charge in such a way that they enjoy priority over other creditors. The credit risk associated with the airline is reduced whilst the secured loan is on the balance sheet of the borrower. This structure is common due to the restriction by banks on ownership of aircrafts which results in these structures being used. 

Illustration of aircraft acquisition and leaseback



GBCs are subject to taxation under the Income Tax Act 1995 of Mauritius, with a tax rate of 15% on their taxable income. However, a partial exemption regime was introduced from 01 January 2019, allowing companies deriving specific types of income to benefit from an 80% tax exemption, subject to meeting substance requirements. 

Mauritius imposes no capital gains tax, with double taxation avoided through foreign tax credits. Tax sparing benefits are available under treaties or regulations. 

An Authorised Company on the other hand is, as mentioned above, tax-exempt.


Aircraft Registration in Mauritius

An aircraft registered in Mauritius will have Mauritian nationality. The Department of Civil Aviation of Mauritius (“DCA”) is the regulatory body which is responsible for registration of aircrafts in Mauritius. The DCA also conducts other activities such as issuing air operation certificates, issuing certificate of air worthiness, licensing of cabin crew personnel and engineers, licensing of aerodromes and conducting safety and security audits. The Mauritius aircraft registry is a registry of title and registration of aircraft charges are recorded in a publicly available mortgage register.

Mauritius is signatory to several conventions, amongst others the Chicago International Civil Aviation Organization (ICAO) Convention, the Geneva Convention on International Recognition of Rights in Aircraft and the New York Convention on the Recognition and Enforcement of Foreign Arbitration.

Aircraft ranging from helicopters and private executive jets to large commercial airliners, less than 25 years old, are eligible for registration. White tailed aircraft, engines, spare parts whether attached or not to an airframe and flight simulators are also eligible for registration.


Benefits of Mauritius aircraft registration 

  • The DCA recognises and accepts Type Certificates for aircraft already certified by any of the Airworthiness Authorities. There is, thus, no requirement for a new exercise for the aircraft when registered in Mauritius.
  • The DCA does not require the aircraft to be physically present in Mauritius at any time except for repairs and maintenance.
  • The DCA validates foreign flight crew licences subject to such licences being in accordance to ICAO standards.
  • Mauritius allows for 100% accelerated depreciation rate in the first year of the aircraft. The registration fees and costs are competitive.