There are many similarities between a Trust and a Foundation. Both may be set up during one’s lifetime (inter-vivos) or on death (testamentary) and can allow for the organisation of your estate/assets during your life-time. However, the main difference between a Trust and a Foundation is that a Trust is not a legal entity.
A Foundation is a legal entity in its own right and can therefore own assets directly. It can be charitable or non-charitable, or both. It possesses some hybrid characteristics of a trust and a company. It is governed by the Foundations Act 2012
A trust is an “agreement” between the Settlor and the Trustee in which the ownership of the assets is transferred by the Settlor to the Trustee for the benefit of the beneficiaries named in the trust deed. There is therefore “split” ownership, legal ownership by the Trustees and the equitable interest held by the beneficiaries named in the Trust Deed.
If a Trust or Foundation has chosen Mauritius as its jurisdiction, it is required to be registered in Mauritius. A Trust Mauritius will be governed by the Trust Act 2001 whilst a Foundation by the Foundations Act 2012.
| Trusts | Foundations | |
|---|---|---|
| Types | Discretionary Trusts | Charitable |
| Charitable Trusts, meant solely for the benefits of charitable bodies | Non- charitable | |
| Purpose Trusts, formed for specific, reasonable and certain purposes. Such trusts will normally have no beneficiaries | Both charitable and non-charitable | |
| Foreign Trusts | ||
| Uses | Estate, succession planning and family office services | Estate and succession planning |
| Accumulation and Preservation of wealth | Accumulation and Preservation of wealth | |
| Asset Protection | Asset Protection | |
| Tax Planning | Tax Planning | |
| Corporate Finance/Asset Financing | Corporate Finance/Asset Financing | |
| Used as a Special Purpose Vehicle in off Balance Sheet Transaction | Used as a Special Purpose Vehicle in off Balance Sheet Transaction | |
| Securitisation | ||
| Benefits | Full confidentiality of trustees’ identity, deliberations and beneficiaries | Foundations in Mauritius may apply for a Global Business Company Licence and become tax resident. It can benefit from the 80% partial tax exemption regime on specified income streams and has access to wide network of Double Tax Agreements |
| Charitable trusts are tax exempt | Charitable Foundations are automatically tax exempted; | |
| Freedom to choose proper law of trust (i.e. may not be Mauritius Trust) | Foundations currently set up in other jurisdictions can re-domicile to Mauritius or vice versa | |
| Migration | Members of the Foundation council are not liable to the Beneficiaries | |
| Duration |