In just 44 years since independence, Mauritius has renewed its fortunes as an impoverished agricultural backwater, into one of Africa's richest countries, the biggest source of FDI into India, and an integral hotspot for international investment into South Asia and Africa. While the idea of a sun-soaked paradise may inspire the ideal tourism package, the country's favourable tax laws mean that foreign entities abound on the small island nation. Sam Mendelson looks at the attributes that have put Mauritius on the map.

In the mind’s eye, Mauritius conjures up images of white sand, deep blue waters, and palm trees. Set in the southern tropics of the Indian Ocean, it is the quintessential paradise with 150 kilometres of picturesque beaches, a postcard-perfect lagoon, and a welcoming maritime subtropical climate.

Although it would be easy to underestimate Mauritius as a tiny island getaway, there is much more than meets the eye. Uniquely positioned at the crossroads of Africa and Asia, Mauritius is a country of paradoxes and financial heft. Since achieving independence in 1968, the country has emerged as a transcontinental gateway, and regional hub for foreign investment.

Geopolitically, Mauritius aligns itself with sub-Saharan Africa. But ethnically, economically and politically, it encompasses a distinct combination of immigration from the Indian subcontinent, the legacy of its European colonial past, and China’s current and anticipated investment in the region.

Mauritius is a small country recognised for social peace, political stability and racial harmony. Its steady growth, and long-term planning post-independence, is at odds with most of its neighbours in continental Africa.

A model for development, Mauritius boasts a literacy rate over 80 percent; an average GDP growth of 4.6 percent since 1977, compared to just 2.9 percent across sub-Saharan Africa; and perhaps most impressively of all, a more equitable income distribution and lower inequality in the last 30 years, demonstrated by its decline in Gini coefficient from 45 to 38 since 1980.

Mauritius’ investment in financial services, and especially outsourcing industries, is a testament to the country’s entrepreneurial, enterprise-driven character, reminiscent to that of India.

But perhaps Mauritius’ greatest economic appeal is in its emergence as a favourable tax jurisdiction. Similar to Ghana, this shift acts as a lightning rod in attracting foreign direct investment (FDI) into the neighbouring economic powerhouses of South Africa and India.

The facts speak for themselves. Mauritius has continuously enjoyed its position on the OECD’s “white list” of tax-favourable jurisdictions, which have implemented the approved checks and balances, in contrast to the dreaded “grey” and “black lists.”

Thanks to a blend of legal and tax opportunities, Mauritius is home to countless cross-border ventures, global investment funds, and private wealth management structures. The jurisdiction imposes no tax on dividends; no withholding tax on interest, royalties or dividends; and no estate duty, inheritance, wealth or gift taxes, stamp duties, registration duties or levies.

With more than 9,000 foreign entities doing business in a country of just 1.2 million people, it is clear that Mauritius has effectively hung a proverbial “Open for Business” banner across its threshold.

This accessibility and liberalisation manifests in a variety of ways. One important aspect is flexibility, demonstrated through an extensive network of Double Taxation treaties, different forms of trusts and societies, as well as a companies’ structure that allows for registration as private or public, indefinite or limited life, protected cell and private trust.

Even offshore activities conducted in Mauritius have been diversified to include offshore banking, insurance and funds management, shipping management, aircraft financing, international licensing and franchising, pension funds, and data processing and ICT services.

Most significantly, Mauritius has positioned itself firmly on the map as a result of its substantial FDI inflows to India. In a little over a decade, the country has become an indispensable partner that routs financial investments, in part through the prudent pursuit of the Double Taxation Avoidance Treaty with India, under which registered corporate entities can instead choose to pay taxes in the island nation.

Whether a multinational firm investing in its Indian subsidiary; a private equity firm looking to take advantage of tax loopholes; or even Indian businesspersons routing a part of his or her own holdings in a group company through a Mauritian arm, Mauritius is easily the tax jurisdiction of choice for Indian investors.

In 2010, Mauritian FDI to India surpassed the staggering US$50 billion dollar mark, accounting for 42 percent of the total FDI inflows – a phenomenal amount of investment given Mauritius’ size.

Mauritius is adept at maintaining significant relations with major players on the world stage. The UK has traditionally been the major export market for Mauritian products, which amounted to some £250 million in 2010. During the same period, the UK remained the primary source of FDI into Mauritius, with over £100 million across the financial, real estate and agricultural sectors.

Although typical perceptions about Mauritius still hold true – boasting lagoons, tourist attractions and the ideal climate – it differentiates itself from other island paradises. Having spent the last 40 years investing for the 21st century, and establishing itself as a platform for entry into the new generation of booming economic superpowers - it is an investment that is currently paying dividends for all Mauritians.