Employers in Madagascar have a significant responsibility towards the National Social Security Fund (Caisse Nationale de Prévoyance Sociale or CNaPS). This includes making contributions towards pensions, health insurance, and work-related injury & occupational illness insurance.

Pension Contributions

Employers contribute 13% of an employee's gross salary (up to a monthly ceiling) towards pensions.

Health Insurance

Employers contribute an additional 5% of an employee's gross salary (up to a monthly ceiling) towards health insurance.

Work-Related Injury & Occupational Illness Insurance

The contribution rate for this insurance varies and is determined based on the level of occupational risk associated with the company's business activities.

Calculation and Reporting

Employer contributions are calculated based on each employee's gross salary, up to the relevant salary ceilings. Social Security contributions from employers are usually paid on a monthly basis to the CNaPS.

Salary Ceiling

Social security contributions are calculated based on an employee's salary up to a maximum ceiling. This ceiling is eight times the minimum wage and is adjusted periodically.

Other Important Considerations

Employers might be responsible for other taxes related to employment, such as the Skills Development Levy (Taxe pour le Développement de la Formation Professionnelle), which is often around 1% of payroll, and specific regional or municipal taxes. Madagascar's Labor Code defines the responsibilities and obligations of employers, including timely payment of salaries, social contributions, and benefits.

In Madagascar, employee income is subject to a progressive tax rate structure, with rates generally ranging from 0% to 20% depending on the amount of taxable income.

Deductions

Certain deductions are allowed to arrive at taxable income for IRSA purposes:

• Social security contributions (1% of salary)
• Statutory health insurance contributions (1% of salary)
• Contributions to statutory professional training funds (1% of salary)
• Retirement contributions (up to 10% of taxable salary)
• Alimony payments (under certain conditions)

Tax Reduction

Employees receive a tax reduction of MGA 2,000 per dependent.

Tax Withholding and Filing

Employers are obligated to withhold income tax (IRSA) and social security contributions from their employees' salaries. Withheld taxes must then be remitted to the appropriate tax authorities. Filing and payment deadlines can vary, so it's important to verify with the Madagascar tax authorities for the most accurate schedule.

Madagascar's standard VAT rate is 20%, applicable to most goods and services supplied within the country. However, a favorable 0% VAT rate applies to exported services, enhancing the competitiveness of Madagascar's service providers on the international market.

VAT on Imported Services (Intermittent VAT)

Services provided by non-resident companies (without an establishment in Madagascar) are subject to Intermittent VAT (VATI). The accrual of VATI can occur in two ways. If the non-resident company appoints a local tax representative, this representative is responsible for collecting and paying the VAT to the tax authorities. Without a tax representative, the local recipient of the service becomes liable for paying VAT under a reverse charge mechanism.

Place of Supply Rules

Services are generally considered supplied in Madagascar if they are executed in Madagascar, used or consumed in Madagascar, or invoiced to a Madagascar tax resident.

VAT Registration

Businesses providing taxable services in Madagascar must register for VAT if their annual turnover exceeds MGA 400 million (approximately USD 100,000). Non-resident service providers do not have a registration threshold for VAT purposes and must account for VATI regardless of turnover.

VAT Deductibility (Input VAT)

Businesses can generally deduct the VAT paid on goods and services used for their taxable activities (input VAT) against their output VAT liability. This helps avoid the cascading effect of VAT.

VAT Compliance

VAT-registered businesses must file periodic VAT returns and remit the due tax to the tax authorities. Deadlines and procedures should be confirmed with the revenue authorities.

Tax incentives are a crucial part of business strategy, and various regimes offer different benefits. Here are some of the key tax incentive regimes:

Free Trade Zone (FTZ) Regime

Primarily geared towards export-oriented businesses in sectors like manufacturing and services, the FTZ regime offers a Corporate Income Tax (CIT) exemption for varying periods (typically 5 to 15 years) followed by a reduced rate of 10%. There is also an exemption from customs duties on imports relating to production activities, and potential relaxed labor regulations.

Investment Promotion Charter Incentives

Companies making investments in priority sectors like renewable energy, tourism, industrial activities, civil works and construction, and agricultural transformation can benefit from tax reduction based on a percentage of the investment amount. There are also customs duty and VAT exemptions on imported equipment under specific conditions.

Mining Sector Incentives

Companies engaged in large-scale mining projects can benefit from a reduced CIT rate of 10% (restrictions may apply), stability of tax regime during an agreed period, and land and building taxes subject to reduced rates. There are also exemptions from customs duties and VAT on certain imports.

Small Business Tax Regime

Businesses with annual turnover below a certain threshold (typically around MGA 400 million) can benefit from a simplified tax regime with lower tax rates and potential tax deductions based on purchases and investments.

Other Incentives

Companies may be eligible for additional incentives based on factors such as job creation, location in underdeveloped regions, and use of environmentally friendly technologies.