MadagascarTax Obligations Detailed

In Madagascar, employers face various tax obligations, including payroll taxes, social security contributions, and VAT.

Employer Payroll Contributions

• IRSA (Impôt sur les Revenus Salariaux et Assimilés): Withheld monthly by the employer at progressive rates up to 20% of the employee's total taxable remuneration. The tax brackets are:

  • 0% for up to MGA 350,000
  • 5% for MGA 350,001 to MGA 400,000
  • 10% for MGA 400,001 to MGA 500,000
  • 15% for MGA 500,001 to MGA 600,000
  • 20% above MGA 600,000

• CNaPS (Caisse Nationale de Prévoyance Sociale): 13% of the employee's cash remuneration up to a monthly maximum of 13% of eight times the legal minimum salary.

• Health Insurance: 5% of the employee's remuneration up to a monthly maximum of 5% of eight times the legal minimum salary.

• FNFP (Fonds National sur la Formation Professionnelle): 1% of the employee's taxable remuneration up to a ceiling calculated on eight times the legal minimum salary.

Corporate Income Tax (IS)

• Standard Rate: 20% for companies with turnover of MGA 200 million (approximately USD 50,000) or more.

• Reduced Rate: 5% for companies with turnover less than MGA 200 million (Synthetic Tax).

• Specific Sectors: A minimum tax of MGA 100,000 plus 0.5% of annual turnover applies to agriculture, crafts, mining, industry, tourism, and transport. For other commercial activities, the minimum tax is MGA 1,000,000 plus 0.5% of turnover. Fuel retailers have a minimum tax of 1‰ of pre-tax turnover.

Value Added Tax (VAT)

• Standard Rate: 20% on most goods and services.

• Reduced Rate: 5% for locally produced butane gas.

• Exemption: 0% for exports.

Other Taxes and Obligations

• Real Estate Tax: Annual tax on building owners at rates ranging from 5% to 10%.

• Registration Fees: Applicable to transfers of ownership and other transactions, with rates varying from 0.5% to 5%.

• Tax Deadlines: Vary based on the tax type and the company's financial year-end. Corporate income tax returns are typically due by May 15th for calendar year-end companies and November 15th for June 30th year-end companies. Companies with other year-ends must file within four months of the year-end. Monthly payroll taxes (IRSA) are due by the 15th of the following month, and social security contributions are generally paid quarterly.

• Record Keeping: Tax and accounting records, including salary slips and tax documents, must be kept for 10 years. Employment contracts should be retained for five years after employee termination.

This information is current as of February 5, 2025, and might be subject to changes in regulations or interpretations. Consulting with a local tax advisor is recommended for specific situations.

In Madagascar, employee tax deductions encompass various areas, including social security contributions, health insurance, professional training, and income tax.

Income Tax (IRSA)

The Income Tax (Impôt sur le Revenu des Salaires et Assimilés - IRSA) is a progressive tax deducted directly from employee salaries. Here's the general structure:

• Up to 350,000 MGA: 3,000 MGA
• 350,001 MGA - 400,000 MGA: 5%
• 400,001 MGA - 500,000 MGA: 10%
• 500,001 MGA - 600,000 MGA: 15%
• Above 600,000 MGA: 20%

Social Security Contributions (CNaPS)

Employees contribute a total of 2% of their salary to the National Social Security Fund (Caisse Nationale de Prévoyance Sociale - CNaPS), covering:

• Pension (Retirement): 1% (employee contribution)
• Sickness and Maternity: 1% (employee contribution)
• Work Accidents and Occupational Diseases: Covered by the employer's contribution.
• Family benefits: Covered by the employer's contribution.

The employer contributes 18% divided into the above categories, with 13% allocated to the retirement plan. Contributions are calculated on earnings up to eight times the monthly minimum wage.

Health Insurance

Employees contribute 1% of their monthly salary towards a statutory health organization. Employers are also required to contribute 5% of the total payroll for employee healthcare coverage.

Professional Training Funds

Employees are subject to a 1% contribution from their monthly salary towards professional training funds.

Other Deductions

• Retirement Contributions: Employees can make additional voluntary contributions to their retirement savings, up to 10% of their taxable salary.

It's important to note that the information provided here reflects the situation as of February 5, 2025, and might be subject to changes due to legal and regulatory updates in Madagascar. Consulting with local tax and legal professionals is always recommended for the most up-to-date and accurate details. More detailed information about tax rates and regulations may be found through the Direction Générale des Impôts (DGI) in Madagascar. They are responsible for tax administration in the country.

In Madagascar, the Value Added Tax (VAT), known locally as Taxe sur la Valeur Ajoutée (TVA), is a consumption tax applied to most goods and services.

VAT Rates

• Standard Rate: 20% This applies to most goods and services unless a specific exception exists.
• Reduced Rate: 5% This applies to locally produced butane gas and its containers.
• Zero Rate: 0% This applies to exports of goods and services.

VAT Registration

There is no registration threshold for VAT in Madagascar. All businesses making sales in the country, including foreign businesses selling digital services, must register for VAT, regardless of their turnover. Foreign businesses without a physical presence in Madagascar must appoint a fiscal representative to handle VAT registration, collection, and remittance. The recipient of the services is liable for the VAT if a fiscal representative isn't appointed.

VAT Filing and Payment

Businesses must file monthly VAT returns within 15 days of the following month's end. For instance, the VAT return for January is due on February 15th. Payments are also due on the same date.

VAT Invoices

VAT invoices must include:

• Supplier's name, address, and VAT registration number
• Invoice date and sequential number
• Buyer's name, address, and VAT registration number (if applicable)
• VAT amount and rate applied to each item
• Final amount after tax
• Currency used

Exempt Goods and Services

Some goods and services are exempt from VAT. These include certain basic foodstuffs, education and training costs, financial transactions, some healthcare services and medicines, newspapers, and corrective lenses.

Digital Services and VAT

Madagascar levies VAT on digital services sold by foreign businesses to consumers in the country. These include:

• Downloadable or streaming media (e-books, music, movies)
• Software (SaaS, PaaS, IaaS)
• Website hosting and internet services
• Online advertising and affiliate marketing

Record Keeping

Businesses must retain VAT invoices and related tax records for five years. A centralized electronic invoicing system is planned for potential implementation in 2025. This system aims to enhance tax revenue verification, prevent fraud, and reduce compliance costs.

Additional Information

Businesses with an annual turnover exceeding MGA 400 million are also subject to Corporate Income Tax (IR) at a rate of 20%. There's also a synthetic tax regime (IS) for smaller businesses with turnover below this threshold. This tax is calculated at 5% of the turnover. It's important to stay informed about any potential changes in VAT regulations and consult with tax professionals for specific guidance.

Madagascar offers various tax incentives primarily focused on promoting investment and exports. Key incentives include those related to Export Processing Zones (EPZs), free zone companies, and specific sectors like renewable energy.

Export Processing Zones (EPZs) and Free Zone Companies

• Tax Advantages: Companies operating within EPZs and designated free zones benefit from several tax advantages, including exemptions from income tax for a specified period (e.g., the first five years for free zone companies), exemption from VAT and customs duties on imported raw materials, and reduced income tax rates on profits after the initial exemption period. Free zone companies are also exempted from registration taxes and customs tax on exported goods. Income tax on repatriated profits does not exceed 30% of the taxable base for EPZ companies.
• Eligibility: These incentives primarily target export-oriented businesses, particularly in manufacturing, industrial free zone development and management, and services provided to EPZ companies. A key requirement is that 95% of a free zone company's output must be exported.
• Additional Benefits: EPZ and free zone companies also gain access to a secure land acquisition mechanism and other facilities.

General Tax Incentives

• Investment Incentives: The Malagasy General Tax Code provides incentives aimed at attracting both domestic and foreign investment. These incentives encompass a range of measures, including tax credits, deductions, and exemptions. More specific details on these incentives would necessitate referring to the tax code itself.
• Sector-Specific Incentives: Madagascar is actively promoting renewable energy. Tax incentives in this sector include exemptions for companies investing in renewable energy projects. Further sector-specific details may exist and would be found within the General Tax code.
• Double Taxation Agreements: Madagascar has double taxation treaties with several countries, including France and Mauritius, with agreements underway with Canada and Morocco. These treaties are designed to avoid or mitigate double taxation for individuals and companies residing in these countries and earning income in Madagascar or vice-versa. These aim to encourage cross-border investment and trade.
• Tax Exemptions on Official Development Assistance (ODA): Policies exist addressing the taxation of ODA, which may include exemptions from certain taxes like interest income tax and tax on income from movable capital. These provisions would typically aim to facilitate the inflow of development aid and assistance.

Tax Administration and Other Relevant Information

• Economic Development Board of Madagascar (EDBM): The EDBM plays a role in simplifying administrative procedures for setting up companies and facilitating investment procedures.

Please note: The specifics of eligibility criteria, application processes, and the precise nature of available tax incentives can be complex and subject to change. Consulting with a tax advisor or the relevant Malagasy authorities is recommended for detailed and up-to-date guidance. The above information is current as of February 5th, 2025, and it is advisable to verify current regulations for any investment decisions.

Corporate Income Tax

• The standard corporate income tax rate in Madagascar is 20%.
• Minimum Tax: A minimum tax applies to corporations based on their turnover, with different rates for various activities.
• Tax Losses: Tax losses may be carried forward for five fiscal years, but carryback is not allowed.

Individual Income Tax

• Residents are taxed on worldwide income, while non-residents are taxed only on Madagascar-sourced income.
• Several deductions are available for individual taxpayers, including social security contributions, retirement contributions, and certain other expenses.
• A tax reduction is available for dependants, subject to specific criteria.

Other Taxes

• Value Added Tax (VAT): The standard VAT rate is typically around 20%. VAT registration is mandatory for companies with an annual turnover exceeding a certain threshold. Registration can also be optional for other businesses.
• Withholding Tax: Withholding taxes apply to certain payments like interest and royalties.
• Capital Duty: An increase in share capital is subject to a tax.
• Registration Duty: This applies to asset transfers.

Additional resources for comprehensive tax information on Madagascar can be found on the websites of organizations such as the International Bureau of Fiscal Documentation (IBFD), PwC, and KPMG, as well as official government sources.