Martinique

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

Social Security Contributions

Employers contribute approximately 41% to 45% of an employee's total earnings to the Social Security system. This covers health insurance, retirement pensions, unemployment benefits, and family allowances. Employees also contribute approximately 19% of their earnings.

Payroll Tax

The payroll tax applies to employers not subject to VAT. It's calculated on remuneration paid during the year using a progressive scale. The 2025 thresholds for the progressive rates are pending publication of the 2025 budget law.

Value Added Tax (VAT)

The standard VAT rate in Martinique is 8.5%. Certain essential services may qualify for a reduced rate of 2.1%. Additional reduced VAT rates exist for specific goods and services.

Income Tax

Martinique uses a progressive income tax system with rates ranging from 0% to 45%. Specific income thresholds for 2025 are pending publication of the 2025 budget law.

Other Employer Obligations

• Annual Leave: Employees are entitled to 30 days of annual leave.
• Maternity Leave: Mothers receive 16 weeks of maternity leave.
• Workweek: The standard workweek is 35 hours.
• Public Holidays: Martinique observes 12 public holidays annually.

In Martinique, employee tax deductions encompass various mandatory contributions and income tax, impacting an employee's net pay.

Income Tax

Income tax is determined based on the employee's earnings, applicable tax rates, and eligible deductions. As of 2023, a standard allowance for professional expenses equal to 10% of taxable employment income is applied (capped at €13,522). Employees may opt to deduct actual professional expenses instead, although this necessitates adding back any employer-reimbursed expenses to the taxable salary. Tax scales and thresholds are subject to annual revisions, with updates for 2025 expected following the publication of the budget law.

Social Security Contributions

Employees in Martinique contribute to social security through deductions from their salary. These contributions cover various branches of social security, including healthcare, retirement, and family allowances. Specific contribution rates and ceilings are subject to change, and employers are responsible for withholding the correct amounts from employee salaries.

Payroll Tax

Martinique applies a payroll tax to employers, calculated based on the employee's gross earnings. The applicable rate is 2.95% in Guadeloupe, Martinique, and Reunion, and 2.55% in Guyana and Mayotte. This tax is distinct from the employee's income tax and social security contributions. Salary thresholds and related calculations are subject to change each year after the income tax brackets are re-evaluated in the annual budget law.

Other Deductions

Besides income tax and social security, other deductions might include payments for employee benefits like supplementary health insurance or retirement plans, if applicable. Certain personal deductions, like alimony payments, might also reduce the taxable income. Additional information on specific deductions can often be found in the official budget law published annually.

Tax Year and Deadlines

The tax year in Martinique typically aligns with the calendar year. Employers are responsible for filing relevant tax declarations and payments within specified deadlines, which can vary based on the type of tax or contribution. For income tax, employees usually file their annual tax return in the following year. The specific deadlines for 2025 declarations and payments should be confirmed with the relevant authorities or a tax advisor.

Martinique applies a Value Added Tax (VAT), a consumption tax levied on most goods and services. As an overseas department of France, it operates a unique VAT system with specific rates and exemptions.

VAT Rates in Martinique

• Standard Rate: 8.5% - This rate applies to most goods and services not specifically covered by reduced rates.
• Reduced Rates:
  • 2.1% - Applies to essential goods and services like food, medicine, accommodation, and transport.
  • 1.05% - Specifically applies to newspapers.

VAT Registration

Martinique follows French VAT rules. Businesses operating within Martinique, regardless of turnover, generally must register for VAT. Non-established businesses selling into Martinique may also require registration depending on the nature and volume of their sales. Those involved in exempt activities might still choose to register to recover VAT paid on their purchases.

VAT Filing and Payment

Businesses registered for VAT are required to file regular VAT returns, either monthly or quarterly. Filing frequency depends on the annual VAT due. Those with an annual VAT due of less than €4,000 can generally file quarterly. The deadline for filing is typically by the end of the month following the reporting period. The return summarizes all transactions since the start of the fiscal year and includes details of taxable bases, non-taxable bases, and deductible VAT amounts. Payment is typically due concurrently with filing the return.

Octroi de Mer (OM)

In addition to VAT, Martinique levies the Octroi de Mer (OM), a tax on imported and locally manufactured goods. Certain exemptions apply, particularly for businesses with turnover below specific thresholds.

VAT Exemptions and Specific Considerations

• Exports: Goods shipped from mainland France to Martinique are often treated as exports and may, therefore, be VAT exempt. This is because Martinique has a unique fiscal status as an overseas department of France. Invoices for such goods must clearly state the VAT exemption under Article 294 of the French General Tax Code.
• Tax-Free Sales for Cruise Tourists: Merchants authorized by Martinique customs can offer duty-free sales (including VAT exemptions) to cruise tourists under a program effective until December 31, 2026. Specific conditions apply.
• Yacht Charters: Superyachts over 24 meters and under 3,000GT chartered from Martinique are exempt from VAT, provided they travel outside French territorial waters.

General Information on VAT

VAT is a consumption tax assessed incrementally on the value added at each stage of production. The final consumer ultimately bears the full VAT cost. This contrasts with a sales tax, which is levied only at the final point of sale. VAT systems are prevalent globally, though implementation varies significantly across countries. Thresholds for registration, rates, filing frequencies, and exempt goods and services are all subject to local regulations. Businesses operating internationally must diligently track VAT regulations in each jurisdiction to maintain compliance.

Martinique offers various tax incentives to stimulate economic activity and investment.

Tax Incentives in Martinique

Martinique, as an overseas department of France, benefits from several tax incentives designed to encourage investment and job creation. These incentives are available to businesses across various sectors, with priority given to agriculture, tourism, and industry. Eligibility criteria often depend on the sector, location, and performance of the investment, such as job creation.

Types of Incentives

• Income Tax Reduction: Residents of Martinique may benefit from an allowance deductible from their taxable income.
• Deduction of Business Deficit: Businesses may be able to deduct business deficits from their global income.
• Real Estate Capital Gains Exemption: Capital gains on the sale of building land for tourist facilities may be exempt.
• Corporate Tax Exemption: Start-up companies may be eligible for corporate tax exemptions for up to ten years.
• Reduction on Taxable Profits: Companies subject to corporate tax may benefit from an allowance deductible from taxable profits.
• Tax Credits: There are tax credits for professional training, innovation, and research, often at higher rates than mainland France.
• Reduced Charges on Wages and Social Security Contributions: Specific measures exist to reduce wage-related charges and waive social security contributions.
• Grants: Grants are available for tangible investments, job creation, and recruitment of local managers.
• Local Authority Guarantees: Some businesses can secure guarantees from local authorities.
• Octroi de Mer Exemptions and Reductions: Certain local products benefit from exemptions or reductions on the Octroi de Mer tax (dock dues), a tax specific to overseas departments. The types of products eligible for these exemptions and reductions may change periodically.
• EU Operational Programs: Martinique benefits from European Union operational programs aimed at fostering economic development and convergence with other European territories.

Application Procedures

Specific application procedures vary based on the incentive. It is essential to consult with relevant authorities or seek professional advice for details regarding eligibility and applications. Generally, the approval of tax incentives is consolidated under the authority of the Minister of Finance and monitored by the tax administration.

Additional Information

• The tax system in Martinique also includes General Customs Tax, Octroi de Mer Tax (OM), Additional Tax to the Octroi de Mer Tax (DAOM), and Value Added Taxes (VAT). Goods from African, Caribbean, and Pacific (ACP) countries may be exempt from General Customs Tax.
• A tax-free sales scheme allows cruise tourists to purchase certain goods tax-free from approved vendors until December 31, 2026.
• Tax incentives are subject to change and are reviewed periodically. Therefore, staying updated on the latest regulations is crucial. For the most current information, consult official sources such as the French tax administration and local authorities in Martinique.

It's important to note that this information is current as of February 5, 2025, and may be subject to change. Consulting with a tax professional or relevant authorities in Martinique is always recommended for the most up-to-date information and personalized guidance.