Madagascar: Business Environment

Company Tax

5% of 70% of turnover, with a minimum tax of MGA 16,000 to MGA 150,000 depending on the sector.
A reduction of 2% of the amount of purchases of goods and equipment subject to regular invoices is applicable. In any case, tax due cannot be less than 3% of the turnover

Tax Rate For Foreign Companies

A resident corporation is subject to tax on its worldwide income, while non-resident entities are taxed only on Madagascar-source income.
An entity generally is deemed to be a resident of Madagascar for tax purposes if its registered office or centre of activities is in Madagascar, or if it has a permanent establishment in the country.
Non-resident entities are subject to a withholding tax of 10% of any income realised in Madagascar (financial loan interest is subject to a withholding tax of 20%).

Capital Gains Taxation

Capital gains are taxed as ordinary income. Capital gains realised from the sale of shares held in a company of which the entire or partial value is derived from goods located in Madagascar, or from rights thereof, are subject to tax at a rate of 20%.

Main Allowable Deductions and Tax Credits

The rates of depreciation vary from 5% to 33%.
Interest expenses, charitable contributions (capped at 0.5% of annual turnover), payments to foreign affiliates and taxes in relation to business in Madagascar are deductible (except for corporate income tax). Moreover, exemptions for public organizations, associations and non-governmental organizations apply. Provisions for doubtful debt can be deducted in case of an amicable or judicial settlement.
Half of the difference between the total benefits in kind and the value of benefits in kind included in the tax base of salary income tax are deductible expenses.
Accumulated loss can be carried forward for five financial years, whereas the carryback of losses is not allowed.
For companies with an annual turnover of less than MGA 200 million, a tax reduction of 2% of the amount of purchases of goods and equipment subject to regular invoices is applicable. However, tax due cannot be less than 3% of the turnover.

Other Corporate Taxes

Real estate ownership tax is imposed annually at the rate of 5% to 10% on the rental value of the property.
Registration fees are applicable at rates ranging from 0.5% to 5%, depending on the nature of the transaction.
Insurance contracts are taxed at a rate ranging from 3% to 20% of the insurance premiums.
A payroll tax is levied at a rate of up to 20% on the total taxable remuneration of employees, including salaries, allowances, and benefits in kind. Employers contribute up to 13% of eight times the legal minimum salary per employee for social security ("Caisse Nationale de Prévoyance Sociale"), plus 5% of the total amount of taxable remuneration for health contributions.

Several local taxes (also called para-fiscal taxes) are levied, including:

• Civil protection tax: MGA 5,000 per domestic animal or bladed weapon ("arme blanche")
• Advertising tax: MGA 30 to MGA 30,000/square metre
• Residence tax for development: MGA 5,000
• Tax on antennas, relays, or masts: MGA 600,000
• Tax on pylons: MGA 1 million
• Tax on mineral waters: MGA 5/litre
• Tourist tax (or stay tax): MGA 500 to MGA 2,000 per night/room
• Tax on radio and television games: MGA 10/sms; MGA 20/call
• Tax on entering parties, shows, and various events: 3% to 5%
• Tax on water and/or electricity: 10%.

Other Domestic Resources

Directorate-General for Taxation

Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Tax Rate

Allowable Deductions and Tax Credits

Several items are deductible from salary income tax (IRSA - Impôt sur les Revenus Salariaux et Assimilés), including:
- contributions to the social security system at 1% of the monthly salary income (capped at 1% of eight times the monthly legal minimum salary)
- contributions to the statutory health organisation at 1% of the monthly salary income
- retirement contributions (up to 10% of the remuneration subject to the contribution)
- statutory professional training funds contributions at 1% of the monthly salary income
- mandatory payment of freely paid arrears on rents (i.e. an amount periodically payable by a person to another person until the death of this last person)
- alimony payments, under certain conditions.
Furthermore, taxpayers are entitled to an IRSA reduction of MGA 2,000 per dependant.

Where an individual derives income from a trade, business, or profession having an annual turnover exceeding MGA 200 million, expenses duly justified can be deducted from the taxable revenue for IR purposes.
For annual revenues below MGA 200 million, an automatic deduction of 30% is applicable on the gross revenue, although the annual deduction cannot exceed MGA 2 million.
A tax reduction of 2% of the amount of purchases of goods and equipment subject to regular invoices is applicable. However, tax payable has to be at least 3% of the turnover.
If an individual has more than half of the share capital of société à responsabilité limitée (Sarl) and is manager of the same company, only a deduction of MGA 4,2 million is applicable on the gross remuneration.

Special Expatriate Tax Regime

Resident individuals are taxed on their worldwide income. Non-resident individuals are taxed only on Madagascar-source income.
An individual is considered a resident if he/she has his/her home or abode in the country.
There is no special expatriate regime in Madagascar.