Madagascar

Value-added tax (VAT)

The VAT rate is 20%, and the VAT rate on export is 0%. VAT input is recoverable under certain conditions.

The VAT rate of 5% is applicable for locally produced butane gas.

VAT is applicable to all transactions realised in Madagascar by a VAT vendor. Services are considered to be performed in Madagascar if such services are used in Madagascar or invoiced to a taxpayer established in Madagascar.

Business engaged in e-commerce is subject to VAT.

Transport companies are allowed to claim VAT input on gasoline used for land transportation. The objective is to reduce the impact of cost of oil and gas on transportation fees.

VAT on purchases of petroleum products for duly authorised hotels and restaurants using generators when their establishment is situated in a locality with no current power is deductible. 

Any corporate entity or individual person who realises an annual turnover exceeding MGA 400 million is a VAT vendor. For a business realising annual revenue less than MGA 400 million, VAT vendor registration is an option. If during the course of the year, the turnover exceeds MGA 400 million, the entity must file a declaration of VAT liability before the end of its fiscal year. The liability to VAT takes effect from the beginning of the next fiscal year in terms of rights and obligations related to it.

A foreign company that has no PE in Madagascar but renders services to a Madagascar taxpayer must appoint a tax representative to collect and pay VAT on its behalf. Otherwise, the beneficiary of the services must collect and pay VAT on behalf of the foreign supplier.

All transactions made by a VAT vendor with a non-VAT vendor must be done via the banking system when the value of the transaction exceeds a threshold fixed by Decree.

Entities engaged in research, exploration, and development of oil and gas minerals are exempt from VAT on importation of equipment and vehicles as per the list duly approved on an annual basis by the authorities in charge of mining activities. 

VAT refund is extended to VAT paid by oil and gas entities on their importation of services under certain conditions.

Customs and import tax

The importation of goods is subject to payment of customs and import tax payable to the customs office.

In addition, Gasynet fee, corresponding to 0.5% of the cost, insurance, and freight (CIF) value of goods, is applicable on importation of goods.

Excise duty

Excise duty applies on a range of goods and services, such as tobacco, alcohol, lighters, precious and semi-precious stones, import of tea and salt, import of honey and sugars, import of sweets without cacao but including white chocolate, chocolates, jams, fruit, etc., import of mineral waters, and communication by mobile phones. Excise duty rates range from 5% to 325% or are a fixed amount per litre or per unit. From 2022, exports of certain products, such as gold and precious stones, are subject to excise duty.

Real estate ownership tax

Real estate ownership tax is imposed annually at the rate of 5% on the rental value of the property.

Land ownership is also taxable at a rate between 5% to 10% depending on the nature of the land. Real estate ownership tax return can be filed online.

Registration fees

Registration fees are applicable to transfers of title ownership (e.g. sales, donations) of movable and immovable assets, to transfers of interests, to share capital increases, and to lease agreements.

Registration fee rates are 0.5% to 5%, depending on the nature of the transaction. The rate of 5% is applicable mainly on transfers of assets and transfers of business.  

Registration fees of 0,5% of share capital is applicable of registration of a new company. Extension of the duration of a company is subject to a 0,5% calculated on the basis of the net equity. 

From a tax point of view, a company is deemed to be dissolved and new entity is set up in case of sale of 100% of the share capital to one or more new shareholders. This provision is not applicable if the shares have been held by the sellers for a period of three years prior to the transfer.

Payroll tax

Salary income taxes, called Impôt sur les Revenus Salariaux et Assimilés (IRSA), are levied at a rate of up to 20% (see scale below) on the total taxable remuneration of employees, including salaries, allowances, and benefits in kind. Employers are responsible for withholding and paying salary income taxes on behalf of employees.

IRSA scale:

• Income range up to MGA 350 000: 0%
• Income range from MGA 350,001 to MGA 400,000: 5%
• Income range from MGA 400,001 to MGA 500,000: 10%
• Income range from MGA 500,001 to MGA 600,000: 15%
• Income range above MGA 600,000: 20%

In all cases, regardless of the income, the minimum salary income tax payable is MGA 3,000.

Social security contributions

Employers must contribute to Caisse Nationale de Prévoyance Sociale, Madagascar’s national social security fund, which includes pensions and accident insurance. The contribution is capped at 13% of eight times the legal minimum salary per employee.

Health contributions

Employers must contribute to the health system assessment at a rate of 5% of the total amount of taxable remuneration of its employees. The contribution may or may not be capped at 5% of eight times the legal minimum salary per employee, depending on the health system organisation where the company is affiliated.

Tax on insurance contracts

All insurance or life annuity conventions concluded with a company, insurance firm, or with any other Madagascan or other insurer are subject to an annual tax on insurance contracts at a rate of 3% to 20% levied on the insurance premiums.

Para-fiscal taxes

Concerning local tax, generally called ‘para-fiscal taxes’, the following are introduced in the tax code applicable from January 2017. These local taxes are not new since they already existed; however, their introduction to the tax code results from the principle that only a financial act can introduce tax. The following are the maximum rates/amounts:

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