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 related to any services performed in Madagascar by a corporate entity with a turnover equal to or more than MGA400 million.
Services are considered to be performed in Madagascar if such services are executed, used in Madagascar or invoiced to a taxpayer established in Madagascar.
There is no VAT registration threshold for a non-resident supplier. A foreign company that has no PE in Madagascar but renders services to a Madagascar taxpayer should appoint a tax representative to collect and pay VAT on its behalf. In the absence of such tax representative, the recipient or business consumer in Madagascar is liable to account for VAT on the services.
VAT is generally chargeable on:
- supplies of goods and services made in Madagascar by a taxpayer in the course of its business
- importation of goods and certain services into Madagascar
- execution of building and civil works.
In the absence of information to the contrary, prices are deemed to be inclusive of VAT. Supplier invoices should mention clearly the amount of VAT in order to allow the recipient to deduct VAT input tax. Any payment between two VAT taxpayers must be executed by way of bank transaction (bank cheque or bank card or also mobile banking).
VAT collected by the supplier can be credited against VAT output. If output tax is not sufficient to offset input tax, then the difference constitutes a VAT credit. A VAT credit can be carried forward on the following monthly deadlines.
Only free Zone Companies, export professionals, approved credit-lessors and companies subject to VAT making investments can claim for VAT refund. 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 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 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.
In the event of an extension of the life of the Company, a registration fee of 0.5% calculated on the basis of the net assets shown in the balance sheet at the end of the financial year preceding the decision to extend.
Registration fees of 2% is applicable on the acquisition of large agricultural, fishing, handling, lifting and similar machinery.
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.
- 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.
Malagasy Fund for Professional Training contributions
Employers must contribute to Malagasy Fund for Professional Training (FMFP). The contribution amount is the same as for the Social security contribution.
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.
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.