Annual allowance rates vary between 5% and 100% of base value (unless stated otherwise), as per the following table:
|Capital expenditure incurred on
|Rate of annual allowance
|Industrial premises, excluding hotels
|Industrial premises dedicated to manufacturing
|Plant or machinery:
|Costing MUR 60,000 or less
|Costing more than MUR 60,000:
|Ships or aircraft
|Aircraft and aircraft simulators leased by a company engaged in aircraft leasing
|Electronic and high precision machinery or equipment, computer hardware and peripherals, and computer software
|Plant and machinery (excluding passenger car) by a manufacturing company
|Furniture and fittings
|Improvement on agricultural land for agricultural purposes
|Acquisition of patent
|Green technology equipment
|Landscaping and other earth works for embellishment
|Acquisition or improvement of any other item of a capital nature that is subject to depreciation under the normal accounting principles
Tax depreciation need not conform to book depreciation. Depreciation is generally recaptured on disposal or sale when balancing charges or allowances are computed.
Goodwill amortised under normal accounting principles is not allowed as an expense for tax purposes. However, the cost amount can be capitalised, and an annual allowance of 5% of cost can be claimed.
Where an asset is transferred under a financial lease agreement, the lessee is entitled to capital allowances on the value of the asset, including finance charges, as if it was an outright sale by the lessor.
On the other hand, the lessor cannot capitalise the leased assets in its books, and no capital allowance is claimed on the assets leased. However, the lessor is taxable on the interest income derived from the assets leased.
There have been changes brought by IFRS 16 leases with regards to operating leases. The new standard requires lessees to recognise operating leases on the balance sheet that will reflect their right to use an asset for a period of time and the associated liability for payments. According to the Statement of Practice from the MRA, the lessee is allowed to claim the rental expenditure as an allowable deduction. The interest expense in the Income Statement will not be an allowable deduction. Also, the lessee will not be allowed to claim capital allowances on the leased assets.
Set-up costs are not deductible for tax purposes, as they are considered pre-operational expenses.
Expenditure incurred on interest is deductible, provided it is incurred in respect of capital employed exclusively in the production of income.
A request can be made by the tax authorities to support any claim made in respect of interest expense by a certificate from a qualified auditor certifying that the amount of interest claimed has been incurred on capital employed exclusively in the production of gross income.
Interest paid by a GBL to a non-resident out of its foreign source income is exempt from corporate tax.
The tax authorities may refuse to allow a deduction on expenditure incurred as interest where it is found that:
- the interest is payable to a non-resident who is not chargeable to tax on the amount of the interest, or
- the interest is not likely to be paid in cash within a reasonable time.
A provision for bad or doubtful debt is generally not deductible unless legal actions have been taken against the debtor.
Donations/gifts, whether to charitable institutions or not, are not deductible for tax purposes.
Fines and penalties
Fines and penalties are not deductible for tax purposes as they are expenses not exclusively incurred for the production of gross income.
Income taxes and foreign taxes paid are not normally deductible; however, some taxes (e.g. municipal taxes relating to buildings, land transfer tax, irrecoverable input VAT) are deductible.
Other significant items
A bank or an approved financial institution may claim as deductions any irrecoverable loans due by a company in liquidation in respect of which winding-up procedures have started or by a company in receivership.
Net operating losses
Losses made in an accounting year are carried forward for a maximum of five years.
A company may claim to carry forward to an income year any loss it incurred in any former income year, provided the company can demonstrate a 50% continuity of shareholding at the end of those income years. Losses resulting from capital allowances can be carried forward indefinitely. Loss carrybacks are not permitted.
Where a company takes over another company engaged in manufacturing activities, two or more companies engaged in manufacturing activities merge into one company, or a company acquires the whole or part of the undertaking of another company and the Minister has deemed such a take-over or transfer of undertaking to be in the public interest, any unrelieved loss of the acquiree may be transferred to the acquirer in the income year in which the takeover takes place, on such conditions relating to safeguard of employment as may be approved by the Minister of Finance.
Payments to foreign affiliates
Royalties, interest, and service fees payable to foreign affiliates are allowed as expenses, provided they correspond to actual expenses incurred, are reasonable, and do not exceed what would be paid under an arm’s-length agreement. There are certain limitations if the recipient of the interest is not liable to Mauritius tax. Withholding tax may apply on payments to foreign affiliates, depending on the nature of such payments.