Skip to content

Madagascar

General Information

Country Name: Madagascar
Currency: Malagasy Ariary (MGA)
Primary Tax Authority: General Tax Directorate (Direction Générale des Impôts – DGI)
Key Legislation:

  • The General Tax Code (Code Général des Impôts)
  • The Law on Value Added Tax (Loi relative à la TVA)
  • The Finance Act (Loi de Finances)

Fiscal Authority Allocation

Centralized Fiscal System:
Madagascar operates under a centralized tax system. All taxes, including income tax, VAT, and other forms of revenue collection, are administered by the General Tax Directorate (DGI).

Corporate Income Tax (CIT)

Standard Rate: 20%
The standard corporate income tax rate in Madagascar is 20%. Resident companies are taxed on their worldwide income, while non-resident companies are taxed on Malagasy-sourced income only.

Corporate Forms and Taxation:

  1. Société Anonyme (SA): Subject to the standard CIT rate of 20%.
  2. Société à Responsabilité Limitée (SARL): Also subject to the standard CIT rate on worldwide income.
  3. Branches of Foreign Companies: Taxed on Madagascar-sourced income at the standard CIT rate.

Exemptions and Incentives:

  • Free Zones: Companies operating in export processing zones (EPZs) may benefit from full or partial CIT exemptions.
  • Tax Holidays: Available for strategic sectors such as agriculture, mining, and energy development, with tax holidays of up to 5 years.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 20%
Madagascar applies a standard VAT rate of 20% on the sale of goods and services. VAT is also levied on imports of goods and services into Madagascar.

Exemptions:
Certain goods and services, such as basic food items, healthcare, education, and financial services, are exempt from VAT.

Personal Income Tax (PIT)

Progressive Rates:
Madagascar uses a progressive income tax system for individuals based on their income levels.

  • Income up to MGA 350,000: 0%
  • Income between MGA 350,001 and MGA 4,000,000: 10%
  • Income above MGA 4,000,001: 20%

Non-Residents:
Non-residents are taxed on their Malagasy-sourced income at the same rates as residents.

Additional Mandatory Contributions

Social Security Contributions:
Both employers and employees must contribute to the National Social Security Fund (Caisse Nationale de Prévoyance Sociale – CNAPS).

  • Employer Contribution: 13% of gross salary.
  • Employee Contribution: 1% of gross salary.

Self-Employed Contribution: Self-employed individuals contribute to the CNAPS at rates based on their declared income.

Withholding Taxes

  • Dividends: 10%
  • Interest: 20%
  • Royalties: 10%
    These rates may be reduced under applicable double taxation agreements (DTAs).

Transfer Pricing Rules

Madagascar follows the arm’s-length principle for related-party transactions and requires that they be conducted on fair market terms. Transfer pricing documentation is required for large transactions between related parties.

Special Tax Regimes

  • Free Economic Zones (EPZs): Companies operating in EPZs benefit from tax incentives, including exemptions from CIT for a period of up to 15 years.
  • Agricultural Sector: Tax holidays are available for companies in the agriculture sector, especially those involved in export production.

Other Taxes

  • Property Tax: Levied on the ownership of immovable property, with rates depending on the value and location of the property.
  • Capital Gains Tax: 20% on gains from the sale of real estate and shares in companies holding real estate in Madagascar.
  • Stamp Duty: Applies to certain legal documents and transactions, such as property transfers and business contracts.

Double Taxation Agreements (DTAs)

Madagascar has signed double taxation agreements (DTAs) with several countries, including France, Mauritius, and China. These treaties aim to prevent double taxation of income and reduce withholding taxes on cross-border payments.

Local Taxes

In addition to national taxes, local governments in Madagascar may impose certain taxes, such as municipal taxes on businesses and property.

Compliance and Reporting

Annual Filing:
Corporate and individual tax returns must be filed annually. The tax year runs from January 1st to December 31st, with corporate tax returns generally due by March 31st of the following year.

Penalties for Late Filing:
Failure to file or pay taxes on time results in penalties and interest charges, which are determined based on the amount and duration of unpaid taxes.

Recent Developments

Tax Reforms:
Recent tax reforms in Madagascar have focused on improving tax compliance, broadening the tax base, and reducing the tax burden on small and medium-sized enterprises (SMEs). The government is also working on modernizing the tax administration to improve efficiency and reduce tax evasion.

Digital Taxation:
Madagascar is considering the introduction of a digital services tax to address the challenges posed by the digital economy, particularly concerning foreign companies providing digital services to local consumers.

Subscribe to my free newsletter for regular updates on law, taxation and business worldwide.

Tags: