Antananarivo
EY Immeuble EY Lot II K 61 J, Ivandry 101 Antananarivo Madagascar
Indirect tax contacts
Yann Rasamoely +261 20 23 217 96 yann.rasamoely@mu.ey.com
Mialinirina Rasamoelina +261 20 23 217 96 mialinirina.rasamoelina@mu.ey.com
Danielle Razafiarison +261 20 23 217 96 danielle.razafiarison@mu.ey.com
A. At a glance
Name of the tax
Local name
Date introduced
Value-added tax (VAT)
Taxe sur la Valeur Ajoutée (TVA)
VAT – July 1994
Equivalent tax on turnover (Taxe Unique sur les Transactions (TUT)) – October 1962
Trading bloc membership Common Market for Eastern and Southern Africa (COMESA)
Tarif Préférentiel Spécial with China (TPS)
Système Generalisé de Préférences (SGP)
Commission de l`Océan Indien (COI)
Accord de Partenariat Economique (APE)
Southern African Development Community (SADC)
Administered by Ministry of Economy and Financest (www.mefb.gov.mg)
VAT rates
Standard
Reduced
Other
VAT number format
Thresholds
Registration
Recovery of VAT by non-established businesses
20%
5%
Zero-rated (0%) for export, 5% for sales of locally produced pasta and for imports and sales of butane gas and their containers and exempt
General tax ID (“Numéro d’Identification Fiscale – NIF”) 10 digits (XXXXXXXXXX)
MGA400 million (annual turnover exclusive of taxes)
No
B. Scope of the tax
VAT applies to legal persons carrying out economic activities habitually or occasionally in Madagascar, including such activities as:
• Trade
• Commercial, industrial, agricultural, handmade, mining, hotel activities
• Games exploitation
• Service delivery
• Liberal profession
• Import
• Supply of goods and services
• Construction
• Miscellaneous, except supplies that are exempt from VAT
The following are outside the scope of VAT and should not be included in the computation of taxable operations:
• Cash discounts and rebates mentioned in the invoice
• Compensation for damages
• Disbursements to service providers in repayment of expenditures paid on behalf of the client
C. Who is liable
Persons with an annual turnover equal to or more than MGA400 million are required to register for VAT.
Exemption from registration. Persons with a total annual turnover less than MGA400 million are exempt from registering for VAT in Madagascar.
Voluntary registration and small businesses. The General Tax Code provides for the possibility of registering for VAT for the following scenarios:
• Newly created taxable persons that meet the criteria set by regulatory texts submit an applica tion to the tax administration to be registered for VAT. If the conditions are not fulfilled for any reason, maintaining or withdrawing the status of taxable person for the following financial year will be subject to the assessment of the tax authority depending on the reason presented.
• Taxable persons whose annual turnover is greater than or equal to MGA200 million, that is to say subject to the actual regime and taxed at 20% of corporate income tax (CIT) must make a declaration before the end of their current financial year with the tax authority if they consider that they reach or exceed the threshold of MGA400 million to be subject to VAT from the start of their activity for their next financial year.
Thus, taxable persons with an annual turnover of less than MGA200 million and that are subject to CIT (20%) as an option can no longer opt voluntarily for VAT. MGA400 million is the new threshold for VAT liability but not the CIT ceiling. This scenario is a transitional provision for taxable persons that are already subject to VAT and CIT based with the former CIT and VAT threshold (MGA200 million). With the new VAT threshold, they should make declaration to tax authority that they will reach the threshold to maintain their VAT liability.
Group registration. Group registration is not allowed in Madagascar.
Non-established businesses. Only persons that are established in Madagascar with general tax registration can be registered specifically for VAT. This applies for both supplies of goods and supplies of services.
For non-established businesses that make supplies of services to customers located in Madagascar, for both business-to-business (B2B) and business-to-consumer (B2C) supplies, the customer self-accounts for the VAT by way of the reverse-charge mechanism (see the Reverse charge subsection below).
Persons with no fixed place of business in Madagascar but that perform taxable services (for both B2B and B2C) in Madagascar must also appoint a legal resident representative who is authorized to act for the nonresident business in complying with its VAT obligations (see the Tax representa tives subsection below). In practice, the recipient of the service is responsible for the payment of the tax as well as for the filing of the return (by way of the reverse-charge mechanism). This does not have any impact if the Madagascar located person is able to recover the VAT. It does not imply that the recipient will become the legal representative of the nonresident supplier without any official appointment. However, in case of compliance failure by the nonresident supplier, the VAT liabilities shift to the recipient of the service.
There are special rules that apply for nonresident providers of electronically supplied services (see the Digital economy subsection below).
There is no specific provision for non-established suppliers of goods, as import of goods is sub ject to standard VAT, which is due at customs clearance.
Tax representatives. As described above, nonresident businesses with no fixed place of business in Madagascar must appoint a legal resident representative that acts on behalf of the taxable person to comply with VAT obligations.
The appointment consists of sending an official letter to the Ministry of Finances appointing the tax representative to obtain a tax identification number for compliance obligations. This repre sentative would be responsible for filing returns and paying the tax due. However, in practice, it is most commonly the recipient of supplies from a nonresident business who ensures VAT compliance and will be liable to tax assessment in case of noncompliance.
The tax representative should collect the VAT due from the beneficiary of the service and pay it to the competent tax authority. Failing the appointment of a tax representative, the tax authorities provide that the VAT is collected and repaid by the local customers/recipients of services. In practice, the customers directly withhold and repay VAT via the reverse-charge mechanism, so the non-established business does not have to appoint a representative.
Reverse charge. Reverse charge is applicable to services performed in Madagascar by a nonresi dent service provider who does not have a fixed place of business in Madagascar.
The VAT is paid by the local recipient of the service to the tax authority before the 15th of the month following the month of payment for the service if the nonresident service provider does not have a legal representative in Madagascar.
Domestic reverse charge. There are no domestic reverse charges in Madagascar.
Digital economy. There are no specific VAT rules regarding the digital economy in Madagascar. However, in accordance with the General Tax Code, taxable persons providing services elec tronically are subject to VAT. These services include, but are not limited to, the provision and hosting of computer sites, remote maintenance of programs and equipment; provision and updat ing of software; provision of images, texts, information and provision of databases; provision of music, films and games, including games of chance or gambling; as well as the broadcasting of political, cultural, artistic, sporting, scientific or entertainment programs or events; provision of distance education services.
As such, nonresidents supplying electronically supplied services are subject to VAT via the reverse-charge mechanism and are not required to register for VAT, as it is accounted for by the customer. They must also appoint a local representative to be compliant. This applies for both B2B and B2C supplies.
There are no other specific e-commerce rules for imported goods in Madagascar.
Online marketplaces and platforms. No special rules exist for online marketplaces and platforms in Madagascar.
Registration procedures. In Madagascar, there are no specific VAT registration procedures. The general tax registration process is performed directly along with the entity registration.
However, for newly created taxable persons that meet the criteria set by the regulatory text, they must submit an application to the tax administration to be registered for VAT. If the conditions are not met for any reason whatsoever, the maintenance or withdrawal of taxable person status for the following financial year will be subject to the assessment of the tax authorities depending on the reason presented.
In the case of a company subject to the CIT actual regime (turnover greater than or equal to MGA200 million), which considers that it may reach or exceed the turnover of MGA400 million at during its fiscal year, the latter must make a declaration of VAT liability to the tax authority before the end of its fiscal year. The VAT mechanism will apply from the start of the next finan cial year.
MGA400 million is the new threshold for VAT liability but not the CIT ceiling. This scenario is a transitional provision for taxable persons that are already subject to VAT and CIT based with the former CIT and VAT threshold (MGA200 million). With the new VAT threshold, they should make a declaration to tax authority that they will reach the threshold to maintain their VAT liabil ity.
The tax authority will update the Standard Tax Identification Card with the mention of VAT registration. The tax authority does not assign the registrant a specific VAT identification number; the general tax identification number serves for VAT as well.
The declaration and the application should be accompanied by all documents evidencing that the business has exceeded the VAT registration threshold.
Deregistration. Taxable persons registered for VAT whose turnover falls below the VAT registra tion threshold should notify the tax administration of their new tax situation in order not to be subject to VAT anymore.
Changes to VAT registration details. The taxable person must notify the tax administration within 20 days in the event of a change in its VAT registration, in particular but not exhaustively, change of address, family or marital status and any change in its economic activities, as well as any amending declaration obligations relating to the information required by the General Tax Code.
The notification of the tax administration is made according to the minutes of shareholders meet ing prepared by the company (change of address, change of activity, etc.) or by a simple declaration if the minutes are not required.
In the event of noncompliance with these obligations, the taxable person will be punished with a fine of MGA100,000 to MGA1 million.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.
The VAT rates are:
• Standard rate: 20%
• Reduced rate: 5% (from 1 January 2021)
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods or services, unless a specific measure provides for the zero rate or an exemption.
All exports of goods or services are taxed at the zero rate, and those are the only zero-rated sup plies.
Examples of goods and services taxable at 5%
• Sales of locally produced pasta products (from 1 January 2021)
• Imports and sales of butane gas and their containers (from 1 January 2021)
The term “exempt” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• School fees relating to general, technical and professional education
• Interest paid by the Public Treasury
• Certain operations linked to shares, bonds and other securities
• Interest from receivables, deposits and guarantees of banks having their headquarters in Madagascar, interest charged by credit on financing; interest received from deposits and loans granted to members of microfinance institutions
• Subscription of mixed popular insurance or insurance group linked to supplement retirement with an insurance company having its headquarters in Madagascar; reinsurance premiums granted by local insurance taxable persons to insurance taxable persons that do not have per manent establishment in Madagascar
• Consumption of water and electricity by individuals for their domestic use up to 10m3 for water and 100kWh for electricity
• Services provided regarding health profession
• Import and sale of contraceptives and condoms
• Import and sales of newspapers and periodicals, excluding revenue from advertising
• Import and sales of stamps and legal currency
• Sales of gold to the Central Bank of Madagascar for the constitution of the national gold reserve
• Import and sales of books, brochures and educational and academic nature
• Import and sales of corrective lenses
• Import and sales of inputs exclusively used for agriculture
• Import and sales of potato seed, corn seed, wheat seed and soybean seed
• Import and sale of breeding animals, agricultural materials and equipment, materials and equip ment for the food industry, public sports equipment and equipment for the production of renew able energy
• Subject to reciprocity, goods or services earned by diplomatic agent and consular officers from taxable individuals
• Import and sales of mosquito nets and mosquitos
• Air and sea transport of people and goods to and from abroad
• Membership fees and contributions of members of management centers during their three first years; products of shares for training or information provided to members of the management centers
• Import and sales of kerosene
• Sale of maize and sale of flour and edible oil made by local industries
• Import and sales of wheat, rice, paddy, fluorine and iodine
• Import and sale of milk and supplements dietetics for infants and young children
• Import and sales of wheelchairs and other invalid vehicles
• Import and sales of medical materials, equipment and consumables
• Sale of denatured flammable ethanol locally produced
• Participation and entrance fees for visitors at the fair organized by one or more members of professional interest groups of the private sector
• Import and sales of ready-to-use therapeutic foods
• Training costs as part of the development of professional training, supported by the Ministry in charge of professional training or engaged for the development of learning by the National Industry Development agency or for training hosted by the Chamber of Commerce to help their members to develop their activities
• The supply of goods, services and works carried out by a holder of public procurement con tracts on behalf of public persons
• Final imports of materials, equipment, vehicles specific and exclusively intended for research, exploration and development activities carried out by oil taxable persons holding a mining title. These exempted goods should not be for private or multiple use and should not be available on the domestic market
Option to tax for exempt supplies. The option to tax exempt supplies is not available in Madagascar.
E. Time of supply
The moment when VAT becomes due is called the “time of supply,” which in Madagascar depends on the good or service being supplied. For general sales of goods, the time of supply is upon delivery of the goods. For both construction and service delivery, the time of supply is upon receipt of payment.
Deposits and prepayments. VAT is due on prepayments and deposits within the month of its receipt for supply of services and upon delivery for supply of goods. The supplier must issue an invoice with the corresponding VAT.
Continuous supplies of services. For continuous supplies of services, VAT is due on payment. However, the service provider can account for the tax on an accrual basis with the prior authori zation of the tax authority.
Goods sent on approval or for sale or return. For supplies of goods sent on approval or for sale or return, VAT would apply only when the “goods sent on approval or for sale or return” are booked and recorded as delivered.
Reverse-charge services. Recipients of services provided by nonresident suppliers must selfassess and account for the VAT due on the supply at the time of the payment of the service. The related VAT returns, and payment are due on a monthly basis. The due date is the 15th of the month following the taxable month.
There is no reverse-charge mechanism applicable to the supply of goods, as those are imports and subject to the import VAT accounting rules.
Leased assets. The time of supply for the supply of leased assets occurs at the payment of the rent.
Imported goods. For imports, the time of supply is the moment of clearance from customs. For operations subject to a special customs regime (warehouse, temporary admission, transit, transshipment, customs deposit), the time of supply is upon release for consumption.
F. Recovery of VAT by taxable persons
Input tax may be recovered in the usual way by deducting it from output tax due, or in limited cases by refund.
When offsetting input tax against output tax, the following requirements should be respected:
• Input tax must be clearly labeled on the invoices, linked to the company business and paid by bank transfer.
• Input tax paid on imported goods linked to the company business
• Input tax relating to the acquisition of goods in respect of leasing clearly identified
• Input tax linked to goods held in stock and the portion of the tax paid clearly corresponding to the depreciated value of property, machinery and equipment for newly registered individuals/ entities
The tax can only be deducted when the chargeability occurs at the supplier side and when the supplier is legally allowed to collect VAT.
VAT credit is the difference occurred when deductible input tax is higher than the output tax due. This credit can be carried forward to the following month’s tax deadline. The non-cleared VAT credit of the company with taxable and nontaxable operations at the end of fiscal year can be reported as an expense.
For VAT repayment, only the taxable persons listed below can receive a VAT refund:
• Free-zone taxable persons
• Taxable persons performing exclusive export activities
• Taxable persons making investments that comply with the following conditions: Being registered for VAT
Having VAT credit higher than MGA100 million in a month and in which VAT involved must not be less than MGA20 million
Concerned investments related to tangible capital assets necessary to the normal company business
The time limit for a taxable person to reclaim input tax in Madagascar is three months. Any VAT credit that has not been subject to the VAT refund application within three months of the due date can no longer be refunded but can be charged. The same applies to VAT credit for which a refund has been definitively rejected.
For taxable persons carrying out taxable and nontaxable operations, they can charge any VAT credit carried forward that has not been cleared by the end of the fiscal year. For taxable persons whose status as a taxable person is withdrawn, the VAT credit not eligible for refund and not cleared at the end of the fiscal year must be charged. “Charged” means allocated to the company’s expenses (recorded as an expense).
Nondeductible input tax. Nondeductible tax is the tax that does not have a link with normal busi ness activities of the company, does not appear clearly in the invoices for purchases or services or is related to a purchase or service that has not been regularly invoiced or that has not been paid by bank transfer.
Examples of items for which input tax is nondeductible
• VAT on construction or acquisition of buildings or on related services (not applicable to indus trial, commercial, mining, craft, hotel and agricultural buildings)
• VAT on purchase of vehicles not used for rental or related services
• VAT on purchase of furniture or related services (not applicable to hotels and restaurants)
• VAT on purchase of energy unnecessary for the operation of the company
• VAT on purchase of food intended for consumption of the company
• VAT on purchase of oil products such as gasoline used for tourism, super fuel, gas-oil and fueloil (not applicable to taxable persons in charge of processing and distribution of oil products, industrial taxable persons, aquaculture farms, land transport of goods, sea and land transport of hydrocarbons, or professionals in the hotel and catering industry who have a prior notice decision or an opening authorization officially issued by the Ministry of Tourism if their establish ment is located in a locality not yet served by electricity)
Examples of items for which input tax is deductible (if related to a taxable business use)
• VAT documented in an invoice (with the tax identification number of the provider) relating to nonexempt products and services that have a link with the normal business of the company
• VAT on import of goods that have a link with the normal business of the company
• VAT on goods representing intangible assets
• VAT on goods and services allocated to deductible operations
• VAT on goods relating to the acquisition of leased assets by the lessor; and VAT on rent paid by the lessee to the lessor
• VAT on import of oil products carried out by taxable persons in charge of processing and dis tribution of oil products; VAT on purchase of oil products made by industrial taxable persons for fixed motors used in their production operations; VAT on oil products used in aquaculture farms; VAT on purchase of oil products performed by professional carriers of hydrocarbon cargo
• VAT on goods held in stock and nonamortized machines and materials for newly taxable per sons
• VAT on purchase of petroleum product, necessary for the supply and operation of generator, made by hotel and restaurant professionals having the decision of prior notice or the opening authorization officially issued by the Ministry in charge of tourism, located in a place not yet served by electricity
Partial exemption. Where input tax is attributable to both taxable and exempt supplies, only the portion of input tax attributable to taxable supplies is recoverable. The taxable person must cal culate and document taxable supplies as a percentage of total supplies.
Approval from the tax authorities is not required to use the partial exemption standard method in Madagascar. Special methods are not allowed in Madagascar.
Examples of partially exempt items
• Operations linked to shares, bonds and other securities are exempt, but operations relating to stock and management of shares, bonds and securities are taxable, as are securities representing goods and shares giving the holder de jure or de facto rights of possession of property or enjoyment of an immovable property.
• Consumption of water and electricity by individuals for their domestic use up to 10m3 for water and 100kWh for electricity is exempt, while consumption above those levels is taxable.
• Import and sales of newspapers and periodicals are exempt, but income from insertion of adver tising is taxable.
Capital goods. Input tax incurred on capital goods dedicated to the normal business of the company is accepted as deductible.
If the company subject to VAT carries out exclusively taxable transactions giving rise to the right to deduct, VAT on these goods is fully deductible.
For a company that does not perform exclusively taxable operations, goods constituting capital goods are considered to be mixed use. Therefore, the amount of the input tax is computed on the basis of the ratio between the annual amount of taxable transactions and the annual amount of turnover related to all transactions made. The turnover to be used includes all fees and taxes except VAT. The pro rata defined is computed provisionally according to the turnover of the previous exercise.
For a newly registered company or newly subject to VAT, the ratio is provisionally calculated on the basis of forecast turnover for the current financial year.
The amount of input tax is finalized no later than the expiry of the VAT return that follows the four months of the end of the financial year.
In the case of leasing, the lessor is able to deduct input tax applied on the acquisition of any kind of assets dedicated to leasing. In general, for all types of leased assets, input tax on the following is not deductible:
• Buildings not dedicated to industrial, commercial, hotel, restaurant, agricultural or mining activities
• Passenger vehicles (except those whose exclusive use is leasing)
• Furniture (except hotel and restaurant furniture)
Refunds. Free-zone taxable persons, taxable persons performing export activities, certified finan cial lessors and taxable persons making a specified amount of investment are allowed to apply for a VAT refund.
For free-zone and export taxable persons, the amount subject to refund is determined by the proportion between the amount of the annual turnover on export and the amount of the total tax able annual turnover of the previous year.
The application for the refund is made at the time the VAT return is submitted.
The refunds should be done within 60 days from the receipt of the application by the tax author ity.
Pre-registration costs. Input tax incurred on pre-registration costs in Madagascar is not recover able.
Bad debts. Although the VAT laws do not expressly deal with the VAT treatment of bad debts, the tax authority generally agrees that an output tax write-off on bad debt is allowable. This does not arise for supply of services. Since the tax point is the time payment is received, relief for bad debt is automatic.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Madagascar.
G. Recovery of VAT by non-established businesses
Input tax incurred by non-established businesses in Madagascar is not recoverable
H. Invoicing
VAT invoices. Any entity subject to VAT that delivers goods or provides services, or that claims down payments giving rise to chargeability of the tax, must issue an invoice or document in lieu thereof in accordance with the requirements of regularity of invoices provided for by the General Tax Code, by clearly indicating the price in letters and numbers excluding tax of the good or service and the amount of the corresponding tax.
Credit notes. A VAT credit note may be used to reduce the amount of VAT charged on a supply. The credit note must reflect a genuine mistake, an overcharge or an agreed reduction in the value of the original supply.
Electronic invoicing. Electronic invoicing is allowed in Madagascar, but not mandatory. Electronic invoices should comply with the same requirements as regular nonelectronic invoices above.
Simplified VAT invoices. Simplified VAT invoicing is not allowed in Madagascar. As such, full VAT invoices are required.
Self-billing. Self-billing is not allowed in Madagascar.
Proof of exports. Supplies of services and goods are treated as exports if the ultimate beneficiary is located outside Madagascar and the payment is made from a foreign bank in a foreign currency. Customs documents are also required for export of goods.
Foreign currency invoices. Foreign currency invoices are only allowed for the export of goods or services or supplies made to local free-zone taxable persons. Otherwise, invoices should be in the local currency, which is the Malagasy ariary (MGA).
Supplies to nontaxable persons. There are no specific rules for VAT invoices issued for supplies made by taxable persons to private consumers. Invoices issued between taxable persons must comply with the regular requirements.
Records. Regarding indirect tax, regular accounting is mandatory for taxable persons. This regu lar accounting is done manually or by means of computer systems in accordance with the local GAAP, the “Plan Comptable Général 2005” established by the Decree n° 2004-272 of 18 February 2004.
The accounting must include the regulatory books provided by the abovementioned Decree. These books, on numbered pages, are quoted and initialed before being put into service by the authorities provided for in the Madagascar Commercial Code or by the tax authorities with ter ritorial jurisdiction. The operations must be written in French or Malagasy, day by day, without white or erasure.
In the event of a failure to keep regular accounting, the taxable person is liable to automatic taxation or an automatic tax assessment.
Regarding the conservation of these records, the General Tax Code does not provide for the obligation to keep them locally in Madagascar or outside the country – either can be done. However, in the event of a tax audit, the taxable person must provide the documents within a maximum period of 12 days.
Record retention period. Archiving requirements involve storing and making available the finan cial statements, ledgers, invoices and all supporting documents (agreements, etc.) relating to each transaction for 10 years after the transaction.
Electronic archiving. Electronic archiving is allowed in Madagascar; however, it is not manda tory. Physical archiving (i.e., by paper) is also allowed.
I. Returns and payment
Periodic returns. VAT returns are due on a monthly basis: the due date is the 15th of the month following the taxable month.
The monthly return is mandatory even if there is no payment due in the taxable month. In case of omission of input tax, the registered person is allowed to make an adjustment in any of the VAT returns in the subsequent three months.
Periodic payments. VAT due must be paid by the same date as the VAT return deadline, i.e., the due date is the 15th of the month following the taxable month. According to the General Tax Code, taxes, duties and charges including VAT are payable by cash in MGA, by remittance of checks or bank or postal bills, or by electronic means, including procedures by mobile phone or by online payment. This payment can also be made by deposit or transfer to one of the external cash accounts opened in the name of the public accountant or according to the declaration and payment methods authorized by the Ministry responsible for tax regulations.
Electronic filing. Electronic filing is allowed in Madagascar, but not mandatory. Since 2020, electronic filing is mandatory through the E-hetra platform for taxable persons managed by the Direction générale des entreprises (DGE), the Service regional des entreprises (SRE) 1 and SRE 2. However, at the time of preparing this chapter, the platform is not yet operational for the tax able persons managed by other tax authorities in Madagascar.
Taxable persons with annual turnover between MGA200 million and MGA4 billion are assigned to the Services Régionaux des Entreprises (SRE). Taxable persons with annual turnover more than MGA4 billion are assigned to the DGE. These two tax offices have discretion to allow electronic filing according to rules they establish. Taxable persons with annual turnover lower than MGA200 million and that are assigned to the Centre fiscal (CF) may also be allowed to make electronic filings according to the Managing Tax Center.
Payments on account. Payments on account are not required in Madagascar.
Special schemes. Free zones and free regime taxable persons. Imports made by free zones and free regime entities are exempt from VAT. Regarding the exports of goods and services per formed by free regime entities, as well as sales of goods and services to other free regime enterprises, the VAT at the rate of zero percent (0%) is applicable.
However, the following transactions are subject to VAT at the common law rate:
• Sales or services made by free regime taxable persons in Madagascar
• Sales of goods and services made by local taxable persons governed by common law for the benefit of free regime taxable persons. The VAT is deductible for free regime entities, regardless of the nature of the good or service consumed, if it relates to taxable transactions
Regarding the refund of the VAT credit, the free regime taxable persons or the free zones are authorized to obtain the reimbursement of the VAT credit resulting from the excess of deductible VAT over the VAT collected. This VAT credit is refundable by the State on simple request filed with the VAT return showing said credit.
The refund of the VAT credit must be made within 60 days from the date of receipt of the request by the tax authority. The VAT credit granted for reimbursement can be used by the tax administra tion in payment of other taxes applicable to entities subject to the free zones and enterprises regime.
Large Scale Investments in the Malagasy Mining Sector (LGIM). Certain entities (i.e., the holder, the transformation entity and the subcontractors) are subject to a special regime, which is liable for VAT according to the common tax law, i.e., the General Tax Code. However, the following are exempted from VAT:
• Debt service relating to the project: interest payments, fees, commissions on loans made by the holder, transformation entity
• Personal effects of expatriate employees of the holder and the transformation entity when they are imported (limited list)
Regarding the application of VAT to exporters:
• Imports made by the holder or the transformation entity or by its subcontractors on materials, goods and equipment following a commitment to export the entire production are exempted from VAT
• Possibility of annually selling 10% of the production on the national market, with VAT at rate of 20%
• Sales of mining products from holder, transformation entity are considered as export: VAT at the rate of 0% is thus applicable
Regarding the VAT credit refund: for the holder, the transformation entity and the subcontractors, in accordance with the General Tax Code, the time limit should not exceed 10 working days from receipt of the request.
Annual returns. Annual returns are not required in Madagascar.
Supplementary filings. The following documents must also be filed to the tax authority at the same time as the VAT return:
• Ventilation sheet
• Debit notice (i.e., a breakdown of the taxes that must be provided when the taxes are paid by bank transfer)
• Deposit slip
Correcting errors in previous returns. The General Tax Code does not provide for a specific procedure for voluntary regularizations by taxable persons in case of errors or omissions in previous periodic filings. However, in practice, taxable persons should notify the tax administration of the voluntary regularization and should, in principle, pay the penalties and fines for spontaneous regularization provided for by the General Tax Code (see the Penalties section below).
Digital tax administration. There are no transactional reporting requirements in Madagascar.
J. Penalties
Penalties for late registration. Penalties in case of late registration area fine for default of submis sion of the return, for MGA200,000, for taxable persons subject to the actual taxation regime.
Penalties for late payment and filings. In case of late payment, the following penalties apply:
• Fine for default of submission of the return: MGA200,000 for taxable persons subject to the actual taxation regime
• Delay penalty interest:
3% of the amount payable for the first month and 1% for the following months for taxable persons with a turnover or income greater than MGA200 million
The total interest payable must not be less than MGA2,000. Any month started being due in full. The abovementioned fixed fine only applies for cases outside of any tax audit period, where a voluntary disclosure is made. Once the tax audit is started, though the tax assessment notice is not yet issued or definitive, penalties range from 40% to 80% of the additional due tax.
For the notification of changes to a taxable person’s VAT registration, in the event of noncompli ance with such obligations (see the subsection above on Changes to VAT registration details), the taxable person will be punished with a fine of MGA100,000 to MGA1 million.
For the failure of voluntary regularization by the taxable person, the following apply:
• Fine for default of submission of the return: MGA200,000 for taxable persons subject to the actual taxation regime
• Delay interest penalty:
3% of the amount payable for the first month and 1% for the following months for taxable persons with a turnover or income greater than MGA200 million
The total interest payable must not be less than MGA2,000. Any month started being due in full.
In case of a tax audit, the taxable person who has not made the spontaneous regularization of their tax situation could be the object recovery by the tax authority. Thus, a fine of 40% to 80% on top of the tax due could apply.
Penalties for errors. Proportional fines have been introduced for errors relating to the VAT annexures. These fines are 0.5% of the following:
• The amount declared, including tax of omitted or inaccurate transactions
• The actual amount declared, including tax of the error declared
• The amount declared, including tax of the transaction in case of error on the information relat ing to the transaction
Penalties for fraud. In case of deficiency, inaccuracy, omission, reduction or falsity in the VAT return, the fine would be 40% of the additional tax due. In the case of fraudulent practice or intentional noncompliance, the penalty is computed at 80% of the additional tax due. In case of misrepresentation on zero-rated taxable transactions and on exempted transactions, the applicable fine would be 40% of a fictitious tax calculated at a rate of 20%.
Personal liability for company officers. In accordance with the General Tax Code, the liability of company directors is engaged in the event of fraudulent maneuvers observed. These offenses are punishable by a fine of 80% of the duties payable. In the event of fraud where it is not possible to compute the remainder of fees, taxes and duties, a fixed fine ranging from MGA5 million to MGA50 million is applied. The setting of this fine in this case is subject to the assessment of the tax fraud commission.
The co-infringers and accomplices of fraudulent maneuvers, such as company directors, are jointly and severally liable for the payment of both fiscal and criminal fines, recorded by minutes.
The tax administration may claim payment of the due duties from any of the joint and several debtors thus established, without the latter being able to oppose the benefit of division.
Without prejudice to the specific provisions of the General Tax Code, the authors, co-infringers and accomplices of fraudulent maneuvers are punished, regardless of tax sanctions, by imprison ment of six months to three years.
In the event of a repeated offense, they are liable to imprisonment for five years. Statute of limitations. The statute of limitations in Madagascar is three years. The tax authorities’ right of recovery and verification can be exercised until the end of the third year following the year in which the VAT became due. If the taxable person’s financial year does not correspond to the calendar year, the time limit starts from the beginning of the first period for which the right of recovery of income tax can be exercised and expires on 31 December of the third year follow ing the year during which this period ends. However, the tax authorities can go back to statutebarred years when the tax credits from which the taxable person is claiming originate in those years. There is no specific time limit for taxable persons to voluntarily correct errors in previous VAT return.