Antananarivo
EY
Immeuble EY-II K 61 J Mahatony Ivandry
Antananarivo 101 Madagascar
Executive and immigration contact
Yann Rasamoely
+261 20-22-217-96
Fax: +261 20-23-216-48
Email: yann.rasamoely@mu.ey.com
The exchange rate used in this chapter is that of the Central Bank of Madagascar on 1 October 2021, which is MGA3,916.61 = USD1.
A. Income tax
Who is liable. Resident and nonresident individuals are subject to personal income tax (payroll tax) on their Malagasy-source income, including employment income.
Individuals are deemed to be residents of Madagascar if they meet either of the following criteria:
• They own, use or rent a residential house in Madagascar.
• They have Madagascar as their principal place of residence, regardless of the existence of a residential house.
Individuals who are not nationals of Madagascar are also deemed to be resident if they have a permanent or long-stay visa and a work permit.
The domestic law related to payroll tax does not provide a 183days’ rule. However, this 183-days’ rule is mentioned in the application guide of the General Tax Code (GTC), which is an official reference document used by the tax authorities. According to the application guide of the GTC, an individual having his or her habitual residence in Madagascar is considered a taxable person when his or her length of stay in Madagascar exceeds 183 days. This rule is implemented in practice.
Nonresident individuals are also subject to tax on certain speci fied types of income, such as income allocated to Madagascar by a multilateral or bilateral tax treaty.
Income subject to tax. Income subject to income tax includes the following:
• All types of remuneration received for public or private employment
• Allowances received by employees that are intended to supplement wages, regardless of the names of the allowances
• Indemnities and allowances paid to leaders of companies
• Fringe benefits including the following:
— Cars dedicated to personal and professional use, up to 15% of the actual expenses borne by the employer (insurance, fuel, repair and maintenance expenses)
— Accommodation expenses up to 50% of the rent and limited to 25% of the salary
— Telephone expenses up to 15% of the actual expenses incurred by the employer
Canteen expenses are considered to be a fringe benefit (under the payroll tax and the corporate income tax) but their tax treatment is different depending on whether it is provided directly to the employee in cash or whether it is provided as a canteen at the office (lunch). The following are the applicable rules:
• The amount of the canteen expenses is in principle fixed at MGA5,000 per employee per day.
• If the canteen expenses are paid directly by the employer in cash to the employee, it is subject to payroll tax as an indemnity.
• If the canteen service is provided in kind to the employee as a lunch at the office, it is considered to be a fringe benefit exempt from payroll tax.
• The amount of canteen expenses up to MGA5,000 is consid ered to be a fringe benefit not subject to corporate income tax. The amount exceeding MGA5,000 per day per employee is subject to corporate income tax.
The total amount of fringe benefits taxable is capped at 20% of cash remuneration. Fringe benefits not listed above are fully tax able.
Employers must withhold tax from their employees’ wages.
Certain types of income are exempt from income tax, including the following:
• Medical expenses that are duly justified and not exaggerated
• Retirement allowances not exceeding one year’s salary
• Family allowances, and military and civil disability pensions
• Military retirement pensions
• Overtime salary limited to 20 hours per month for staff whose salaries are lower than those received by officers in the group of highest professional category (OP3-5B)
Deductions. Certain expenses are deductible, including the fol lowing:
• Payments to the National Social Security Fund (Caisse Nationale de Prévoyance Sociale, or CNAPS), the government fund for social security. The deduction is limited to the amount up to 1% of the salary received in cash (gross salary).
• Payments to the main intercompany medical service or private medical insurance. The deduction is limited to the amount up to 1% of the salary received in cash (gross salary).
• Compulsory alimony payments.
Rates. For the determination of the payroll tax, the tax is calcu lated by applying to the taxable income brackets the rates corre sponding to the brackets. The amount of tax payable is equal to the sum of the results of each tranche. The following are the brackets and rates:
• The first MGA350,000 of monthly income is subject to tax of 0%.
• Income bracket from MGA350,001 to MGA400,000 of month ly income is subject to tax of 5%.
• Income bracket from MGA 400,001 to MGA500,000 of month ly income is subject to tax of 10%.
• Income bracket from MGA500,001 to MGA 600,000 of the monthly income is subject to tax of 15%.
• Monthly income exceeding MGA600,00 is subject to a tax of 20%.
The amount of tax to be paid cannot be less than the minimum charge of MGA2,000.
B. Social security
Employers and employees must make contributions to the CNAPS, the government social security fund in Madagascar, which uses the contributions to make payments for various items including pensions and compensation for industrial accidents and occupational diseases. The contribution rates are 13% for employers and 1% for employees. The rates are applied to the “monthly salary cap,” which is equal to the new minimum wage (provided annually by decree) multiplied by eight. For 2021, the monthly salary cap is MGA1,600,000. Employers withhold the employees’ contributions from the employees’ wages.
Employers must also make contributions in accordance with Law No. 2017-025 on the creation of a financial contribution from companies to the development of continuing vocational training and a management fund for this contribution. The contribution rate is 1% of the total earnings and it is paid to the CNAPS (collecting entity that can be replaced) but intended for the Malagasy Fund for Professional Training (Fonds Malgache de Formation Professionnelle, or FMFP). This contribution has no effect on the payroll tax computation and payroll.
Employers and employees must also make monthly contributions to one of the Service Medical Inter-Entreprises (SMIEs), which are entities providing medical insurance. The main intercompany medical services in Madagascar are the Intercompany Health Organization Antananarivo (Organisation Sanitaire Tananarivienne Inter-Entreprise, or OSTIE), Intercompanies Sanitary Space of Antananarivo (Espace Sanitaire Interentreprises d’Antananarivo, or ESIA), Intercompanies Medical Association (Association Médicale Interentreprises, or AMIT) and the Funds Health Center (FUNHECE). The contribution rates are 5% for employers and 1% for employees. In general, the rates are applied to the monthly salary cap of MGA1,600,000. This thresh old is valid for all SMIEs, except for AMIT, which applies the rates to the monthly salary without this threshold. Employers may purchase medical insurance from private companies in addi tion to insurance from SMIEs.
The minimum wage used as a basis for the calculation of the monthly salary cap is increased annually by a decree. Consequently, an increase of the minimum wage also implies an increase of the monthly salary cap subject to social contributions.
C. Tax filing and payment procedures
Employers must remit withholding tax on wages monthly between the 1st and 15th days of the month following the month
in which the wages are paid. However, employers subject to the synthetic tax (an income tax for small businesses [companies with annual turnover of less than MGA200 million]) are autho rized to remit the payments every two months.
For nongovernmental organizations, associations and projects, regardless of the source of their funding, and for institutions and related bodies and other public or private entities that pay salaries but are not subject to income tax or synthetic tax, the remittance of the payroll tax must be made within the first 15 days of the month of payment. However, if the total of the amounts withheld as payroll tax does not exceed MGA50,000 per month, such entities and organizations are allowed to make the payment per semester (every six months).
D. Double tax relief and tax treaties
Madagascar has entered into tax treaties with Canada, France, Mauritius and Morocco.
E. Entry visas
Foreigners who want to enter Madagascar must obtain a tourism visa or business visa for a stay of less than three months. A tour ism visa can be obtained at the airport on arrival in Madagascar. A business visa can be obtained at the Malagasy embassy or consulate in the foreigner’s home country. These types of visas do not allow foreigners to work in Madagascar.
Foreigners who want to work in Madagascar must obtain a trans formable visa, which is valid for one month. The fee for this visa is MGA140,000. It can be obtained at a Malagasy embassy or consulate in the foreigner’s home country. The transformable visa must be changed to a long-stay visa for a foreign worker within one month after he or she enters Madagascar.
If no Malagasy embassy or consulate is located in the home country, an entry visa for workers, called a “boarding agree ment,” may be obtained from the Ministry of Foreign Affairs in Madagascar before departure. After the foreigner arrives in Madagascar, the authorities can provide the foreigner with a transformable visa.
The application for a transformable visa and the boarding agree ment requires a prior work permit issued by the Ministry of Labor as well as a local labor contract stamped by the Ministry.
F. Work permits
To work in Madagascar, foreign nationals must obtain a work permit from the Malagasy Ministry of Labor. This permit is normally issued within two months following the application.
The following are the requirements for obtaining a work permit:
• A local labor contract mentioning an address in Madagascar must be concluded with a local entity and receive the prior approval of the Ministry of Labor
• Payment of a fee of EUR100
G. Residence permits
A foreigner who wants to stay in Madagascar for a period of more than three months must obtain a long-stay visa and a bio metric residence permit from the Ministry of Interior (Home Office). To obtain these documents, the foreigner must submit the following:
• Transformable visa
• Local labor contract
• Police clearance from the home country
• Residence certificate delivered by the local authority (Fokontany) for the location where the foreigner resides in Madagascar
• Passport
• Photos
• Foreigner’s census issued by the district of residence of the foreigner in Madagascar
• A work permit delivered in Madagascar by the Department of Labour
• An employment certificate from the employer in Madagascar
• Tax Identification Number Card (Carte de Numéro d’Identification Fiscale, or NIF) of the employer
• Long-stay visa fees ranging from MGA150,000 to MGA250,000, depending on the length of the stay
• Biometric residence permit issuance fees ranging from EUR300 to EUR838.47, depending on the length of stay
After the submission, the foreigner must undergo a morality investigation by the Ministry of Interior and deposit biometric data (picture and digital fingerprint) in person. The long-stay visa and biometric residence permit are issued within three months.
The following additional documents are required for a renewal:
• Police clearance issued by the Court of Madagascar
• A copy of the previous Resident Card
• A payment certificate with respect to the withholding tax on wages for the preceding three months