Mauritania Corporate Tax Guide

Mauritania

Dakar, Senegal GMT

EY

+221 (33) 849-2222 22, rue Ramez Bourgi Fax: +221 (33) 823-8032 B.P. 2085 Dakar Senegal

Principal Tax Contacts

Alexis Moutome +221 (33) 849-2232 Email: alexis.moutome1@sn.ey.com

Olga Akakpovi +221 (33) 849-2213 Email: olga.akakpovi@sn.ey.com

A. At a glance

Corporate Income Tax Rate (%) 2/25 (a)

Capital Gains Tax Rate (%) 25 Branch Tax Rate (%) 2/25

Withholding Tax (%)

Dividends 10

Interest 10

Royalties from Patents, Know-how, etc. 15 (b)

Payments to Nonresidents for Services 15 (b) Directors’ Fees 10

Payments to Resident Individuals for Services 2.5 (c) Branch Remittance Tax 10 (d) Net Operating Losses (Years)

Carryback 0 Carryforward 5

(a) The Mauritanian tax code no longer provides for a minimum tax (see Section B). (b) This tax applies to payments by residents to nonresidents. A tax treaty may reduce the rate applicable to nonresidents. (c) This tax applies to service fees paid to local (Mauritania-based) consultants. A failure to pay the 2.5% withholding tax results in the non-deductibility of the service fees paid to the consultants. (d) See Section B.

B. Taxes on corporate income and gains

Corporate income tax. Mauritanian companies are taxed on the territoriality principle. As a result, Mauritanian companies carry ing on a trade or business outside Mauritania are not taxed in Mauritania on the related profits. However, profits deriving from export sales of goods or services of a Mauritania-based company are subject to tax in Mauritania. Foreign companies performing activities in the country are subject to Mauritanian corporate tax on profits generated if such activities are performed through a permanent establishment (PE).

Under the new General Tax Code, effective from 1 January 2020, foreign companies are deemed to have a PE if they wholly or partly carry on their activity through a fixed place of business such as a place of management, a branch, an office, a factory, a

workshop, a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

A PE also encompasses a construction site, an assembly or instal lation project as well as provision of services that last over six months in Mauritania, except for oil subcontractors/operators, for which the period is extended to 12 months.

Tax rates. The regular corporate income tax rate is the higher of 25% of net taxable profit or 2% of turnover (except transfer or reversal of expenses). The corporate income tax cannot be less than MRU100,000.

Profits realized in Mauritania by branches of foreign companies are deemed to be distributed and, consequently, are subject to a branch withholding tax of 10% on after-tax income.

The Mauritanian investment code provides for a preferential tax regime for the following types of companies:

• Small-Sized Companies

• Free-Export Companies

Small-Sized Companies qualify for a preferential tax regime if they invest between MRO50 million and MRO200 million. The preferential regime grants certain tax advantages during the installation phase (limited to three years) and the operation phase.

Free-Export Companies qualify for a preferential tax regime if they satisfy the following conditions:

• They invest at least MRO500 million.

• They create at least 50 new permanent jobs.

• They intend to devote least 80% of their production to export sales.

• They are located in a free economic zone.

Free-Export Companies are eligible for certain tax exemptions and other tax advantages.

A simplified tax regime designed for the oil and gas sector provides for an 8% withholding tax.

Capital gains. Capital gains are taxed at the regular corporate income tax rate.

Administration. The fiscal year is the calendar year. Tax returns must be filed by 31 March of the year following the fiscal year.

Companies must pay the corporate tax (see Tax rates) in two equal installments, which are due on 31 March and 30 June of the year following the tax year. Companies must pay any balance of tax due by 30 September.

Dividends. Dividends are subject to a 10% withholding tax. Foreign tax relief. Foreign tax credits are not allowed. Income subject to foreign tax that is not exempt from Mauritanian tax under the territoriality principle is taxable net of the foreign tax.

C. Determination of taxable income

General. Taxable income is based on financial statements prepared according to generally accepted accounting principles and the rules contained in the National General Accounting Plan.

Business expenses are generally deductible unless specifically excluded by law. The following expenses are not deductible:

• Interest paid on loans from shareholders to the extent that the rate exceeds the current rate of the central bank plus two percentage points and the company cannot provide a copy of the loan con tract duly registered by a notary and a withholding tax certificate pertaining to the said interests

• Head-office expenses to the extent that they exceed 2% of an nual turnover

• Corporate income tax (see Section B)

• Certain specified charges

• Corporate income tax, penalties, gifts and most liberalities, as well as donations exceeding 1% of the annual turnover within an MRU2 million limit

• Charges paid in cash to another company if their unit amount exceeds MRU200,000, or MRU50,000 for companies involved in the export and processing of fishery products

Inventories. Inventory is normally valued at the lower of cost or market value.

Provisions. In determining accounting profit, companies must establish certain provisions, such as a provision for a risk of loss or for certain expenses. These provisions are normally deductible for tax purposes if they provide for clearly specified losses or expenses that are probably going to occur and if they appear in the financial statements and in a specific statement in the tax return.

Capital allowances. Land and intangible assets, such as goodwill, are not depreciable for tax purposes. Other fixed assets may be depreciated using the straight-line method at maximum rates specified by the tax law. The following are some of the applicable straight-line rates.

Asset Rate (%)

Commercial buildings 4 Industrial buildings 5 Office equipment 10 Motor vehicles 25

Plant and machinery 20

Certain industrial assets may be depreciated using the decliningbalance method. The Mauritanian tax law does not allow acceler ated depreciation methods.

Relief for tax losses. Losses may be carried forward for five years. Losses may not be carried back.

Groups of companies. Fiscal integration of Mauritanian companies equivalent to a consolidated filing position is not allowed.

D. Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)

Value-added tax, on sales of goods and services, and on imports Standard rate 16

Export of goods and services 0 Telecom services 18

Nature of tax Rate (%)

Business activity tax (patente); calculated based on the turnover of the business

Registration duties, on transfers of real property or businesses

Social security contributions, on an employee’s annual gross salary up to MRO70,000; paid by Employer

E. Foreign-exchange controls

The Mauritanian currency is the ouguiya.

Effective from January 2018, Mauritania has changed its cur rency from the old ouguiya (MRO) to the new ouguiya (MRU). Mainly, the currency unit changes (MRO100,000 becomes MRU10,000). From a tax point of view, Mauritanian tax authori ties have issued an internal memorandum that provides the fol lowing:

• Documents filed, such as financial statements and returns, should take into account the new currency units.

• Documents issued by revenue authorities to the attention of taxpayers should also refer to the new currency units.

Some amounts mentioned in this chapter refer to the former cur rency because relevant legal codes and documents referring to the currency have not yet been formally amended. However, in prac tice, payments should now be performed with the new Mauritanian currency.

Exchange-control regulations exist in Mauritania for foreign finan cial transactions.

Transfer pricing. The Mauritanian legal framework relating to transfer pricing has been significantly amended through the implementation of additional rules contained in the 2018 Finance Act. Under the act, important tax obligations are imposed on Mauritania-based entities that have annual net turnover or gross assets of MRU30 million or more and either of the following circumstances exists:

• At the end of the fiscal year, they hold, directly or indirectly, more than half of the share capital or voting rights of another company incorporated in Mauritania or abroad that meets the turnover condition mentioned above.

• At the end of the fiscal year, more than half of the share capital or voting rights of the entity are held, directly or indirectly, by another company meeting the turnover condition mentioned above.

The above companies are now required to take the following actions:

• They must file an annual transfer-pricing return (statement): This statement should be filed by 31 March of each year through an official form that Mauritanian tax authorities will be issuing in upcoming months. The return should include, among other items, general information on the group of related companies, including a general description of the business

activities, the transfer-pricing policy, a list of immaterial assets, information on financial transactions (loans) and a statement of transactions performed between related parties.

• They must make available to the Mauritania tax authorities transfer-pricing documentation demonstrating compliance with the arm’s-length principle. This documentation should be avail able to the tax authorities from the beginning of an on-site formal tax audit. In the event of a lack of production of com plete documentation, a notice can be addressed to the taxpayer to provide requested information within a 15-day period.

A failure to submit the annual transfer-pricing return should trigger a tax fine of MRU2,500,000. A failure to submit documentation requested by the tax authorities should trigger a penalty of 0.5% per fiscal year of the amount of transactions related to the docu ments that have not been provided to the tax authorities. The mini mum penalty is MRU500,000.

F. Tax treaties

Mauritania has entered into double tax treaties with France, the Maghreb Arab Union, Senegal and Tunisia.