Madagascar legal and accounting and tax considerations in 2024

Since 2003, Healy Consultants Group assists our multi-national Clients’ to timely, accurately and completely discharge their Malagasy legal, accounting, audit and tax obligations. Every Madagascar entity needs to register for corporate tax and VAT.

• Tax rates

  • All Madagascar resident corporate entities with annual revenue over MGA 200 million (~US$50,650) suffer a flat corporation income tax rate of 20% on annual net profits;
  • For resident companies with a lower amount of turnover than MGA 200 million (~US$50,650), a special corporate income tax called Synthetic Tax is applied at a rate of 5%;
  • Madagascar Revenue Authority applies a minimum tax rate if i) the company incurs a loss or ii) if the corporate income tax calculated using the 20% rate is less than the minimum tax to be paid as stated above;

  • For companies engaged in i) Agricultural, ii) Craft, iii) Mining, iv) Industrial, v) Tourism, and vi) Transport, the minimum tax is MGA100,000 (USD27) plus 0.5% of annual turnover (including capital gains);
  • For companies engaged in other activities, the minimum tax is MGA320,000 (USD85) plus 0.5% of annual turnover.

• Withholding taxes/capital gains tax

  • Capital gains are included in taxable income and subject to corporate income tax. Income from the following is subject to capital gains tax at a rate of 20%:
    • Possession of property or rights relating to that property
    • The sale of shares in entities of which all or part of the value comes, directly or indirectly, from property located in Madagascar, or rights relating to this property
  • Revenue of foreign businesses operating locally but do not have a permanent establishment (PE) in Madagascar are subject to withholding tax at a rate of 10% of any income in Madagascar, including dividends, management fees, royalties, technical and assistance fees, licence fees, equipment rental fees;
  • Financial loan interest is subject to withholding tax rate of 20%;
  • Unfortunately, Madagascar has few tax treaties in place. There is a tax treaty between i) Canada, ii) France, and iii) Morocco.

• Social security tax

  • Employers in Madagascar must contribute to Caisse Nationale de Prévoyance Sociale, Madagascar’s national social security fund, which includes pensions and accident insurance;
  • The contribution is capped at 13% of eight times the legal minimum salary per employee;
  • Since 1 January 2019, employers are required to contribute to the Fonds National sur la Formation Professionnelle (FNFP). The contribution rate is 1% of employee taxable remuneration. The contribution is capped to an amount calculated on eight times the legal minimum salary.

• Payroll Tax

  • Salary income taxes, called Impôt sur les Revenus Salariaux et Assimilés (IRSA), are levied at a rate of up to 20% on the total taxable remuneration of employees, including salaries, allowances, and benefits in kind. Employers are responsible for withholding and paying salary income taxes on behalf of employees.

  IRSA scale	Payroll Tax
  Income range up to MGA 350 000	0%
  Income range from MGA 350,001 to MGA 400,000	5%
  Income range from MGA 400,001 to MGA 500,000	10%
  Income range from MGA 500,001 to MGA 600,000	15%
  Income range above MGA 600,000	20%

  • In all cases, regardless of the income, the minimum salary income tax payable is MGA 2,000.

• Value Added Tax (VAT)

  • The Madagascar government imposes 20% VAT on goods and services and 0% on exports;
  • VAT is applicable to all transactions realised in Madagascar by a VAT vendor. Services are considered to be performed in Madagascar if such services are used in Madagascar or invoiced to a taxpayer established in Madagascar;

  • VAT input is recoverable under certain conditions. Transport companies are allowed to claim VAT input on gasoline used for land transportation;

  • Any corporate entity with an annual turnover exceeding MGA 400 million (~US$100,000) must complete VAT vendor registration. For a business with annual revenue less than MGA 400 million, VAT vendor registration is optional;
  • A foreign company that has no PE in Madagascar but renders services to a Madagascar taxpayer must appoint a tax representative to collect and pay VAT on its behalf. Alternatively, the beneficiary of the services must collect and pay VAT on behalf of the foreign supplier.

• Legal and compliance considerations

  • In Madagascar, the financial year for a corporate entity may be spread over any period of 12 months, generally 31 December or 30 June. Though there are no restrictions, a prior authorisation from the Madagascar Revenue Authority is required in order to close the financial year on a different date;
  • Corporate Income Tax is payable bimonthly in provisional instalments. Taxpayers having annual revenue of more than MGA 200 million must file annual financial statements online;
  • Resident companies can decide to suspend the payment of bimonthly income tax instalments, but they must pay a penalty of 80% if the final tax due is more than the previous year’s income tax;
  • Financial statements provided to private or public entities require the visa or certification of the tax administration;
  • Losses may be carried forward for five years. Losses attributable to depreciation may be carried forward indefinitely. Losses may not be carried back;
  • In the case of a tax audit, the tax authority may require any documents and information about the nature of the business relationships between a resident company and foreign company, the companies’ transfer-pricing methods, and the activities and tax regimes of the companies. A failure to provide documents and information to the tax authority is subject to a fine of MGA5 million (approximately USD1,382);
  • The tax limitation period is three years. However, by way of derogation the 2017 financial year remains non-prescribed in 2021.

  Madagascar tax return filing - Corporate income tax and financial statements
  Financial Year End (FYE)	Deadline
  31 December	15 May
  30 June	15 November
  All others	15th day of the fourth month from FYE

• Healy Consultants Group’s fees for accounting and tax support

  Madagascar accounting & tax task	US$
  VAT registration	950
  Annual tax and accounting fees (active trading company)	2,300
  Annual tax and accounting fees (dormant company)	950

  • For an active trading company, Healy Consultants Group’s fees to efficiently and effectively discharge our Client’s annual company accounting, auditing and tax obligations are US$2,300. Following receipt of a set of draft accounting figures from our Client’s company, Healy Consultants Group will more accurately advise accounting and tax fees. For a dormant company, our fee is US$950;
  • Healy Consultants Group will be happy to provide a monthly bookkeeping service for your Madagascar company. Typically, our Accounting & Tax Department (ATD) team will receive a Dropbox of data from our Client and will immediately thereafter timely supply our Client with i) a general ledger, ii) trial balance, iii) monthly and quarterly management accounts and iv) monthly and quarterly government reporting, including sales tax and payroll. For further details of our bookkeeping service and our fees, visit this page;
  • Healy Consultants Group’s Compliance Department will also assist our Clients to i) document and implement accounting procedures, ii) implement financial accounting software, iii) prepare of financial accounting records and iv) prepare forecasts, budgets and sensitivity analysis.

• Conclusion

  Clients should be aware of their personal and corporate tax obligations in their country of residence and domicile. They must fulfil these obligations annually. Let us know if you need Healy Consultants Group’s help to clarify your annual reporting obligations.