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17 January 2018 Madagascar enacts Finance Act of 2018 Madagascar's Finance Act for 2018 (No. 040-2017) makes significant changes to the General Tax Code (GTC) by reforming the Corporate Income Tax (CIT), the Synthetic Tax (ST), and the Value Added Tax (VAT) Laws. The law was promulgated and applies for 2018. Decrease of the CIT threshold, removal of the simplified CIT regime and increase in the ST threshold Companies with turnover of at least MGA100 million are now subject to CIT under the real income regime. They are required to have an accrual accounting system and are taxed on their operating profit. The simplified CIT regime has been entirely eliminated. This regime allowed eligible companies to have a cash accounting system. Companies with a turnover of less than MGA100 million are subject to the ST. Accordingly, they are taxed on their turnover and not their profit. To take expenses into account, a tax reduction of 2% on the purchased goods and equipment supported by regular invoices is applied. Applying a tax reduction not supported by a regular invoice is liable to a fine of 40% in addition to the payment of ST. Any company for which turnover reaches MGA100 million is now subject to VAT. Prior to 2018, the threshold was set at MGA200 million. The cost of products to be destroyed is now deductible, subject to prior authorization of the tax authorities and the issuance of a statement of destruction by a tax officer. The CIT rate applicable to non-profit organizations and associations is reduced to 10% for non-exempted incomes. Companies that earn income from both real estate and business operations are required to produce separate financial statements and returns. Regulations will set forth detailed rules. Entities subject to ST may provide their payroll tax returns and their payment every two months. The payment per semester has been repealed. For the calculation of payroll tax, deductions made by the employer as contributions to health insurance organizations are now deductible from gross income within the limit of 1% of the salary received in cash. Expenses related to any form of social security coverage for all employees are deductible for CIT purposes within the limit of 5% of the total payroll. The deductibility for CIT purposes of benefits in kind is limited to 50% of the difference between the total of these benefits in kind and the value of these benefits included in the payroll tax base. The CGT is due and payable when the taxable income is made available or registered to any account, regardless of its method of payment. Returns related to the tax authorities' right of communication (amounts paid to third parties) must now occur before the first day of the fifth month following to end of the financial year of the company. The automatic taxation that penalizes non-compliance of return obligations must be subject to a prior reminder by the tax authorities. Tax authorities can issue a collective writ of collection when two or more entities are co-responsible for the same tax offense. The parties will be jointly liable for the payment of the due tax. The writ of collection (the Writ) may now be issued after the deliverance of final notifications or notifications of automatic taxation, without being formally attached to them. The Writ is now made enforceable by the Director of the service handling the taxpayer's file and no longer by the Director of Litigation, thus speeding up the process. The Writ can now be notified electronically with acknowledgement of receipt to taxpayers authorized to make online returns.
The processing time of cases submitted to the tax appeal committee was increased to one month instead of 15 days. Amortization of eligible assets acquired by authorized entities is deductible within the limit of 50% of their acquisition value for the first period and the balance to be spread over the legal amortization period. Regulations will set forth detailed rules and a list of eligible assets. Deductible interest from loans is limited to a total-debt-to-equity ratio of 3:1, and at a maximum rate of the Central Bank of Madagascar's rate plus two points. Authorized industries benefit from an additional deduction of 5% of the withholding tax of non-registered suppliers paid during the period that precedes their formal registration. The taxable basis of the IFPB for industrial real estate is 30% of the rental value obtained by the application of evaluation criteria fixed by the Municipality where the real estate is located.
Document ID: 2018-5145 |
