The economic context, including the expansion of tourism activities, is a key factor in revising Madagascar’s Finance Act 2024. The number of tourists visiting the Big Island increased by 98.3% in 2023 compared to 2022.
To start with, the main amendments to the Tax Code (CDI) and the Fiscal Procedures Code (CPF) focus on:
- The revision of provisions related to the obligation of documentation in transfer pricing, alongside strengthening penalties in cases of refusal to produce the relevant documents.
- Limiting the right to tax reductions under Synthetic Tax (IS) for the purchase of goods and services, which must be declared under the right of communication.
- The mandatory affixing of initials on registered documents containing more than one page.
- The obligation to issue invoices online via the “e-invoicing” module, a system to be implemented by the administration for all transactions.
- The possibility for taxpayers subject to Synthetic Tax (IS) to have their first fiscal year be less than 12 months, and a maximum of 18 months.
- Determining the tax regime after the first fiscal year.
- The authorized payment method for any transaction between VAT-registered and/or non-registered entities.
- Aligning the minimum tax for majority managing partners of an LLC (SARL) with the general tax regime.
Next, the main tax measures introduced in the Amending Finance Act concerning the Tax Code are as follows.
Income Tax (IR) – Tax Base
Taxpayers must adjust differences in taxable bases for Income Tax if they don’t comply with the arm’s length principle. They must also provide proof in the Income Tax declaration. (Ref: Article 01.01.13.-c)
The minimum tax for majority managing partners of an LLC (SARL) is aligned with the general tax regime and has increased from Ar 320,000 to Ar 1,000,000. (Ref: Article 01.01.14.-a)
No other export operation may be carried out until taxes on previous exports have been fully paid off. (Ref: Article 01.01.14.-a))
Synthetic Tax (IS)
Taxpayers subject to IS can have their first fiscal year last less than 12 months, with a maximum of 18 months. (Ref: Article 01.02.04.)
The right to tax reduction under IS for the purchase of goods and services is limited to those declared under the right of communication. (Ref: Article 01.02.05 bis)
Registration Duty for Acts and Transfers
The affixing of initials on registered documents containing more than one page is mandatory. (Ref: Article 02.01.01)
Value Added Tax: Exempt Products and Operations
The effective date of VAT status under the real regime has been moved to the day following the notification of the decision to be subject to the regime, instead of the first day of the month of the notification. (Ref: Article 06.01.19)
VAT must be repaid for non-amortized assets that are sold or discarded. (Ref: Article 06.01.21)
Non-VAT registered entities are also required to make payments via bank transfer for any transaction with VAT-registered entities where the amount exceeds a threshold set by regulation. (Ref: Article 06.01.26)
Tax Collection, Penalties, and Fines
Revision of provisions related to the obligation of documentation in transfer pricing, with stricter penalties for refusal to produce the relevant documents, including a fine of Ar 10,000,000 in cases of:
- Failure to submit, late submission, or insufficient or inaccurate transfer pricing documentation,
- Absence of a special register for beneficial owners or failure to update the register.
(Ref: Article 20.01.52)
Learn about the main amendments to the Fiscal Procedures Code related to the 2024 Amending Finance Act.
Finally, if you need tax optimization and advice from an experienced team, contact us.