Overview
VAT was introduced in Madagascar in 1994. It is referred to locally as ‘Taxe sur la Valeur Ajoutée’ (TVA). It is a tax on turnover. The tax law is amended every year. The information contained here applies to the fiscal year ending 31 December 2023.
Release date: May 2023
Rates and scope |
The standard rate of VAT is 20%. A rate of 0% is applicable to exports of goods and services. Imports and sales of butane gases and their containers are taxed at a reduced rate of 5%. The rate of VAT on premium fuel and diesel was reduced to 15% in 2022, and then increased to 20% in 2023. VAT is applicable to all transactions related to goods and services performed in Madagascar by a legal entity, or by an individual business with a turnover equal to or more than MGA400 million (approximately USD100,000). VAT is generally chargeable on:
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VAT registration |
Tax identification number All new businesses must get a tax identification number and a tax card, or ‘Carte Fiscale’, at the time of incorporation. The tax identification number automatically covers VAT registration. The ‘Carte Fiscale’ must be renewed every year. A tax card is required for each place of business or establishment. |
Compulsory registration Any company (legal entity) or individual business which makes supplies of goods or services and realises an annual gross revenue of MGA400 million or more must be subject to VAT. Persons whose turnover or income for the current financial year is below MGA400m are obliged to file a declaration of VAT liability with the department responsible for their tax files before the end of their financial year. The liability takes effect from the beginning of the next fiscal year in terms of rights and obligations relating thereto. |
Voluntary registration Any new entity may ask for the status of being VAT registered. However, if the entity does not reach an annual gross revenue of MGA400m, the tax authority is able to deregister its VAT vendor status. |
Group and branch registration Each independent legal entity has to get its own tax identification number and ‘Carte Fiscale’ and perform its own VAT compliances and obligations. VAT grouping is not permitted. A branch of a company registered under Malagasy law has the same tax identification number as the main company. A branch of a foreign company has to get a tax identification number and ‘Carte Fiscale’ for the purpose of tax compliance obligations, including VAT obligations. A foreign company must register or open a branch if it wants to establish an operation in Madagascar. |
Non-residents Any services performed in Madagascar are subject to VAT. Services are considered to be performed in Madagascar if such services are used or enjoyed in Madagascar. A foreign services supplier that is not registered in Madagascar has to appoint a tax representative to collect and pay VAT on its behalf. In the absence of such a tax representative, the recipient is liable to account for VAT on behalf of the foreign supplier. The taxpayer or the tax representative must have a bank account in Madagascar for VAT payment purposes. |
Application for registration There is no separate VAT registration procedure, distinct from general tax registration in Madagascar. In practice, registration is completed on incorporation, but the ‘Carte Fiscale’ has to be renewed every year. A foreign business that does not have or is not required to have a local branch has to appoint a fiscal representative in Madagascar, which can be the recipient. |
Deregistration Taxpayers cannot deregister separately for VAT. Tax deregistration only occurs with the winding up or liquidation of a business. |
Output tax |
Calculation of output tax In the absence of information to the contrary, prices are deemed to be inclusive of VAT. Supplier invoices should mention clearly the amount of VAT in order to allow the recipient to deduct VAT input tax. Any payment between two VAT taxpayers must be executed by way of bank transaction (bank cheque or bank card or also mobile banking). Output tax is calculated on:
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Exempt supplies The following supplies fall mainly outside the scope of the VAT system:
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International transhipment of goods The following operations also fall mainly outside the scope of the VAT system:
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Zero-rated supplies The zero rate is applicable only to the exportation of goods and services. |
Input tax |
Input tax allowed In general, input tax is allowed on the following:
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Input tax expressly denied Restrictions apply to the recovery of input VAT incurred on the purchase of the following:
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Partial exemption Input tax can only be recovered to the extent that it is attributable to the registered business’ taxable activity. When a business makes a mixed supply of taxable and exempt supplies, only the input tax attributable to the taxable supplies is fully recoverable. Where the input tax is attributable to both taxable and exempt supplies, only a proportion calculated on the basis of taxable turnover as a proportion of total turnover is recoverable. |
Adjustments Adjustments are required when taxable goods are sold at a lower value than the net value. When an apportionment is applicable, the taxpayer calculates the input tax according to a provisory proportion based on available information for previous years regarding taxable supplies compared to total supplies. After calculation of the final proportion, an adjustment must be made to ensure that input tax for a year corresponds to the proportion of taxable turnover compared to total turnover for such year. |
International trade |
Imports Import VAT is due on the importation of goods into Madagascar. VAT is payable to the customs department. The rate of import VAT is the same as the rate that applies to a domestic supply of goods. It is payable on the value of the goods, including cost, insurance and freight (CIF) and duty. VAT incurred on the importation of goods into Madagascar may be recovered by a registered business as input VAT. The receipt issued by customs at the time of import constitutes appropriate evidence of VAT payment. There is no definition of imported services. Services are regarded as being performed in Madagascar (and thus subject to VAT) when they are executed in Madagascar or used by a recipient, or the recipient is a taxpayer established in Madagascar. Even if the supplier of the services is not registered for VAT in Madagascar, the reverse-charge procedure applies. In that case, the recipient will be liable to account for VAT on the supply. |
Exports Goods that are exported from Madagascar are zero-rated. In order to qualify for input tax credit, the taxpayer must issue valid commercial invoices and retain evidence of export. The VAT law does not provide for when services are regarded as being exported. The fact that the recipient is established abroad does not necessarily result in zero-rating of the service. In practice, the Tax Administration accepts that services are considered as exported if payment of a related invoice is made within one month from the date of issuance. Exported services include also those services eligible under the free zone company regime, which are mainly quality control, data-processing, call centre and cinematographic services. There is no mechanism to allow foreigners who are not tax registered in Madagascar to obtain a refund of VAT paid. |
Place, time and value of supply |
Place of supply VAT is applicable to all goods delivered in Madagascar and all services performed in Madagascar. Services are considered to be performed in Madagascar when they are executed or consumed in Madagascar or invoiced to a recipient established in Madagascar. |
Time of supply VAT is payable at the time of clearing in the case of importation, or at the time of delivery of goods for local purchase, or at the time of payment for services. |
Value of supply VAT is payable on the CIF value of imported goods, or on the cost or price of a transaction for services and local transactions in respect of goods. |
VAT compliance |
Accounting basis and tax periods VAT returns and VAT payments related to operations performed during a month must be filed and made no later than 15 days after the following month. Periodical VAT filing is compulsory even if no VAT is payable. VAT payable is the difference between output tax and input tax recorded during a period (monthly). Only VAT input on a regular invoice showing the VAT collected by the supplier can be credited against VAT output. If output tax is not sufficient to offset input tax, then the difference constitutes a VAT credit. A VAT credit can be carried forward for an undetermined period. |
Returns and payment of VAT Returns and payments of VAT must be filed at the territorially competent tax office (online or physical deposit), no later than the 15th day of the following month. VAT must be paid via bank transfer. |
Interest and penalties In case of a tax audit, the penalties range depending on the nature of the default:
In case of voluntary regularisation, penalties for late payment are:
Penalties for non deposit:
Criminal penalties may also be imposed. Penalties can be mitigated in certain circumstances. |
Refunds Free-zone enterprises and qualified exporters may obtain a VAT refund of a VAT credit that is directly attributable to their export activities. Credit lessor and normal companies with a VAT credit of more than MGA20m due to significant investments are also entitled to claim for a VAT refund. Oil companies engaged in upstream activities may apply for reimbursement of tax credits generated by their local acquisitions of goods and by their imports of services specific to the oil sector in the research, exploration and development phases up to the commercial discovery of solid, liquid or gaseous hydrocarbons. An application for a refund must be submitted at the same time that the periodical VAT return is filed. |
Objections and appeals A tax inspector has three years from the date of filing to challenge, by way of notice, a VAT declaration submitted by the taxpayer. The taxpayer has 30 days from such notice to provide further explanation or information. The parties have five days to hold a contradictory debate. The tax inspector then issues à final notice with the perception title. The taxpayer may request, or not, the opinion of the Tax Commission (CoFi):
The taxpayer has 30 days from the final decision of the tax Administration to appeal to the Court (State Council). |
Time limits The prescription period for output tax and claims by the Tax Administration is three years. The maximum period for the claiming of input tax is three months. |
VAT records |
Tax invoices A proper tax invoice must be prepared in two copies and include the following information:
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Credit notes and debit notes Credit notes and debit notes are not regulated by the tax law but result from accounting practice. These credit notes and debit notes are assimilated by the Tax Administration as an invoice, invoice cancellation or disbursement, depending on the nature of the concerned operation. A disbursement re-invoiced at real cost is not subject to VAT. |
Additional export documentation Exportation must be substantiated by the following documents:
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Record-keeping All evidence, commercial, tax and accounting documentation should be kept at the company’s head office or at the company’s main establishment in the case of a branch. The taxpayer should be able to provide the originals in the case of an audit. Documentation must be retained for ten years. Electronic files and scanned copies cannot be submitted to the Tax Administration. |
Specific VAT rules |
Bad debts There is no special VAT provision in the tax law regarding bad debts. Therefore, the general rule is applicable, which means that in the case of transactions involving goods, VAT is due at the time of delivery of the goods independently of the debt situation, while in the case of transactions involving services, VAT is due at the time of payment for the services. If no payment is made, no liability for VAT arises. |
Land and buildings There is no special provision regarding land and buildings. Land and building transactions (rent or sale) are subject to VAT as long as they are performed by VAT taxpayers (a legal company or professional individual). Land and building transactions by non-professional individuals are not subject to VAT. |
Promotional gifts No special provisions apply. Output tax cannot be less than VAT applicable on the goods’ net book value. |
Tourism industry VAT on purchases of petroleum products for duly authorised hotels and restaurants using generators, when their establishment is situated in a locality with no current power, are deductible. No special rules apply. The general rule is applicable with the exception that the Tax Administration accepts the calculation of output tax on the company margin per operation. |
Transfer of a business Transfer of a business by cession of assets is subject to VAT. Transfer of a business by cession of shares is not subject to VAT. Transfer of a business by merging or assimilated operation is not subject to VAT. |
Warranty repairs No special rules apply. Goods imported and services rendered to foreign companies are subject to VAT. The importation of goods for the purpose of identical exchange is not subject to VAT. The importation of goods after exportation for repair is not subject to VAT. |
Other indirect taxes |
Import duty Import duty is applicable on the importation of goods. The rates vary from 0% to 20%. |
Excise duty Excise duty is applicable on the collection, extraction, fabrication, preparation or importation of goods and services as provided each year by the tax law, on, for example, wine, juices, beer, other fermented drinks, alcohol, whiskies and rum, tobacco, cigarettes and cigars, tourism vehicles, quads, motorcycles, internet and phone communication. The applicable rate depends on the nature of the goods or services and may be fixed or variable from 5% to 325%. |
Tax on transfer A withholding tax (income tax for non-residents), at a rate of 10%, applies to any transfer of dividends from Madagascar to a non-resident entity or individual or transfer of revenue from Madagascar to other countries in remuneration of services performed by a non-resident entity or individual. |
Stamp duty Since August 2008, no stamp duty is applicable. |
Royalties Alcohol and alcoholic products, automatic devices, mineral water, advertising, water and electricity, parties, shows and various events, pylons, paid radio and television emissions, games, are subject to royalties. |
Special tax and duty Alcoholic drinks, cigarettes and gambling games are subject to a special tax and duty. |
