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Why Madagascar?

Madagascar is the world’s fifth-largest island, situated in the Indian Ocean off the coast of southern Africa. It is an island nation in the Indian Ocean off the southeastern coast of Africa. Madagascar has a strategic location along the Mozambique Channel. The government system is a republic; the chief of state is the president, and the head of government is the prime minister.

Madagascar transitioned from socialist economic policies to a market economy with policies of privatization and liberalization. Madagascar is a member of the Common Market for Eastern and Southern Africa (” COMESA”) and the Southern African Development Community.


Strategic location:

Madagascar is in the Indian Ocean, making it a strategic location for businesses looking to expand into Africa and Asia. Madagascar is located off the eastern coast of Africa, making it a gateway to the continent.

Natural resources:

Madagascar is rich in natural resources such as minerals, precious stones, and timber, which can be beneficial for businesses in the mining, forestry, and construction industries. Madagascar is renowned for its gemstone deposits, including sapphires, rubies, emeralds, and tourmalines.

Growing economy:

Madagascar’s economy has been growing steadily in recent years, with a focus on agriculture, tourism, and manufacturing. Agriculture is a vital sector in Madagascar, employing a significant portion of the population and contributing to the country’s GDP.

Government incentives:

The government of Madagascar offers various incentives to attract foreign investment, including tax exemptions and reduced tariffs.

Skilled labor force:

Madagascar has a young and growing population, with a large percentage of the population under the age of 25.

Ease of doing business:

Madagascar has made significant improvements in its business environment in recent years, making it easier for businesses to start and operate in the country.

Simple Tax Regime

Corporate Income Tax (“CIT”):

  • A corporate entity registered in Madagascar and having an annual turnover exceeding MGA 200 million is subject to CIT at a rate of 20% [1][4].
  • A corporate entity having an annual turnover of less than MGA 200 million is subject to CIT at a rate of 5% of 70% of turnover, with a minimum tax of MGA 16,000 to MGA 150,000 depending on the activities. However, the tax due cannot be less than 3% of the turnover. A tax reduction of 2% of the amount of purchases of goods and services and equipment subject to regular invoices is applicable.

Other taxes:

  • Value-added tax:The VAT rate is 20%, and the VAT rate on exports is 0%. VAT input is recoverable under certain conditions. The VAT rate of 5% is applicable for locally produced butane gas. VAT is applicable to all transactions realized in Madagascar by a VAT.
  • Salary income taxes: Salary income taxes are levied at a rate of 20% on the total taxable remuneration of employees, including salaries, allowances, and any benefits in kind. Employers are required to withhold and pay the salary income tax.
  • National Social Security fund: Employers are required to contribute to the national social security fund at 13% and to the medical insurance organization at 5% of the gross monthly remuneration of employees. Employees are required to contribute 1% each of their gross salaries towards the social security fund and to the medical insurance organization, which is withheld by the employer.

Madagascar Companies

Madagascar, like many other countries, has a diverse range of companies operating within its borders. These companies can be categorized into various types based on their industry, ownership structure, and size. Here are some common types of companies you can find in Madagascar:

Private Limited Company (SARL – Société à Responsabilité Limitée):

SARL is a common business structure in Madagascar. It’s a limited liability company where the liability of shareholders is limited to their contributions to the company’s capital. SARLs are often used for small to medium-sized enterprises.

Public Limited Company (SA – Société Anonyme):

SA is a form of business that is owned by shareholders, and its shares can be traded on the stock exchange. This type of company is suitable for larger businesses and may have more stringent regulatory requirements.

Partnership (SNC – Société en Nom Collectif):

In an SNC, partners manage the company together and share its profits and losses. This is a common structure for professional services firms.

Limited Partnership (SCS – Société en Commandite Simple):

An SCS has two types of partners: active partners who manage the company and have unlimited liability, and silent partners who provide capital but have limited liability.

Madagascar is the world’s fifth-largest island, situated in the Indian Ocean off the coast of southern Africa.

Author: Chandrawat & Partners

Topic: Doing Business in Madagascar

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