Madagascar Tax Regime

Madagascar operates a turnover-tiered corporate tax system that channels small enterprises into a simplified synthetic tax regime and larger enterprises into a standard real tax regime charging 20% on realised profit. The threshold — an annual turnover of MGA 400 million — determines whether a company is taxed at 5% of 70% of turnover (subject to a 3%-of-turnover floor) under the synthetic regime, or at 20% of net profit under the real regime, itself subject to alternative minimum-tax floors expressed as a percentage of turnover plus a fixed amount. Cooperative societies benefit from a conditional income tax exemption, and revenue from public-market contracts is ring-fenced and taxed separately at 8%. Non-resident service providers without a Malagasy permanent establishment are taxed through withholding at source rather than assessment, with a materially higher rate applying to financial loan interest.

1.1 Sources

Primary legislation includes the Malagasy General Tax Code (Code Général des Impôts), the annual Finance Laws (Lois de Finances) and the Tax Procedures Book.

1.2 Recent developments

The turnover threshold separating the synthetic tax regime from the standard real tax regime remains set at MGA 400 million, with the synthetic regime continuing to apply a 5% rate to 70% of turnover (subject to a minimum tax band of MGA 16,000 to MGA 150,000 depending on activity, and an overriding floor of 3% of turnover) and a 2% reduction available for qualifying purchases of goods, services and equipment under prescribed conditions. Under the real tax regime, the alternative minimum-tax formulas continue to differentiate by sector — 1% of turnover plus a fixed MGA 500,000 for agricultural, artisan, transport, industrial, hotel and mining activities, 1% of turnover plus MGA 1 million for other activities generally, 1/1,000 of turnover for retail fuel sellers, and 7/1,000 of turnover plus MGA 1 million for certain other activities — ensuring a minimum tax contribution even where reported profit is low. Public-market revenue continues to be taxed separately at 8%, reinforcing the ring-fencing of government-contract income from ordinary commercial income.

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

2.1 Rates and residence

Resident corporate entities are taxed on realised worldwide income. A corporate entity with annual turnover below MGA 400 million falls within the synthetic tax regime (impôt synthétique), taxed at 5% of turnover (members of an approved management centre deduct a 50% abatement from the base, capped at MGA 10 million), subject to minimum amounts fixed by regulation, and an overriding floor under which tax due cannot be less than 3% of turnover; a 2% reduction on qualifying purchases of goods, services and equipment can lower the liability within this regime under prescribed conditions. A corporate entity registered in Madagascar with annual turnover exceeding MGA 400 million falls within the standard real tax regime (régime réel), taxed at 20% of net taxable profit (benefice), but subject to alternative minimum-tax floors: 1% of turnover plus MGA 500,000 for agricultural, artisan, transport, industrial, hotel or mining activities; 1% of turnover plus MGA 1 million for other activities; 1/1,000 of turnover for retail fuel sellers; and 7/1,000 of turnover plus MGA 1 million for certain other specified activities. Cooperative societies are exempt from income tax provided income from non-members does not exceed one quarter of turnover, though members remain subject to income tax or the synthetic tax depending on their own turnover, and a reduced 10% rate applies to interest on shares and rebates distributed annually to cooperative members. Revenue from public-market (government procurement) contracts must be tracked separately and is taxed at a specific rate of 8%. Non-residents are taxed only on Madagascar-source income.

2.2 Dividends and participation exemption

Dividends distributed by a Malagasy resident company are generally subject to withholding tax at source; there is no broad domestic participation exemption comparable to OECD holding-company regimes, so dividends received by a resident corporate shareholder from another resident company are typically included in the recipient's taxable base with credit mechanisms or specific exemptions applying only in limited circumstances (such as cooperative-society interest and rebates taxed at the reduced 10% rate). Dividends paid to non-resident shareholders without a Malagasy permanent establishment are subject to the standard 10% non-resident withholding tax on Madagascar-source income, absent treaty relief.

2.3 Income determination and deductions

Taxable profit under the real tax regime is computed from the statutory accounts, adjusted for tax-specific add-backs and deductions, on an accrual basis. Ordinary and necessary business expenses properly invoiced and supported are deductible; non-deductible or capped items typically include a portion of excessive executive remuneration, certain entertainment and gift expenses, fines and penalties, and payments lacking adequate documentary support. Depreciation is generally computed on a straight-line basis over the asset's useful life, with specific schedules prescribed by the tax administration for common asset categories; accelerated depreciation may be available for certain industrial equipment. Provisions for doubtful debts and inventory obsolescence are deductible where specific, adequately evidenced and not merely general or contingent.

2.4 Interest limitation

Interest paid on shareholder current accounts and related-party loans is deductible only within limits referencing the paid-up capital of the borrowing entity and a capped interest rate benchmarked to prevailing central bank reference rates; amounts in excess of these caps are treated as non-deductible and may be recharacterised as a distribution. Interest paid to non-resident lenders is subject to a specific withholding tax of 20% on financial loan interest — materially higher than the general 10% non-resident withholding rate — reflecting policy scrutiny of cross-border debt financing.

2.5 Losses

Tax losses incurred under the real tax regime may generally be carried forward for a limited number of years (typically up to five years) to offset future taxable profits, subject to continuity-of-business conditions; there is no loss carryback. Companies within the synthetic tax regime, being taxed on a turnover basis rather than net profit, do not generate carryforward losses in the conventional sense, since the regime does not compute a net taxable result subject to loss relief.

2.6 Group taxation

Madagascar does not operate a formal fiscal consolidation or group relief regime allowing the pooling of profits and losses across separate resident group companies. Each Malagasy company is assessed and taxed as a standalone entity, and intra-group transactions (including intra-group financing, management fees and dividend flows) must be priced and documented on an arm's-length basis as if between unrelated parties, without the benefit of consolidated filing or automatic loss transfer between group members.

2.7 Controlled foreign companies

Madagascar does not operate a controlled-foreign-company regime attributing the undistributed income of foreign subsidiaries to Malagasy parent companies. Anti-avoidance protection for outbound structures relies principally on the territoriality-based scope of CIT (non-residents taxed only on Madagascar-source income, with resident companies taxed on worldwide realised income), together with withholding tax on outbound payments and general anti-abuse review of artificial arrangements by the tax administration.

2.8 Transfer pricing

Transactions between related parties, including cross-border transactions with foreign affiliates, must be conducted on arm's-length terms, and the Malagasy tax administration may reassess profits considered to have been understated through non-arm's-length pricing with related parties, particularly where a Malagasy entity transacts with an affiliate established in a lower-tax jurisdiction. Documentation requirements are less codified than in OECD three-tier (master file/local file/CbCR) systems, but taxpayers under audit are expected to produce evidence supporting the arm's-length nature of related-party pricing, including intercompany agreements, functional analysis and comparable pricing benchmarks.

2.9 Incentives

Madagascar offers investment incentives through its Economic Development Board and free-zone and export-processing frameworks, including customs duty relief and VAT suspension on capital goods and inputs for approved export-oriented and free-zone enterprises, along with temporary profit-tax relief for qualifying new investments in prioritised sectors such as agribusiness, textiles, mining and tourism, subject to job-creation and investment-completion conditions. The synthetic tax regime itself operates as a simplification incentive for small businesses, replacing a full profit-based computation with a low flat percentage of turnover. The 2% purchase-based reduction within the synthetic regime further lowers the effective burden for qualifying small taxpayers.

2.10 Pillar Two

Madagascar has not enacted Pillar Two legislation and does not apply an income inclusion rule, undertaxed profits rule or qualified domestic minimum top-up tax. Multinational groups with Malagasy operations that are headquartered in a jurisdiction applying an income inclusion rule should monitor exposure, since Malagasy profits benefiting from free-zone or investment incentives could in principle be topped up abroad to the 15% global minimum where the blended effective Malagasy rate for the jurisdiction falls below that threshold, though most in-scope multinational groups are unlikely to have material Malagasy operations given the size of the economy.

2.11 Branch income and reorganisations

A branch or permanent establishment of a foreign company in Madagascar is taxed on its Malagasy-attributable profits under the same turnover-tiered regime (synthetic or real, depending on turnover) as resident companies, with restrictions on the deductibility of head-office overhead allocations that are not adequately substantiated as directly connected to the Malagasy activity. Where a foreign service provider does not have a Malagasy permanent establishment, its Madagascar-source income (including dividends) is instead subject to a 10% withholding tax at source (20% for financial loan interest), collected by the Malagasy payer rather than assessed on the foreign provider. There is no separate branch remittance tax. Domestic reorganisations (mergers, demergers, contributions of assets) may benefit from deferral of gain recognition subject to specific administrative approval; absent such approval, ordinary capital gains taxation applies to asset transfers.

3.1 Residence and rates

An individual is considered Malagasy tax resident where they have their principal home or habitual place of abode in Madagascar, their principal professional activity is carried on in Madagascar, or the centre of their economic interests is in Madagascar. Residents are taxed on Madagascar-source income under the personal income tax (impôt sur les revenus, IR); non-residents are taxed only on Madagascar-source income. Personal income tax applies progressive rates to net taxable income by category (salaries, business profits, property income, investment income), with a schedule running from an exempt lower band up to a top marginal rate of 25% on monthly salary income above MGA 4,000,000 from 1 January 2026, applied after standard deductions and family-situation allowances.

3.2 Capital income and real estate

Dividends and interest paid to resident individuals are generally subject to withholding tax at source, often applied as a final discharge for smaller savers, simplifying compliance. Capital gains on the disposal of real estate located in Madagascar are subject to a specific capital gains tax, generally calculated on the realised gain with the rate and any exemptions (such as for a taxpayer's sole long-held primary residence) determined under the property transfer tax rules. Rental income is included in ordinary taxable income under the property-income category, with standard allowances for maintenance and management costs.

3.3 Social security and payroll

Employees and employers contribute to the National Social Insurance Fund (CNaPS) system, with employer contributions representing the larger share of combined payroll cost, funding pensions, family benefits and occupational injury cover; a separate health-insurance-linked contribution (OSTIE or equivalent occupational health organisation membership) also applies to formal-sector employment. Employers withhold personal income tax on salaries monthly under a pay-as-you-earn mechanism, applying the specific salary-income schedule, with reconciliation through annual filing where the employee has other taxable income sources.

3.4 Inbound individuals

Madagascar does not levy a general net wealth tax on individuals. Property transfer duties apply to the transfer of real estate and specified assets, including on gratuitous transfers by inheritance or gift, generally calculated by reference to the value transferred with the specific rate depending on the nature of the asset and the relationship between the parties. There is no dedicated statutory expatriate tax regime, though foreign personnel employed on approved investment or free-zone projects may benefit from administrative arrangements agreed as part of the underlying project approval. Individuals becoming Malagasy tax resident are subject to standard residence-based taxation from the point residence is established, with relief for foreign-source income taxed abroad available under any applicable double tax treaty, though Madagascar's treaty network remains limited relative to larger economies.

Madagascar applies withholding tax principally to payments made to non-residents without a Malagasy permanent establishment: a general rate of 10% applies to Madagascar-source income realised by foreign service providers, including dividends, while financial loan interest is subject to a higher 20% withholding rate reflecting specific policy scrutiny of cross-border debt. Domestic withholding also applies to dividends and interest paid to resident individuals as described in section 3.2. Madagascar's double tax treaty network is comparatively limited, so most cross-border payments to non-treaty jurisdictions bear the full domestic withholding rate without reduction; where a treaty does apply, reduced rates and residence-certification procedures follow the terms of that specific convention.

Because Madagascar's treaty network is narrower than that of many peer jurisdictions, payers should verify on a case-by-case basis whether a convention with the counterparty's jurisdiction exists before assuming any reduction to the standard 10%/20% withholding rates. Withholding on payments to foreign service providers without a Malagasy permanent establishment is generally a final tax on that Madagascar-source income rather than a mere advance credit, given the absence of an assessment mechanism for such non-resident, non-PE taxpayers.

5.1 General anti-abuse and hybrids

The Malagasy tax administration applies general anti-abuse principles allowing it to disregard or recharacterise artificial arrangements entered into principally to obtain a tax advantage, including artificial splitting of turnover between related entities to remain within the synthetic tax regime threshold, or artificial characterisation of Madagascar-source income to avoid the applicable withholding rate. Madagascar does not operate a codified hybrid-mismatch regime; protection against mismatches involving hybrid instruments or entities relies on the general anti-abuse doctrine and the withholding-based taxation of non-resident, non-PE income.

5.2 Exit taxation and disclosure

Madagascar does not operate a formal exit tax regime for companies or individuals migrating tax residence. There is no domestic equivalent of the EU's DAC6 mandatory disclosure regime or a public country-by-country reporting requirement; multinational groups with a Malagasy constituent entity may nonetheless be subject to group-level CbCR obligations imposed by their ultimate parent's home jurisdiction, and Malagasy-sourced income remains subject to the territoriality-based withholding and CIT rules described above regardless of whether the international group discloses the arrangement domestically.

6.1 VAT

Value-added tax is levied at a standard rate of 20% on the supply of goods and services and on imports, with a limited set of exemptions covering specified essential goods, healthcare, education and exports (zero-rated). Registration is mandatory for businesses exceeding prescribed turnover thresholds, broadly aligned with the real tax regime threshold, while smaller businesses within the synthetic tax regime are generally outside the VAT system and instead bear VAT as a final cost on their purchases. Monthly VAT returns are filed with payment due shortly after month-end; input VAT is recoverable against output VAT for registered taxable persons, subject to standard restrictions on passenger vehicles and specified non-business expenses.

6.2 Transaction, payroll and other taxes

Property transfer duties apply to the registration of real estate transfers and specified corporate transactions (capital increases, mergers, business transfers), generally at proportional rates with fixed minimums. There are no regional or local income taxes in Madagascar, but municipalities levy local property-based levies (property tax on built and unbuilt land) on real estate owners, distinct from the transfer duty. Excise-type duties apply to specified products including alcohol, tobacco and petroleum products. Stamp duties apply to specified legal documents and instruments. Public-market (government procurement) revenue is taxed separately at 8% as described in section 2.1, in place of ordinary CIT on that revenue stream.

7.1 Filing, assessment and audit

The tax year is generally the calendar year. Companies within the real tax regime file an annual CIT return with supporting financial statements within the statutory deadline following the close of the fiscal year, generally in the first half of the following year; companies within the synthetic tax regime file simplified periodic declarations reflecting their turnover-based liability. The tax administration (Direction Générale des Impôts) conducts risk-based audits, with large taxpayers managed by a dedicated large-taxpayer unit applying enhanced monitoring. The general statute of limitations for reassessment is a limited number of years from the year the tax became due, extended where fraud or non-filing is established.

7.2 Rulings, appeals and penalties

Taxpayers may seek administrative guidance from the tax administration on the treatment of specific transactions, though a formalised binding ruling or advance pricing agreement programme is not broadly established. Disputed assessments can be challenged through an administrative appeal to the tax administration in the first instance, escalating to the competent courts for judicial review where the dispute remains unresolved. Late payment penalties and interest apply to underpaid tax and late filings, with materially higher penalties where fraud or deliberate concealment of turnover or profit is established, a particular area of scrutiny given the turnover-driven thresholds separating the synthetic and real tax regimes.

Businesses close to the MGA 400 million turnover threshold should monitor their trailing turnover carefully, since crossing the threshold shifts the entity from the synthetic to the real tax regime (or vice versa) with materially different compliance obligations, filing cadence and computation methodology. Late filings and underpayments attract interest calculated from the original statutory due date.

9.1 Entity choice

The SARL (limited liability company) is the most commonly used vehicle for small and medium-sized investment, offering limited liability with modest capital requirements and straightforward registration; the SA (public limited company) suits larger ventures, regulated sectors (banking, insurance) and enterprises anticipating external capital raising. Branches of foreign companies are permitted and are taxed on Malagasy-attributable profits under the same turnover-tiered regime as resident companies. Investors targeting export markets or operating in designated zones should evaluate free-zone (zone franche) status, which offers customs and tax advantages but carries restrictions on domestic-market sales and specific compliance obligations administered by the Economic Development Board.

9.2 Structuring and incentives

New entrants should carefully assess anticipated turnover against the MGA 400 million threshold when structuring their Malagasy operations, since the choice between remaining within the simplified synthetic regime and operating under the real regime materially affects both the tax base (turnover versus profit) and the administrative burden. Capital-intensive or export-oriented investors should evaluate free-zone and investment-incentive eligibility for customs and VAT relief on capital goods, and structure related-party financing to remain within the shareholder-loan interest deductibility caps referencing paid-up capital, given the elevated 20% withholding rate applicable to cross-border financial loan interest. Businesses transacting with government entities should track public-market revenue separately given its distinct 8% tax treatment.

9.3 Worked effective-rate illustration

A Malagasy trading company operating under the real tax regime has annual turnover of MGA 600,000,000 (above the MGA 400 million synthetic-regime threshold), EBITDA of MGA 90,000,000, depreciation of MGA 15,000,000 and net interest expense of MGA 5,000,000 (within the deductibility cap). Taxable profit is 90,000,000 − 15,000,000 − 5,000,000 = MGA 70,000,000. CIT at the standard real-regime rate of 20% is MGA 14,000,000. The alternative minimum tax for this general (non-agricultural/industrial-list) activity is 1% of turnover plus MGA 1,000,000 = (600,000,000 × 1%) + 1,000,000 = MGA 7,000,000, which is lower than the standard 20%-of-profit computation, so the standard computation of MGA 14,000,000 applies as the higher of the two. The effective corporate tax rate is 14,000,000 / 70,000,000 = 20.0% of taxable profit, equivalent to 2.33% of turnover. Had the same company instead remained just below the MGA 400 million synthetic-regime threshold with turnover of MGA 390,000,000, its liability would instead be 5% of 70% of turnover = 390,000,000 × 70% × 5% = MGA 13,650,000, and since this exceeds the 3%-of-turnover floor (MGA 11,700,000), the 5%-of-70%-of-turnover computation of MGA 13,650,000 would apply — illustrating how the tax base shifts entirely from profit to turnover across the regime threshold.

9.4 Compliance

Expect statutory financial statements for real-regime taxpayers, simplified periodic declarations for synthetic-regime taxpayers, monthly VAT and payroll withholding compliance for registered businesses, and careful turnover monitoring near the MGA 400 million regime threshold. Companies transacting with related foreign parties should maintain documentation supporting arm's-length pricing given the tax administration's authority to reassess understated profits on cross-border related-party transactions, and businesses with government contracts should maintain separate accounting records for public-market revenue subject to the distinct 8% tax treatment.