Madagascar operates a structured tax system that includes obligations for both employers and employees regarding income and social contributions. Employers play a crucial role in collecting and remitting taxes on behalf of their employees, as well as making their own contributions to social security and other funds. Understanding these requirements is essential for compliant operations within the country.
The primary taxes and contributions related to employment in Madagascar include Personal Income Tax (IRSA), which is withheld from employee salaries, and various employer contributions towards social security, pension, and other social programs. Compliance involves accurate calculation, timely withholding, and regular reporting and payment to the relevant authorities.
Employer Social Security and Payroll Tax Obligations
Employers in Madagascar are responsible for contributing to several social and welfare funds based on employee salaries. These contributions are mandatory and represent a significant part of the cost of employment. The main contributions include those to the Caisse Nationale de Prévoyance Sociale (CNaPS) for social security and pension, and contributions for occupational health services.
Key employer contribution rates expected for 2025 are:
- CNaPS (Social Security & Pension): Employers contribute a percentage of the employee's gross salary. The rate is typically 13% of gross salary, up to a certain ceiling.
- Occupational Health Services (OSTIE or similar): Employers are required to subscribe to an approved inter-company medical service. The contribution rate varies depending on the service provider but is generally around 1% of the gross salary, also subject to a ceiling.
- Fonds Malgache de Formation Professionnelle (FMFP): Employers contribute to this fund for vocational training. The rate is typically 1% of the gross salary.
These contributions are calculated monthly based on the total gross salaries paid to employees, up to the applicable ceilings for each fund.
Income Tax Withholding Requirements
Employers are legally required to withhold Personal Income Tax (Impôt sur les Revenus Salariaux et Assimilés - IRSA) from the gross salaries paid to their employees each month. The amount of IRSA to be withheld is determined by applying a progressive tax scale to the employee's taxable income.
The taxable income is generally the gross salary less mandatory employee contributions (such as the employee's share of CNaPS contributions). The progressive tax rates for IRSA expected for 2025 are typically structured as follows:
| Taxable Monthly Income (MGA) | Tax Rate |
|---|---|
| Up to 350,000 | 0% |
| 350,001 to 400,000 | 5% |
| 400,001 to 500,000 | 10% |
| 500,001 to 600,000 | 15% |
| 600,001 to 800,000 | 20% |
| 800,001 to 1,000,000 | 25% |
| Over 1,000,000 | 30% |
There is also a minimum monthly IRSA amount payable if the calculated tax is below this threshold, currently set at MGA 2,000 per employee. Employers must calculate the correct IRSA amount for each employee based on their monthly taxable income and remit the total withheld amount to the tax authorities.
Employee Tax Deductions and Allowances
Employees in Madagascar can benefit from certain deductions and allowances that reduce their taxable income for IRSA purposes. The most significant deduction is the employee's mandatory contribution to CNaPS.
- CNaPS Contributions: Employees contribute a percentage of their gross salary to CNaPS. The expected rate for 2025 is 1% of gross salary, up to the same ceiling as the employer contribution. This 1% is deductible from the gross salary before calculating IRSA.
- Other Potential Deductions: While less common or specific, certain other mandatory contributions or specific allowances stipulated by law or collective agreements might be deductible. However, the primary and most common deduction is the employee's CNaPS contribution.
It is important for employers to correctly calculate the taxable base by subtracting these authorized deductions before applying the IRSA tax scale.
Tax Compliance and Reporting Deadlines
Employers in Madagascar must adhere to strict deadlines for reporting and paying withheld taxes and employer contributions.
- Monthly Declarations and Payments: Employers are required to file a monthly declaration (Déclaration des Salaires - DS) detailing salaries paid, IRSA withheld, and social contributions due. The corresponding payments for IRSA, CNaPS, OSTIE, and FMFP are typically due by the 15th of the following month.
- Annual Declarations: An annual declaration summarizing all salaries paid and taxes/contributions remitted throughout the year is also required. The deadline for the annual declaration is generally by March 31st of the following year.
Failure to meet these deadlines can result in penalties, interest, and potential audits by the tax and social security authorities.
Special Tax Considerations for Foreign Workers and Companies
Foreign workers and companies operating in Madagascar may face specific tax considerations.
- Tax Residence: The tax treatment of foreign workers depends on their tax residence status in Madagascar. Individuals who are considered tax residents are generally taxed on their worldwide income, while non-residents are typically taxed only on income sourced within Madagascar. Residence is usually determined by physical presence (e.g., spending more than 183 days in a 12-month period).
- IRSA for Non-Residents: Non-resident employees earning income from employment exercised in Madagascar are subject to IRSA withholding on that income. The same progressive tax scale generally applies, although specific rules might exist depending on the individual's circumstances and any applicable double taxation treaties.
- Employer Obligations for Foreign Companies: Foreign companies employing staff in Madagascar, even without a permanent establishment, may still be required to register as an employer for tax and social security purposes and fulfill the same withholding and contribution obligations as local employers. Engaging an Employer of Record can simplify compliance for foreign companies.
- Double Taxation Treaties: Madagascar has entered into double taxation treaties with several countries. These treaties can provide relief from double taxation and may affect the tax obligations of foreign workers and companies. The provisions of the relevant treaty should be consulted.
