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Hiring in Madagascar
Madagascar, officially known as the Republic of Madagascar, is an Island country in East Africa. Antananarivo is the capital and the largest city of Madagascar. Malagasy and French are the official languages. Madagascar is a low income country. Madagascar’s main industries are agriculture, tourism, fishing, forestry and mining. Its main trading partners are France, United States, South Africa, Germany, China and Netherlands. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Madagascar’s legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. Labor Code stipulates that employees are entitled to 30 days of annual leave. Both residents and non-residents are subject to salary income tax on their worldwide income. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Madagascar’s Labor Code and tax laws.
statutory labor requirements
Probation Period
- Probationary periods of up to 6 months are allowed with a one-time renewal.
Annual Leave
- In general, employees are entitled to 2.5 days of paid leave per month.
Public Holidays
- New Year's Day (1st January)
- Martyrs' Day (29th March)
- Easter Monday (13th April)
- Labor Day (1st May)
- Ascension Day (21st May)
- Eid al-Fitr
- Whit Monday (1st June)
- Independence Day (26th June)
- Assumption of Mary (15th August)
- All Saints' Day (1st November)
- Christmas Day (25th December)
Maternity Leave
- Female employees are generally entitled to 14 weeks of paid maternity leave, at least 8 of which should be taken after the child’s birth.
- Leave is paid at 50% for employees covered by the labor code and at 100% for public servants.
Paternity Leave
- Men are generally entitled to up to 10 days each year for family events.
Sick Leave
- Employees are entitled to at least 5 paid sick days per year.
Work Hours
- In general, the work week is 40 hours, with five, eight-hour days.
Overtime
- For the first 8 overtime hours: 30 percent premium rate; and for the following overtime hours: 50 percent premium rate.
Notice Period
- The notice period is determined by the type of employment and length of service, and ranges from 8 days to 6 months.
Severance
- Employees are not generally eligible for severance pay, except if they are terminated for economic reasons, in which case they are entitled to 10 days’ wages for each year of service, up to 6 months’ of wages.
13th / 14th Month Pay
- Yes
- There is no statutory requirement to pay the 13th or the 14th month salary.
- However, it is customary for the 13th month salary to be paid.
income tax
- Individuals are subject to business income tax, called Impôt sur les Revenus (IR), or to salary income tax, called Impôt sur les Revenus Salariaux et Assimilés (IRSA), depending on the nature of the revenue earned.
- For IRSA purposes, an individual resident in Madagascar, either Malagasy or of a foreign nationality, is liable on worldwide income.
- For IR purposes, an individual who is not resident in Madagascar is liable only on income from Malagasy sources.
- IRSA
-
- For taxable salary income up to MGA 350,000, tax due is MGA 2,000.
- For taxable salary income more than MGA 350,000, the IRSA is 20%, with a minimum tax of MGA 2,000.
- IR
-
- An individual business having an annual turnover of less than MGA 200 million is subject to IR at a rate of 5% (with a possible reduction of 70%) of the annual turnover.
- However, the minimum tax is MGA 16,000.
- An individual business having an annual turnover exceeding MGA 200 million is taxable in the same manner as a corporation (income tax on the profit).
|
Salary Income Tax (IRSA) |
|
|
Taxable Income |
Tax Rate/Amount |
|
Up to MGA 350,000 |
MGA 2,000 |
|
More than MGA 350,000 |
20% |
|
Business Income Tax (IR) |
|
|
Taxable Income |
Tax Rate/Amount |
|
Less than MGA 200 million |
5% |
|
More than MGA 200 million |
Corporate tax rate |
deductible expenses
Employment Expenses
- The following items are deductible from gross income for IRSA purposes:
-
- Contributions to the social security system at 1% of the monthly salary income, with a capped amount of contribution corresponding to 1% of eight times the monthly legal minimum salary.
- Contributions to the statutory health organization at 1% of the monthly salary income.
- Contributions to the statutory professional training funds at 1% of the monthly salary income.
- Retirement contributions, capped at 10% of the remuneration subject to the contribution.
- Mandatory payment of freely paid arrears on rents (i.e. an amount periodically payable by a person to another person until death of this last person).
- Alimony payments, under certain conditions.
Personal Allowances
- Taxpayers are entitled to an IRSA reduction of MGA 2,000 per dependent.
Business Deductions
- Where an individual derives income from a trade, business, or profession having an annual turnover exceeding MGA 200 million, expenses duly justified can be deducted from the taxable revenue for IR purposes.
- If the annual revenue is less than MGA 200 million, a deduction of 30% is applicable on the gross revenue.
- However, the annual deduction cannot exceed MGA 2 million.
- A tax reduction of 2% of the amount of purchases of goods and services and equipment subject to regular invoices is applicable.
- However, tax due cannot be less than 3% of the turnover.
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Deductible Expenses |
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|
Employment Expenses |
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|
Personal Allowance |
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Business Deductions |
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immigration
- Foreigners who want to enter Madagascar must obtain a tourism visa or business visa for a stay of less than three months.
- A tourism visa can be obtained at the airport on arrival in Madagascar.
- A business visa can be obtained at the Malagasy embassy or consulate in the foreigner’s home country.
- These types of visas do not allow foreigners to work in Madagascar.
- Foreigners who want to work in Madagascar must obtain a transformable visa, which is valid for one month.
- The fee for this visa is MGA140,000 (USD38.34).
- It can be obtained at a Malagasy embassy or consulate in the foreigner’s home country.
- The transformable visa must be changed to a long-stay visa for a foreign worker within one month after he or she enters Madagascar.
- If no Malagasy embassy or consulate is located in the home country, an entry visa for workers, called a “boarding agreement,” may be obtained from the Ministry of Foreign Affairs in Madagascar before departure.
- After the foreigner arrives in Madagascar, the authorities can provide the foreigner with a transformable visa.
- The application for a transformable visa and the boarding agreement requires a prior work permit issued by the Ministry of Labor as well as a local labor contract stamped by the Ministry.
- To work in Madagascar, foreign nationals must obtain a work permit from the Malagasy Ministry of Labor.
- This permit is normally issued within two months following the application.
- The following are the requirements for obtaining a work permit:
-
- A local labor contract mentioning an address in Madagascar must be concluded with a local entity and receive the prior approval of the Ministry of Labor
- Payment of a fee of EUR100
|
Type of Visa/Permit |
Documentation |
Validity |
Eligibility |
|
Tourist Visa |
|
3 months |
|
|
Business Visa |
|
3 months |
|
|
Work Permit |
|
1 year |
|
value added tax
- The VAT rate is 20%, and the VAT rate on export is 0%.
|
VAT |
|
|
Standard Rate |
20% |
|
Zero Rate |
0% |
withholding tax
The following table sets out the applicable withholding tax rates on dividends, interest and royalties (the tax is a final tax for non-residents)
|
Payment |
Residents |
Non-residents |
|
Dividends |
0% |
0% |
|
Interest |
20% |
20% |
|
Royalties |
n/a |
10% |
termination
- Employees may be terminated for cause with written notice.
- The notice period is determined by the type of employment and length of service, and ranges from 8 days to 6 months.
- Employees are not generally eligible for severance pay, except if they are terminated for economic reasons, in which case they are entitled to 10 days’ wages for each year of service, up to 6 months’ of wages.
statutory benefits
- These are mandatory benefits as postulated by law
- These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, and severance pay
- Statutory benefits also include social security benefits
|
Statutory Benefits |
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Probationary Period |
|
Annual Leave |
|
Public Holidays |
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Maternity Leave |
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Paternity Leave |
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Sick Leave |
|
Overtime Pay |
|
Notice Period |
|
Severance Pay |
|
Social Security Benefits |
payments and invoicing
IRSA
- The tax on salary and all statutory social contributions are withheld monthly by the employer, who is responsible for tax filing and payment.
- Employees are not required to file individual tax returns unless they work for an employer that is not established in Madagascar.
- If the employee does not have any business income, there is no requirement to file for IR. Payment of IRSA must be done before the 15th day of each month.
- Payment of social tax contributions must be done quarterly.
IR
- IR returns for small individual businesses must be filed at the tax office before 31 March of each year.
- IR returns for large individual businesses must be filed before 15 May of each year for businesses having financial years ended on 31 December, before 15 November of each year for businesses having financial years ended on 30 June, and within 15 days of the fourth month of the end of financial year for other businesses.
- WHT on foreign services payable to the tax authorities within one month of the date of payment.
- Payment of IR must be done at the same time as the tax return filing and at the same office.
ease of doing business
- The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
- Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
- According to the World Bank Madagascar ranked 161st in the World in 2019 in terms of ease of doing business.
employee accruals
| Christmas Bonus% |
Based on one month bonus |
| Christmas Bonus Over Vacations % |
0% |
| Severance per Year % |
Employees are entitled to severance pay that equals two weeks of pay after one year of service (2.74% of annual salary) |
| Vacations % | Employees are entitled to an annual holiday of 30 days (8.24% of annual salary) |
| Notice % |
Employees are entitled to 8 days of notice after one year of service (2.19% of annual salary) |
| Christmas Bonus Over Notifications% | 0% |
| Vacations Plus% | 0% |
| Total percentage of Salary (yearly) | The total employment accruals as a percentage of salary per anum are equal to 21.5% |
employer accruals
Additional information (Country Accruals)
| National Pension fund | 13.00% |
| Statutory health organization | 5.00% |
| Sick leave | 1.37% |
| Maternity | 14 weeks |
| Vacations | 9.59% |
| Description |
Employers contribute to the National Pensions Fund at 13% of cash remuneration, up to a monthly maximum amount of 13% of eight times the legal minimum salary, per employee. In addition, employers are required to contribute 5% of employee remuneration to the statutory health organisation, up to a monthly maximum of 5% of eight times the legal minimum salary. Employees contribute to the National Pensions Fund at 1%, subject to a monthly maximum amount of 1% of eight times the legal minimum salary. In addition, employees are also required to contribute 1% of monthly remuneration to the statutory health organisation, up to a monthly maximum of 1% of eight times the legal minimum salary. Since 1 January 2019, employers are required to contribute to the Fonds National sur la Formation Professionnelle (FNFP). The contribution rate is 1% of employee taxable remuneration. The contribution is capped to an amount calculated on eight times the legal minimum salary. |
Employer Accruals Additional information
| Employment Accruals | ||
| Annual Leave | In general, employees are entitled to 2.5 days of paid leave per month. | This equals 8.22% (30/365 days) of annual income |
| Maternity Leave | Female employees are generally entitled to 14 weeks of paid maternity leave, at least 8 of which should be taken after the child’s birth. Leave is paid at 50% for employees covered by the labor code and at 100% for public servants. |
This equals 50% of 26.9% (14/52 weeks) of annual income |
| Paternity Leave | Men are generally entitled to up to 10 days each year for family events. | This equals 2.74% (10/365 days) of annual income |
| Sick Leave | Employees are entitled to at least 5 paid sick days per year. | This equals 1.36% (5/365 days) of annual income |
| Overtime | For the first 8 overtime hours: 30 percent premium rate; and for the following overtime hours: 50 percent premium rate. | Depends on the number of overtime hours worked |
| Severance | Employees are not generally eligible for severance pay, except if they are terminated for economic reasons, in which case they are entitled to 10 days’ wages for each year of service, up to 6 months’ of wages. | This equals 2.74% (10/365 days) of annual income |
| Social Security | Employers contribute to the National Pensions Fund at 13% of cash remuneration, up to a monthly maximum amount of 13% of eight times the legal minimum salary, per employee. In addition, employers are required to contribute 5% of employee remuneration to the statutory health organization, up to a monthly maximum of 5% of eight times the legal minimum salary.Since 1 January 2019, employers are required to contribute to the Fonds National sur la Formation Professionnelle (FNFP). |
This equals 18% of annual income |
