Tax Guide for US Expats Living and Working in Mauritania
Who Is Liable For Income Taxes in Mauritania
Residents of Mauritania are taxed on worldwide income. Nonresidents are taxed on their Mauritanian-source income only.
Mauritanian and foreign individuals are considered to be residents for tax purposes if they meet any of following criteria:
- They maintain a home in Mauritania as owner or renter.
- They reside primarily in Mauritania.
- They perform a professional activity in Mauritania, unless such activity is accessory (not the principal source of income)
Foreign-source income is not taxable in Mauritania if the recipient can prove that such income has been taxed in the source country.
Income subject to tax. Resident individuals are subject to general income tax on their worldwide general income, including the following income:
- Self-employment or business income derived from commercial, noncommercial, or agricultural activities
- Rental income
- Investment income
- Capital gains that are not taxable as self-employment or business income
- Salaries and wages that have not been subject to the tax on salaries
Employment income. Gross employment income includes public and private wages, salaries, perquisites, bonuses, fringe benefits and supplement salaries (payments made in addition to salary, such as rental subsidies and overtime pay).
The following types of income are exempt from tax:
- Compensation and allowances relating to governmental or local representative duties.
- A fixed amount of MRO 30,000.
- Up to MRO 10,000 per month for all compensation and allowances except those relating to housing, transportation, liability and office (allowances relating to liability or office are allowances paid to employees with administrative or financial responsibilities, such as those who are on call or must remain late at the office).
- Family or state allowances.
- Legal payments for war disability.
- Allowances for professional accidents (allowances for accidents caused by working tools or the handling of products in the work place).
- Legal retirement benefits.
- Fringe benefits not exceeding 20% of remuneration. However, only 40% of fringe benefits exceeding the exempt amount is included in taxable income.
A nonresident individual is taxable on income derived from services performed in Mauritania.
Employers withhold tax from salaries monthly. Salaries that are subject to withholding tax are not included in the tax base for general income tax purposes.
Self-employment and business income. Self-employment activities are divided into commercial and industrial activities, non-commercial activities, and taxable activities that are not subject to a special tax. Income from each category is subject to proportional tax and general income tax.
The taxation of these types of income is summarized below.
Individuals are taxed on commercial and industrial income if they derive profits from activities with respect to industry, skilled trade, commerce, agriculture, fishing and forestry. If agricultural products are sold, agricultural production is considered a commercial activity. If agricultural production is used as food for the farmer only, it is not taxed. Taxable income equals the net profit derived from all such activities carried on by the taxpayer, including capital gains on transfer of business assets. Taxable income is computed on an accrual basis and taxed at a rate of 25%.
Individuals are taxed at a rate of 30% on professional income from noncommercial activities and from other occupations and business activities not subject to a special tax. Taxable professional income equals the difference between income received, including capital gains on transfer of assets, and expenses incurred with respect to the performance of the relevant activities. Taxable professional income is computed on a cash basis.
Investment income. Investment income, which includes dividends, directors’ fees and interest on bonds, debentures and bank deposits is subject to proportional tax at a rate of 10%. However, interest on banking deposits up to MRO 1 million paid to Mauritanians performing activities abroad are exempt from tax.
Rental income. Rental income includes rentals of houses, office buildings, factories and real estate without buildings. Rental income is subjected to proportional tax at a rate of 10%.
Taxation of employer-provided stock options. No specific rules apply to the taxation of employer-provided stock options.
Capital gains. Capital gains realized in the performance of professional, commercial and agricultural activities are taxed as ordinary income, with certain relief available.
Capital gains realized on the transfer of commercial business assets are tax-free if the proceeds are reinvested during the following three years in the business assets of an enterprise located in Mauritania that is owned by the taxpayer.
Capital gains on the transfer of shares and real property that were not realized in the performance of self-employment activities are not subject to tax.
Deductions
General. Expenses are deductible for general income tax purposes if they satisfy the following conditions:
- They have not been taken into account in the calculation of the categories of income described above.
- They were effectively incurred during the tax year.
- They are evidenced by documents.
Personal deductions. Under the tax law, the following personal expenses may be deducted:
- Losses or expenses that are recoverable under insurance contracts or indemnities
- Tax on the income of individuals or interest payable on such tax
- Expenses relating to income that is not included in taxable income
- Expenses for which subsidies have been or will be received
- Rent or cost of repairs to premises not occupied for purposes of trade
- Costs incurred by individuals to maintain themselves and their families
- Domestic or private expenses of individuals including the cost of travel between the individual’s residence and place of work
Business deductions. For the self-employment and business income, the following expenses are deductible
- General expenses incurred for business purposes, which include personnel and social security contribution expenses, rental and leasing expenses, finance charges and certain professional taxes, including business tax, license fees and tax on wages
- Depreciation expenses computed using the rates established by the tax administration
Rates. In Mauritania, the following two levels of income taxation exist:
- Proportional tax on each particular type of income (employment income, self-employment and business income, investment income and rental income).
- Annual general income tax, which is a tax on total or global income, including the specific types of income subject to proportional tax. If an individual has several sources of income, he or she is taxed annually on global income, and he or she may claim deductions for taxes that have been paid on the specific types of income.
The rates of the proportional taxes are described in Income subject to tax above. The calculation of the general tax is summarized below.
General income tax is levied at rates ranging from 5% to 33%. Family-coefficient rules reduce the progressive general income tax rates for taxpayers. Under the family-coefficient system, the applicable progressive tax rates are determined by dividing taxable income by the number of family allowances of the taxpayer.
The final progressive tax liability is calculated by multiplying the tax computed for one allowance by the number of allowances claimed.
Relief for losses. Losses may not be deducted from income from other categories, but may be carried forward for three years to offset income in the same category.
B. Inheritance and gift taxes
The Mauritanian tax law does not contain an inheritance tax. However, donations and inter vivos gifts are subject to registration fees at various rates that vary according to the type of assets transferred. For example, donations and inter vivos gifts of real estate and goods are subject to a registration fee at a rate of 2%.
C. Social security
Social security contributions are withheld monthly by employers. They are computed on the basis of gross remuneration paid up to MRO 70,000. The rates of social security contributions are 15% for employers and 1% for employees. Social security benefits relate to sickness, maternity, retirement, disability, or invalidity. The amount of benefits depends on the total amount of contributions made on behalf of the employee.
Double tax relief and tax treaties
Foreign taxes paid may be deducted as an expense from taxable income. Mauritania has entered into double tax treaties with France and Senegal. In addition, Mauritania is a signatory of the West African Economic Community (Communauté Economique de L’Afrique de L’Ouest, or CEAO) tax treaty. Other signatories include Burkina Faso, Côte d’Ivoire, Mali, Niger and Senegal. Under the CEAO treaty, dividends are taxed in the state of source.
The treaties generally provide the following relief:
- Commercial profits are taxable in the treaty country where a foreign firm performs its activities through a permanent establishment.
- Interest is taxable in the state of residence of the beneficiary, but the state of source may withhold tax at source if allowed by the domestic law of such state.
- Employment income is taxed in the treaty country where the activity is performed, except in the case of a short assignment.
The treaties with France and Senegal provide that royalties and remuneration paid to a nonresident for services rendered in Mauritania are taxable in the state of residence of the beneficiary, but the state of source may withhold tax at source if allowed by the domestic law of such state.
To learn more about the history, culture, economy and other information about Mauritania
We have been preparing US income tax returns for US Citizens and permanent residents living in Mauritania for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Mauritania and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed while working, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Mauritania.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a consultation by phone, skype or email