Tax Guide for US Expats Living and Working in Madagascar
Who Is Liable For Income Taxes in Madagascar
Resident and nonresident individuals are subject to tax on their Malagasy-source income, including employment income.
Resident individuals are individuals who are present in Madagascar for at least 183 days in a tax year (calendar year).
Nonresident individuals are also subject to tax on certain specified types of income, such as income allocated to Madagascar by a multilateral or bilateral tax treaty.
Income subject to tax. Income subject to income tax includes the following:
- All types of remuneration received for public or private employment, including fringe benefits (telephone communications, cars and accommodation)
- Allowances received by employees that are intended to supplement wages, regardless of the name of the allowances
- Indemnities and allowances paid to leaders of companies
- Mandatory alimony, except for amounts allocated to dependent children
- Life annuities
Employers must withhold tax from their employees’ wages.
Certain types of income are exempt from income tax, including family allowances, military and civil disability pensions and military retirement pensions.
Deductions. Certain expenses are deductible, including the following:
- Payments to the Caisse Nationale de Prévoyance Sociale (CNAPS), the government fund for social security, and for government or private medical insurance (see Section C)
- Compulsory alimony payments
Rates. The first MGA 250,000 of monthly income is not taxable. Monthly income exceeding MGA 250,000 is subject to tax at a rate of 22%.
B. Estate tax
A lump-sum tax ranging from MGA 10,000 to MGA 40,000 is imposed on inheritances.
C. Social security
Employers and employees must make contributions to the CNAPS, which uses the contributions to make payments for various items including pensions and compensation for industrial accidents and occupational diseases. The contribution rates are 13% for employers and 1% for employees. The rates are applied to the gross monthly remuneration of each employee up to MGA 721,885. Employers withhold the employees’ contributions from the employees’ wages.
Employers and employees must also make monthly contributions to either an Organisation Socio-sanitaire Inter Entreprise (OSIE) or to AMIE. These entities provide medical insurance. The contribution rates are 5% for employers and 1% for employees. The rates are applied to the gross monthly remuneration (no remuneration limit is imposed). Employers may purchase medical insurance from private companies instead of OSIE or AMIE, but these private companies must have special authorization from the Malagasy administration. Employers may also purchase supplemental medical insurance from private companies in addition to insurance from OSIE and AMIE.
Double tax relief and tax treaties
Madagascar has entered into tax treaties with France and Mauritius
To learn more about the history, culture, economy and other information about Madagascar
We have been preparing US income tax returns for US Citizens and permanent residents living in Madagascar 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 Madagascar 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 Madagascar.
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 request a consultation by phone, skype or email