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The law of 17 January 2008 defined the provisions governing the Free Zone and Enterprise regime. This regime applies to investments made by national or foreign promoters, or in association of both, in export-oriented activities and according to the categories referred to in the meaning of this law.
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By export, the law means the sale abroad or to Free Zones and Enterprises of goods and services originating in or coming from Madagascar.
Free Enterprises are export-oriented companies and are made up of three categories: industrial processing companies; service companies; intensive basic production companies.
Tax incentives
– The application of Corporate Profit Tax at the rate of 10% and a Minimum Collection at the rate of 5%,
– From the date of effective operation (i.e. 12 months after the certificate is issued), the application of an exemption from Corporate Profits Tax and the minimum collection during the first 15 financial years for free zones, during the first 5 financial years for industrial processing free companies, and during the first 2 financial years for service free companies
– The application of tax reduction for investments in depreciable assets made after the period of exemption from Corporate Profit Tax,
– A cap of 30% on the taxable base for the amount of tax on expatriate salary income,
– Free registration of acts concluded by free companies when the latter are subject to the registration formality.
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Customs incentives
– Non-submission to VAT of imports, and subjection to VAT at the rate of 0% of exports of goods and services, or sales of goods and services to other Free Enterprises,
– The guarantee of the stability of the tax regime established by law no. 2007-037 of January 14, 2008, except for more favorable provisions,
– Exemption from customs duties and any import tax for materials defined and intended for the preparation, development and operation of Free Zones and Enterprises,
– Exemption from customs duties and any export tax for goods and services exported abroad, or goods and services sold to other Free Enterprises, and
– The possibility of selling products and services on national territory, within the limit of 5% of the production actually exported (these sales being subject to the application of VAT).
Companies located in free zones must export at least 95% of their production.
Labor-intensive industries, such as the textile industry, have already benefited from these incentives, thanks to easier access to European and American markets through AGOA and bilateral trade agreements.
With Madagascar's participation in SADC, COMESA and IOC, these opportunities have increased significantly.
Any investor is free to carry out his activity without prior investment authorization.
Each investor is free to transfer their capital or their own income as they wish. The law respects property rights (collective and/or individual). All investors receive the same treatment. They are free to manage their staff within the framework of the Labor Code and the social security policy. At the same time, the State is committed to maintaining a sustainable, fair tax system conducive to the development of foreign investors' activities.
The Malagasy State's commitments in terms of foreign investments.
According to figures from the EDBM in 2019, 41,40% of newly created companies were foreign companies, hence the importance of providing a stable, transparent, and attractive business environment for foreign investors. Indeed, this is a branch of the economy with very high added value. Everything has been done to establish an effective system for securing capital and confidentiality regarding collective and/or individual property rights. In Madagascar, all investors, whether foreign nationals or natives, benefit from the same legal treatment. With this in mind, numerous laws have been adopted.
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