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A NEW LAW ON INVESTMENTS IN MADAGASCAR
Because of its choice to open its economy, Madagascar must enhance its competitiveness and seize all commercial opportunities to be able to get real benefits in the context of globalization.
In this sense, the draft law No.023/2007 of the June 11, 2007, on investments in Madagascar has been votes with unanimity at the National Assembly. This law makes up one of the government’s key tools to enhance specifically direct foreign investments in Madagascar.
The goals of the new regulation are to:
- create a framework that encourages the completion of investments
- provide national and foreign investors with a level playing field
- simplify tax and administrative procedures
- strengthen the competitiveness of companies established in Madagascar
- allow access to land tenure properties for Malagasy companies whether or no they are controlled by foreign interests.
The EDBM (Economic Development Board of Madagascar) constitutes the main center of all the activities designed to promote investments. Taking over from the Unique counter for investments and corporate development (Guide), the EDBM acquires a whole new dimension with this law. This latter highlights all of its new attributions.
This structure, directly under the supervision of the Presidency of the Republic, is vested with exceptional power. It can issue visas, grant permits to purchase lands, as well as attestations for free zone companies. In order to be applicable, the law still has to be examined and approved by senators and vetted by the President of the Republic.
Besides, the government commits to ensure the perpetuation of a more attractive fiscal environment. The reform of the tax system pursuant to the 2008 fiancés law is already included in this dynamic, with considerable mitigating measures both for employees and companies.
AN EASIER FISCAL SYSTEM FROM 2008
The government has undertaken this reform of the tax system policy in view of improving business climate in Madagascar. The first goal is to attract large numbers of foreign investments, promote the blossoming of local companies and of course improve tax recovery at the level of the administration. The major features of this reduction have been studied with the International Monetary Funds so they can be beneficial to all sectors of activities.
Removal of 14 taxes called « harmful »
The number of taxes will be cut down from 28 to 14 from 2008. This reform constitutes a concrete facilitating measure both for taxpayers and the administration. The taxes removed include the professional tax, license tax for tourism, forfeit tax on transfers, as well as excise duties for an extended list of products.
Nevertheless, other taxes have been merged, namely the case of an unique proportional income tax of 25 %, which now gathers the tax on corporate profits (Ibs), the tax on the non-salary income (Irns) and the tax on real estate profits (Ipvi) .
Other new provisions
Other operational provisions have also been made in order to perpetuate this environment favorable to investments:
- Payment through bank transfer, already operational among major companies, will be progressively generalized;
- An observatory of mediation will be set up to act as a platform for periodical meetings between the administration and businesses;
- The online declaration will be operational at the middle term;
- A site shall be designed within the Department of Major Companies.
For the Customs Code, the implementation of the agreements at the level of the SADC and the COMESA makes up the main novelty.
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