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June 22, 2018

Budget 2018-19: Fiscal Measures

Corporate Social Responsibility (“CSR”)

  • Companies will not be allowed to offset any unused tax credit, including foreign tax credit, against any CSR payable;
  • Companies benefiting from tax holidays will still be required to contribute to CSR;

As from 1 January 2019, companies can continue to contribute 50% of CSR (instead of 75%) to the Mauritius Revenue Authority (“MRA”) provided they receive approval from the National CSR Foundation.

Tax holidays

A five-year tax holiday will be introduced for Mauritian companies collaborating with the Mauritius Africa Fund with respect to investment in the development of infrastructure in the Special Economic Zones

 

PERSONAL TAX

Income tax

  • An individual deriving an annual net income up to MUR 650,000 will be taxed at a lower rate of 10% instead of 15%
  • In addition, effective as from the income year starting on 1 July 2018, the Income Exemption Threshold for all categories has been increased by MUR 5,000

Negative Income Tax

  • The Negative Income Tax scheme was introduced as from 1 July 2017 to provide financial support to employees deriving monthly earnings less than or equal to MUR 9,900;
  • It has been proposed that the eligibility criteria will be reviewed with retrospective effect as from 1 July 2017 as follows:
  • The Negative Income Tax allowance will be based on the monthly basic salary instead of the total monthly earnings;
  • However, an employee will not be eligible to Negative Income Tax if his monthly earnings exceed MUR 20,000;

INDIRECT TAXES

Value Added Tax (VAT)

Claw Back of VAT on Capital Goods

The MRA will be empowered to claw back VAT refunded on capital goods exceeding Rs 100,000 (other than building) where a person has voluntarily registered for VAT purposes solely to benefit from VAT refund on capital goods following which they deregister.

VAT Administration

  • To facilitate the cash flow operation of businesses, a VAT registered person will no longer be required to pay a VAT amount on import of capital goods if the VAT payable exceeds MUR150,000. However, the import of capital goods will still have to be declared in the VAT return.
  • The VAT Act currently provides that a VAT-registered person has to submit a consolidated list of taxable supplies electronically along with its VAT return. It is now being proposed that the list of taxable supplies will be reported in terms of serially numbered invoices instead of taxpayer-wise.

TAX ADMINISTRATION

Tax deduction at source (TDS)

  • TDS at the rate of 3% has been introduced on commission payments
  • TDS at the rate of 10% will apply on rent paid to a non-resident
  • Directors fees are no longer subject to TDS

5% payment on appeal to Assessment Review Committee (“ARC”)

  • Presently, 10% of the amount assessed is payable for lodging an objection against a tax assessment made by the MRA. No additional payment is required where the taxpayer is not agreeable with the decision of the MRA and decides to file an appeal before the ARC
  • It has been proposed that an additional payment of 5% of the amount assessed will have to be paid where written representation is made to the ARC
  • This measure will be applicable for assessments raised by both the MRA and the Registrar-General’s Department.

Recovery of arrears of revenue

The Act will be amended so that the recovery actions for tax arrears under the various revenue laws are streamlined.

Expeditious Dispute Resolution of Tax Scheme (“EDRTS”)

This measure, which was re-introduced in the last fiscal year, will be extended to assessments raised from 1 July 2015 to 30 June 2016 for disputes of less than MUR 10 Million.

Exchange of information with other Countries

A person who fails to provide information required for the automatic exchange of information with other countries will be subject to penalties.

Review of penalty by Registrar-General’s Department

  • The penalty applicable on land transfer tax and registration duty where an immovable property is being undervalued between 10% and 50% is being reduced from 20% to 10% and a reduced penalty of 25% (currently 50%) will apply if the difference exceeds 50% of the declared value.
  • Interest at the rate 0.5% per month up to a maximum of 50% of the tax or duty remaining unpaid will also be applicable.

MITCO COMMENTS:

The 2018/2019 budget provides for a number of tax measures aiming to provide incentives to boost the economy as well as implementation of certain tax reforms which would comply with the OECD recommendations. In a nutshell, these measures concerned the Corporate tax, Personal tax, Indirect tax and Tax Administration.

Under the Corporate tax, in an effort to align the domestic and global business taxation, except for banks a partial exemption of 80% would be available on certain specified income which would eventually lead to trading profits being taxed at 3%. Income tax exemption will be removed as from 1 July 2021 for freeport companies, but the latter will still be exempted from CSR.  Companies will not be allowed to offset any unused tax credit, including foreign tax credit, against any CSR payable and companies benefiting from tax holidays will still be required to contribute to CSR. As from 1 January 2019, companies can continue to contribute 50% of CSR (instead of 75%) to the MRA provided they receive approval from the National CSR Foundation. The Minister has also included the work at home scheme and a five-year tax holiday will be introduced for Mauritian companies collaborating with the Mauritius Africa Fund with respect to investment in the development of infrastructure in the Special Economic Zones.

In view to alleviate the gap between high and low income earners, the Minister has lowered the income tax from 15% to 10% for employees an annual net income up to MUR 650,000.  The eligibility criteria of the Negative Income Tax scheme was introduced which was introduced on 1st July 2017 to provide financial support to employees deriving monthly earnings less than or equal to MUR 9,900 will be reviewed with retrospective effect as from 1 July 2017.

Certain measures with respect to indirect taxes on VAT and tax administration have also been introduced.



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