Register your business

A natural or legal person who carries out an activity in Madagascar must register within 30 days of starting the activity. Opening a bank account is mandatory for any newly registered company.

There are two types of entities that can be registered in Madagascar:

  • a subsidiary, which will adopt an autonomous legal form according to the Malagasy Law, registered as a commercial company, usually a limited company (SA) or a limited liability company (SARL);
  • a branch, which does not have an independent legal personality, cannot act in its own name. In practice, the branch can have several names such as liaison office, resident representative or representative office, commercial branch, agency .... 

A newly registered business entity must apply for taxpayer identification number (NIF), a statistics number from the National Bureau of Statistics (INSTAT) and an RCS number from the Trade and Companies Registry (Registre des Commerces et des Sociétés). Registration is also required with the National Fund for Social Welfare (CNaPS) (see Labour tab). 

The entities are represented at the Economic Development Board of Madagascar, within its one stop shop, which is the technical body for company registration. 

Register a subsidiary as a domestic limited company (société anonyme)

Investors may choose to establish a domestic limited company when they fund their activities using a debenture loan (which is not allowed for a domestic limited liability company) or if the company is planning to expand its activities in the future and will require significant investments. 

Investors establishing a domestic limited company must follow these steps:

  • Register the company at the one stop shop of the Economic Development Board of Madagascar (EDBM): submit the documents described in the procedure below.
  • Obtain the documents of incorporation: collect the registration documents from EDBM

Register a subsidiary as a domestic limited liability company (société à responsabilité limité)

Alternatively, investors may choose to establish a limited liability company when its associates envisage a degree of relational proximity or a more restricted activity than that of a limited company.

Investors establishing a domestic limited liability company must follow these steps:

  • Register the company at the one stop shop of the Economic Development Board of Madagascar (EDBM): submit the documents described in the procedure below.
  • Obtain the documents of incorporation: collect the registration documents from EDBM

Register a branch

Investors may choose to establish a branch for a short-term activities or market exploration. The structure is easy to register, but lacks legal autonomy. There is no limit on its duration.

The establishment of a branch requires only a minimum of formalities and creation costs: 

  • zero minimum capital required;
  • limited creation documents;
  • the company retains full control of its commercial policy;
  • does not have to hold a general meeting or board of directors; and
  • a limited cost compared to the subsidiary.

Find out more...

Relevant institutions Economic Development Board of Madagascar

One stop shop for creating your business - Economic Development Board of Madagascar

The Economic Development Board of Madagascar (EDBM) is an investment promotion agency. Its objective is to strengthen the competitiveness of the Madagascar's private sector by increasing foreign direct investment (FDI), recommending business incentives for investment, and helping investors set up and expand their business. Services provided at the one stop shop include:

  • Company creation.
  • Boarding agreements or 72-hour entry visas for the purpose of obtaining a convertible visa.
  • Company modification at the Trade and Commerce Registry.
  • Environmental permits.
  • Free regime companies and free zones.
  • Land requests.
  • Long-stay visas.
  • Opening authorizations, classification and licenses.
  • Prior notices of creation (tourism sector).
  • Residence permits and morality investigations carried out by the Ministry of Interior prior to long-stay visa approval.
  • Administrative costs simulation during company creation.
  • Statistical card modification.
  • Work permits.
Investors can communicate with EDBM in French or English, but all required documents must be submitted in French or translated into French.

Investment concessions

Madagascar provides a range of incentives for investors. These derive principally from the Investment Law. However, they are supplemented by additional legislation including the Free Zones and Free Companies Law and the Law on Large Mining Investments.

The purpose of the Investment Law is to regulate how investment is carried out in Madagascar. Key principles include:

  • no differential treatment between foreign and national investors;
  • simple administrative procedures through the EDBM and its one stop shop;
  • ability to recruit foreign employees without restriction;
  • ability for foreign investors to hold up to 100% of the shares in the company in which they operate, subject to the application of a regime specific to a regulated activity;
  • access to land for registered companies; and
  • the right to transfer funds abroad.

Free Zones and Free Companies Law

The Free Zones and Companies Law provides incentives to national or foreign investors investing in activities geared towards exports (at least 95% of production must be exported).

The regime grants the following:

  • Income tax rate: 
    • 5 year exemption of corporate tax for industrial firms engaged in processing and intensive production, then corporate tax at 10% thereafter.
    • 2 year exemption for service sector companies, then 10% thereafter.
    • 15 year exemption for all other types of free zone company, then 10% thereafter.
  • Exemptions from custom duties and VAT on imports of all inputs (such as equipment, raw materials, construction materials)

The following can benefit from the law:

  • Industrial processing companies (“entreprises industrielles de transformation” EIT).
  • Service companies (“entreprises de services” ES).
  • Basic intensive production companies (“entreprises de production intensive basique” EPIB).
  • Free Zones (“zones franches” ZF).

Investors who want to benefit from those incentives can submit a request for approval to EDBM, after registering online through the MIDAC online portal (Ministries, Departments and Control Agencies or “Ministères, départements et agencies de contrôle” ).

Law on Large Mining Investments

This law supplements the Mining Code and establishes a special regime for foreign exchange, taxation, customs and other elements concerning major mining investments. The law benefits investors, permit holders and industrial processing companies that make large investments in the mining sector (investments of more than 50 billion MGA, approximately 15 million USD). 

Incentives provided by the law include the following:

  • 5 year exemption on corporate tax followed thereafter by 25% for mining operations and 10% for processing operations.
  • International arbitration clause for settling any dispute.
  • Duty free import of equipment.

To benefit from these advantages, investors must obtain investment eligibility certification from the Ministry of Mines. The decision is made by decree of government committee, chaired by the President.

Environmental impact assessment

Depending on the sector, the investment may require an Environment Impact Assessment (EIA), integrating socio-economic and environmental issues. Subject to a positive evaluation of the EIA, the National Office for Environment (Office national de l'environnement - ONE) delivers an environmental permit combined with an environmental management plan. 

Investors need to submit an environment impact assessment along with the accompanying forms, which are detailed on the ONE website (see relevant institutions). 

If the documents have been correctly submitted and there are no further questions, processing time is 6 months.

What investors think

Starting a business in Madagascar is reported to be easy and straightforward, including the environmental impact assessment and compliance procedures. Investors of are also pleased with the assistance and follow-up provided by the EDBM. Nonetheless, daily administrative processes once the company is established tend to be slow and investors feel more effort should be devoted by the government to improving this aspect.

Population and skills

The population is estimated at 24.8 million, formed of 64% living in rural areas and 36% in urban ones. 55.68% are aged between 15 to 64.

The education system in Madagascar is based on the French model.

Primary and secondary education is free of charge. Primary completion rate was 68% as of 2016. Literacy rates for 15-24 year-olds was 71.6% in 2012

Tertiary education is also provided by several public and private institutions, the main ones being:

  • University of Antananarivo: Medical School, Faculty of Law, Economics, Management and Sociology, Faculty of Sciences, Faculty of Arts and Humanities, École Normale Supérieure, Ecole Polytechnique, School of Agronomic Sciences
  • Institute of Technology of Antananarivo: Civil Engineering, Industrial Engineering, Engineering of Business and Commerce Management
  • National Institute for Tourism and Hospitality (INTH)
  • Institute of Gemology of Madagascar (IGM)

Employment and contracts

International labour rights are recognized in domestic labour law, with provisions to ensure freedom of association; the prohibition of forced labour, child labour, employment discrimination; and the establishment of minimum wages, as well as weekly work hours.

Terms and conditions of employment may be changed with the agreement of the employee. The law provides workers in the private sector, except for seafarers, the right to bargain collectively.

Employment can include a probationary period of a maximum 6 months renewable once. The duration of the probationary period varies according to the workers' category (5 categories in total) as follows: 

  • 3 months for skilled and unskilled blue-collar workers and white-collar workers who do not have managerial responsibilities (cat. 1,2, 3) 
  • 4 months for engineers, employees with supervisory or managerial functions (cat. 4)
  • 6 months for high-ranking executives (cat. 5).

Beyond the probationary period, the notice period of termination of contract is three months, with the payment of a severance. In general, these payments are calculated at ten days of salary per full year of employment, and are capped at six months of salary. There is no unemployment insurance or other such safety net for workers laid off for economic reasons, aside from the mandated severance pay.

The Labour Law differentiates between firing for cause and lay-offs, and allows employers to adjust employment in light of fluctuating market conditions with the payment of a severance. The requirements are different in case of firing for cause. 

The law establishes labor dispute mechanisms, which proceed progressively from internal negotiation to outside mediation from the Ministry of Labour to arbitration or legal settlement through the competent court.

The Government is charged with setting occupational safety and health standards for workers and workplaces, but penalties for non-compliance are not defined in the labour code, which only requires an inspection before a company can open. The National Fund for Social Welfare, the country’s social security agency, also conducts inspections and publishes reports on workplace conditions, occupational health hazards, and workplace accident trends, though these inspections are also limited by a lack of resources.

Wages

The table below shows indicative monthly wages paid by foreign investors, which are significantly higher than the government-set minimum wage of 51 USD per month. The work week is up to six days with a maximum of 8 hours per day.

Prices

UnitValueYearComment
Senior managerUSD40002018per month + benefit
Middle ManagerUSD2000-30002018per month
EngineerUSD20002018per month
Graduate entryUSD5002018per month
Skilled technicianUSD12002018per month
Office assistantUSD3002018per month
Shop assistantUSD1002018per month
DriverUSD1002018per month
Security guardUSD1002018per month
Unskilled labourerUSD752018per month

Find out more...

Relevant documents Minimum wages as of 2018
Relevant institutions National Fund for Social Welfare

Non-wage benefits


Non-wage benefits provided by an employer.

Benefit Amount paid
Annual sick leave (certificate to be produced after third consecutive day) Sickness benefit (employer liability): Up to six months of paid sick leave are provided
Annual vacation leave 2.5 calendar days per month of actual service at least 30 business days after twelve (12) months of actual service
Severance pay 10 days of salary per full year of employment
Work during a public holiday compensation at a rate of 150% of the standard hourly premium rate

Social security contributions

The employer must register workers with a corporate health organization: OSIE, AMIT or FUNHECE.

Every employer must be registered with the National Fund for Social Welfare (CNaPS) for each of its activities. Registration must be made within 15 days after the opening or acquisition of the company, or hiring the first paid staff.

Contributions to the National Fund for Social Welfare (CNaPS) is mandatory, and shared between the employer and the employee. The rates depend on the type of establishment and are presented in the following table.


Social security contributions

Scheme Employer contribution Employee contribution
General 13% 1%
Agriculture and education 8% 1%
Servants Monthly = 0.25 USD 0.025 USD
Daily = 0,01 USD 0.001 USD
On set schedule = 0.00125 USD 0.000125 USD
Tobacco farmers (% of 1.25 USD per hectare cultivated) 1.5%
Seasonal/temporary agriculture (% of wages paid) 1%
Members and non-paid managers of the cooperative/societies of production and their employees (% of annual income) 1%
Students of Technical Education 0.0125 USD / school year / student

Work permits

Investors can recruit foreign employees without restriction. For this, they need a work permit issued by the Ministry of Civil Service, Administrative Reforms, Labour and Social Legislation (MFPRATLS).

The first application or the renewal of the work permit must be submitted to the MFPRATLS through EDBM.

Find out more...

Relevant documents Procedures to request a work permit

What investors think

Investors consider labour costs relatively low and note that people are willing to learn though in the quality of the skills acquired at school varies. Companies therefore often engage in in-house upskilling to bring people to speed. There is a shortage of qualified engineers and related professions, resulting in a high turnover. 

Leading positions in companies and operations requiring more advanced business and/or technical skills are still often retained by expatriate staff, although the return of Madagascans from abroad is mitigating this somewhat. Some investors report a lingering but fading suspicion towards foreign workers. Work permits are relatively easy to obtain.

No issues have been reported in relation to the administration of social security.

Electricity

JIRAMA (Jiro sy Rano Malagasy) is the main supplier of electricity (as well as water) in Madagascar, but there are other independent power producers. Regulation, control and monitoring of the sector are provided by ORE (Office de Régulation de l’Eléctricité - Electricity Regulation Office). 

JIRAMA's current generation fleet has a total installed capacity of 699 MW. Although Madagascar has a huge potential in hydro-electric generation (7,800 MW of which only 1.6% is exploited), in solar energy (2,000 kWh / m² / year) and in wind energy (2,000 MW), the current production of JIRAMA is largely dominated by thermal source energies. Currently, only 24% of installed power is of hydraulic origin and the remaining 76% is of thermal origin.

In addition, the Rural Electrification Development Agency (ADER) and the National Fund of Electricity (FNE) were created in 2002 to accelerate the electrification of the country, to promote the access to the service electricity base of the rural population, and develop renewable energy sources, including wind, hydro, and solar.


Cost of electricity

UnitValueYearComment
Industrial use: middle voltage zone 1USD0.072018Based on long use, added to a fixed premium fee of 15.5 USD/kW/month and royalties of 63.3USD/month
Industrial use: middle voltage zone 2USD0.162018Based on long use, added to a fixed premium fee of 10.1 USD/kW/month and royalties of 63.3USD/month
Industrial use: middle voltage zone 3USD0.262018Based on long use, added to a fixed premium fee of 8.4 USD/kW/month and royalties of 63.3USD/month

Water

The Jiro sy Rano Malagasy (JIRAMA) provides drinkable water services through its management of surface and groundwater resources.

To get a water connection for a new site, application must be made to any of JIRAMA’s business offices. A site inspection follows with an estimate for the required work generated. Service installation follows on payment of the estimate.

Prices

UnitValueYearComment
Domestic tariff (less than 1000 m3 per month)USD0.122018per m3 consumed for 1st tier: up to 10m3 per month
Domestic tariff (less than 1000 m3 per month)USD0.332018per m3 consumed for 2nd tier: more than 10m3 per month
Domestic tariff (more than 1000 m3 per month)USD0.352018per m3 consumed
Special use for ports (sale to ships)USD1.642018per m3 consumed
Use during construction period (construction work use)USD1.192018per m3 consumed

Telecommunications

Madagascar is connected to the rest of the world through submarine fibre optic cables: 

  • Cable EaSSy connecting 9 countries (available capacity of 166 STM-1, 10,500 km long). 
  • Cable lIoN 1&2 linking respectively 3 and 2 countries (capacity of 16 STM-1). 
  • Cable Fly/lIoN 3 securing EaSSy and lIoN (in process). 

Four operators are present in this sector: Telma, Orange, Airtel and Blueline. The ARTEC (Autorité de Régulation des Technologies de Communication) or Regulatory Authority for Communication Technologies ensures the regulation, control and monitoring of telecommunications.

Prices

UnitValueYearComment
Internet 1Go (3Gb bandwith)USD8.792018Monthly, tax inclusive, for a 12 months contract
Internet 1Go (3Gb bandwith)USD7.422018Monthly, tax inclusive, for a 24 months contract
Mobile phone call USD0.00392018Per second

Find out more...

Relevant institutions Regulatory Authority for Communication Technologies (ARTEC)

Transport infrastructure

Road network

The road network is made up of 5,278 km of national roads, of which 61% are paved.

Find out more...

Relevant documents Map of road network of Madagascar as of December 2016

Airport

Madagascar has 12 airports, of which 6 are international and can accommodate variety of large commercial aircraft.

Maritime

There are 11 seaports, including 5 container terminals, the biggest being Toamasina. The other container terminals are Taolagnaro (the second largest deepwater port in the Indian Ocean region), Toliara, Mahajanga, and Antsiranana. Secondary ports are Nosy-Be, Antsiranana, Manakara, Mananjary, Morondava and Vohémar.

The Maritime and fluvial port agency (Agence Portuaire, Maritime et Fluviale APMF) is the authority responsible for the regulation of the port, sea and river subsector.

Find out more...

Relevant institutions Maritime and fluvial port agency (APMF)

Transport costs

Typical costs according to interviews with transport companies are in the table below.

Prices

UnitValueYearComment
Transport one 20 foot container of more than 25 tonnesUSD1,1002018Road transport from Toamasina (port) to Antananarivo Duration: 2 to 3 days
Transport one 40 foot container of less than 25 tonnesUSD1,2502018Road transport from Toamasina (port) to Antananarivo Duration: 2 to 3 days
Transport one 20 foot container of more than 12 tonnesUSD1,3002018Road transport from Toamasina (port) to Antananarivo Duration: 2 to 3 days
Transport one 40 foot container of 10 to 12 tonnesUSD1,4402018Road transport from Toamasina (port) to Antananarivo Duration: 2 to 3 days
Transport one 40 foot container of less than 10 tonnesUSD1,4802018Road transport from Toamasina (port) to Antananarivo Duration: 2 to 3 days
Freight from Shanghai (China)USD2,200201840 foot container
Freight from Shanghai (China)USD1,540201820 foot container
Freight from Guangzhou (China)USD2,170201840 foot container
Freight from Guangzhou (China)USD1,420201820 foot container
Freight from Anvers (Belgium)USD 2,670201840 foot container
Freight from Anvers (Belgium)USD 1,430201820 foot container
Freight from Dubai (United Arab Emirates)USD 2,760201840 foot container
Freight from Dubai (United Arab Emirates)USD1,840201820 foot container

Other costs

For indicative purposes, a basket of goods and services that investors may face are included below.

Prices

UnitValueYearComment
CementUSD8.792018per bag of 50kg
DieselUSD1.022018per litre
Unleaded petrolUSD1.212018per litre
Coca ColaUSD1.122018per bottle of 1.5 litres
Local beerUSD0.762018per bottle of 1 litre
Imported beerUSD1.362018per bottle of 330ml
Bottled waterUSD0.472018per bottle of 1 litre
MilkUSD1.152018per pack of 1 litre
RiceUSD3.822018per bag of 5kg
FlourUSD1.122018per kg
SugarUSD1.212018per kg
Whole chickenUSD0.392018per kg
AccomodationUSD/day/person20 to 20020182 stars to 5 stars
CateringUSD6 to 202018per meal
Car rentalUSD26 to 672018Per day, fuel not included
Taxi-trip in city centre USD2 to 52018per trip
Taxi-trip city centre to Ivato international airport USD12.122018per trip, distance of about 15 km

What investors think

Electricity prices are thought to be relatively high and supply rather unreliable. Access to electricity often limits where companies can effectively invest. Connections to the grid can also be complicated and lengthy. Power cuts occur frequently as energy is often in short supply; however companies get a priority in receiving electricity from the grid. Power generators are ubiquitous though petrol is relatively expensive. 

The port of Toamasina operates at its full capacity. Import customs procedures usually take about 72 hours and then further 12 hours are needed to take the cargo from the port to Antananarivo as there is only one road connecting the port to the city. Customs and entry checks are inconsistent in terms of the time they require, and political uncertainty has seen customs offices close sometimes for days on end, holding up goods in port.

Investors on Nosy Be island noted that the requirement for goods exiting by air to be exported via the main island added to costs and decreased reliability. Sea port handling for connections between Nosy Be and the main island are seen as rudimentary.

The weak quality of roads sometimes discourages tourists from travelling around the island.

No issues with water prices or supply in and around Antananarivo have been reported.

Telecommunication services are seen as reliable and affordable.

Types of land

Madagascar‘s law recognizes private and state land. Foreigners do not have the right to buy land.

Private land can be owned by individuals of Malagasy nationality or companies registered with Malagasy ownership.

The law recognizes the following tenure types. Investors have access to leasehold and concession:

  • Leasehold: Landowners are free to transfer their rights by lease. Leaseholds are subject to the terms of the parties’ agreement. Leasing is relatively common, with between 10% and 30% of land leased in cropping. The Investment Law provides foreign investors authorization to acquire real estate property through lease with a maximum, renewable duration of 99 years, so long as the property is solely and continuously used to carry out commercial activity. 
  • Concession: Concessions can be granted on state land up to a period of 30 years. Concessions are subject to the government’s terms regarding land use and can be revoked for noncompliance.
  • Sharecropping: An estimated 45% of all tenancies are sharecropping relationships. 
  • Ownership: Land can be owned by the state, individuals or groups. Landowners have the rights of exclusive possession and use of their land, and land is freely transferrable. Land can be held in ownership if it is titled or the ownership rights of an individual or group are recognized by a land tenure system and can be recorded. An estimated 90% of farmers are owner-operators. The law specifically prohibits the acquisition of land by foreign investors for resale in its original state, or for resale after development.

Acquisition procedures

Acquisition of state land through leasehold (requiring development of the land) or concession, is subject to the undertaking of local consultations, both with local authorities and local communities. 

For acquisition of private land through leasehold or concession, consultations may also be required if the investment project might have significnt environmental or social consequences-

In all cases, foreign investors need to present an investment programme to the Ministry of Land Tenures and EDBM, and then to request either an emphyteutic lease or a concession.

Find out more...

Land costs

Typical costs according to interviews with real estate professionals are below.

Prices

UnitValueYearComment
Warehouse in Ankadimbahoaka Industrial Zone – outskirts of Antananarivo (Free zone) USD2.42018per square metre per month, tax exclusive
Commercial building Ankadimbahoaka – outskirts of AntananarivoUSD142018per square metre per month, tax exclusive
Commercial building Alarobia – business area near city centerUSD202018per square metre per month, tax exclusive
Villas and residence Talatamaty – outskirts of Antananarivo, near the airportUSD35002018per square metre per month, includes parking, all taxes included
Apartments Ankadimbahoaka – outskirts of AntananarivoUSD15002018per month, includes parking, tax exclusive

Construction permit procedures

To apply for a construction permit, the necessary documents are as follows:

  • Alignment: This authorization is mandatory before any application for construction permit, backfill and / or excavation, subdivision;
  • 5 topographical plans;
  • 3 plans of the house to build;
  • 3 layout plans;
  • 1 legal certificate of less than 3 months;
  • 1 handwritten request addressed to the mayor and chief of the fokontany.

It should be noted that depending on the fokontany (smallest administrative entity), documents may vary. The fee is calculated based on the size of the project.

What investors think

Investors note that leasing land is relatively simple. However, the procedures to buy land and start construction projects are seen as cumbersome, sometimes reliant on too much administrative discretion. Construction permit procedures can also be slow and can also present opportunities for administrative discretion. Further, investors in the property sector feel that planning laws need updating.

Land-related litigations happen and investors ought to make sure that all the procedures are correctly observed and that they are buying from the right title holders. Further, investors should be aware that land can be a political touchstone, particularly for large projects and if local communities might be displaced.

With regards to export processing zones, feedback was positive and customs procedures were seen to be fairly observed.

Tax introduction and registration

A newly registered business entity must apply for a taxpayer identification number (NIF), a statistics number from the National Bureau of Statistics (INSTAT) and an RCS number from the Trade and Companies Registry (Registre des Commerces et des Sociétés). Registration is also required with the National Fund for Social Welfare (CNaPS) (see Labour tab).

The fiscal year is the calendar year, but a different cycle may be requested. The taxable basis is income earned in Madagascar. Companies that can be taxed include those incorporated in Madagascar or external companies doing business there.

Corporate tax

Taxation is governed by the General Tax Code following the annual finance law.

Taxpayers realizing a turnover under MGA 100 million may choose between the normal tax regime (impôts sur les revenus - IR) and the lower revenue tax regime (impôt synthétique).

Taxpayers realizing a turnover exceeding MGA100 million are subject to the normal tax regime. 

Normal tax regime: Income tax (Impôts sur les revenus – IR)

It is established according to the income or results achieved during the year with bi-monthly or half-yearly installments paid in advance. The rate is fixed at 20% of tax results as defined below:

  • Tax result = Accounting result - Tax deductions + Reinstatement of expenses not deductible for tax purposes
  • Accounting result (net profit) = total income - total expenses

Tax deductions include for example all expenses related to any form of health coverage paid by the employer for the benefit of all its employees (see Labour tab). Deductibility is in the limit of 5% of the payroll.

The declaration must be made annually.

Lower revenue tax regime: Synthetic tax (Impôt synthétique - IS) 

It is established according to the turnover, income or gains in a year with payment of half-yearly instalments in advance. The rate is 5% of the overall turnover and must be reported annually, more precisely, by March 31st of the year following the year of the realization of turnover or the acquisition of gross income or gain for all other cases.


Corporate tax

Companies with turnover above 34 000 US $ 20% of profits
Companies with turnover up to 34 000 US $ 100 000 Ariary + 0.5% of turnover

VAT

VAT (Taxe à la valeur ajoutée - TVA) is 20% and must be reported no later than the 15th day of the month following the tax period. Exports of goods and services are taxed at a rate of 0%.

All companies with a turnover equal to or more than MGA 100 million are subject to VAT. 

Key products exempt from VAT upon import and sale are:

  • materials and inputs for the manufacture of medicinal products and packaging articles exclusively designed for their retail sale;
  • corrective lenses;
  • educational and scholarly books, brochures and printed matter (newspapers, etc.);
  • inputs for agricultural use only;
  • seed of potatoes or maize, fresh or chilled;
  • breeding animals, agricultural materials and equipment;
  • public sports equipment; and
  • equipment, materials and equipment for the production of renewable energy.


Find out more...

Relevant institutions Ministry of Finance and Budget (MFB) / Tax Directorate (DGI)

Tax on revenues of movable capital

Taxes on revenues of movable capital (Taxes sur les revenus du capital mobilier - TRCM) applies to income from movable assets (interest, income and all other income from bonds and loans, etc.). The rate is 20% of revenues of movable capital and its statement must be done annually.


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Relevant institutions Ministry of Finance and Budget (MFB) / Tax Directorate (DGI)

Tax on income and wage-related revenues

Tax on income and wage-related revenues (Impôts sur les salaires et revenus assimilés - IRSA) is the amount withheld and paid by the company on wages paid to its employees. It is 20% for the salary range superior to 250,000 MGA. The payment is made on monthly basis, within the first 15 days of the month following the one in which the deduction was made. IRSA payments by taxpayers which are subject to the lower revenue tax regime (‘impôt synthétique’) may be made per quarter.


Find out more...

Relevant institutions Ministry of Finance and Budget (MFB) / Tax Directorate (DGI)

Custom duties

Custom duties (droits de douane) range from 0 to 20 percent, depending on whether it is a basic, intermediary or finished product and whether they pertain to a protected local production sector. For example, electric components are taxed at 10%, whereas cloves are taxed at 20%. Duties may be reduced in line with Madagascar's commitments under the COMESA, SADC and the Interim Economic Partnership Agreement (EPAi) treaties. Examples of duties are below.


Custom duties indicative rates

Goods Custom duty rate
Prefabricated elements for building or civil engineering, cement 0 %
Galvanized iron sheet nozzle for road works 0 %
Ceramic building brick 0 %
Parts of integrated circuits and electronic microassemblies 0 %
Sunflower, safflower or cotton oils and their fractions, even refined, but not chemically modified; crude oil, whether or not put up for retail sale 10 %
Wires used to clean interdental spaces (dental floss) 20 %

Stamp duty

Stamp duty (droits d’enregistrement) is applicable in the context of restructuring of the share capital (creation, capital increase, merger, etc.), commercial lease contracts, housing and transfer of ownership of property. 

It is paid within two months after the signing of the contract, and is usually either a fixed duty or a proportional duty depending on the nature of the transaction. The taxable base is the amount provided for in the contract or fixed by the general tax code.


Stamp duty indivative selected rates

Tax application Rate
Assignment of debts 0.5%
Capital increase and share transfer 0.5%
Commercial lease 2 %
Residential lease 1 %
Transfer of movable and immovable property, property and buildings 5 %

Find out more...

Relevant institutions Ministry of Finance and Budget (MFB) / Tax Directorate (DGI)

What investors think

Investors appreciate the option of filing tax reports online. No problems have been reported if companies fully observe all the procedures and requirements. 

Some investors think that the mentality of the tax office is to punish rather than advise when mistakes are found. Some also noted that there remains uncertainty about certain taxes and their legal application. It was also noted that customs could be inconsistent in the application of duties.

Legal framework

Madagascar's legal system is based on French civil law, and its provisions contain protections for private property rights. Local commercial law consists largely of the Code of Commerce and annexed laws, which are reportedly applied in a non-discriminatory manner.

In addition to the freedom of investment and equality of treatment for foreign and national investors, Madagascar's Investment Law includes articles on the protection of patent rights, freedom to transfer funds abroad without prior authorization, protections against expropriation and a stability clause guaranteeing investor privileges from future legal or regulatory measures. There is no legal requirement that nationals own shares of foreign investment, nor any restriction on the mobility of foreign investors.

Investment protection

Madagascar has legal and treaty measures that provide protection, which are detailed below.

Expropriation

The Investment Law provides foreign and local investors protection against nationalization, expropriation, and requisition, with the exception of public interest cases as established by regulation. Such cases require official proclamation by the government of the public interest of a proposed project, to include infrastructure works, establishment of natural reserves, or military sites, among others, requiring expropriation of private property. In these cases, the investor is to be granted a fair and prior compensation according to the market value of expropriated interests.

Dispute settlement

Madagascar is a member of the International Centre for the Settlement of Investment Disputes (ICSID Convention) and under domestic law, disputes between foreign investors and the State may be handled through arbitrage proceedings administered by this institution. If the foreign investor is the initiator of the proceedings, they may also choose to submit the dispute to the Commerce Tribunal, the competent Malagasy jurisdiction.

The Malagasy Arbitration and Mediation Center (known by its French acronym, CAMM) was created in 2000 as a private organization to promote and facilitate the use of arbitration to resolve commercial disputes, both international and domestic, and to lessen reliance on a court system that is, at a minimum, overburdened. 

As a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention), Madagascar also accepts international arbitration as means of resolving investment disputes. Based on the obligation of the New York convention, domestic courts should recognize and be willing to enforce foreign arbitral awards. International arbitration is also accepted as a means of settling commercial disputes between private parties.

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Relevant institutions Malagasy Arbitration and Mediation Centre

Repatriation of funds

The Investment Law provides foreign and local investors the right to freely transfer abroad without prior authorization. There are repatriation requirements for export earnings, and some specific capital controls, but Madagascar abides by the IMF’s Article VIII statutory framework, which prohibits direct government limitation on foreign exchange use and availability.

Intellectual property

Two government offices share responsibility for the protection of intellectual property rights: the Malagasy Office for Industrial Property (OMAPI) and the Malagasy Copyright Office (OMDA). These offices are financially autonomous bodies, despite their close collaboration with the Ministry of Industry, Ministry of Commerce, and Ministry of Culture and Handicrafts. 

International intellectual property agreements

Madagascar is signatory to the following intellectual property agreements.

Berne Convention for the Protection of Literary and Artistic Works (1886) establishes minimum standards regarding the national protection of copyrights in signatory countries, and guarantees the application in these countries of the national copyright law to artistic works originating from another signatory country.

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Relevant documents WIPO Berne Convention
Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (1989)

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Relevant documents WIPO Madrid Protocol

The Paris Convention for the Protection of Industrial Property (1883) establishes industrial property protection rules regarding patents, marks, industrial designs, trade names, geographical indications and the repression of unfair competition. Its provisions include regulations regarding the national treatment, the right of priority and a number of common rules.

Link to WIPO website

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Relevant documents WIPO Paris Convention
Patent Cooperation Treaty (1970)

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Relevant documents WIPO Patent Cooperation Treaty

Convention Establishing the World Intellectual Property Organization (1967)

Link to WIPO website

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Relevant documents WIPO Convention
The Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms (1971) protects producers of phonograms (sound recordings) originating from signatory countries against unauthorized duplication, as well as against importation and distribution of duplicates of their works.

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Relevant documents WIPO Phonograms Convention

The WIPO Copyright Treaty (1996) extends the copyright protection granted by previous treaties, in particular the Berne Convention, to new information technologies, including computer programmes and databases.

Link to WIPO website

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Relevant documents WIPO Copyright Treaty

What investors think

No issues have been reported with the way investor rights are upheld and protected.

Economy and production

Madagascar is a mostly liberalized economy with many untapped natural resources. Agriculture, including fishing and forestry, is the mainstay of the economy, accounting for more than one-fourth of GDP and employing roughly 80% of the population. Almost half of the 60 million ha of the country’s total land area is suitable for agriculture, and 18 million ha of arable land is still available. 

Real GDP growth was 4.2% in 2016 and 2017. Driven by the secondary and tertiary sectors, real GDP growth is projected to be 5.2% in 2018 and 6% in 2019.

France remains Madagascar's leading export customer (21.5% of Malagasy exports). Strong export sectors include textiles, essential oils, cloves and vanilla, as well as tourism.

Regional and international markets

Madagascar is a member of the WTO as well as a number of regional groupings. It has preferential access to the following markets.

COMESA forms a major market place in Africa bringing together as it does 19 member states covering a total population of 444 million. A Free Trade Area (FTA) was created in 2000 and now encompasses 15 of the 19 member states (all but Democratic Republic of the Congo, Eritrea, Ethiopia and Seychelles). A customs union is planned in the close future with the eventual elimination of quantitative and non-tariff barriers for goods originating from within the region. Common external tariffs are also foreseen. Given the technical and legal challenges posed by a number of countries being both members of COMESA and the EAC single market, it is likely that the conditions of the COMESA union will be harmonized with that of EAC.

Its member countries are: Burundi, Comoros, Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe.


SADC is a regional organization bringing together countries in the Southern Africa region. It provides for cooperation in a number of areas through legally-binding protocols. The SADC Free Trade Area provides for common external tarrifs on a range of goods. It is envisaged that the free trade area will be integrated into the Continental Free Trade Area.

The agreement provides a schedule of market liberalization in a number of sectors. The aim is for the ultimate tariff structure to mirror that applied by COMESA. More information can be found here: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2012:111:FULL&from=EN

Under the African Growth and Opportunity Act (AGOA) Sub-Saharan African countries benefit from duty-free access to the United States for an additional range of 1,800 products that are excluded from the Generalized system of preferences. These include most textiles and apparel; watches; and most footwear, handbags, and luggage products. With regards to apparels, the textiles and yarns must in general originate from Sub-Saharan African countries or the United States.

Developing countries benefit from preferential duty-free access to the United States for up to 5,000 products, under its Generalized system of preferences (GSP). Eligible include: most manufactured items; many types of chemicals, minerals and building stone; jewelry; many types of carpets; and certain agricultural and fishery products. Among the products that are not eligible are: most textiles and apparel; watches; and most footwear, handbags, and luggage products.

Under European Union's Everything But Arms Initiative (EBA), least developed countries (LDCs) enjoy duty-free access to the EU market for all products except arms and ammunition. Sugar and other processed foods are permitted.

Tourism

Madagascar benefits from diverse landscapes and climate areas, that have favoured the development of a unique biodiversity, both on land and along the coast, of which 80% of flora and fauna species are endemic.

The cornerstone of the country's tourism offering is its environmental heritage for which the government has introduced a national parks policy designed to include ecotourism projects, with potential for development of eco-lodges and luxury resorts. 

Tourists spend an average of 10 to 20 days in Madagascar. Preferred circuits, usually offering access to both pristine beaches and protected natural areas, are:

  • The Northern circuit: from Nosy Be to Diégo Suarez bay, passing through the Ankarana massif, sea and forests attractions. It is well suited to adventure tourism. From Nosy Be, tourists embark on cruises and tours to archipelagoes composed of small islands, for fishing, snorkeling, or diving; and can also explore ylang-ylang refineries and traditional handicraft villages.
  • The Western circuit: between river cruises, treks and marine excursions, the programme comprises the discovery of the Tsingy de Bemaraha, Belo sur mer, with a highlight being the “path of the baobabs”.
  • The Eastern circuit: to the lush landscapes of the East, this tour starts with the discovery of lemurs and other rare species of fauna and flora sheltered by the Andasibe forest, then heads towards the Pangalane Canal. This route continues north to the port city of Toamasina and ends on the beaches of the island of Sainte Marie, popular for its whale safaris.
  • The Southern circuit: crosses the center of Madagascar from Antananarivo to Tulear, offering diverse scenery. It includes forests, the Isalo massif and turquoise blue lagoons with thermal baths, wood carvings, vineyards and national park visits.

Tourist arrivals were 255,460 in 2017. France remains the main source market for Madagascar with 44% of the total international visitors. Tourist numbers are growing at 20% per annum on average, but are limited by the supply of hotels, air connections, tour operators and other services. 

Opportunities for hotel investors and operators are the following:

  • Develop eco-lodges and hotels in the vicinity of national parks, as well as other related hospitality services (transports, catering, etc.).
  • Develop hotels able to accommodate larger groups along the established circuits.
  • Create services related to water sports: surfing, wind-surfing and kite-surfing, sailing, Kerala-style house-boats.
  • Develop a leisure marina in or near the ports and other related services.
  • Develop MICE related hospitality infrastructure (adequate to accommodate large groups of tourists, such as meetings, conferences, and convention infrastructure and facilities) and other related services (transports and catering for large groups).
  • Create adventure tourism related services: rock-climbing, caving, rafting, trekking, trail-biking and paragliding.

Tourism in Nosy Bé

Nosy Bé, an island off the Madagascar main island, has traditionally specialized in beach tourism. With a bed capacity of 2,500 (2015), it provides accommodation from guest houses up to four stars all-inclusive resorts.


Typical activities on the island include diving, fishing, nature parks, excursions to outlying islands, quadbike trails, wellness and honeymoons. Average stays are of seven days and are mainly fed by charter flights from Europe, predominantly Italy and Poland, although nearby Réunion, Mauritius and South Africa are also growing as source markets. Stays on the island are sometimes combined with the mainland Northern or Southern circuits


There are two types of accommodation. Smaller hotels cater to independent travelers, while larger establishments have resorted to foreign tour operators to fill their rooms. The Royal Beach Hotel is planning a new site further north on the island. Meanwhile foreign hotels groups such as Accor and Hilton have also been prospecting the island together with local partners. New air connections have also been opened to Addis Ababa and Johannesburg, meaning tourists no longer have to change in Antananarivo, a connection that is seen as unreliable.


However, challenges remain. Hotels have had to source food mainly from the main island as agricultural production on Nosy Bé is currently limited. Electricity is expensive although supply is for the most part guaranteed to hotels. Hotels need to invest significantly in training their staff, and hotel managers are often foreign. And in order to circumvent challenges with the national airline, one hotel company bought its own plane to take guests to and from the mainland.


Hotel managers also cited challenges related to Nosy Bé airport itself. The facilities are limited and the Tourism Board has been working hard with authorities to change the behavior of airport officials towards tourists.

Mining

Madagascar's mineral wealth includes metals (ilmenite, nickel, zircon and cobalt), precious and semi-precious stones (sapphire, ruby, aquamarine, tourmaline, topaz, amethyst, emerald) and oil. The Law on Large Scale Mining Investments, for investments of 25 million dollars and above provides for investment protections, fiscal benefits and guarantees, including stability in the legal, tax and customs environments. 

Madagascar has set up a mining cadastre to inform potential investors of opportunities in the sector. Madagascar is also a member of the EITI (Extractive Industries Transparency Initiative) process.

Examples of companies operating or about to operate in Madagascar

The following companies currently operate in Madagascar:

  • QIT Madagascar Minerals: a mining company, 80% owned by Rio Tinto and 20% by the Malagasy government represented by the Office of National Mines and Strategic Industries (OMNIS), owns and operates a mineral sands mining project near Fort-Dauphin, at the southeastern end of Madagascar.
  • Ambatovy: a large-tonnage, long-life nickel and cobalt mining enterprise located in the East of Madagascar. At a total project cost of US$8 billion, Ambatovy is the largest-ever foreign investment in the country – and one of the biggest in sub-Saharan Africa and the Indian Ocean region. It ranks among the largest lateritic nickel mining entities in the world. 


The following companies have publicly announced their investment projects in Madagascar:

  • NextSource Materials Inc., a mine development company based in Toronto, Canada, that is developing a fully-owned, feasibility-stage Molo graphite project.
  • Toliara Sands: The Ranobe Mine (in the Southern region) is projected to produce 600,000tpa of ilmenite and 65,000tpa of zircon rich concentrate per annum over an initial 20-year mine life.

Agribusiness

Almost half of the 60 million ha of the country’s total land area is suitable for agriculture, and 18 million ha of the arable lands are still available.

Exported agricultural products include spices, vanilla, cloves, tropical fruits (mango, pineapple, passion fruit, lychees, guava and lemon), coffee and cocoa.

Opportunities exist in the following sectors and activities:

  • Cultivation, transformation and export of tropical products: moringa, palm oil, coconut, lychee, stevia, other fruits and vegetables (mango, pineapple, passion fruit, lychees, guava, lemon, baobab, coffee, cocoa);
  • Cultivation, transformation and export of spices: cloves, black pepper, pink pepper, ginger, paprika, curcuma,
  • Transport (refrigerated containers) and other related facilitation services for exports, certifications and quality control.

Fruits de Madagascar

Established on Nosy Be island in 2012, the company sources mango, pineapple, passion fruit, lychees, guava and lemon, which it then either chops or pulps, and freezes and exports to Europe. There it is used by companies such as Danone to make yoghurts and compotes.


With a workforce of 30 permanent staff that expands by 300 temporary staff during peak periods, the factory sources its fruit both from Nosy Be and the main island. It works closely with a large network of smallholder suppliers to improve their yields and claims that a single 20 tonne shipment can provide a grower with six months of income.


The owner is optimistic about the future. Much of the sector is under exploited. More fruit could be processed, and with better infrastructure to bring down transport costs, new fruits such as banana could be used too. 


The owner has had a generally positive experience with the authorities who are willing to give permits given the jobs being created. Further, an Institut Pasteur laboratory in Antananarivo means that samples can be tested in order to pass sanitary and phytosanitary rules for export to France and Belgium. No issues have been reported with customs.


The biggest challenges relate to infrastructure. Shipping fruit from the main island to Nosy Be is complicated by the lack of port facilities meaning that loading has to be done manually. Meanwhile Nosy Be is only served by one cargo ship a month to Europe meaning that containers have to wait at port and meaning a total delivery time of two months. At the same time both the factory and the port are affected by electricity shortages and the need for more expensive backup generation.

SSPM ylang ylang distillery and plantation

The SSPM distillery and plantation, now 120 years old, is the world’s biggest producer of ylang ylang (caranga tree) essence and other essential oils, supplying major cosmetic companies such as Estée Lauder. 


Established on the island of Nosy Be, it was bought by its current owner in 1986 and since 1991 has been designated as an entreprise franche, given that its total output is exported.


Managing the business has not come without its administrative challenges. The owner cited an ongoing dispute with the local authorities relating to land taxes, and the apparent sudden imposition of a tax on forestry products at 1.5 percent of turnover, which he managed to defeat in the courts.


The owner also cited a requirement to fly products out of the country via Antananarivo instead of Nosy Be airport, thus preventing the export of perishables such as green pepper, which grow on the island.


In addition to agribusiness activities, the company also owns a lemur park.

Energy

Currently the demand in electricity exceeds supply, and only 23% of the population has access. Madagascar’s three electricity grids remain unconnected. Production is sourced from thermal (76%) and hydro (24%).

There is a great potential to supply hydro, solar and wind power to replace diesel gensets. Madagascar’s geographical situation is beneficial to exploiting renewable energy: 

  • sunny days of 2,800 h/year providing an average of 2,000 kWh/sqm/year.
  • at 50 m high, a sufficient wind force reaches a speed of 6 to 8 m/s in the North, 6 to 6,5 m/s in the centre and of 8 to 9 m/s in the southern most part. 

Additionally, recent legal and institutional reforms have opened up the sector for private investments, including with the provision of 25-year guaranteed feed-in tarrifs.

Fiscal benefits in the sector include:

  • Tax reductions of 50% for investments made in the production and supply of renewable energy.
  • Exemption from duties and taxes on various renewable energy equipment.

Opportunities in the sector exist in the following activities:
  • Building and operating wind/solar/hydro electricity farms
  • Supplying materials and equipments for independent power producers

Find out more...

Relevant documents EDBM Investors guide into the energy sector
Relevant institutions Ministry of Energy and Hydrocarbons

Textile and apparel

Madagascar's textile and apparel sector consists of woven (54%), knitwear (14%), as well as lingerie, embroidery including hand-embroidery, denim, high fashion, fancy dress, medical clothes, work wear, sportswear and specialized apparel using technical fabric. Customers include Gap, Zara, JC Penny, Décathlon, Camaieu, Woolworths, Walmart and Tesco. 

The sector benefits from a skill labour force, plant-based fibre products for the manufacture of textiles, and an attractive geographic location near business platforms in Mauritius and South Africa, which facilitates access to expertise, inputs and logistical support for export, as well as free zones (zones franches) and duty-free access to the EU and US markets.

Opportunities exist in the following sectors, activities and product segments:

  • Cut, Make, Trim (CMT) activities.
  • Manufacture of buttons, closures and labels.
  • Dyeing, spinning and weaving activities.
  • Manufacture of plant-based fibre products or other processed products of vegetable and animal origin.
  • Certification and quality control.

Business process outsourcing and call centres

This sector started in the early 1990s, originally in the area of database management. However, the arrival of undersea fibre optic cables have allowed the BPO and call centre sector to become export-oriented.

Call centres can benefit from the small time difference with European and African French-speaking countries. The workforce is also able to speak French without an accent and wages run around 200 USD per month. The BPO sector has benefited from the presence of engineers and technicians (200 graduate a year with a qualification) although there remains a shortage. 

What investors think

Investors identify energy generation is an opportunity as the sector is open and competitive.

Tourism also retains a great potential and the existing infrastructure is insufficient. A worsening security situation over the past years and shortage of qualified staff have slowed down its development. Although the reliability of Air Madagascar is reported to have improved recently, problems remain. Hotels noted that most supplies were available within the country. A number of operators reported their concerns with the hustling of tourists by authorities at airports and police checkpoints.

Some investors also believe that Madagascar have a competitive edge in the call centre business due to the French language skills of the population coupled with reliable telephone and internet connection and low labour costs.

Why invest in the country?

Main advantages for investors:

  • Strong potential in the sectors of tourism, mining, energy, agro-processing and apparel.
  • Diverse landscapes and climate areas with a unique biodiversity.
  • Preferential market access to the European Union, the United States and Eastern and Southern Africa.
  • Liberal investment and fiscal regime.
  • Competitive, French-speaking labour force.

Country data

Date
Official name Madagascar 2018
Country area 587,041 sq kilometres 2018
Capital city Antananarivo 2018
Population 24.8 million 2018
Local currency Ariary (MGA) 2018
Official language Malagasy 2018
Other national language French 2018
GDP per capita 401 US$ 2016

Map of Madagascar

last update on: 3/9/2018