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 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.
|What is the procedure?||Company creation procedure|
|Relevant documents||Law 2003-036 of 30 January 2004 on commercial companies Law 2014-010 of 04 August 2014 on commercial companies Law 2001-026 of 3 September 2004 on the contract of society and civil society Law 99-025 of 30 July 1999 on the transparency of businesses|
|Relevant institutions||Economic Development Board of Madagascar Ministry of Industry and Private Sector Development Ministry of Civil Service, Administrative Reforms, Labour; Employment and Social Legislation|
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:
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:
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:
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:
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:
|Relevant documents||Law 2007-036 of 14 January 2008 on Investments in Madagascar|
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:
The following can benefit from the law:
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” ).
|What is the procedure?||Registration on MIDAC online portal via TradeNet/GasyNet List of documents to request free zones and companies status|
|Relevant documents||Procedures to request free zones and companies status Loi n°2007-037 du 14 janvier 2008 sur les Zones et Entreprises Franches Décret n° 2015-1096 portant application de la loi sur les Zones et Entreprises Franches Plan type for the file to request free zones and companies status|
|Relevant institutions||Ministry of Industry and Private Sector Development Association of Free Zones and Companies|
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:
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.
|Relevant documents||Law 2001-031 of 8 Octobrer 2002 for major mining investments|
|Relevant institutions||Ministry of Mines and Petroleum Office of National Mining and Strategic Resources Cadastral mining office of Madagascar (BCMM)|
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 is the procedure?||Procedures to request an environmental permit|
|Relevant documents||Decree 99-954 of 15 december 1999 on making Investments Compatible with the Environment|
|Relevant institutions||National Office for Environment|
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:
|Relevant documents||Law 2004-004 of 9 June 2004 on the general orientation of the education, teaching and training system in Madagascar Law 2008-011 of 20 June 2008 on amending certain provisions of Law 2004-004 of 26 July 2004 on the general orientation of the Education, Training and Education System in Madagascar Law 2015-040 of 9 December 2015 on the orientation of the National Policy on Employment and Professional Training List of Tertiary Education including Training offers|
|Relevant institutions||Ministry of Education (MEN) Ministry of Higher Education and Research (MESUPRES) Ministry of Civil Service, Administrative Reforms, Labour; Employment and Social Legislation University of Antananarivo Higher Institute of Technology of Antananarivo National Institute for Toursim and Hospitality Institute of Gemology of Madagascar|
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:
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.
|Relevant documents||Law 2003-044 of 28 July 2004 on the Labour Code Decree 2007-563 of 3 July 2007 on child labour Decree 2007-009 of 9 January 2007 on the conditions and the duration of the termination notice period for an employment contract of indefinite duration Decree 2007-008 of 9 January 2007 on the form, duration and other conditions of the trial period (« engagement a l’essai ») Decree 2007-007 of 9 January 2007 on the conditions of the management by the employer of the transport and safety of night workers Decree 2005-728 of 8 November 2005 on the organization and operation of the Works Council (« Comite d’Entreprise »)|
|Relevant institutions||National Fund for Social Welfare|
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.
|Senior manager||USD||4000||2018||per month + benefit|
|Middle Manager||USD||2000-3000||2018||per month|
|Graduate entry||USD||500||2018||per month|
|Skilled technician||USD||1200||2018||per month|
|Office assistant||USD||300||2018||per month|
|Shop assistant||USD||100||2018||per month|
|Security guard||USD||100||2018||per month|
|Unskilled labourer||USD||75||2018||per month|
|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|
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.
|Scheme||Employer contribution||Employee contribution|
|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|
|What is the procedure?||Social security and other contributions|
|Relevant documents||Social security code Employer Application For Registration (DIMM) French-Malagasy convention in terms of Social Security Mauritius-Malagasy Convention in terms of Social Security|
|Relevant institutions||National Fund for Social Welfare|
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.
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.
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.
|Industrial use: middle voltage zone 1||USD||0.07||2018||Based 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 2||USD||0.16||2018||Based 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 3||USD||0.26||2018||Based on long use, added to a fixed premium fee of 8.4 USD/kW/month and royalties of 63.3USD/month|
|What is the procedure?||Guide for investors in the electricity sector by the Electricity Regulation Office (ORE) JIRAMA Electricity Tariffs as of April 2018|
|Relevant documents||Law 98-032 of January 20, 1999 on the Reform of the Electricity Sector Law 2002-001 of October 7, 2002: Creation of the National Electricity Fund (F.N.E.) Law 2017-020 of April 10, 2018: carrying the Code of Electricity in Madagascar New Energy Policy and Strategy for the Republic of Madagascar: Energy Policy and Strategy Study Paper (August 4, 2015) Energy Policy Letter of Madagascar: 2015 – 2030|
|Relevant institutions||National company of water and electricity (JIRAMA) Ministry of Energy and Hydrocarbons Electricity Regulation Office Rural Electrification Development Agency|
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.
|Domestic tariff (less than 1000 m3 per month)||USD||0.12||2018||per m3 consumed for 1st tier: up to 10m3 per month|
|Domestic tariff (less than 1000 m3 per month)||USD||0.33||2018||per m3 consumed for 2nd tier: more than 10m3 per month|
|Domestic tariff (more than 1000 m3 per month)||USD||0.35||2018||per m3 consumed|
|Special use for ports (sale to ships)||USD||1.64||2018||per m3 consumed|
|Use during construction period (construction work use)||USD||1.19||2018||per m3 consumed|
|What is the procedure?||JIRAMA water tariffs|
|Relevant institutions||National company of water and electricity (JIRAMA) Ministry of Water, Sanitation and Hygiene|
Madagascar is connected to the rest of the world through submarine fibre optic cables:
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.
|Internet 1Go (3Gb bandwith)||USD||8.79||2018||Monthly, tax inclusive, for a 12 months contract|
|Internet 1Go (3Gb bandwith)||USD||7.42||2018||Monthly, tax inclusive, for a 24 months contract|
|Mobile phone call||USD||0.0039||2018||Per second|
|Relevant institutions||Regulatory Authority for Communication Technologies (ARTEC)|
|Relevant documents||Map of road network of Madagascar as of December 2016|
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.
|Relevant institutions||Maritime and fluvial port agency (APMF)|
Typical costs according to interviews with transport companies are in the table below.
|Transport one 20 foot container of more than 25 tonnes||USD||1,100||2018||Road transport from Toamasina (port) to Antananarivo Duration: 2 to 3 days|
|Transport one 40 foot container of less than 25 tonnes||USD||1,250||2018||Road transport from Toamasina (port) to Antananarivo Duration: 2 to 3 days|
|Transport one 20 foot container of more than 12 tonnes||USD||1,300||2018||Road transport from Toamasina (port) to Antananarivo Duration: 2 to 3 days|
|Transport one 40 foot container of 10 to 12 tonnes||USD||1,440||2018||Road transport from Toamasina (port) to Antananarivo Duration: 2 to 3 days|
|Transport one 40 foot container of less than 10 tonnes||USD||1,480||2018||Road transport from Toamasina (port) to Antananarivo Duration: 2 to 3 days|
|Freight from Shanghai (China)||USD||2,200||2018||40 foot container|
|Freight from Shanghai (China)||USD||1,540||2018||20 foot container|
|Freight from Guangzhou (China)||USD||2,170||2018||40 foot container|
|Freight from Guangzhou (China)||USD||1,420||2018||20 foot container|
|Freight from Anvers (Belgium)||USD||2,670||2018||40 foot container|
|Freight from Anvers (Belgium)||USD||1,430||2018||20 foot container|
|Freight from Dubai (United Arab Emirates)||USD||2,760||2018||40 foot container|
|Freight from Dubai (United Arab Emirates)||USD||1,840||2018||20 foot container|
For indicative purposes, a basket of goods and services that investors may face are included below.
|Cement||USD||8.79||2018||per bag of 50kg|
|Unleaded petrol||USD||1.21||2018||per litre|
|Coca Cola||USD||1.12||2018||per bottle of 1.5 litres|
|Local beer||USD||0.76||2018||per bottle of 1 litre|
|Imported beer||USD||1.36||2018||per bottle of 330ml|
|Bottled water||USD||0.47||2018||per bottle of 1 litre|
|Milk||USD||1.15||2018||per pack of 1 litre|
|Rice||USD||3.82||2018||per bag of 5kg|
|Whole chicken||USD||0.39||2018||per kg|
|Accomodation||USD/day/person||20 to 200||2018||2 stars to 5 stars|
|Catering||USD||6 to 20||2018||per meal|
|Car rental||USD||26 to 67||2018||Per day, fuel not included|
|Taxi-trip in city centre||USD||2 to 5||2018||per trip|
|Taxi-trip city centre to Ivato international airport||USD||12.12||2018||per trip, distance of about 15 km|
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.
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:
|Relevant documents||Law 2005-019 of 17 october 2005 on land status Law 2006-031 of 24 november 2006 on private property Order 24731-2014 of 29 july 2014 laying down measures relating to the management of the private domain of the State New land policy letter Land tenure in Madagascar|
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.
|What is the procedure?||Procedures on land ownership requests at EDBM|
Typical costs according to interviews with real estate professionals are below.
|Warehouse in Ankadimbahoaka Industrial Zone – outskirts of Antananarivo (Free zone)||USD||2.4||2018||per square metre per month, tax exclusive|
|Commercial building Ankadimbahoaka – outskirts of Antananarivo||USD||14||2018||per square metre per month, tax exclusive|
|Commercial building Alarobia – business area near city center||USD||20||2018||per square metre per month, tax exclusive|
|Villas and residence Talatamaty – outskirts of Antananarivo, near the airport||USD||3500||2018||per square metre per month, includes parking, all taxes included|
|Apartments Ankadimbahoaka – outskirts of Antananarivo||USD||1500||2018||per month, includes parking, tax exclusive|
To apply for a construction permit, the necessary documents are as follows:
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 is the procedure?||Procedures to request a construction permit at the Urban Commune of Antananarivo Types of documents to be used in the request for a construction permit at the Urban Commune of Antananarivo Urban Commune of Antananarivo|
|Relevant documents||Practical guide to the construction permit|
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.
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.
|What is the procedure?||Online registration for a taxpayer identification number (NIF) Documents needed for registration for a taxpayer identification number (NIF)|
|Relevant institutions||Economic Development Board of Madagascar|
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 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.
|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|
|What is the procedure?||2018 Finance Act 2018 Finance Act (2) 2018 Tax Code|
|Relevant institutions||Ministry of Finance and Budget (MFB) / Tax Directorate (DGI)|
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:
|What is the procedure?||2018 Finance Act 2018 Tax Code|
|Relevant institutions||Ministry of Finance and Budget (MFB) / Tax Directorate (DGI)|
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.
|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 %|
|What is the procedure?||2018 Finance Act Custom duty online Custom duty list Custom code|
|Relevant institutions||Ministry of Finance and Budget – Directorate of Customs|
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.
|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 %|
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.
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.
Madagascar has legal and treaty measures that provide protection, which are detailed below.
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.
|Relevant documents||Law on investment Ordinance 62-023 of 19 September 1962 on expropriation for public purposes|
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.
|Relevant institutions||Malagasy Arbitration and Mediation Centre|
Madagascar is party to a number of bilateral investment treaties and treaties with investment provisions, which are detailed below.
|Relevant documents||Madagascar-BLEU (2005) Madagascar-China (2005) Madagascar-France (2003) Madagascar-Germany (2006) Madagascar-Mauritius (2004) Madagascar-Norway (1966) Madagascar-Sweden (1966) Madagascar-Switzerland (2008) ESA-EU interim Economic Partnership Agreement (2012) COMESA Common Investment Area (2007) Cotonou Agreement (2000) COMESA-US TIFA (2001)|
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.
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.
|Relevant documents||Law 2017-049 on the protection of industrial property in Madagascar Law 2007- 013 authorizing the accession of Madagascar to the Protocol on the Madrid Agreement Concerning Registration Trademark Office (Madrid Protocol)|
|Relevant institutions||Malagasy Office of Intellectual Property Malagasy Copyright Office|
Madagascar is signatory to the following intellectual property agreements.
|Relevant documents||WIPO Berne Convention|
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.
|Relevant documents||WIPO Paris Convention|
|Relevant documents||WIPO Phonograms Convention|
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.
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.
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:
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:
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.
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.
The following companies currently operate in Madagascar:
The following companies have publicly announced their investment projects in Madagascar:
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:
|Relevant documents||EDBM Investor guide into agribusiness EDBM brochures and feasibility studies for palm oil EDBM brochures and feasibility studies for coconut EDBM brochures and feasibility studies for lychee|
|Relevant institutions||Ministry of Agriculture and Livestock|
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.
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.
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:
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:
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:
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.
|Relevant institutions||Ministry of Higher Education and Research (MESUPRES) Higher Institute of Technology of Antananarivo|
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.
|Country area||587,041 sq kilometres||2018|
|Local currency||Ariary (MGA)||2018|
|Other national language||French||2018|
|GDP per capita||401 US$||2016|