Mauritius Budget

Brief 2015

Budget Brief 2015

Table of contents

FOREWORD .............................................................................................................................................. 2

FISCAL MEASURES .................................................................................................................................... 3

CORPORATE TAX ............................................................................................................................................. 3

PERSONAL TAX ............................................................................................................................................... 4

VALUE ADDED TAX .......................................................................................................................................... 5

OTHER TAXES AND FISCAL MEASURES ................................................................................................................. 5

OTHER BUDGETARY MEASURES ............................................................................................................... 7

FINANCIAL SERVICES ........................................................................................................................................ 7

GATEWAY TO AFRICA AND POSITIONING IN MAJOR CITIES OF THE WORLD ................................................................. 7

REGIONAL HUB AND OCEAN ECONOMY ............................................................................................................... 7

MEGA PROJECTS AND IRS / RES ........................................................................................................................ 8

ICT .............................................................................................................................................................. 8

SMES AND BUSINESS FACILITATION .................................................................................................................... 8

AGRO INDUSTRY AND FISHING ........................................................................................................................... 9

MANUFACTURING ........................................................................................................................................... 9

TOURISM AND LAND TRANSPORT ....................................................................................................................... 9

ENVIRONMENT AND SOCIAL ............................................................................................................................ 10

SELECTED ECONOMIC INDICATORS ........................................................................................................ 11

Budget Brief 2015

Foreword The Minister of Finance and Economic Development, Hon. Seetanah Lutchmeenaraidoo, presented the

first budget of the new Government after their sweeping victory at the last General Elections held in

December of last year. In his speech, the Finance Minister stated that Mauritius is at a crossroad and

that decisions taken today will have a profound impact on the country’s future.

The objectives of the budget are to steer the economy towards a path of high investment and high

employment, secure long term sustainable development, achieve greater equality and social justice for

one and all and lastly to promote transparency and good governance in the management of public

affairs. According to the Finance Minister, the average GDP growth of 3% in the past decade has been

too anaemic and actions are required to boost growth and create sufficient employment. In line with

the objective of the new Government to create a second economic miracle, several readily

implementable ‘mega projects’ will be rolled out to boost growth.

The population must have been pleased to hear that a number of measures announced in the budget

for 2015/16 are in line with promises made at the last electoral campaign. In the period leading to

budget day, however, there were genuine fears that in some form or another, taxes had to be

increased. Taxpayers must have been relieved to hear that there is no change to the personal income,

corporate tax and value added tax rates for 2015/16. Other laudable fiscal measures contained in the

budget include the full tax deductibility of interest paid on mortgages taken by first time home owners

over the period of the mortgage and the tax deductibility of investments made by households in solar

energy unit.

The budget exercise provides a softer approach to tax administration with the reduction of 30% to 10%

on the deposit required from a taxpayer for lodging an objection against tax assessment made by the

Mauritius Revenue Authority or the Registrar General’s Department. The reduction of the statutory limit

for an assessment to be raised from 4 to 3 years is another important measure aimed to simplify tax

administration. On the negative side, there will be more administrative work for large companies

(turnover in excess of MUR 100m) as they will henceforth need to make an annual electronic

submission for all purchases of more than MUR 100,000.

Investors wishing to do business in Mauritius will be pleased to hear that Government will address

bottlenecks in public administration. Greater powers will be given to the Fast Track Committee to

expedite and facilitate the implementation of major projects. Up to 70 licences / permits (which have

been judged as irrelevant) will be scrapped and there will be automatic renewal of certain licences and

permits for up to 3 years.

The measures proposed in this year’s budget are expected to facilitate doing business in Mauritius

whilst at the same time boost the creation of jobs and achieve better equality and social justice.

24 March 2015

Tax team

AAA Global Services Ltd

Mauritius

Budget Brief 2015

Fiscal measures CORPORATE TAX General

• Corporate Tax Rate to remain at the flat rate of 15% of chargeable income.

• Statutory deadline to submit corporate tax return being kept at 6 months after the year end of the company.

• Companies having a 30 June year end will exceptionally be allowed to file their returns at latest on the 31

st of the next January provided the return is based on their audited

financial statements and they have opted to file a return under the Advance Payment System (APS) for the 4

th Quarter of their financial year.

• Introduction of an 8 year tax holiday for business holding a Bio Farming Development Certificate.

APS, AMT, CSR, TDS

• Exemption Threshold under the APS increased from MUR 4m to MUR 10m.

• Interest received by non-resident company from debentures quoted on the stock exchange exempt from income tax.

• Abolition of the Alternative Minimum Tax (AMT).

• Simplified system for computation under the Corporate Social Responsibility (CSR) system.

• Abolishment of all existing CSR Guidelines.

• Dispensation for companies generating turnover of less than MUR 6m from the operation of a Tax Deduction at Source (TDS) withholding system.

Special Tax Measures Applicable to Small & Medium Enterprises (SMEs)

• Introduction of a Simplified Tax System for Income Tax based on cash instead of accrual basis for small enterprises.

• Exemption of small companies registered with SMEDA after 1st June 2015 from

Corporate Tax and the operation of a TDS system for 8 years.

• Reduction in maximum penalty for late submission of income tax return from MUR 20,000 to MUR 5,000 for SMEs.

Budget Brief 2015

• Reduction of interest on late payment of taxes from 5% of amount due to 2% of amount due for SMEs.

Other Levies and Annual Allowances

• Extension of the Solidarity Levy on telephony services providers to June 2018.

• Extension of the Special Levy on banks to June 2018.

• Simplified system for computation of Annual Allowances.

• Extension of accelerated Annual Allowances for manufacturing companies to June 2018.

• Permanent extension of accelerated Annual Allowance for Green Technology equipment. PERSONAL TAX General

• Personal Tax Rate to remain at the flat rate of 15% of chargeable income.

• Two Personal Income tax returns to be submitted in 2015: first one by 31st March 2015 /

15th April 2015 (the later date applying to electronic filings) for period from 1

st January

2014 to 31 December 2014 and the second one by 30th September 2015 / 15

th October

2015 (the later date applying to electronic filings) for period from 1st January 2015 to 30

th

June 2015.

• As from 2016, the statutory deadline to submit personal income tax return to be 30th

September / 15th October (the later date applying to electronic filings).

Allowable Deduction

• Increase of income exemption thresholds by MUR 10,000 for each category of taxpayers as follows:

FROM TO

Individual with no dependent MUR 275,000 MUR 285,000

Individual with one dependent MUR 385,000 MUR 395,000

Individual with two dependents MUR 445,000 MUR 455,000

Individual with three or more dependents MUR 485,000 MUR 495,000

Retired/disabled person with no dependent MUR 325,000 MUR 335,000

Retired/disabled person with dependents MUR 435,000 MUR 445,000

• Additional deduction to tax payer for dependent child pursuing tertiary education of MUR 135,000 for the first 6 years of study.

• Investment by household in solar energy unit (including photovoltaic kits and battery) to be an allowable deduction.

• Full deduction of interest paid on secured housing loan to first-time buyers.

Budget Brief 2015

VALUE ADDED TAX General

• Value Added Tax (VAT) to remain at the flat rate of 15%.

• VAT registration threshold increased to MUR 6m.

• Introduction of a Simplified Tax System for VAT filing based on cash instead of accrual basis for small enterprises.

• All prices to be advertised or displayed to be inclusive of VAT.

Exemption and Zero Rating

• Exemption of VAT on machinery and equipment used in the exploration and production of petroleum products.

• VAT zero-rating of chilled deep sea-water to be used for the provision of air conditioning services.

• Exemption of VAT on construction of nursing homes and residential cares homes. OTHER TAXES AND FISCAL MEASURES Tax Administration & Assessment

• Change of the fiscal year from 31st December to 30

th June of each year.

• Reduction of interest rate for late payment of taxes to the Mauritius Revenue Authority (MRA) from 1% per month to 0.5% per month.

• Introduction of an Advanced Ruling System for notaries for duties and taxes payable under the aegis of the Registrar General’s Department.

• Simplification of the tax system on gambling, gaming and betting.

• Renewal of the Arrears Payment Scheme to ensure that any amount due to the Registrar General’s Department at 23

rd March 2015 to be settled free of any penalty provided

payment is made on or before 31st January 2016.

• Requirement for companies generating an annual turnover in excess of MUR 100m to submit to MRA on a yearly basis an electronic statement detailing payments made during the year for purchases of goods or services in excess of MUR 100,000.

• Reduction of statutory time limit for a tax assessment from 4 years to 3 years.

• Reduction of deposit required from a tax payer for lodging an objection against a tax assessment made by the MRA or Registrar General’s Department from 30% to 10%.

Budget Brief 2015

• Obligation for the MRA or Registrar General’s Department to issue to a taxpayer written notice specifying the amount of duty or tax payable and time limit for such payment within 5 working days after any agreement or any decision is reached before the Assessment Review Committee.

Other Fiscal Measures

• Removal of MID levy on petroleum products for re-export and local consumption as from 1

st July 2015.

• Abolishment of 10 cents levy on SMS and MMS as from 1st July 2015.

• Exemption from Land Conversion Tax on land put to use from renewable energy projects.

• Increase of the exemption to Registration Duty to first-time buyer purchasing a residential land to MUR 1,500,000.

• Introduction of a 5% penalty on late payment of customs duty and excise duty.

Budget Brief 2015

Other budgetary measures FINANCIAL SERVICES

• Introduction of a special Financial Sector Incentive Scheme to attract international asset and fund managers to relocate their front-office operations in Mauritius.

• Reactivation of the Financial Services Promotion Agency (FSPA) to deliver more effective promotion campaigns, particularly, to diversify Global Business activities in Africa.

• Setting up of a Financial Services Institute for the provision of specialized and industry focused training.

• Provision of an exit mechanism to market makers by the Bank of Mauritius to revitalize the secondary market for Government securities.

• To conclude discussions on outstanding issues relating to the Mauritius – India Double Taxation Avoidance Agreement.

• Enabling issuance of insurance policy documents in digital format.

• In order to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (developed by OECD and Council of Europe), the confidentiality provision in the Income Tax Act will be amended to cover exchange of information in respect of all the taxes falling under the purview of the Convention.

GATEWAY TO AFRICA AND POSITIONING IN MAJOR CITIES OF THE WORLD

• Redefining the role of the Mauritius Africa Fund to concentrate of the development of Special Economic Zones (SEZ). Madagascar, Ghana and Senegal have already expressed their intention to work with Mauritius.

• Posting of 8 Trade and Investment Managers in strategic cities around the world, namely, Beijing, Geneva, Pretoria, London, Moscow, Mumbai, New York and Paris.

REGIONAL HUB AND OCEAN ECONOMY

• High investments in the port infrastructure with a view to connect the Port-Louis harbour to all ports in the region and beyond.

• Port-Louis harbour to become a hub for bunkering, seafood, transshipment, cruise and petroleum.

• Development of a full-fledged marina.

• Setting up of a regional shipping line to expand regional trade and the role of the Mauritius port in the region.

• Introduction of new Petroleum Bill to provide legal and fiscal framework for exploration and exploitation of hydrocarbon resources.

Budget Brief 2015

• Setting up of a National Ocean Council to ensure better coordination with respect to the implementation of the Ocean Economy project.

• Courses in Oil and Gas Enterprise Management at the University of Mauritius in collaboration with Aberdeen University.

MEGA PROJECTS AND IRS / RES

• 13 Mega Projects, of which eight will be designed on the “Smart City” concept.

• Designing a single scheme centered on inclusive development. ICT

• Installation of a new submarine cable to connect Mauritius to the rest of the world.

• The entire country will be equipped with full broadband fibre connectivity within the next 3 years.

• Extension of the ICT Skills Development Programme to provide training to unemployed youths.

• Introduction of a Scheme to allow ICT companies that recruit a minimum of 100 employees to bring in a quota of foreign qualified employees.

• Increase by circa 96% of free WIFI hotspots.

• Provision of MUR 125m to a National Innovation Programme. SMES AND BUSINESS FACILITATION

• Launch of an SME bank with funds of MUR 10bn over the next 5 years for provision of seed capital to entrepreneurs.

• Introduction of a One-Stop-Shop (under SMEDA’s management) which will provide all support and financing information and deliver all permits and licences.

• Reduced requirements of permits and licences and introduction of a fast track mechanism for delivery of permits and approvals.

• Creation of 7 SME Parks.

• Empowerment of Fast Track Committee to expedite approvals and facilitate major investment projects.

• Abolition of 70 permits and licences which are obsolete and irrelevant.

• Omnibus permit covering the various activities of operators in the tourism sector.

• Small companies registered with the new SMEDA will not be required to submit financial statements and annual returns to the Registrar of Companies during its first 8 years.

Budget Brief 2015

• There will be no obligation for a small private company to file an annual return to the Registrar of Companies except if there has been a change in shareholding or directorship or other particulars.

• A small private company will be allowed to file financial statements prepared on a cash basis and a balance sheet will no more be required to be submitted.

• Annual fees payable to the Registrar of Companies by small private companies shall be reduced from MUR 2,500 to MUR 500.

AGRO INDUSTRY AND FISHING

• Creating opportunities for fishermen in aquaculture through partnership with large operators.

• Focus on bio-food; sensitizing the population and encouraging production by introducing several incentives.

• Investment of MUR 370m in a national wholesale vegetable market.

• Investment of MUR 223m in a modern slaughterhouse.

MANUFACTURING

• Setting up of an inter-ministerial committee to oversee tariff protection for sensitive local industries, in particular, against dumping practices.

• Freight Rebate Scheme will be extended to other ports in Africa and open to all shipping lines.

• Provision of MUR 442m to the Ministry of Industry, Commerce and Consumer Protection to support the manufacturing sector.

TOURISM AND LAND TRANSPORT

• Increasing the budget of the Mauritius Tourism Promotion Authority.

• Opening of the air access to airlines (e.g. Austrian Airlines, Lufthansa).

• Negotiation with airline companies for stopovers in Mauritius on the UK-Australia route.

• Negotiations with other airlines to expand the air connectivity to Eastern Europe and Central Asia.

• Fly-over, bridge, ferry boat projects will be accelerated / considered / implemented.

• The National Transport Corporation will acquire 100 semi low floor buses to modernize its fleet.

Budget Brief 2015

ENVIRONMENT AND SOCIAL

• Revival of the National Environment Commission for better synergy amongst stakeholders.

• Setting up of a National Disaster Management Centre to readily act upon natural calamities.

• Provision of MUR 1.3bn for drain works across the island (measure to counter recurring flooding problems).

• Ban of use of plastic bags with effect from 1st January 2016.

• Setting up of a Mauritius Renewable Energy Agency to promote the development of renewable energies.

• Incentives for investment in solar and other renewable energy.

• Injection of MUR 9.7bn in the Health Care sector.

• Setting up of various Medical Centres across the Island.

• Recruitment of 100 doctors and 1,400 support medical staffs.

• Provision of MUR 27.5bn for social security expenditure.

Budget Brief 2015

Selected Economic indicators Real GDP Growth rate

* Estimates

Inflation rate

Budget Brief 2015

Selected Economic indicators (continued) Exchange rates

Other key economic indicators

Year 2010 2011 2012 2013 2014

GDP (market prices) (MUR Bn)

277 323 303 366.2 387.3*

Labour Force (No.) 586,700 582,800 593,100 607,700 573,300*

Total employment (No.) 531,100 536,700 544,800 525,700 529,700*

Unemployment rate (%) 7.5 7.9 8.1 8.0 7.6*

Investment as a % of GDP

24.9 23 23 21.2 19.4*

Savings rate (%) 15.5 15.0 14.9 11.8 11.6*

* Estimates

Budget Brief 2015

Contact

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18 Cybercity, Ebene Mauritius Tel: +230 454 3200 Fax: +230 454 3202 Email: headoffice@aaa.com.mu Website: www.aaa.com.mu Disclaimer This Budget Brief is a copyright of AAA Global Services Ltd. No reader should act on the basis of any statement contained herein without seeking professional advice. AAA Global Services Ltd and its officers expressly disclaim all and any liability to any person who has read this Budget Brief, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this Budget Brief. Readers are advised that the budget proposals are subject to amendments during the parliamentary debates.