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General Principles of Taxation

 

  1. Legislationsprinciples
  2. Basis of Assessment
  3. What is Chargeable Tax?
  4. Exempt Bodies of person
  5. Allowable Deductions
  6. Rate of Annual Allowance
  7. Unauthorised Deductions
  8. Losses
  9. Pay As You Earn (PAYE)
  10. Current Payment System (CPS)
  11. Tax Deduction at Source (TDS)
  12. Annual Returns
  13. Assessment
  14. Objection
  15. Appeal

  1. Legislations

    The administration of Income Tax is governed by the Income Tax Act 1995.

     

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  2. Basis of Assessment

    Mauritius runs a self-assessment system based on the residence concept. A person resident in Mauritius is liable to tax on the worldwide income derived by that person.

    A non-resident is taxed on income derived from sources in Mauritius.

     

    However, all income derived from overseas by an individual resident in Mauritius is taxable to the extent it is remitted to Mauritius.

     

    Income tax is payable on income derived in the preceding year . The fiscal year runs from 1 July to 30 June.

     

    "Resident" is defined in the Act and means in relation to -

    Individual:

    A person who has his domicile in Mauritius unless his permanent place of abode is outside Mauritius or has been present in Mauritius in an income year for a period of, or an aggregate period of, 183 days or more or has been present in Mauritius in an income year and the 2 preceding income years for an aggregate period of 270 days or more.

    Company:

    A company which is incorporated in Mauritius or has its central management and control in Mauritius.

     

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  3. What is Chargeable Tax?

     

    Individuals Personal Taxation
    Emoluments (PAYE)

    Pay As You Earn (PAYE) System concerns salary earners, and covers salaries, wages, pensions and other income related to employment.

    Business Income (CPS) Current Payment System (CPS) concerns self-employed persons with income derived from trade, business, profession and rent. Is also included share of income from société and succession deriving income from trade, business and rent.
    Other Income (Income NOT falling under PAYE and CPS) Income such as interest, royalty, foreign dividends, charges, annuity.
    Companies (including Trusts and Unit Trust Schemes Corporate Taxation :

    Income such as trade profits, interest, royalty, foreign dividends and rent.

     

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  4. Exempt Bodies of person

    Part 1 of Second Schedule ( The Income Tax Act 1995 )

     

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  5. Allowable Deductions

    Include expenditure incurred in the production of income, losses, bad debts and annual allowance (in lieu of depreciation).

     

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  6. Rate of Annual Allowance

     

    Capital expenditure incurred on :

    Rate of annual allowance - % of

      

    Base

    Value

    Cost
    1.

    Industrial premises excluding hotels

    - 5
    2. Commercial Premises - 5
    3. Hotels 30 -
    4. Plant or Machinery  
    (a) costing or having a base value of Rs 30, 000 or less 100 -
    (b) costing more than Rs 30, 000  
      (i)   Ships or aircrafts 20 -
     

    (ii)  Aircrafts and aircraft simulators leased by a

          company engaged in aircraft leasing

    - 100
      (iii) Motor Vehicles 25 -
     

    (iv) Electronic and high precision machinery or equipment,

          computer hardware and peripherals and computer software

    50 -
      (v)  Furniture and Fittings 20 -
      (vi) Other 35 -
    5. Improvement on agricultural land for agricultural purposes 25 -
    6. Scientific Research 25 -
    7. Golf courses 15 -
    8.

    Acquisition or improvement of any other item of a capital nature which is subject to depreciation under the normal accounting principles

    - 5

     

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  7. Unauthorised Deductions

    The following deductions are not allowable:

    1. any investment, expenditure or loss to the extent to which it is capital or of a capital nature;
    2. any expenditure or loss to the extent to which it is incurred in the production of income which is exempt income;
    3. any reserve or provision of any kind;
    4. any expenditure or loss recoverable under a contract of insurance or of indemnity;
    5. any expenditure incurred in providing business entertainment or any gift;
    6. any tax payable under the Land (Duties and Taxes) Act 1984;
    7. income tax or foreign tax;
    8. any expenditure or loss to the extent to which it is of a private or domestic nature.

     

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  8. <a" name="losses">Losses

    Unrelieved business losses may be carried forward for set-off against future income (other than emoluments). For companies, losses are not available for carry forward when there is more than 50% change in shareholding.

    The time limit to carry forward any unrelieved loss, applicable both to individuals and companies, is 5 years. However, the time limit of 5 years does not apply for the carry forward of any amount of loss which is attributable to annual allowance.

     

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  9. Pay As You Earn (PAYE)

    Employers are required to withhold tax from the emoluments of their employees who have a chargeable income in respect of a pay period.

     

      1. Employer Registration

        In order to be able to operate PAYE, an employer should register with the MRA by filling in an Employer Registration Form (ERF) within 14 days of his becoming an employer.

        For more information refer to Guide on PAYE

         

      2. Employee Declaration Form (EDF)

        Every employee should submit to his/her employer (normally in July / August each year) an Employee Declaration Form to claim income exemption threshold to which he/she is entitled in respect of the income year concerned.

        For more information refer to Guide on PAYE

         

      3. Requirement for employer to join electronic system

        Every employer who has in his employment 50 or more employees is required to submit his PAYE return and remit the tax withheld to the MRA electronically.

         

      4. Statement of Emoluments and Tax Deductions

        Every employer is required, not later than 15 August in every year, to give to every employee, a Statement of Emoluments and Tax Deduction in duplicate showing the salary/wages, overtime, fees, allowance etc., and any tax withheld under PAYE relating to the preceding income year.

         

      5. Annual Return by Employers

        Every employer is required, not later than 15 August in every year to submit to the MRA, a return specifying in respect of every employee whose emoluments for the preceding year exceed Rs 295, 000:

        • the full name;
        • the National Identity Number;
        • the Tax Account Number (TAN);
        • the particulars of emoluments and any exempt income
        • the amount of the income exemption threshold claimed in his EDF; and
        • the total amount of tax withheld and remitted to the MRA, if any.

         

      6. Refund of tax under PAYE

        Where tax has been withheld in excess by the employer, the employee is entitled to claim a refund of the tax overpaid by submitting a return of income duly filled in and supported by relevant documents and receipts. The law requires the refund to be effected within a maximum period of three months as from the date the return is submitted, otherwise interest at bank rate will have to be paid to the taxpayer by the MRA.

         

      7. Penalty for failure to join electronic system

        Where an employer fails to submit his PAYE return and remit the tax withheld electronically, he is liable to a penalty of Rs 5,000 for every month or part of the month up to a maximum penalty of Rs 50,000.

         

      8. Penalty and interest for late payment of tax by employer

        Where an employer fails to remit the tax required to be withheld by the due date to the MRA, he is liable to a penalty of 5% of the tax due and to interest at the rate of 1% per month or part of the month during which the tax remains unpaid.

        For more information refer to Guide on PAYE

     

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  10. Current Payment System (CPS)

     

    1. Under the CPS, an individual who derives income from business, profession or rent and whose gross income in the preceding income year exceeds Rs 4 million is required to submit to the MRA, in respect of each CPS quarter, a Statement of Income and at the same time pay tax in accordance thereof as follows:

       

      In respect of quarter

      Due date for submission of Statement of Income and payment of tax

      1 June to 30 September 29 December
      1 October to 31 December 31 March
      1 January to 31 March 28 June

       

      An individual deriving income from the cultivation of sugar cane or growing of tobacco is not required to submit CPS Statement of Income.

       

    2. Penalty for late submission of Statement of Income

      Where an individual fails to submit a Statement of Income under CPS he is liable to a penalty of Rs 2,000 per month or part of the month up to a maximum of Rs 6,000 per Statement of Income.

       

    3. Penalty and interest for late payment of tax

      Where an individual fails to pay the tax in accordance with the Statement of Income by the due date he is liable to pay penalty of 5% of the amount of the tax, excluding any penalty and interest at the rate of 1% per month or part of the month during which the tax remain unpaid.

       

     

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  11. Tax Deduction at Source (TDS)

    Under the system of TDS, the payer is required to deduct tax at the time the payment is made to or credited to the account of the payee.

    1. Types of payments subject to TDS

      The following types of payments are subject to deduction at source :

        1. Interest
        2. Royalties
        3. Rent
        4. Payments to architects, engineers, land surveyors, project managers in construction industry, property valuers and quantity surveyors as consideration for services rendered by them
        5. Payments to contractors and sub-contractors
        6. Medical Service Providers

       

    2. Persons to deduct tax at source
      1. Types of payments subject to TDS

        The following persons are required to deduct tax at source :

         

        1. From interest:
        • any bank including the Bank of Mauritius;
        • any non-bank deposit taking institution;
        • any person, other than an individual, issuing debentures and any other loan instrument.
        2. From royalties: any company or société other than companies holding a Category 1 Global Business Licence.
        3. From rent: any person excluding individuals
        4. From fees to providers of specified services: any person excluding individuals
        5. From payments to contractors and sub-contractors: any person excluding individuals

         

      2. Rate of Tax Deduction at Source

         

         

          Nature of payment Rate of tax(%)
        1. Interest, other than interest falling under sub-part B of part II of the Second Schedule*, payable by any other person other than an individual, to any person, other than a company resident in Mauritius 15%

        2.

        Royalties**

        - a resident

        - a non-resident

         

        10%

        15%

        3. Rent 5%
        4. Payments to contractors and sub-contractors 0.75%
        5. Payments to providers of specified services** 3

        6.

        Payment made by Ministry, Government department, local authority, statutory body or the Rodrigues Regional Assembly on contracts, other than payments to contractors and subcontractors and payments to providers of services mentioned at 5 :
        1. For the procurement of goods and services under a single contract, where the payment exceeds 300,000 rupees;
        2. For the procurement of goods under a contract, where the payment exceeds 100,000 rupees; or
        3. For the procurement of services under a contract, other than telephone, insurance, postal, air travel and hotel services, where the payment exceeds 30,000 rupees.

         

         

         

        1%

         

        1%

         

         

        3%

        7. Payments made to the owner of an immovable property or his agent 5%
        8. Payments made to a non-resident for any services rendered in Mauritius 10%

         

        *Interest falling under Sub-part B of Part II of the Second Schedule includes interest payable on:

        • A balance maintained in a bank by an individual who is not resident in Mauritius
        • Call and deposits account held by a corporation holding a Category 1 Global Business Licence
        • a savings or fixed deposit account held by an individual, a société or a succession with any bank or a non-bank deposit taking institution
        • Government securities, debentures quoted on the stock exchange and Bank of Mauritius Bills held by an individual, a société or a succession

         

        ** Payment of Royalties to non-residents is subject to tax deduction at source at the rate of 15%.

        *** Providers of Services also include: Architect, Attorney / Solicitor, Barrister, Medical Service Providers, Engineer, Land Surveyor, Legal Consultant, Project Manager in construction industry, Property Valuer and Quantity Surveyor

         

        Note :

        1. No income tax shall be deducted where the tax is less than Rs 500
        2. Companies with annual turnover not exceeding Rs 6 million is not required to operate TDS.

         

      3. Statement of Income Tax Deduction

        The payer is required to issue a statement of income tax deduction to the payee by 15 August every year showing the total payments made to the payee and the total amount of tax deducted at source.

         

      4. Statement to the MRA

        The payer is required to submit by 15 February every year to the MRA a statement giving particulars of the payee, the amount made available to the payee and the tax deducted at source.

         

      5. Penalty and interest for late payment of tax to the MRA

        Where a payer fails to remit to the MRA by the due date the tax required to be deducted at source, he is liable to a penalty of 5% of the tax due and to interest at the rate of 1% per month or part of the month during which the tax remains unpaid.

         

        For more information refer to Guide On TDS

       

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  12. Annual Returns
    • Individuals are required to submit returns of income and pay tax, if any, by 30 September where the return is filed electronically and payment of tax, if any, is also made electronically, an extended delay of up to 15 October is applicable.
    • Companies with accounting year ending on 30 June are required to submit their returns and pay tax, if any, by 29 December, that is, within 6 months after the end of the accounting year. The due date for the submission of annual income tax return with no tax liability by companies whose accounting year ends in June is by 15th January of the following year.
    • Other companies are required to submit their returns and pay tax, if any,within six months after the end of their accounting year.
    • Sociétés and Successions are required to submit their returns by 30 September.

     

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  13. Assessment

    Tax claimed in a notice of assessment should be paid within 28 days of the date of the notice of assessment, unless the taxpayer objects against the assesment.

    There is a time limit of four years to raise an assessment, except where the taxpayer has failed to submit a return or in case of fraud or wilful neglect.

     

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  14. Objection

    In case of dissatisfaction with a notice of assessment, the taxpayer may object to the tax claimed within a delay of 28 days specifying, in the letter of objection, the grounds of the objection and at the same time pay 30% of the amount of income tax claimed. If the taxpayer objects exclusively to income assessed as emoluments or to the amount of income exemption threshold, the payment of the 30% mentioned above does not apply.

     

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  15. Appeal
    1. Representation to Assessment Review Committee (ARC)

      Where the taxpayer is not satisfied with the determination of an objection, a written representation may be lodged with the Assessment Review Committee within 28 days of the date of the determination.

       

    2. Appeal to Supreme Court

      Where the taxpayer is not satisfied with the determination of the Assessment Review Committee, he may appeal to the Supreme Court within 28 days of the date of the determination.

       

    3. Appeal to Privy Council

      Where the taxpayer is not satisfied with the judgment of the Supreme Court, he may appeal to the Privy Council within 28 days of the date of the judgment.

       

     

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