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General Principles of Taxation

 

  1. Legislationsprinciples
  2. Basis of Assessment
  3. What types of income are chargeable to tax?
  4. Exempt Bodies of person
  5. General rule for deductions of expenses
  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 him.

     

    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 but the individual is entitled to claim a tax credit against the Mauritian tax payable on the remitted income in respect of the tax sufferred abroad on that same remitted income.

     

    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 types of income are chargeable to 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 business 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. General rule for deduction of expenses

    Any expenditure or loss to the extent to which it is exclusively incurred in the production of gross income of the business is deductible from the gross income.

     

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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. Research and development, including innovation, improvement or development of a process, product or service - 50
    7. Golf courses 15 -
    7A. Acquisition of patents 25 -
    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. Losses

    Losses may be set off against net income other than emoluments subject to the following:

    1. Losses incurred in an income year may be carried forward to be set-off against net income of the following 5 income years only.

       

    2. The time limit of 5 years is not applicable for the carry forward of any amount of loss that is attributable to annual allowance claimed in respect of capital expenditure incurred on or after 1 July 2006

     

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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, registered to the purpose of PAYE, 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 305, 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 an annual income tax return. However, MRA may require the employee to provide further documentary evidence to support any claim made in respect of Exemption Reliefs & Deduction. 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 10% 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 July to 30 September 2 days, excluding Saturdays and public holidays, before the end of December
      1 October to 31 December 31 March
      1 January to 31 March 2 days, excluding Saturdays and public holidays, before the end of 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 a penalty of 5% of the amount of the tax, excluding any penalty and interest at the rate of 0.5% per month or part of the month during which the tax remains 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
        6. Management Fees to an individual by any person
        7. Commission any person excluding individuals

         

      2. Rate of Tax Deduction at Source

         

         

          Amount or sum made vailable to payee by way of: Rate of tax (%)
        1. Interest payable by any person, other than by a bank or nonbank deposit taking institution, under the Banking Act, to any person, other than a company resident in Mauritius * 15

        2.

        Royalties payable to -

           (a) a resident

           (b) a non-resident

         

        10

        15

        3.

        Rent payable to - **

          (a) a resident

          (b) a non-resident

         

        5

        10

        4. Payment to contractors and sub-contractors 0.75
        5. Payments to providers of services as specified in the Fifth Schedule to the Income Tax Act 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 in the Fifth Schedule :

        a. for the procurement of goods and services under a single contract, where the payment exceeds 300,000 rupees;

        b. for the procurement of goods under a contract, where the payment exceeds 100,000 rupees; or

        c. for the procurement of services under a contract, other than telephone,  postal, air travel and hotel services, where the payment exceeds 30,000 rupees.

         

         

        1

         

        1

         

        3

        7. Payment made to the owner of an immovable property or his agent pursuant to section 111B(g) of the Income tax Act 5
        8. Payment made to a non-resident for any services rendered in Mauritius pursuant to Section 111B(h) of the Income Tax Act 10
        9. Payment of management fees pursuant to section 111B(i) to:
          (a) resident
          (b) non- resident

         

        5
        10

        10. Payment to a non-resident entertainer or sportsperson pursuant to section 111B (j) 10
        11. Commission*** 3

         

        * GN No.5 of 2014 – The Sixth Schedule to the Act is amended, in item 1, the words "a non-resident" deleted and replaced by the words "any person, other than a company resident in Mauritius" - shall come into operation in respect of the income year commencing 1 January 2014 and in respect of every subsequent income year.

         

        ** FA 2018 –Item 3 deleted and its corresponding entries and replaced w.e.f 9 August 2018

        3. Rent 5

         

        *** FA 2018 – New item 11 and its corresponding entries added w.e.f 9 August 2018.

        FA 2006 s.18(zzf)- (effective as from income year commencing on 1 July 2006)

        FA 2006 s.18(zzf) effective as from income year commencing 1July 2006 for individuals and as from year of assessment 2007/2008 for companies.

         

        Note :

        No income tax shall be deducted where the tax is less than Rs 500

        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 August 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 10% 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.

       

    • Every company, whether or not it is a taxpayer, is now required to file its annual return not later than six months from the end of the month in which its accounting year ends.However, where a company's accounting year ends on 30 June, the due date for submission of return and paymentof tax is 2 days, excluding saturdays and public holidays, before the end of December.

      Besides the annual return, companies are also required to file, under the Advance Payment System(APS), quarterly APS statements and to pay tax in accordance thereof. However, company with a turnover below the threshold of Rs 10 million per annum are exempted from the requirement to file quarterly returns and pay tax under APS.

      All companies deriving gross income and exempt income exceeding Rs 10 million have the legal obligation to file annual returns and pay tax electronically. Failure to file electronic returns carries a penalty of 20 per cent of the tax payable (maximum Rs 100 000) or Rs 5000 where no tax liability is declared in the return.

      Companies may file return / statements and pay tax electronically to MRA using the Mauritius Network Services (MNS) system. Relevant application forms are available on the MRA website.Alternatively, companies may request an eFiling Service Centre to do the electronic filing on their behalf. A list of approved eFiling Service Centre is also available on MRA website. Companies filing their returns in Mauritian rupees may use the efiling facility available on the MRA website.

    • 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 10% 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 10% 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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