The Mauritius Budget 2023 in a nutshell

The Minister of Finance, Dr. Renganaden Padayachy, termed this year’s budget as one TO DARE & TO CARE. He announced a series of economic measures with aim of maintaining the economic recovery through import substitution, diversification, and revitalizing exports. Drastic social measures have also been introduced and the buzz around the new tax budget is the removal of the solidarity levy and the implementation of a new progressive tax system as well as the increase of the minimum salary. According to the Minister, this new tax system will bring more fairness and equity in society, ‘’One where nobody is worse off’’.

We set out below some of the key takeaways from the 2023 Mauritius Budget speech.

Overhaul of the personal income tax system – Good news for taxpayers!

As from 01 July 2023, the personal income tax will be completely progressive and the solidarity levy is being removed. All income will be taxed incrementally, and this means that the chargeable income is divided into different revenue brackets with each bracket having a specific tax rate summarized in the table below:

On top of that, those individuals without dependents and a chargeable income up to Rs 30 000 per month (Rs 390 000 annually) and those with two dependents having a chargeable income of Rs 50 000 monthly, will be exempt from income tax. These changes prove to be indeed daring and caring.

It is a game changer for the 85,000 individuals who are working tirelessly on a full-time basis, and they will now have the assurance of a minimum monthly income of MUR 15 000. If an individual’s income falls below Rs 15 000 (including the CSG Income Allowance), the government will step in and add a maximum of Rs 1 425 every month.

Exemptions and Reliefs for companies – Exempt Income

• The partial exemption granted in respect of interest earned by a Collective Investment Scheme or a Closed End Fund established in Mauritius will be increased from 80% to 95%.
• It is proposed that the exemption of interest income derived from bonds (Green Bonds) to finance renewable energy projects be extended to all sustainable projects.

The 3% Reduced Rate of Corporate Tax on Exports of Goods

• The profits derived from the sale of aviation fuel to an airline will be considered as an export of goods and therefore subject to tax at the reduced rate of 3%.

Taxation of Banks

• An incentive system was granted during the years of assessment 2020/2021 and 2021/2022 to banks having chargeable income exceeding Rs 1.5 billion. Under this system, any chargeable income in excess of the chargeable income for the base year of 2017/2018 is taxed at a reduced tax rate of 5% if certain pre-defined conditions are satisfied.
• As from the year of assessment 2022/2023, this incentive tax rate of 5% is no longer applicable and banks are being taxed at the rate of 15% on chargeable income above Rs 1.5 billion.

Solidarity Levy on Telephony Service Providers – Bad news for them!

• A profitable company currently pays 5% of its accounting profit and 1.5% of its turnover as Solidarity Levy. The rate of levy on the turnover will be reduced from 1.5% to 1%. An operator will still be required to pay the 1% even if it has made a loss.

Investment Tax Credit for manufacturing companies

• A yearly investment tax credit of 15% over 3 years is granted to manufacturing companies in respect of expenditure incurred on new plant and machinery (excluding motor cars). The investment window will be extended up to the financial year 2025/2026. Any unrelieved investment tax credit may be carried forward over 10 years.
• Companies engaged in the manufacture of both alcoholic and non-alcoholic beverages will be allowed to claim the investment tax credit on expenditure incurred on new plant and machinery used exclusively for the production of non-alcoholic drinks.

Tax Deductions  

• The double deduction granted to a manufacturing company for expenditure incurred on market research and product development will no longer be restricted to the African market. This additional facility is restricted to companies having an annual turnover not exceeding Rs 500 million.
• A tax relief of 200% of amount spent by local companies participating in the financing, sponsorship or marketing and/or distribution of an approved film project, under the Film Rebate Scheme, intended for theatrical or media streaming release. The approved film should be produced at least 90% in Mauritius.
• A double deduction will be granted to companies for employing newly recruited women or unemployed women for at least a year under the Prime a L’Emploi Scheme.
• An increased tax deduction of 300% will be available for companies for employment of disabled individuals.
• It will be compulsory for all companies employing more than 250 employees to provide necessary facilities for workplace-based childcare. A double deduction on the cost of setting up a childcare centre will be available to those companies.

Waiver of the COVID-19 Levy

• At long last, all outstanding debts of the COVID-19 levy as of 20 January 2023 inclusive of penalties and interest will be waived.

Financial Assistance to Specified Enterprises- Salary Compensation 2023

• Following decision of Government, it is being proposed that a monthly financial assistance will be provided for payment of Salary Compensation 2023 of –

1. Rs 250 or Rs 500 per eligible employee of a Small and Medium Enterprise (SME) including an expatriate employee depending on the profitability of the company;
2. Rs 300 per eligible employee of an Export Oriented Enterprise including an expatriate employee; and
3. Rs 500 per eligible employee of a large public bus operator including an expatriate employee.

• This assistance will be payable to an SME and an Export Oriented Enterprise during the period from January 2023 to June 2024, including a double payment in December 2023.
• For a large public bus operator, financial assistance will be provided during the period from January 2023 to December 2023, including a double payment in December 2023.

Corporate Social Responsibility (CSR)

• CSR amount of Rs 200 million collected by the MRA will be transferred to the Solidarity Fund annually as from financial year 2023/2024.

Tax Deduction at Source (TDS) – Broadening of Scope and Exemptions

• The Income Tax Act will be amended to broaden the scope of TDS as per table below:

• TDS retained on fees paid to a Management Company and an Investment Adviser licenced by Financial Services Commission, will no longer be applicable.

Protected Cell Company (PCC) and Variable Capital Company (VCC)

• The MRA will not have recourse to assets of other cells or non-cellular assets of the PCC to recover tax owed by a cell of a PCC. Likewise, each sub-fund or special purpose vehicle of a VCC will be treated as a separate entity for the purpose of recovery of tax.

Amendments and exemptions under the Value Added Tax (VAT) Act

• The VAT exemption granted on the construction of a purpose-built building for the provision of tertiary education has been extended to the construction for primary and secondary education.
• Instruments and appliances used in medical, surgical, dental or veterinary sciences, of HS Code 90.18, will be made zero-rated for VAT purposes instead of VAT exempt.
• The special levy on banks will be aligned to 5.5% for all banks. Currently, 5.5% is applied for banks having operating income of not more than Rs 1.2 billion from transactions with residents and 4.5% is applied for banks having operating income in excess of Rs 1.2 billion from transactions with residents. Large banks will negatively be impacted.

Extension of the Tax Arrears Settlement Scheme (TASS)

• Re-introduction of TASS under Income Tax Act, VAT Act and Gambling Regulatory Act whereby penalties and interest for tax due are fully waived provided that the tax is paid in full by 31 March 2024. Taxpayers wishing to avail of TASS should register by 31 December 2023 and any assessments pending at the ARC, Supreme Court or Privy Council should be withdrawn in order to avail of the scheme.

Statement of Financial Transactions

• A virtual asset service provider and an issuer of initial token offerings will have to report annually to the MRA a transaction made by:

Sale of Immovable Property Outside of Schemes to Resident Non-citizens

• A resident non-citizen is now allowed, upon application, to acquire residential property of a minimum of USD 500000 (previously USD 350 000) outside of existing schemes subject to the payment of an additional registration duty of 10%.
• Only one property may be acquired by the main holder of a resident permit and not his or her spouse or children.

Acquisition of Property in a PDS Project relating to Senior Living

• The Immigration Act will be amended to grant a residence permit to a retired non-citizen and his family on the acquisition of a property in a PDS project relating to senior living provided that –

1. the acquisition price exceeds USD 200 000; and
2. the non-citizen is aged above 50 years old.

• The status of resident shall remain valid as long as the buyer holds the property.
• This amendment will be backdated to 27 April 2019, i.e. the date the Property Development Scheme was amended to include construction of purpose-built building or bringing an existing building under the Scheme targeting senior citizens.

Sustainable City Scheme

• The Non-Citizens (Property Restriction) Act will be amended to allow non-citizens to acquire residential property in a sustainable city in the same manner as for an acquisition under the Smart City Scheme.
• The Immigration Act will be amended to allow a non-citizen and his family to be granted a residence permit on the acquisition of property of a minimum price of USD 375000 under the Sustainable City Scheme. The status of resident will remain valid as long as the buyer holds the property.

Occupation, Work Permit and Visa – Streamlining the process!

• The threshold for occupation permit for professionals will be reduced to Rs 30 000.
• An applicant for an occupation permit will be allowed a business visa of 120 days without having to leave Mauritius.
• Obtaining an occupation permit will no longer be conditional on having a local bank account.
• The Young Professional Occupation Permit will be opened to all fields of study.
• A “silent is consent” provision of 4 weeks will be introduced for registration of foreign professionals with professional bodies including the medical, dental and veterinary councils.
• Non-citizens on a tourist or business visa will be allowed to apply for a work permit.
• Approval of work permit will be deemed to have been granted upon the issuance of an electronic work permit certificate if no response has been received from the Ministry of Labour, Human Resource Development and Training within 4 weeks of the date of application.
• To support the establishment of high-end research and development centres, an 18-month International Expert Training Visa will be introduced.

About the author:

Today’s article was written by Jayesh Ramloll.  Jayesh is in our Mauritius office and specialises in Mauritian domestic and international tax and can be contacted via email at jramloll@reganvanrooy.com.