On 4 June 2020, the Mauritius Minister of Finance, Economic Planning, and Development, Renganaden Padayachy, delivered the 2020-2021 Budget speech in parliament. Some of the main tax-related measures of the Budget are summarized as follows.

Individual Income Exemption Thresholds

The individual income exemption thresholds will be increased by amounts ranging from MUR 15,000 to MUR 80,000, resulting in the following thresholds from 1 July 2020 depending on taxpayer category:

• Individual with no dependent - 325,000
• Individual with one dependent - 435,000
• Individual with two dependents - 515,000
• Individual with three dependents - 600,000
• Individual with four or more dependents - 680,000
• Retired/disabled person with no dependent - 375,000
• Retired/disabled person with dependents - 485,000

Solidarity Levy

The Solidarity Levy currently levied at a rate of 5% on resident individuals having chargeable income plus dividends in excess of MUR 3.5 million in a year will be increased to 25% for 2020-2021 on chargeable income plus dividends in excess of MUR 3.0 million. Lump-sum income received by a person by way of commutation of pension, death gratuity, or as compensation for death or injury is excluded from the computation of the Solidarity Levy. The Pay As You Earn (PAYE) system will apply to the Solidarity Levy.

New Contribution Sociale Généralisée

The National Pension Fund is being abolished and replaced with a new system, the Contribution Sociale Généralisée, with effect from 1 September 2020. Under the new system, employees earning up to MUR 50,000 per month will contribute 1.5% and their employers will contribute 3% on monthly salary. Employees earning more than MUR 50,000 per month will contribute 3.0% and their employers will contribute 6%.

Investment Incentives

Several investment incentives are provided:

• Enterprises which have been affected by COVID-19 will be entitled to a double tax deduction on their investment in Plant and Machinery during the period 1 March 2020 to 30 June 2020;
• The investment tax credit of 15% over 3 years will be extended to all manufacturing companies;
• A double deduction will be provided for manufacturing companies on the cost of acquisition of patents and franchises and also the costs incurred to comply with international quality standards and norms; and
• Medical R&D centers will be provided a VAT exemption on construction materials and specialized equipment, as well as a double deduction on R&D expenditures.

Income Tax Holiday

Tax holiday measures include the following:

• An 8-year income tax holiday will be granted to a company engaged in the manufacture of nutraceutical products provided it starts its operations on or after 4 June 2020;
• The 8-year income tax holiday granted to a company engaged in the manufacturing of pharmaceutical products, medical devices, or high-tech products will apply to a company which has started or starts its operation on or after 8 June 2017; and
• An 8-year income tax holiday will be granted under a new inland aquaculture scheme to promote the blue economy, which also provides a duty and VAT exemption on equipment.

Accelerated Depreciation

Accelerated depreciation measures include:

• Capital expenditure incurred on electronic, high precision machinery or equipment and automated equipment will be allowed as a deduction in the year in which it is incurred instead of being amortized over more than two years; and
• Green technology equipment, which is depreciated over two years, will now include equipment and machinery used for eliminating, reducing, or transforming industrial wastes.

Solidarity Levy on Telephony Service Providers

The Solidarity Levy on telephony service providers (5% of accounting profit + 1.5% of turnover), which was introduced in 2009 and subsequently extended, will be made permanent. A profitable company will pay 5% of its accounting profit and 1.5% of its turnover as Solidarity Levy. A company that has not made profits will pay 1.5% of its turnover as Solidarity Levy.

Alternative Minimum Tax on Companies Carrying on Life Insurance Business

A company carrying on life insurance business will pay tax based on the existing system of taxation or under an alternative minimum tax, whichever is the higher. The alternative minimum tax will be computed at the rate of 10% of profit attributable to shareholders adjusted for capital gains or losses.

Partial Exemption Regime

For the avoidance of doubt, it will be clarified that the partial exemption regime on interest income does not cover:

• non-bank deposit-taking institutions;
• money changers;
• foreign exchange dealers;
• insurance companies;
• leasing companies; and
• companies providing factoring, hire purchase facilities, or credit sale facilities.

Levy on Corporates

A company, having gross income exceeding MUR 500 million in an accounting year or if it forms part of a group of companies where the gross income of the group exceeds MUR 500 million, will be subject to a levy on its annual gross income at the rate of:

• 0.3% for insurance companies, financial institutions, service providers, and property holding companies; and
• 0.1% for other companies.

The levy will not apply, however, to a company that operates in the tourism sector or holds a Global Business License.

Reduced Exemption Value for Imported Goods

Presently, the first MUR 3,000 of the value of an article imported by post or courier services is exempt from customs duty and VAT. This exemption value will be reduced to MUR 1,000.

Excise Duty on Sugar Sweetened Products

The existing sugar tax of 3 cents per gram on sugar sweetened beverages will be doubled with effect from 5 June 2020. In addition, the tax of 6 cents per gram of sugar will be extended to several locally manufactured and imported non-staple sweetened products with effect from 1 November 2020. Excise regulations will also be amended to license importers and manufacturers of sugar sweetened products as in the case of sugar sweetened beverages.

VAT Exempt Supplies to become Zero-Rated

Several VAT exempt supplies will become zero-rated, including:

• Unprocessed agricultural and horticultural produce;
• Live animals of a kind generally used as, or yielding or producing, food for human consumption other than live poultry;
• Transport of passengers by public service vehicles excluding contract buses for the transport of tourists and contract cars; and
• Medical, hospital, and dental services.

VAT on Digital and Electronic Services

Digital and electronic services provided through the internet by non-residents for consumption in Mauritius will be made subject to VAT.

Tax Administration

Various tax administration changes and clarifications will be made, including:

• The time limit to effect income tax refunds will be standardized to 60 days for all taxpayers, which will run as from the date all necessary documentation pertaining to the application is received by the Mauritius Revenue Authority (MRA);
• For VAT purposes, it will be clarified that, where a transaction is not at arm's length, the market value of the supply should be taken as the taxable value;
• The MRA will be empowered to request a VAT-registered person to apply an alternative basis of apportionment for input tax when supplying both taxable and exempt supplies;
• A VAT e-invoicing system will be introduced at the business level, on a pilot basis, to enhance tax compliance; and
• Registration of Ultimate Beneficial Owners and VAT registration will be done at the time of business registration and company incorporation.

Click the following link for the Mauritius Budget 2020-2021 webpage for more information.