Cost Of Doing Business Accounting Essay

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Mauritius is a small island located in the Indian Ocean with a population of 1.3 million. The Island was inhabited until the Dutch came to colonize the island, unsuccessfully, in the 17th century. In 1710, the French took possession of the island in 1715 and ruled for the next hundred years bringing Malgash and other African people from the continent. As a result of France-Britain battles, Mauritius was colonized by Britain in 1810 and a large number of Indians were brought to the island as labour at sugar and tea plantations. With a constant influx of Chinese workers beginning in the early 20th century, Mauritius became a multi-ethnic society where the majority was Hindu followed by Creole, Muslim, and Chinese. Ethnic and cultural diversity has become a fundamental feature and asset of Mauritius to this date, where every citizen speaks English and French as well as their native language. Mauritius became independent in 1968 and has enjoyed relative political stability since then.

At the time of independence, the economy was dominated by sugar plantation which exported raw sugar to Europe. In the 1980s, Mauritius initiated economic development with steady progress in structural transformation. With its per capita GNI reaching US$8,240 in 2011 (World Bank), by now the country is regarded as one of the most successful economies in Africa and extensively studied as model cases. Mauritius is also ranked high in terms of investment climate, competitiveness, climate and governance. For consecutive years, the country has been ranked top in Africa in the World Bank's Ease of Doing Business Report2. The World Economic Forum's Global Competitiveness Index ranked Mauritius at 54 out of 133 countries in 2011-12, behind only South Africa in the Africa Region. The country scored the highest in the 2011 Ibrahim Index of African Governance.

Over the past 15 years, Mauritius has emerged as a unique investment destination and as a great place to do business. The country enjoys a vibrant economy, stable democracy and high living standards. Since independence in 1968, it has ambitiously moved from a small agricultural economy to a dynamic secondary sector (textile and tourism), to the services sector through Global Business activities and lately Business.

The constitution of the country, which is based on the British parliamentary democracy, establishes a strict separation of powers between the three arms of government - the Legislative, the Executive and the Judiciary. The President of the Republic, who is elected by the National Assembly, is the Head of State. Executive power rests with the Prime Minister and a cabinet of around 20 Ministers. The National Assembly is the supreme legislative body. The main sources of law in Mauritius are the Constitution, the statutes (including regulations), the Criminal Code, the Civil Code, the Commercial Code, the Code of Civil Procedure, case law, and international treaties. Independence of the judiciary is guaranteed by the Constitution. The Supreme Court, which is the highest judicial authority, is a superior court of record and the principal court of civil and criminal jurisdiction. The Constitution has maintained the right of appeal against final judgments of the Supreme Court to the Judicial Committee of the Privy Council of UK, as Mauritius remains a member of the Commonwealth.

For any person whether local or foreigners both have some cost to pay to the Mauritian government for doing business in the territory of Mauritius whatever is the business activities but legal one.

Introduction

Madagascar

Madagascar, also known as the Great Island or the Red Island, is located in the Indian Ocean about four hundred kilometres (400km) off the Eastern coasts of the main continent Africa, and is the fourth largest Island in the world. Madagascar has an estimated population of 18 million people of African, Arab and Asian Origin. It is home to many African/Asian ethnic groups, including: Malayo-Indonesian (Merina and related Betsileo), Cotiers (mixed African, Malayo-Indonesian, and Arab ancestry - Betsimisaraka, Tsimihety, Antaisaka, Sakalava), French, Indian, Creole, and Comoran. There are two main official languages: Malagasy and French. English has been recently introduced as the third official language. The country also claims several small islands including the French possessions of Juan de Nova Island, Europa Island, the Glorioso Islands, Tromelin Island, and Bassas da India. The capital and largest city is Antananarivo.

The Economy and Business of Madagascar are centred on mineral resources. The market is ruled by diamonds. Other than diamond, the main mineral resources are coal, bauxite, graphite, salt, industrial beryl, zircon, garnets and chromate. Vanilla, coffee, sugar, textile also have a good export market. Nearly 50% of the population of Madagascar lives below poverty line. The lowest rate of product consumption is 10%:3% and the highest rate is 10%:29%. In Madagascar the inflation rate is 7.5%. 7.3 million Labor force is at work. The budget of Madagascar shows that the expenditure of the country is $1.079 billion while the revenues it earns are $783.7 million.

Agricultural products like coffee, sugarcane, vanilla, cloves, rice, cocoa, beans, bananas, peanuts etc contribute to the Economy of Madagascar to a great extent. Economy of Madagascar earns profit from industries like meat processing, soap, breweries, tanneries, sugar, textiles, glassware, cement, paper, petroleum, automobile assembly plant and tourism. The growth rate of the industrial product of the country is 3%

Madagascar has healthy business relations with its neighbouring countries. The foreign trade is small but effective. Madagascar does business with France, Italy, Japan, and United States. International agencies as well as European Union provide assistance to Madagascar. The unit of money in Madagascar is the Malagasy franc. Madagascar is one of the few countries in the world that doesn't use a decimal currency (the only other country is Mauritania). The Malagasy currency uses a base 5 system (1 ariary = 5 Malagasy francs).

Cost of doing business

The Cost of Doing Business Study has been a process of identifying the transaction costs involved in setting up an enterprise in any particular country in the world. Costs determine investment decision and location determines sustainability. Failure to calculate precise costs for the business entity can turn potentially healthy investment opportunities into, for all intents and purposes, non-feasible. Pinning down costs should be a sky-high priority for every business. Having a system that accurately and reliably captures cost information is a requirement, not only for BOI but for investors.

The Cost-of-Doing-Business Index indicates each state's comparative advantages or disadvantages in attracting and retaining businesses. Those states with a low cost of doing business have, on average, greater job growth than those with high costs. The cost of doing business measures and tracks changes in 11 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and employing workers.

Company Incorporation

Mauritius

Any person who wishes to incorporate a company in Mauritius is required by law to reserve a company name prior to incorporation or to reserve a name for a company; an "Application for Reservation of a Company Name" must be completed and lodged with the Registrar of Companies who is responsible for the approval and reservation of names. A new and more sophisticated business environment is being put forward in Mauritius through the Business Facilitation Act. It allows businesses to start operations on the basis of self-adherence to comprehensive and clear guidelines. It also aims at facilitating entry of foreign investors, as well as attracting foreign talents, know-how, ideas and technology.

Business in Mauritius can be conducted as:

Sole trader

Commercial Partnership - Societe under the Code de Commerce

Company under Companies Act

Cooperative society

Trusts

According to the procedures of starting up a business in Mauritius (Appendix 1), it normally takes 1 to 15 days for incorporating a company. The following are the costs incurred in the formation of a company.

Fee payable

Items

Matters in respect of which a fee shall be payable

Within the due date

1.

In the case of a small private company -

(a) at the time of its incorporation; and

(b) in respect of every subsequent year

Rs 2,100

Rs 2,000

2.

In the case of a company holding a Category 2 Global Business Licence

(a) at the time of its incorporation; and

(b) in respect of every subsequent year

US$ 65

US$ 65

3.

In the case of a foreign company -

(a) at the time of its registration; and

(b) in respect of every subsequent year

Rs 9,100

Rs 9,000

4.

In the case of a company

(a) recorded by the Registrar as being a dormant company;

(b) in respect of every subsequent year.

Rs 2,000

Rs 2,000

5.

In the case of a public company -

(a) at the time of its incorporation; and

(b) in respect of every subsequent year

Rs 9,100

Rs 9,000

6.

In the case of any other company -

(a) at the time of its incorporation; and

(b) in respect of every subsequent year

Rs 2,000

Rs 6,000

Where a commercial partnership is formed, the deed of formation of which are deposited with the Registrar of Companies, the following fees are payable:

In the case of a commercial partnership (société commerciale including société commerciale de fait)

-

(a) at the time of its registration; and

(b) in respect of every subsequent year

Rs 6,000

Rs 6,000

As per Business Registration Act 2002, every individual carrying on a business activity in Mauritius is required to register with the Registrar of Companies at the Companies Division.

Registration fees depend on the workforce of the business. Companies are exempt from the payment of registration fees. The Business Registration Card must be renewed every 3 years.

Number of employees

Amount (Rs)

Not more than 10 persons

Rs100.-

Between 11 and 50 persons

Rs200.-

Between 51 and 100 persons

Rs400.-

Above 100 persons

Rs1000.-

Moreover, every individual carrying a business is required to pay a fee to the local authority (municipal or district council) where it is located, within 15 days of start-up.

Madagascar

Normally for any country there are some procedures that should be taken into consideration before opening or starting a business. The procedures, time and costs are as follows:

The procedures to legally start and operate a company are:

Pre-registration ( for example, name, verification or reservation)

Registration in the economy's largest business city

Post registration( for example, social security registration)

Time required to complete each procedure (calendar days)

Does not include time spent gathering information

Each procedure starts on a separate day

Procedure completed once final document is received

No prior contact with officials

Cost required to complete each procedure (% of income per capita)

Official costs only, no bribes

No professional fees unless services required by law

Paid-in minimum capital (% of income per capita)

Deposited in a bank or with a notary before registration (or within 3 months)

The following are associated costs for setting a business:

No:

Procedure

Time to complete

Cost to complete

Registration Requirements:

Deposit registered statuts and apply for license (carte professionnelle),

and statistical identifications

5

MGA 88,899

Comment :

The k-bis, statistical card, tax registration confirmation, commercial registration number, and

professional card (carte professionelle) can be obtained in about 2 days. It takes on average 4 to 8 days to get registered with the EDBM.

Fee schedule:

- Commercial registration fee: MGA 15,500.

- Institut National de la Statistique Malgache (INSTAT) : MGA 20,000.

- K-bis: MGA 2,000.

- Deed registration costs : MGA 9,100

- registration fees: 0.5% of the start-up capital

- lease registration: 2% of the lease

b)

File a notice of constitution to be published in a daily newspaper in

French

2

MGA 15,000

Comment:

The fee to publish a notice of constitution in a daily newspaper varies between MGA 10,000 and

MGA 20,000.

Comparing between Mauritius and Madagascar

Madagascar

Mauritius

Starting a Business data

2010

2011

2010

Rank

52

70

17

Procedure (number)

2

3

5

Time (days)

7

7

6

Cost (% per capita)

6.2

12.9

4.1

Minimum Capital (% per capita)

207.4

248.1

0

Start-up procedures are those required to start a business, including interactions to obtain necessary permits and licenses and to complete all inscriptions, verifications, and notifications to start operations. The value for Start-up procedures to register a business (number) in Mauritius was 5.00 as of 2010 and 2011 whereas for Madagascar it has increased from 2010 to 2011 as it can be noted from the table above.

Time required to start a business is the number of calendar days needed to complete the procedures to legally operate a business. It can be noted from the above table that time required to start a business in Mauritius in the same for 2010 and 2011 that is it takes around 6 days whereas for Madagascar is takes about 7 days which is 1 day extra than that in Mauritius.

The cost to register a business is calculated by presenting it as a percentage of gross national income (GNI) per capita. The cost of business start-up procedures in Madagascar has increased from 6.2 to 12.9 while in Mauritius it has reduced from 4.1 to 3.8. During these past 2 years there was no reform that Mauritius made in order to make starting a business more easier.

Tax

Mauritius

A company is resident in Mauritius if it is incorporated and has its central management and control in Mauritius. Broadly similar criteria apply to determine whether sociétés, trusts and other entities are resident in Mauritius. Non‐residents are subject to income tax on income derived from sources in Mauritius. As from 2010, the fiscal year or income year in Mauritius runs from 01 January to 31 December.

Value Added Tax (VAT)

Value Added Tax (VAT) is a tax on goods and services. It is chargeable on all taxable supplies of goods and services made in Mauritius by a taxable person in the course or furtherance of any business carried on by him. VAT is also payable on the importation of goods into Mauritius, irrespective of whether the importer is a taxable person or not.

The rate of VAT is 15%.

A person in business becomes a taxable person as soon as turnover of his taxable supplies exceeds Rs 2 million or is engaged in business specified in the Tenth Schedule of the VAT Act. It includes:

Accountant,

Auditor,

Advertising Agent,

Adviser,

project manager,

Notary Public

VAT returns

Businesses with annual taxable turnover of Rs 10 million or more have to submit monthly VAT returns and settle any VAT liability within 20 days of the end of the month. Businesses, with an annual taxable turnover below Rs 10 million, submit quarterly returns and settle any VAT liability within 20 days of the end of the relevant quarter. Companies operating as polyclinics or providing healthcare services, registered under the Investment Promotion Act, are exempted from VAT on the construction of buildings to be used for providing health services.

Zero‐rated and exempt supplies

The VAT Act sets out a long list of supplies which are either zero‐rated or exempt. Included, among zero‐rated supplies, are export of goods and services and services provided by Management Companies in the Global Business Sector. Exempt supplies include basic foodstuffs, educational and training services and pharmaceuticals.

Income tax rates

Companies, Trusts, Trustees of Unit Trust Schemes and Non‐Resident 'Sociétés' (partnerships), are liable to tax at the rate of 15%.

Manufacturing companies are allowed to claim 25% investment allowance on investments in state‐of‐the‐art technological equipment.

Companies holding an Investment Certificate (ICT Scheme) as at 30 September 2006 will pay tax at a rate between 0% and 15%.

GBC1 are taxed at a maximum effective rate of 3% while GBC 2's are not liable to tax in Mauritius. Freeport Operators and Private Freeport Developers, depending on the nature of their activities and the date they were awarded a licence, will pay tax between 0% and 15% until 30 June 2011. Thereafter, such companies will be liable to taxation at the rate of 15%.

Where a company owns a residential property, the company is required to pay the National Residential Property Tax (NRPT) according to the prescribed rates. A rate of Rs 10 per m2 for individual residences and Rs 30 per m2 for apartment is applicable.

Income from business and rental income

Individuals deriving income from a business activity or rental income are required to submit returns in respect of their chargeable income and pay income tax accruing thereon to the MRA on a quarterly basis during the income year. The returns cover the quarters ended 30 September, 31 December and 31 March and any tax due must be settled within three months of the end of the respective quarters. The taxpayer must also submit an annual income tax return covering the fiscal year ended 30 June by 30 September and settle any further tax due (if any) at that time.

Alternative Minimum Tax (AMT)

Where the normal tax payable for an income year by a company is less than 7.5% of its book profit, the company should pay either 7.5% of its book profit or 10% of dividends declared in respect of that year, whichever is lesser.

Penalty

Description

Penalty

Description

Late submission of return

A penalty of Rs 2,000 per month or part of the month up to a maximum of Rs 20,000.

Late submission of return

Late payment of tax

A penalty of 5% of the amount of tax excluding any penalty and interest at the rate of 1% per month or part of the month during which the tax remains unpaid.

Late payment of tax

Madagascar

Madagascar tax year is usually the calendar year that is either ending 31 December or 30 June, although taxpayers who carry on a business may elect a different tax year. A company generally is deemed resident if it is incorporated or principally managed in Madagascar.

Resident companies are taxable on their domestic and foreign-source income. Non-residents are taxed only on Madagascar source income.

VAT

The VAT was introduced on August 1, 1994 by supplementary budget No.94 019. This tax replaced former sales tax, namely Tax on transaction .VAT is compulsory for companies (legal entities) and individuals with an annual turnover exclusive of tax higher than MGA 200 million. Companies (legal entities) and individuals with annual turnover, exclusive of tax, of less than MGA 200 million may opt to be liable to VAT. The rate of VAT in Madagascar is 20%. VAT returns are due on a monthly basis.

Individuals, corporations and associations are liable for VAT if they realize:

1. a business activity

2. domestic transactions

3. and an annual turnover more than 250 million FMG

The following goods and services are not subject to the VAT:

1) Medicines, medical services and equipment, raw materials for making medicines;

2) Unprocessed or preliminarily processed products of agriculture and livestock;

3) Importation, sales, printing of newspapers, magazines;

4) Sales of books, copybooks, pens, special bulletin etc;

5) Supply of amateur sports services;

6) Public services;

7) Fees paid for education services at any level

8) Life insurance;

9) Electricity and water for domestic use up to 80Kwh and10 m3 respectively

Tax rates

There are only 2 tax rates:

• 0% which is only applied on exports

• 20%(normal rate) applied on other goods and services.

Initially the tax rate was 25 % . However, since 1996, it was reduced to 20 percent due to the strong complaint of taxpayers' association and politicians. Taxpayer is required to file returns monthly or quarterly, depending on the level of the annual turnover. So the taxpayers, who have an annual turnover equal or more than 1 billion FMG are obliged to file tax returns every month; obviously the rest must file them quarterly. This tax is levied through the self-assessment system where taxpayers are required to calculate by themselves their tax liability. Filing returns and payments must be done at the latest by the 20th of the month following the tax period by means of the notice of tax payment issued by the tax office. The law stipulates that in case where taxpayers do not have a tax liability to pay, that is the output tax equals to input tax or for other reasons, they are required to file returns, namely " Bordereau de situation" during the same period.

All companies are required to file an annual tax return, with the filing date depending on the financial year end of the company. Companies with a December year-end must file a return before 15 May the following year and, if the taxpayer's ends on 30 June, filing must be made before 15 November of the same year. Companies with a different year-end must file a return within 4 months.

Corporate income tax rate

It is generally taxed on all revenues realized by all companies in Madagascar either domestic or foreign companies except those which legally benefit the exoneration. Apart from the ordinary companies, the associations, partnership, group of persons, public or private establishments endowed with a legal entity or not fall within the scope of the law. Precisely, the term "revenue realized in Madagascar" means all revenue of companies having a head office in Madagascar. Corporate income tax rate in Madagascar is 23%.

Domestic and foreign companies are obliged to file returns before 1st of May of the following year if the accounting period coincides with a calendar year, before 1st of October if the accounting period closes on 30th of June. Payment of tax must be made at the time of filling of return. In case of failure to file correct returns within the required date, the taxpayers are punishable by fine 10 percent for the 1st month of delay, and 5 percent for each following months.

The following types of revenue are exempted from corporate income tax:

• Revenue realized by religious association, cultural association legally existed;

• Revenue realized by non-profit-making organization aiming exclusively at promoting the small and medium-sized companies(PME:Petites et Moyennes Entreprises);

• Interest paid by the Savings Bank (Caisse d'Epargne de Madagascar).

Tax on buildings

Tax on buildings is levied on rental value of buildings and of immobile equipment. Tax officer through the declaration submitted annually assesses the tax liability. Buildings owned by government, local authorities, public institutions, and charities are exempt. Certain tax privileges are also stipulated in the internal tax revenue; so the new buildings are exempt for 5 years, from the date of completion.

Tax rates on Buildings Owner-occupied

Nonowner-occupied

Residential

3 to 6 percent

Non-residential

5 to 10 percent

Land tax

Land tax is levied annually on estimated productive value of land based on type of crop use. Land owned by government, local authorities, public institutions, land used for health, and education or social purpose is permanently exempt from tax.

Tax rate

Rates essentially vary according to land use (per hectare):

a) FMG 50-300 for grazing land;

b) FMG500-1000 for industrial plantations;

c) 1 percent of intrinsic value for land in nonagricultural use;

d) FMG400-800 for woods, forests, lakes, and swamps;

Comparing Mauritius and Madagascar

Madagascar

Mauritius

Paying Taxes data

2010

2011

2010

Rank

72

72

-

Total tax rate (% profit)

39.2

37.7

22.9

Payments (number per year)

23

23

7

Time (hours per year)

201

201

161

Tax payments by businesses are the total number of taxes paid by businesses, including electronic filing. The tax is counted as paid once a year even if payments are more frequent. The Tax payments (number) in Madagascar was reported at 23 in 2010 and 2011 compared to Mauritius whose tax payments was 7.00 both in 2010 and 2011.It is considerably lower than that of Madagascar.

The Time to prepare and pay taxes (hours) in Madagascar was at 201 and 161 in Mauritius as it can be noted form the table above. Time to prepare and pay taxes is the time, in hours per year, it takes to prepare, file, and pay (or withhold) three major types of taxes: the corporate income tax, the value added or sales tax, and labor taxes, including payroll taxes and social security contributions. Mauritius is more efficiency compared to Madagascar.

Total tax rate is the total amount of taxes payable by businesses (except for labor taxes) after accounting for deductions and exemptions as a percentage of profit. The Total tax rate (% of profit) in Madagascar has decreased from 39.2 to 37.7 whereas in Mauritius it has increased from 24.1 to 22.9. In 2011 Mauritius has introduced a new corporate social responsibility tax while Madagascar continued to reduce corporate tax rates.

Permits

Mauritius

Building and Land Use Permit

As of October 1, 2006, every person who intends to either start construction work or make extensive alterations, additions or repairs to an existing building or carry out land development activities must apply to the local authority for a building and land-use permit (BLP). This is a single permit that replaces both the development permit and the building permit. Every application for a building and land-use permit must in accordance with provisions of the Building Act, the Town and Country Planning Act, and the Planning and Development Act of 2004.

All plans must be signed by the draughtsman for buildings of less than 250 sq. m. in floor area and must include the name and address. For buildings of 250 sq. m. or more in floor area, all plans are to be signed by a registered professional architect, including the architect's name, address, VAT registration number, and registration number with the Professional Architects Council. The application form can be obtained from the Planning Department of any local authority, Small Enterprises and Handicraft Development Authority (SEHDA), the Board of Investment, or the Ministry of Local Government, or it can be downloaded from various Web sites. When the application is in accordance with the act and guidelines, the development and building permits should, under the Chief Executive authority, be issued within 2 weeks of the effective date of receipt of the application. The processing fee for application for Building and Land Use Permit is Rs 500.

The following documents are needed along with the application

- Copy of the title deed. - Copy of the lease and planning clearance from the Ministry of Housing and Lands (for state land). - Consent of owner and copy of the owner's national identity card. - Copy of the national identity card of the applicant. - Three sets of plans, comprising site and location plans, layout, elevations, and sections. - Public notification by way of plate display and notice in two daily newspapers (for development within residential zones). - Consent of neighbours (not required in this case because it is industrial). Consent is required if the distance between the new building and neighbouring constructions is less than 1 meter for one-story buildings and 1.5 meters for two-story buildings.

Fees for issue of Building and Land Use Permit

Rs

Change of use from one cluster to another cluster

1,000

Change of use within same cluster (where a Business and Land Use Permit is required)

1,000

Construction of building or part of building, including extension to/ or conversion of existing building -

a) of a floor area of not more than 250 m2

b) of a floor area of more than 250 m2 but not more than 500 m2

c) of a floor area of more than 500 m2

10/ m2 (subject to a minimum fee of Rs 500)

20/ m2

50/ m2

Development by small enterprise registered with the Small Enterprises and Handicraft Development Authority established under the Small Enterprises and Handicraft Development Authority Act 2005

500

Engineering or other operations in, on, over and under the land (including rock quarry, golf course, marina)

5,000

Excision/subdivision of land among heirs

500/Lot

Extensive alterations, additions or repairs to an existing building

1,000

Land Conversion Permit

Where a land is classified as agricultural land and that land shall be used for non-agricultural purposes, a land permit is required. A land conversion tax at the following rates is paid except for the portion of land where a golf course shall be developed:

Area of land converted

Rates of land conversion tax (Rs / ha)Category 1

Rates of land conversion tax (Rs / ha)Category 2

Less than 0.25 hectare

250,000

0

0.25 hectare but less than 0.50 hectare

500,000

50,000

0.50 hectare but less than 1.00 hectare

1,000,000

250,000

1.00 hectare but less than 5.00 hectares

2,000,000

1,000,000

5.00 hectares and above

3,500,000

1,500,000

Occupation Permits

An occupation, which is a combination of a work and residence permit, allows an eligible investor, self-employed or professional to, in a more expeditious manner, work and live in Mauritius.

The eligibility criteria are as follows:

Investor

The proposed business activity should generate an annual turnover exceeding MUR 4 million + initial investment of $100,000.

Professional

The basic monthly salary of a professional under a contract of employment should exceed MUR 75,000

Self-employed

The annual income fro the proposed business activity should exceed MUR 600,000 + initial investment of $35,000.

Occupation Permit Fees

Rs

Investor and Self-employed (validity of permit 3 yrs)

Rs.10, 000

Professional

Contract of 2 years or less

Contract of more than 2 years and less than or 3 years

Rs.6, 000.

Rs. 10,000.

Work Permits

An employer based in Mauritius should apply for a work permit in respect of an expatriate who will be employed to do a specific job for the employer on a full-time basis. Work permits are issued by the employment division of the Ministry of Labour, Industrial Relations and Employment and at the same time a Residence Permit is to be sought by the applicant.

The Work Permit fees are as follows:

Fees payable on recruitment of foreign labour:

Application fees of Rs 500 for each individual application

Work Permit fee in the EPZ sector: Rs 1,000 for first five years and Rs 10,000 thereafter

Bank guarantee representing cost of return air ticket to country of origin in respect of each expatriate.

WORK PERMIT IN RELATION TO

FEES (RS)

Gaming

Gaming or other similar activity

50,000 per year

Horse Racing

Jockeys riding horses in training work and in races

15,000 per term or any part thereof

Jockeys riding horses in training work in races for a second or subsequent racing season

30,000 per term or any part thereof

Stipendiary Stewards employed for a first and second racing season

50,000 per racing season or any part thereof

Stipendiary Stewards employed for a third or

subsequent racing season

100,000 per racing season or any part thereof

Professional Entertainers

Professional entertainers for performance in group or in solo

Manufacturing Industry

Employment in any manufacturing industry

WORK PERMIT IN RELATION TO

Hotels and Restaurants

Employment in any hotel or restaurant

Construction

Employment by any construction firm or contractor who has been awarded a contract by the NHDC for the construction of housing units for the lower income group

ICT

Information and Communication Technology

Others

Any other employment

Madagascar

Acquire property registration certificates

Acquire property registration certificate

Time to complete: 30 days

Cost to complete: MGA 2,000

Agency: Land Administration Department (Service des Domaines)

Comment: BuildCo must obtain two copies of all the property registration documents. This procedure usually takes a month. It might take 3 months if the necessary book is missing from the registry, but this is not the rule.

Obtain official topographical plan of the plot

Time to complete: 7 days

Cost to complete: MGA 6,000

Agency: Topographical services (Service Topographique)

Comment: Two copies of the official topographical plan for the property with coordinates are needed. The cost of each copy varies between MGA 5,000 and MGA 7,500.

Acquire lot plan with municipal seal

Time to complete: 7 days

Cost to complete: no charge

Agency: City services at Anosipatrana (Bureau de la Commune à Anosipatrana)

Comment: The documents needed are completed layout forms with the Commune's seal.

Obtain preliminary approval from the urban municipality

Time to complete: 1 day

Cost to complete: no charge

Agency: Commune of Antananarivo (Commune D'Antananarivo)

Obtain a building permit a building permit

Time to complete: 90 days

Cost to complete: MGA 1,170,540

Agency: Commune of Antananarivo (Commune D'Antananarivo)

Comment: After approval by the Urban Commune of Antananarivo, the file is forwarded to the following services: - Bureau of the Commune at Anosipatrana (15 days). - Municipal Bureau of Sanitation (Bureau Municipal d'Hygiène, BMH) (15 days). - SPAT (2 months). After SPAT has checked the information in the file with the land owner (see Procedure 7), it issues its approval of the file, then prepares the file for forwarding to the Directorate of Land Development (at the Ministerial Commission) (15 days). Two months later, SPATissues the building permit to BuildCo. The cost is calculated based on the volume of the building before SPAT gives its opinion. The cost can vary from MGA 1,000 to MGA 2,000 per cubic meter.

Obtain an occupancy certificate

Time to complete: 7 days

Cost to complete: no charge

Agency: Commission

Comparing Madagascar and Mauritius

The time taken to obtain a permit varies around 130 to 136 days in Mauritius. There are around 16 procedures that need to be taken into consideration for any person who intends to either start construction work or make extensive alterations, additions or repairs to an existing building. While in Madagascar the time taken to obtain a permit takes about 178 days, 42 days extra than that of Mauritius with the same number of procedures that is 16.

During these past few years there has been a constant decrease in the cost (% of income per capita) from 35.5 to 32.3 in Mauritius while in Madagascar there has been an increased from 1298 to 1250. No reform was brought in this sector neither in Mauritius or Madagascar in the year 2010 and 2011.

There are various factors that affect the economy of Madagascar that discouraged investors or firm to start business in the economy like political instability, corruption, and poor management and trade laws. Mauritius is classified as an economy with safe and stable jurisdiction and political stability and provide lots of incentives for firm to start business.

Property Registration

Mauritius

Ensuring formal property rights is fundamental. Effective administration of land is part of that. If formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly administered, it has little chance of being accepted as collateral for loans-limiting access to finance.

Notary checks for encumbrances at the Registrar General

The notary public consults the register of transcriptions and the list of deeds which are waiting for transcription in order to ascertain the title of the seller, the status of encumbrances, charges, liens, etc. The notary pays an annual subscription to the Registrar General, which enables him to check the registers free of charge. He may however pass the cost to the client as part of the fees charged for the whole transaction. (Note: The annual fee paid by the notary to the Registrar General is Rs12,000 since last budget).

Time to complete: 2 days (simultaneous with procedures 2)

Cost to complete: no cost

A land surveyor prepares a new survey plan and a situation plan

The seller must obtain a situation plan done by a Land Surveyor.

Time to complete: 4-8 days (simultaneous with procedures 1)

Cost to complete:

A notary prepares and notarizes the deed of sale

The notary prepares the sale deed. The seller is responsible for giving all the required documentation to the notary. The deed is signed by the parties and the notary. According to the law (Registration Duty act and Notaries Act), the notary has up to 7 days from date of deed to submit the deed at the Land Registry

Time to complete : 4 days

Cost to complete : Notary's fees according to the following cumulative schedule:Value of property (in MUR) Notary Fees up to MUR 250,000 2% (minimum MUR 50)

The notary deposits the signed deed for registration and transcription

The notary will deliver the signed deed + one copy of the deed to the Registrar-General for registration. The notary will pay the registration fee, the stamp duty and the transfer tax on behalf of the seller when applying for registration at the Registrar General's office. As of January 2011 the transfer tax is as follows: 5% of the property value if the seller has owned the property for more than 5 years and 10% of the property value if the seller has owned the property for less than 5 years. The Seller must now pay a Capital Gains tax if the profit from the sale is Rs 2,000,000 or more. The stamp duty amounts MUR 1000. The registration fee is equal to 5% of the property value. Once payment is made, the Land Registry will enter this transaction in the book and will give a Transcription Number (TN) to the notary. Once this TN number is available at the land registry, the property is opposable to third parties. The notary will then issue the ―Copie authentiqueâ€- to the buyer. The Finance Bill Act 2008 set up a statutory time of 15 days for the Registrar to complete the transcription and give a Transcription Number (TN) to the notary (Section 37 of transcription and Mortgage Act amended by the Finance Bill Act 2008). After the TN has been issued, the Land registry will verify and re-assess the transaction through internal processes. The original deed is available for pick-up by the notaries in 15 days. The notary will keep the document for 40 years and then transmit it to the Chief Archivist, National Archives Department for safe keeping. If this delay is not respected, there is a penalty of 50% to be paid.

Time to complete: 11 days

Cost to complete: 5% of property value (transfer tax)=5% of property value (registration fee)+MUR1000

Madagascar

Request two copies of the certificate of registration and the legal situation of the land at the Registrar of the Property Registry

This certificate is an extract from the property registry books and must have been obtained in the past three months maximum. It gives the situation of the (past) registrations on the Registry books and indicates the identity of the proprietor of the land who has registered his rights to it. It also indicates any encumbrances on the land.

Time to complete

Cost to complete

7 days (simultaneous with Procedures 1 and 3)

MGA 2,000 (MGA 1,000 per copy)

Request two topographical extracts with coordinates at the 'Service de la Topographie'

These coordinates allow the marking of the property and are expressed in â€-x' and â€-y'. This plan is to be signed by both parties and is annexed to the request for authorization of the real estate transaction. This extract can also be traced by a sworn surveyor to delimit the part of the land to be ceded, in case the transaction does not cede the property in its entirety. The cost and time noted here are for a simple plan, intended for a transfer whereby the buyer is not planning on making changes or constructions to the property. For more complex uses of the property, a more detailed plan would have to be drawn, costing between MGA 5000 and 15000, depending on whether a government or private surveyor was used.

Time to complete

Cost to complete

5 days (simultaneous with Procedures 2 and 3)

MGA 1,000 per plan

Request authorization to conduct a real estate transaction at the Ministry of Urban Planning (Ministere de l'Urbanisme)

This request is for an administrative document that indicates, by way of a report on the urban plan, if the property is located in specific zones and if it has zoning issues or encumbrances. It is necessary to attach the certificate of the legal situation (less than 3 months old) and 5 copies of the plan. Only the Director of the Urban Planning Department is authorized to approve the file. Sometimes, if the Director is away, this can cause delays.

Time to complete

Cost to complete

3 days (simultaneous with Procedures 1 and 2)

no cost

Notary draft and notarize the sale agreement

In 2007, Madagascar adopted a new law: "Loi 2007.026 du 12/12/2007 portant statut du notariat a Madagascar". This law, published in the Official gazette N° 3181 on April 14th, 2008, makes it mandatory to use the services of a notary for all property transaction for a value above 15 000 000 MGA. It is no longer required to the signatures of both parties to be legalized at the Municipality by either the Mayor or an authorized employee. Notary fees are assessed as follows, per l'arrêté n°30286/2011 of October 17, 2011: • 3% on the first 20,000,000 MGA of the property value • 2.5% on the following 20,000,000 MGA of the property value • 1% on any portion of the property value beyond 40,000,000 MGA

Time to complete

Cost to complete

2 - 7 days

Notary fees are assessed as follows: 3% on the first 20,000,000 MGA of the property value 2.5% on the following 20,000,000 MGA of the property value 1% on any portion of the property value beyond 40,000,000 MGA

Registration of sale agreement at the Office of Property Registry

This step is a fiscal Procedure, in light of paying the registration fees on the property and the tax on the appreciation of the property. Capital gains tax for companies transferring property is no longer applicable according to the Loi des Finances 2007.

Time to complete

Cost to complete

4 days

6 % property value for registration fees

Request transfer to be recorded in the books at the Registrar of the Property Registry

This is the most important Procedure in the process. The property right on a land is not transferred until it has been transcribed onto the books at the Registry. When the notary or the buyer file for registration at the Land registry, the "Duplicata" must be attached to the sale and purchase agreement duly notarized. Once the transcription is done, the Registrar will give the "Duplicata" to the new buyer with his name written as the new owner of the property.

Time to complete

Cost to complete

60 days

2% property value (transfer tax) + MGA 15,000 (fixed fee)

Comparing Mauritius and Madagascar

Madagascar

Mauritius

2010

2011

2010

Rank

-

-

..

Procedures (number )

6

6

4

Time (days)

74

74

26

Cost (% of property value)

9.4

9.8

10.7

Time required to register property is the number of calendar days needed for businesses to secure rights to property. There is a great variation in the number of days between Mauritius and Madagascar that is in Mauritius it takes around 26 days whereas in Madagascar it takes about 74 days.

Number of procedures to register property is the number of procedures required for a business to secure rights to register. As shown on the table below the number of procedures needed to register property is 4 in Mauritius while in Madagascar it's around 6 for both 2010 and 2011.

Historical Data Chart

Cost of electricity

Mauritius

Class of consumer

Average sales price per Kwh

2010

Average sales price per Kwh

2011

Domestic

5.66

5.66

Commercial

6.92

7.47

Industrial

3.29

3.55

Other

7.17

7.84

The process for application to get electricity connection is very easy, at a very low cost and has remained the same for the year 2010 and 2011. While doing an application, the applicant has to make a security deposit only which varies accord to class of consumer. For Domestic it is between Rs 200 to Rs 1200 because of different tariffs, for commercial Rs 500 and for industry it is Rs 400. This is the only cost that applicants have to pay and connection is done within 1 week.

The cost per kWh for both commercial and industry use has increased by only 7.9% from 2010 to 2011. This was to only change that we have experience in the cost of electricity in Mauritius

Madagascar

Jiro sy rano Malagasy is the producer of electricity in Madagascar. The procedure and cost of electricity are as follows;

The client applies for electricity connection and awaits estimate of connection fees from Jiro sy rano Malagasy (JIRAMA)

15 calendar days

no charge

The client obtains external inspection by Jiro sy rano Malagasy (JIRAMA)

1 calendar day

no charge

The client obtains right of way from the local authority (Commune)

50 calendar days

MGA 60,000/

RS 816

The client buys the material for the external works from a local store

18 calendar days

no charge

The client obtains testing of material and external works by Jiro sy rano malagasy (JIRAMA)

19 calendar days

MGA 55,748,923/

RS

758,488

The client signs a supply contract with, pays an advance on consumption to, and awaits final connection from JIRAMA

366 calendar days

MGA 29,063,035.3/

RS

395,415

The above cost and procedures was the same for the year 2010 and 2011

Current exchange rate Rs 1-MGA 73.5

Comparing Madagascar and Mauritius

Comparing the cost of electricity for Mauritius and Madagascar, it clearly seems that in Mauritius electricity is much cheaper and quicker than that of Madagascar. In Mauritius an industrial consumer has to pay only the security deposit which is Rs 400 to get electricity in its premises (only external connection). But Madagascar it is completely different after the application to the Jiro by rano Malagasy (supplier of electricity in Madagascar), the applicant must obtain a right of way from the 'Commune' before paying the estimate so that the utility can carry out the external works of expanding the overhead network which cost Rs 816(Mauritian rupees), than he/she must pay the connection fee at the utility's office which is Rs 758,488(Mauritian rupees) and the applicant again has to make a final pay of Rs 395,415 (Mauritian rupees) when the consumer signs the supply contract with Jiro sy rano Malagasy and this payment is an advance on consumption. Moreover the time which an applicant must wait to get electricity is 469 days in Madagascar while in Mauritius everything things are done within one or two weeks. Furthermore, the material for a 140-kVA connection is usually not available in the utility's stock. The client can then choose to either buy the material from a local store or ask the utility to obtain it. Most often than not, the client opts to buy the material to save time.

From the above, we can conclude than getting electricity in Madagascar is very costly in term of money and time also as you must wait for 469 days as in Mauritius a payment of Rs 400 and you get connected within maximum 2 weeks

Cost of water

Mauritius

Category of usage

Rs/

2010

Rs/

2011

Domestic

7.20

7.01

Commercial

16.92

16.78

Hotels, Guests Houses

29.14

28.54

Industrial

14.97

14.85

Agricultural

7.85

7.20

Government

17.77

17.74

Acquired/concessionary prises

5.41

6.73

Ship

29.19

28.43

Non-treated water

2.61

2.50

For application for water domestic applicants do not have to make security deposit. Such industrial and agriculture applicants have to make a security deposit of Rs 500 only. Other fees are as follows and this has remain the same for the year 2010 and 2011

Meter rent

Size of meter(mm)

Rs

12 or 18

10

25

30

37

45

50

60

75

90

100

150

Greater than 100

200

Other charges and fees

Type of Service

Rs

Connection charge(basic)

1300

Meter testing

200

Reconnection at meter

150

Reconnection on main

1300

Shifting of supply

1300

Shifting of meter

200

Enlargement of tapping

Clearance certificate(Residential)

100

Clearance certificate(Commercial)

200

Water tanker service(CWA tanker)

670

Water tanker(private tanker)

300

The cost of water per was decrease in Mauritius for all category of usage, for the commercial and industrial usage the decrease was 0.8% for both and all other cost have remain unchanged for both years.

Madagascar

Apply for water connections

1 day

no charge

Receive an inspection by JIRAMA to prepare an estimate

1 day

no charge

Obtain water connections

21 days

MGA 1.5 million/

Rs 20,408

The connection cost has remained the same for both years.If we cost between Mauritius and Madagascar, the connection fee in Madagascar is 7.2 times more costly compare to Mauritius. For Mauritius the connection cost is only Rs 2750 while for Madagascar it is Rs 20,408.

Networking

Mauritius

In Mauritius we have three operators namely Mauritius telecom, Emtel and Mahanagar Telephone Mauritius Ltd (MTML) which provide services on telephone, mobile and internet.

Fixed Telephone Network providers in Mauritius are:

1. Mauritius Telecom (MT)

2. Mahanagar Telephone Mauritius Ltd (MTML)

Mobile phone and Internet Network providers:

1. Mauritius Telecom (MT)

2. Mahanagar Telephone Mauritius Ltd (MTML)

3. Emtel Mauritius Ltd

Only Mauritius telecom offers these services to business sector. All cost associated to these services has remained the same for the year 2010 and 2011 and the as follows:

Mauritius Telecom

New conventional telephone line

Security deposit

Business Rs 2000

Installation Fee

Business Rs 2000

Cost of apparatus for both residential and business Rs 1000

Local Call Tariff

Price for businesses

1s indivisible minute

Addition second

Monthly Tariff

225

Domestic-normal

0.85

0.01

Calls- off peak hours

(20h30-06h30)

0.60

0.01

International Call

On average for

1st 30 sec

Per second

Peak

4.35

0.161

Off peak

4.15

0.138

Internet -

Business Customers

Tariffs - ADSL PRO and ADSL Business Plans

ADSL PRO 256K*

ADSL PRO 512K

ADSL Business 256K

ADSL Business 512K

ADSL Business 1M

ADSL Business 2M

Download (kbps)

256

512

256

512

1024

2048

Upload (kbps)

128

128

128

128

256

256

Monthly Rental exc. VAT (Rs)

800

1300

1600

2500

2500

8900

Max. chargeable amount (Rs)

1600

2500

NIL

NIL

NIL

NIL

Usage Allowance

3GB

5GB

NIL

NIL

NIL

NIL

For the year 2010 and 2011, all cost have remain unchanged

Madagascar

Apply for a telephone line

1 day

no charge

Receive an inspection by Malagasy Telecom to prepare an estimate

1 day

no charge

Obtain a telephone connection

30 days

MGA 100,000/

Rs 1360

The connection cost has remained the same for both years.

Comparing the connection fee of Mauritius and that to Madagascar, from the above we can see that the total connection in Madagascar is only Rs 1360(Mauritian rupees) while for Mauritius it is a little bit expensive Rs 5000. An application for business purpose, the applicant must pay Rs 2000 each for security deposit and for installation fee and Rs 1000 for the apparatus which is optional the applicant can use it own apparatus.

Business loan in Mauritius and Madagascar

Lending interest rate%

2010

Lending interest rate%

2011

Mauritius

8.92

8.92

Madagascar

49

52.50

In Mauritius we have 19 commercial banks which provide business loan facilities. On top we have an institution name Development Bank of Mauritius which provide loan up to 5 million rupees and for large amount financing we have a company name CIM Finance. The average lending interest rate in Mauritius for 2010 was 8.92% and in 2011 it was the same. Contrary to Madagascar the lending borrowing rate for 2010 was 49% and for 2011 it was 52.50%. This clearly shows than cost of borrowing in Madagascar is very expensive compare to Mauritius. Moreover if we look at the ranking of getting credit for Mauritius and for Madagascar, we will reach same conclusion. For both year Mauritius is ranked 89th while Madagascar is ranked 176th.

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