Embed Size (px)
Citation preview
Budget 2018/2019Our technical analysis and synopsis15 June 2018
3 Budget 2018/2019 | June 2018
1. Executive summary
2. Personal income tax
3. Corporate tax
4. Tax administration
5. Value Added Tax
6. Budget outturn and estimates
7. Background
8. The 7 main strategies
Pg 3
Pg 4
Pg 5
Pg 9
Pg 10
Pg 11
Pg 11
Pg 12
3 Budget 2018/2019 | June 2018
This Budget Alert is based on the Budget Speech presented to the National Assembly by the Prime Minister, Minister of Home Affairs, External Communications and National Development Unit and Minister of Finance and Economic Development, the Honourable Pravind Kumar Jugnauth on 14 June 2018.
This is the fourth Budget of the Minister under the present regime. It is a seven-pronged Budget which builds on the foundations laid in the previous Budgets. A number of measures are aimed at increasing the standard of living of fellow citizens and stimulating the agricultural sector.
We welcome the various measures proposed to reform the financial and banking services sector in line with the international tax landscape. There would be major changes in the taxation regime of banks.
The Work@Home scheme aims at raising productivity and increasing gender equality in the labour workforce and should be welcomed by the working population. The double tax deduction on wage and salary costs will act as an incentive for domestic companies to adopt this global concept. This measure is likely to encourage more women to join the labour workforce.
The Minister did not raise the standard rate of Value Added Tax (‘’VAT’’), but instead removed VAT on a number of products. The reduction and removal of customs duty on a number of products would also reduce the taxable value for VAT purposes where the goods in question are standard rated.
We are disappointed once again that a group relief provision was not introduced for income tax and VAT purposes although a number of representations have been made. Combined with the time limit on the utilisation of tax losses, this may lead to an unnecessary fiscal cost for a group of companies. We already have a group relief provision on intercompany transactions for land transfer tax and registration duty purposes. In the current economic conditions, a number of entities spanning a number of sectors are engaged in cost cutting strategies and a number of restructuring exercises are being made; such exercises are for bona fide commercial reasons.
To conclude, this budget focuses on widening circles of opportunities, encouraging consumption of local products, rejuvenating the agricultural sector amongst others. Its success will depend on the extent to which the measures are implemented and applied bearing in mind their underlying objectives.
1. Executive Summary
4Budget 2018/2019 | June 2018
Negative income tax supported by national minimum wageEmployees with a monthly earnings of Rs 9,900 or less are entitled to the Negative Income Tax (‘’NIT’’). The allowance would be based on the monthly basic salary instead of total earnings as from 1 July 2019. However, an employee with a monthly total earnings over Rs 20,000 will not be eligible to NIT. The objective of the amendment is to ensure that the NIT does not become a disincentive and at the same time does not penalise employees performing overtime.
Some other conditions have been removed so that an employee may be entitled to NIT. For example, he should not be required to be a full-time employee, in so far as he works for at least 24 hours over three days in a week. He will be eligible to the NIT as from the first month of employment.
It is hoped that the measure will benefit society in the long run and will have a catalyst effect for the individuals concerned.
Income exemption threshold (‘’IET’)The basic Income Exemption Threshold has been increased by Rs 5,000 for all categories as depicted below:
This measure will also impact on the exempt portion of the retirement pension of Mauritian citizens living abroad. The fact that the increase is based on a flat amount for all the IET categories implies that the percentage increase will vary for each categories.
2. Personal income tax
Current Proposed
Rs
Individual with no dependent 300,000 305,000
Individual with one dependent 410,000 415,000
Individual with two dependents 475,000 480,000
Individual with three dependents 520,000 525,000
Individual with 4 or more dependents 550,000 555,000
Retired/disabled person with no dependent 350,000 355,000
Retired/disabled person with one dependent
460,000 465,000
5 Budget 2018/2019 | June 2018
Rates of income taxIndividuals with yearly net income of Rs 650,000 will be taxed at a rate of 10% instead of 15%.
This measure seeks to alleviate the tax burden for the middle class people. Once the yearly net income exceeds Rs 650,000, the applicable tax rate would be 15% as the measure is not an introduction of a progressive system of income tax. We are disappointed to see that no amendment would be made to the solidarity tax introduced last year for certain resident individuals. It would appear that the measure applies to residents and non-residents and the nature of the income and its source would not be relevant.
Additional deduction for tertiary educationThe additional income exemption threshold for individuals with dependents pursuing an undergraduate course is being increased from Rs 135,000 to Rs 175,000 where the undergraduate course is pursued in Mauritius. Where the undergraduate course is pursued outside Mauritius, the threshold is being increased from Rs 135,000 to Rs 200,000.
The percentage increase is more than 25% and this measure is consistent with the policy to increase the standard of living of Mauritius. We wish to emphasize that the individuals should ensure that they keep the relevant evidence.
Rainwater harvesting An individual investing on rainwater harvesting system will be allowed to deduct the total cost from his taxable income.
This is a measure which would encourage Mauritians to adopt the “Maurice Ile Durable” policy and would encourage self-sufficiency. Whilst the measure is welcomed, time will tell if the tax incentive has been sufficient to encourage individuals to invest in a rainwater harvesting system.
Interest relief under Islamic Finance ArrangementThe profit charge payable under Islamic Financing Arrangement for the construction of a house would now qualify for interest relief if the arrangement is being secured on an immovable property.
This measure extends the scope of the interest relief. The measure seeks to place all individuals who borrow for the purposes of a construction project on a level playing field.
Exemption on termination payment for employeesThe exemption threshold on lump sum paid to an individual as form of severance allowance, pension or retiring allowance has been raised from Rs 2,000,000 to Rs 2,500,000.
The individuals in question would welcome this measure as the increase in the exempt portion is 25%. The effective tax savings depend on a number of factors like the applicable IET and the liability of the individual to the Solidarity Levy.
Income tax on WinningsTax would now be withheld on betting gains where such amount exceeding Rs 100,000 obtained from “Lotto”, “Loterie Verte”, casinos and gaming houses.
This is a new measure for taxing gains. The relevant entities will be required to remit the tax withheld and submit an annual statement to the Mauritius Revenue Authority (‘’MRA’’).
Statement of assets and liabilitiesThe law will be amended so that the due date for the submission of the statement of assets and liabilities (‘’SAL’’) is extended by one year: the SAL would be submitted with the tax return for the year ending 30 June 2018 for the relevant individuals.
A further amendment would be made so that the SAL would not apply to an individual who has submitted his tax return during the last five years.
The amendments are welcomed. However, the practical challenges and data security should be discussed and agreed with the MRA for individuals who would be required to submit the SAL.
Deductions relating to staff members working from homeEmployers would be able to claim twice the amount of their wage bills in relation to employees working under the work@home scheme. Employers would also be eligible to an annual income tax credit (“ITC”) equivalent to 5% of the cost of investing in the required IT systems. The ITC will be available for a maximum of three years and is in addition to any annual allowances on such assets. The Employment Rights Act will be amended to address the legal aspect of this proposal.
This measure demonstrates the Government’s intention to promote the work at home philosophy. It appears that the status of the employer is not relevant so that it may apply to an individual acting as an independent contractor. This philosophy is already in place in certain developed economies.
Whilst the ITC applies for a maximum of three years, the double deduction for the wage bill would be restricted to the first 2 employment years. Employers should be able to demonstrate the time spent by the employees working at home to benefit from the above incentives: the legal arrangements between the employers and the employees should also reflect the time spent by the employees working at home.
We believe that a guideline should be issued to clarify on how the time spent by the relevant employees should be determined taking into consideration a number of economic factors.
The speech does not specify the commencement date for this measure and whether it would also apply to part-time and seasonal employees. The interaction of this measure with the double deduction for Rodrigues-based employees and disabled employees, the employment cost may be relieved four times for tax purposes.
This measure will also impact on the exempt portion of the
3. Corporate tax
6Budget 2018/2019 | June 2018
Cessation of the Category 2 Global Business Licence (‘’GBL 2’’) regimeThe Financial Services Commission (“FSC”) will cease to issue Category 2 Global Business Licence as from 1 January 2019 and a single Global Business Licence (“GBL”) will be issued by the FSC. Companies holding a GBL2 Licence issued by the FSC prior to 16 October 2017 will be exempt from income tax until 30 June 2021.
It is further provided that the current income tax exemption for companies holding a GBL2 Licence issued by the FSC on or after 16 October 2017 would be reviewed.
We believe that the amending laws should specify the basis for computing any deductible expenses and annual allowances: it would also be important to assess whether the Corporate Social Responsibility (“CSR”) charge would apply for such companies.
Alignment of the taxation system for companies holding Category 1 Global Business Licences with domestic companiesCompanies holding a Category 1 Global Business Licence (“GBL1”) under the Financial Services Act 2007 would no longer be able to compute their foreign tax on the basis of the presumed foreign tax amount. This measure would be effective as from 31 December 2018. A partial exemption regime will be introduced whereby 80% of the specified income of Mauritian resident companies will be exempt from tax: the specified income for this purpose includes the following:
• Foreign dividends and profits attributable to foreign permanent establishments;
• Interest and royalties; and
• Income from the provision of specified financial services.
In the event that the company holds a GBL 1, it will be required to comply with pre-defined substantial activities so that its specified income is exempt from tax. Where the partial exemption is not available, the current credit system would continue to be applicable.
The effective date of 31 December 2018 implies that an apportionment is required where the company does not have a calendar year end.
It does not appear that companies currently holding a GBL1 will be required to make any CSR contributions. Moreover, the income tax exemption on the payment of interests and royalties to non-residents by companies holding a GBL1 still applies: the exemption relating to interests on deposit and savings accounts as well as trading profits on sale of securities would also apply. We presume that amendments would have to be made to other laws like the Companies Act and Value Added Tax Act as a result of the change in the regulatory framework.
This measure aligns the taxation system for all Mauritian resident companies and seeks to treat all residents on an equal footing. The partial exemption regime provides for a unilateral exemption of 80% for the specified income. Resident individuals may not be able to claim such exemption on similar foreign income.
7Budget 2018/2019 | June 2018
Clarity is required on the interaction of the partial exemption with the credit system. We believe that a company should be able to apply the credit system if this is to its advantage. For example, in the context of Indian sourced dividend income, the Indian Dividend Distribution Tax is enough to eliminate the Mauritian tax on the Indian dividends.
Care is required in the application of the proposed partial exemption so that it does not have unintended consequences. Worked examples should be discussed and agreed with all stakeholders to achieve certainty in the implementation of this measure.
It is uncertain if the partial exemption would apply to domestic interest and royalty income.
The additional substance requirement for companies holding a GBL has not been published yet and we believe that any such additional requirement should be in line with the OECD Action point 5.
Reduced corporate tax rate of 3% for companies engaged in global trading activitiesThe corporate tax rate of 3% currently applicable on the profits made on exports would be extended to global trading activities effected by companies.
The amending laws should define the activities that would be treated as global trading: it appears that international trading of goods should fall within its scope.
The commencement date of this measure has not been specified. Although companies would be subject to a corporate tax rate of 3%, companies other than those holding a GBL would still be required to make CSR contributions.
The interaction of this measure with the tax that arises in the country of source should be understood. Where the underlying activities are performed outside of Mauritius, the arm’s length test should not apply in Mauritius and would be the subject matter of the jurisdiction where the economic activities are performed.
Investment tax creditCompanies importing goods in semi-knocked down form would be able to claim an Investment Tax Credit (“ITC”) where at least 20% local value addition is incorporated therein: the ITC would be computed at the rate of 5% of the cost of new plant and machinery excluding motor vehicles and would be available for a maximum period of 3 years. The ITC is available in respect of investment made up to 30 June 2020.
This measure is comparable to the investment tax credit provided in the Finance (Miscellaneous) Provision Act 2017 for the production of certain categories of goods: this measure does not provide for any limit on the amount of capital expenditure incurred.
The treatment of any excess ITC should be clarified. However, the qualifying expenditure which would be considered as “local value addition” and the basis of computing the threshold of 20% should be clearly defined to remove any doubts on its application: it should be noted that this threshold may depend to a large extent on the classification of the semi knocked down products for customs duty and Value Added Tax purposes as well as the VAT registration status of the company.
8Budget 2018/2019 | June 2018
Reduced corporate tax rate of 3% for companies engaged in global trading activitiesThe corporate tax rate of 3% currently applicable on the profits made on exports would be extended to global trading activities effected by companies.
The amending laws should define the activities that would be treated as global trading: it appears that international trading of goods should fall within its scope.
The commencement date of this measure has not been specified. Although companies would be subject to a corporate tax rate of 3%, companies other than those holding a GBL would still be required to make CSR contributions.
The interaction of this measure with the tax that arises in the country of source should be understood. Where the underlying activities are performed outside of Mauritius, the arm’s length test should not apply in Mauritius and would be the subject matter of the jurisdiction where the economic activities are performed.
Investment tax creditCompanies importing goods in semi-knocked down form would be able to claim an Investment Tax Credit (“ITC”) where at least 20% local value addition is incorporated therein: the ITC would be computed at the rate of 5% of the cost of new plant and machinery excluding motor vehicles and would be available for a maximum period of 3 years. The ITC is available in respect of investment made up to 30 June 2020.
This measure is comparable to the investment tax credit provided in the Finance (Miscellaneous) Provision Act 2017 for the production of certain categories of goods: this measure does not provide for any limit on the amount of capital expenditure incurred.
The treatment of any excess ITC should be clarified. However, the qualifying expenditure which would be considered as “local value addition” and the basis of computing the threshold of 20% should be clearly defined to remove any doubts on its application: it should be noted that this threshold may depend to a large extent on the classification of the semi knocked down products for customs duty and Value Added Tax purposes as well as the VAT registration status of the company.
Companies operating in the Freeport sector The income tax exemption currently applicable for Freeport operators and Freeport developers on the export of goods will be removed: however, they would not be required to make any CSR contributions. A transitional provision has been introduced so that companies which have been issued with a Freeport certificate before 14 June 2018 will continue to be exempt from income tax up to 30 June 2021. A number of other measures have been introduced to modernise the Freeport sector.
In view of the reduced tax rate of 3% for companies engaged in global trading activities, it would be useful to understand whether a Freeport activity would be considered as a global trading activity.
Solidarity Levy on Telephony Service Providers The solidarity levy for telephony service providers will apply till 30 June 2020: the condition that the book profit should exceed 5% of its turnover for the liability to arise is being repealed.
The base for the payment of solidarity levy is being widened to include all profitable telephony service providers irrespective of the level of profit made.
Corporate Social ResponsibilityCompanies will not be allowed to offset any unused tax credit against CSR payable. Companies which have been granted tax holidays will be required to contribute to CSR.
We disagree with this measure on the basis that CSR is conceptually an income tax: a company should be able to relieve any foreign tax against its total Mauritian tax charge on its foreign source income. Any treaty provides relief for the full amount of domestic taxes arising on a foreign income in the recipient jurisdiction where such income has been subject to tax in the source country: to the extent that foreign taxes exceed the domestic income tax, no tax is payable in the recipient jurisdiction. The unavailability of a foreign tax credit against a CSR charge would lead to an additional tax burden where domestic companies are used in business structures. This measure discourages the use of domestic companies in cross border transactions
CSR is currently computed on the chargeable income of a company: thus the chargeable income would have to be computed even though a company is exempt from income tax.
The effective date for this measure has not been specified.
Scope of the Deduction of Tax at Source (‘’DTS’’) mechanismThe scope of the DTS mechanism has been widened to include commission: such payment will be subject to a withholding tax rate of 3%. Additionally, the current withholding tax rate of 5% on rental payments would be increased to 10% where the recipient is a non-resident person.
The withholding tax on the payment of director fees to corporate bodies would be abolished.
We are of the view that the term “commission” should be clearly defined in view of its commercial meaning and widespread use in a number of business transactions: in the context of cross border commission payment, the tax should not generally apply where the recipient is resident in a treaty partner country.
9Budget 2018/2019 | June 2018
Authorisation to conduct prosecution for offences Further to the increasing number of cases, the Director General of the MRA will have the power to include any competent officer of his office to conduct any prosecution for offences under the Revenue laws before any court, except the Supreme Court.
It will be useful to understand the reasons for the increase in the number of cases. The success of a measure of this nature depends on its practical applications.
5% Payment on objectionIn case a person has any objection with a tax assessment made by the MRA, a 10% payment of the tax assessed is payable. The law will be amended so that an additional 5% tax will have to be paid where written representation is made to the Assessment Review Committee.
Return of information Casinos, gaming houses and bookmakers will now have the obligation to submit return for withheld taxes.
The success of this measure depends on a number of important factors including the basis of the assessment. Cases on point of law should be excluded from the purview of this measure.
Recovery of arrears of revenue The Mauritius Revenue Act will be amended so that the recovery actions for tax arrears under the various revenue laws are streamlined.
Whilst the objective of this measure is welcomed, the cases where tax arrears are not due are still a cause of concern. Unless the person has all the relevant evidence, he may have to pay a tax that has already been settled.
Allocation of payment of arrearsThe MRA acts as a collecting agent for various governmental bodies, for example, collecting National Pension Fund (‘’NPF’’), National Saving Fund (“NSF”) and Human Resource Development (‘’HRD’’) Levy. However, the MRA will now have prescribed guidelines on which debts to be prioritised to be cleared.
It seems that the MRA would devote its resources towards most important taxes or other collections in terms of amount and obligations to recover a debt.
Expeditious Dispute Resolution of Tax Scheme (‘’EDRTS’’)The EDRTS was restricted to assessments of less than Rs 10 Million and for periods before 1 July 2015.
It will now be applied to assessments raised during the year ended 30 June 2016.
It is a fact that a number of cases have been resolved under the EDRTS. To that extent, the proposed measure is welcomed. It is, however, felt that the measure should include assessments issued during the year ended 30 June 2017.
4. Tax administration
10Budget 2018/2019 | June 2018
Special levy under the Value Added Tax ActThe bank levy will be dealt with in the Value Added Tax Act instead of the Income Tax Act as from 1 July 2019: the levy will be computed on the net operating income of the domestic operations of commercial banks.
We are surprised to note that although special levy would continue to be computed on the net operating income of the bank, it would be administered under the VAT Act. The levy is not of the same nature as VAT and to the extent that it is based on the net operating income, the current legislative framework appears justified. The timing of the payment and the return should be clarified. The rate applicable for the computation of the special levy has not been specified. The book profit appears to be no longer relevant with this measure.
VAT refund schemeThe Value Added Tax (“VAT”) refund scheme introduced by the Finance (Miscellaneous Provisions) Act 2011 would be widened to include the following goods and services:
(a) Planter
• Branch chopper
• Earth auger
• Fogging machine
• Handy blower
• Irrigation hose
• Mini tiller, including blade
• Land preparation works; and
• Rental of land leased for agricultural purposes.
(b) Purchase of musical instruments including guitar, drum set, dhol, flute and violin, by local artists.
This measure is welcomed as it would help in the development and promotion of local artists. The effective date for this measure has not been announced.
VAT for Micro, Small and Medium Sized Enterprises (MSMEs)A VAT-registered person will henceforth not be required to pay VAT on import of machinery and equipment, if the amount payable is Rs 150,000 or more.
This measure aims at promoting local entrepreneurship as it is expected to ease the cash flow of businesses. We believe that any installation cost, together with the related service should be taken into consideration to determine the threshold of Rs 150,000 if the installation cost is incidental to the machinery and equipment so that it forms part of the same commercial and legal arrangement with the foreign party.
Supply of manual labour in the agricultural or construction sectorAn individual operating in the agricultural or construction sector, such as a sirdar or a labour contractor, supplying manual labour to a VAT-registered person will be exempt from VAT.
This measure is designed to promoting a more labour intensive workforce as the individual supplying manual labour would benefit from an exemption for VAT purposes. However, the individual would not be able to claim any input tax. The effective date of this measure has not been announced.
Public busesThe Minister announced that VAT exemption on semi low-floor bus bodies built on chassis would be extended to all buses meant for public transport.
This measure is welcomed as it would help in the development and promotion of local artists. The effective date for this measure has not been announced.
VAT for Micro, Small and Medium Sized Enterprises (MSMEs)A VAT-registered person will henceforth not be required to pay VAT on import of machinery and equipment, if the amount payable is Rs 150,000 or more.
This measure would benefit bus owners engaged in the provision of transport for the general public.
Fees on the examination of vehiclesThe zero-rated VAT status of fees payable for the examination of vehicles (fitness) will be extended by another two years up to 30th June 2020.
The extension of the zero-rated status of fees is welcomed as the car users would not pay VAT and the service provider would generally be able to claim its input tax.
Photovoltaic systemAll components, in addition to photovoltaic panels, generators, batteries and inverters, forming an integral part of a photovoltaic system would henceforth not be subject to VAT.
Clarity should be brought on whether these components would be classified as exempt or zero-rated supplies for VAT purposes. A zero-rated status would ensure that there would be no VAT burden. Currently photovoltaic generators, panels, batteries and inverters are zero rated.
5. Value Added Tax
11 Budget 2018/2019 | June 2018
Recovery of VAT in hospitality sectorVAT paid by VAT-registered persons, whose main activity is the supply of accommodation, catering, entertainment or rental/lease of motor vehicles will be available as credit for input tax.
This is a welcomed clarification in view of the number of litigations on the input tax deductibility of such expenses. Cases where such activities are not recurrent should be clarified: otherwise the principle of neutrality would be breached.
VAT to be clawed back on capital goodsThe MRA will be empowered to claim the VAT refunded on capital goods exceeding Rs 100,000 if an operator registers voluntarily for VAT purposes solely for benefitting from VAT refund on capital goods and is subsequently deregistered for VAT purposes.
This measure reinforces the power of the MRA for abusive cases on VAT refund relating to capital goods.
Budget outturn• Budget deficit for 2017-2018 is expected to be 3.2% of GDP:
with a total revenue of Rs106.8 billion and total expenditure of Rs 122.3 billion
• ►Public sector debt is expected to decline from 64.8% of GDP at end of 30 June 2017 to 63.4% by the end of June 2018
Budget estimates for 2018-2019• Total expenditure: Rs 133.8 billion
• ► Recurrent spending: Rs 115.9 billion
• ► Capital expenditure: Rs 17.9 billion
• ►Total revenue: Rs 117.4 billion
• ► Tax receipts: Rs 99.7 billion
• ► Non tax receipts: Rs 8.8 billion
• ► Grants: Rs 8.9 billion
• ►Overall budget deficit: Rs 16.3 billion-3.2% of GDP
• Uncertainty and adversity at the global level
• ► Impact of external pressures cannot be underestimated
• ► Ambition is to have a stronger economic performance
• ► Recognition of the fundamental values in a new landscape
• ► The Budget is built on seven major strategies
• ► Annex to the Budget Speech is an integral part of the proposed measures:
• ► Part A-taxation and public finance
• ► Part B-other budget measures, like the set up of a Single Licensing Agency and the processing of work permit applications
• ► Part C-other legislations, including the Companies Act, the Employment Rights Act and the Non-Citizens (Employment Restriction) Act
6. Budget outturn and estimates
7. Background
12Budget 2018/2019 | June 2018
Strategy one: Our youth our futureOur young people need the opportunity and the means to access the labour market...
Our Youth Our Future
• Target 14,000 unemployed though a number of measures, including the following:
• ► 3,000 youths will join the National Skills Development Programme
• ► Youth Service Programme will be a new component aimed at developing soft skills like work ethics and discipline
• ► Another 3,000 unemployed will be enrolled in the National Apprenticeship Programme
• ► Introduction of SME Employment Scheme: each graduate will receive a monthly stipend of Rs 14,000 over two years of employment
• ► Youth Employment Programme will focus on job placements for HSC holders
• Promoting Work@Home Scheme
• ► Double deduction for wage and salary costs for first two years
• ► Annual tax credit of 5% for investment made in the relevant IT system for three years
• ► Investment of some Rs 160million in the construction of the Civil Service College at Reduit
Strategy two: New opportunities for private investment... aim to foster the development of a new growth pole revolving around Artificial Intelligence, blockchain technologies and Fintech.
New opportunities for private investment
• Set up of Mauritius Artificial Intelligence Council with members of the public and private sectors as well as international experts to drive Artificial Intelligence activities and advise Government on the appropriate course of action
• ► Set up of a steering committee under the Prime Minister’s Office to ensure consistency between Ministries and ensure timely implementation of the digitization project
• ► CEB will offer a special rate of electricity to accredited data center operators having at least a Tier 3 infrastructure
• ► New scholarship scheme for students wishing to specialize in digital technology: 50 students per year will benefit from this measure on an annual basis
• ► Support to University of Mauritius so that it can double its intake of students in Computer Science and Software Engineering
• ► Provision to train students in primary and secondary schools in coding
• Set up of a National Regulatory Sandbox licencing for Fintech activities
• ► New licensing activities to be created by the FSC
• ► Custodian of Digital Assets and Digital Market Marketplace
• ► Objective is to provide a safeguard of digital assets by investors and enable digital assets exchange
• ► FSC will also issue guidelines on investment in crypto currency as a digital asset
• ► Thus, applicants for Fintech activities will have appropriate cyber-security and cyber-resilience policies and capacities
• ► Harmonization of laws against money-laundering, terrorist financing for banking and non-banking financial services so that they are consistent with the development in Fintech
• Reform in the financial services sector:
• ► New harmonized regime for Global Business companies and a separate fiscal regime for banks
• ► As from January 2019, the FSC will not issue Category 2 Global Business Licence: a grandfathering provision would apply for existing companies
• ► Global Business companies will be required to comply with enhanced substance requirements
• ► New framework to govern and improve the oversight of Management Companies
• ► FSC will work with other countries so that the competitiveness of Mauritius is enhanced as a financial centre
• ► FSC, in collaboration with the OECD, will host a Regional Centre for capacity building and combat against financial malpractices
Strategy three: new wave for import substitution and revive export led activities….to boost private investment and generate jobs but also to reduce our trade and current account deficits.
Import substitution
• Focus on production of food crops: idea is to set up 100 farms over the next two years under a Sheltered Farming Feature that will have the following features:
• ► Farms will be made available on a Ready-To-Operate basis;
• ► Provision of facilities like security and marketing by the Economic Development Board
• ► Technical assistance provided by the Food and Agricultural Research and Extension Institute
• ► Access to finance from Development Bank of Mauritius and Mauback at a reduced rate of 3%
• ► Income from the projects would be exempt from tax for the first 8 years;
8. The seven broad strategies
13 Budget 2018/2019 | June 2018
• ► Government will ensure that the sheltered farms will be equipped with rain harvesting systems and photovoltaic technology
• ► Funds provided for the training of households in aquaponics for the production of water adaptive vegetables in freshwater ponds and basins
• Measures to boost food security programme:
• ► Contribution of Rs 30million by Government to a new Crop Insurance Scheme
• ► Subsidy on production of onion and potato seeds will be increased
• ► Set up of a National Animal Identification System to electronically identify each animal with a unique number
• ► Mauritius Meat Authority will set up a new system for the collection, slaughter and sale of pigs
• ► Write off of all outstanding loans contracted under the Pig Breeders Relaunching Scheme
• Ministerial Committee has been set up to assess the situation in the cane industry to address the various challenges
• Measures in connection with the Ocean economy:
• ► Creation of an Ocean Economic Unit to prepare a National Ocean Policy Paper
• ► Merger of the Mauritius Oceanography Institute and the Albion Fisheries Research Centre
• ► Development of an Ocean Observatory e-platform to support the Marine Spatial Planning Initiative of Mauritius
• ► Conduct of geotechnical study in the continental shelf management area of the Mascarene region to explore any opportunities
• ► Introduction of a Group Life Insurance Scheme for registered fisherman to cover accidents and losses at sea
• ► Allow foreign industrial fishing companies to fish in the shallow water banks provided that they sell all their fish on the Mauritian market
• ► Introduction of a grant of 60% on the cost of outboard engines and fishing nets by fishermen cooperatives: this is capped at Rs 60,000
• ► Measures in connection with the manufacturing sector:
• ► New business parks will be set up in Cote D’Or; Riche Terre and Rose Belle
• ► Strengthen trade policy an use all economic diplomacy mechanisms to address the issue of dumping
• ► Higher standards of quality and safety required for imported products
• ► Procedures on recruitment of foreign nationals will be streamlined as a result of the lack of appropriate skills
• ► Measures to boost demand for Mauritian products: focus on economic diplomacy. Government is completing its negotiations in the context of the following:
• ► The Comprehensive Economic Cooperation Partnership Agreement with India
• ► The Free Trade Agreement with China
• ► The enhanced bilateral cooperation with Saudi Arabia and Middle East Countries
• ► Renewed partnership with member states of the Commonwealth Group; and
• ► Framework agreement for the continental framework agreement for the continental FTA in Africa
• ► Introduction of a 5-year tax holiday for Mauritian companies collaborating with the Mauritius Africa Fund for the development of infrastructure in the Special Economic Zones: the tax holiday will apply to investment in SEZ infrastructure development and will benefit project developers and project financing institutions
• ► Government is working with EU to set up a loan guarantee facility to assist cross border investment within the Africa Strategy
• ► Encourage community-based and inclusive tourism
• ► Pilot project: harness the potential of Mahebourg as a “Village Touristique”
• ► Build on historical and green assets; like the Blue Bay marine Park and the Naval Musuem
• ► Project will be implemented through a public-private partnership endeavor
• ► New Grant Schemes will be set up under the National Arts Fund for:
• ► Encouraging emerging talents
• ► Production of art work
• ► Stimulating research in various fields of arts and culture
• ► Economic Development Board will manage two schemes to attract High Net Worth individuals. The criteria will be defined in advance and a due diligence exercise will be performed
• ► Citizenship for foreign nationals
• ► A non-refundable contribution of US1million is required to be made to a Mauritius Sovereign Fund
• ► Additional contribution of US$ 100,000 per member of family is required for the spouse and his dependents
• ► Mauritian passport
• ► A contribution of US$ 500,000 is required to the Mauritius Sovereign Fund: additional contribution of US$ 50,000 is required for each dependent
• ► Economic Development Board will also operate a Foreign Manpower Scheme to attract foreign talents:
• ► An application for an occupation permit will be processed within 5 days; and
• ► Employer will have to contribute the equivalent of one month salary per foreign worker recruited
• ► New package of fiscal and non-fiscal facilities to attract foreign retirees: they will be exempt from customs duties on the import of personal effects up to the value of Rs 2million.
• ► DBM will earmark Rs 1billion to support the Micro, Small and Medium Sized Enterprises through a number of schemes
14 Budget 2018/2019 | June 2018
Strategy four: building the strategic and modern infrastructureOur aim is to create the physical infrastructure that measures up to our vision of the future-a future of modernity, high income and smart living
Building the infrastructure
• Rs 37 billion will be invested in transport infrastructure over the next three years
• ►Rs 12 billion has been earmarked for the construction and upgrading of roads
• ►Investment will be made in three major projects to expand the port facilities and improve its productivity
• ►The Airport of Mauritius Limited will start procedures to extend the new passenger terminal: objective is to increase passenger handling capacity to 8 million annually
• ►Introduction of a National Regeneration Scheme under the Smart City Regulations
• ►Some Rs 5.6 billion has been earmarked for NDU projects for the construction and upgrading of drains, secondary roads and small sports facilities across the island
Strategy five: Securing a sustainable development in our environment... a country with a sustainable environment that enables a healthy, productive and meaningful life
Secure and protect our environment
• An amount of Rs 2 billion will be transferred to the National Environment Fund: the Fund will be revamped so that it can have the financial assistance from international sources like the Green Climate Fund and the Global Environment Facility. Rs 450 million has already been received from the King Salman Humanitarian Aid and Relief Centre and the Adaptation Fund Board of the United Nation
• ►The National Environment Fund will assist on a number of projects: examples are the construction of drains, the rehabilitation, protection and management of the beaches, lagoons and coral reefs
• ►Investment in a rainwater harvesting system will qualify for a deduction against the taxable income of an individual
• ►Various measures to maintain a sustainable environment: for example Government will commission a maximum of 6 solar farms and a waste-to-energy project will be implemented
15Budget 2018/2019 | June 2018
Strategy six: Lifting the quality of life... a decent dwelling for all families and safety for everybody
Lifting the quality of life
• Health
• ►Construction of a new teaching hospital in Flacq
• ►Development of a medical hub at Cote d’Or City
• ►Set up of a new cancer centre
• ►Provision for the acquisition of a mobile caravan to promote early detection of breast and cervical cancer
• ►Provision of Rs 100 million for e-Health
• Sports and leisure
• Publication of a National Sports and Physical Activity Policy in July 2018: investment of Rs 38million to provide sports and physical activity programmes
• ►Rs 75million is being provided to support the JIOI 2019: in respect of the organisation of the game Rs 195 million is being earmarked
• ►Upgrade of 17 sporting facilities for a total amount of Rs 375 million
• Education
• Construction of 2 pre-primary units at Grand Baie and Montagne Ory
• Construction of a gymnasium in six State Secondary Schools
• Set up of specialist rooms for Food and Textile Studies and Design and Technology
• Increase in additional deduction for deduction for dependent child pursuing tertiary education
• Decent dwelling
• Fixed penalty will apply to additional 63 offences
• ► Fine for speeding of more than 25 km per hour increased from Rs 2,500 to Rs 10,000
• ► Fine for disqualification will be increased from Rs 10,000 to Rs 100,000
• ► A Cumulative Road Traffic Notice will be issued to a driver after he has committed three cumulative road traffic offences under the new system
• ► Issue of probationary driving licence for 2 years
• ► Zero tolerance of alcohol will be applied to drivers
• ► Additional mobile speed cameras will be installed to perform spot checks
• ► The Road Development Authority will be provided with Rs 600 million for road maintenance
16 Budget 2018/2019 | June 2018
Strategy seven: Creating an inclusive and caring societyToo many gender gaps have been with us for too long
Creating an inclusive and caring society
• Introduction of gender considerations
• ►Inclusion of a chapter on gender mainstreaming in 3 Year Rolling Strategic Plan
• ►Conduct of a study on the introduction of gender-based budgeting
• ►Amendment to the Employment Rights Act for mothers with less than 12 months service
• ►Government will come up with a Gender Equality Bill
• ►Training of 250 Government officials to deal with gender issues
• ►Allocation of Rs 200,000 to each Ministry to promote awareness programme and implement activities on gender mainstreaming
• ►Each Ministry will be required to have a Gender Cell that will encourage greater balance in the decision making process
• ►Tax incentives to creches
• Enhancing support to our elderly
• Construction of two elderly day centres at Bambous and Chemin Grenier
• ►Specialised training for 50 carers
• ►Increase in monthly grant to employees of residential care homes and institutions from Rs 6,071 to Rs 8,500
• Enhancing consumer welfare
• Removal of surcharge on late payments governed by the Hire Purchase and Credit Sales Act
• ►Finalisation of the Ombudsperson for Financial Services Bill to better protect consumers for all financial services
• ►Blood Glucose Strips will be subject to the maximum mark-up system so that its price for each pack of strips is expected to decrease between Rs 40 and Rs 170
• ►Stricter control on quality of consumer goods
• ►Reduction in the price of Mogas from Rs 52 to Rs 49.65 per litre
• ►Reduction in the price of gas oil from Rs 41.90 to Rs 40
• ►Reduction in the price of LPG of 12 Kg from Rs 270 to Rs 240
17Budget 2018/2019 | June 2018
Contact us
For additional information regarding this Alert, please contact the following:
Ernst & Young, Mauritius
Ryaad Owodally+230 403 4717 [email protected]
Assad Khoosee+230 403 4738 [email protected]
Kawsar Aumeer+230 403 4777 [email protected]
Kooshal Mungrah+230 403 4777 [email protected]
Vashist Hassea+230 403 4777 [email protected]
18Budget 2018/2019 | June 2018
EY | Assurance | Tax | Transactions | Advisory
About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2018 EYGM Limited. All Rights Reserved
Creative Services ref.3097. Artwork by Upton.
The information in this pack is intended to provide only a general outline of the subject covered. It should not be regarded as comprehensive or sufficient for making decisions, nor should it be used in place of professional advice.
• Accordingly, Ernst & Young accepts no responsibility for loss arising from any action taken or not taken by anyone using this pack.
• Further, the information in this pack will have been supplemented by matters arising from any oral presentation by us, and should be considered in the light of this additional information.
• If you require any further information or explanations, or specific advice, please contact us and we will be happy to discuss matters further.
