The text on the awarding of gifts to employees in Madagascar gave us an idea of the events that could give rise to the awarding of gifts and the types of gifts to choose from.
But from a tax point of view, are all the expenses related to these gifts deductible?
Cases of gifts of a value below the ceiling
Note 02MFB/SG/DGI/DLFC/SL of the Direction de la Législation Fiscale et du Contentieux de Madagascar in force (except note modificative meantime) confirms the limits of the gifts granted by the employer to its employees on the occasion of the Christmas feast or an official holiday: Ar 50,000 per dependent child for Christmas toys and Ar 60,000 per employee for other gifts.
Expenses for gifts below these thresholds are deductible. To this end, they can be considered as necessary expenses for the operation of the enterprise provided that they are the subject of regular invoices.
These expenses are recorded as follows: the corresponding amount is debited from the “other personnel expenses” account and credited to the cash account.
Company A has 50 employees and the total number of children on staff is 30. It makes purchases from suppliers issuing regular bills to offer a gift of AR 15,000 per child and a voucher of AR 30,000 per employee.
The total amount of deductible expenses is therefore 1,950,000 Ar = (15,000 x 30) + (30,000 x 50)
Cases where gifts are granted with a value greater than the ceiling
Practical illustrative cases contribute to the understanding of accounting and tax treatment.
Company A, which has 50 employees with a total of 30 children, plans to offer Christmas toys worth 60,000 Ar per child, apart from gifts to employees of 30,000 Ar per employee. The purchase will always be made from registered suppliers.
The total amount of expenses is 3,300,000 Ar = (60,000 x 30) + (30,000 x 50), of which 300,000 Ar will not be deductible because above the ceiling set by the tax authorities.
This additional cost will thus be included in Company A’s year-end accounting result and will form the basis for the calculation of its tax result. The income tax at the rate of 20% will be calculated from this tax result.
Note however that the Finance Law 2018 in Madagascar provides that the 50p. 100 of the amount of the difference between the total benefits in kind and the value of benefits in kind included in the IRSA taxable base are not deductible».
For any advice or assistance in the processing of your accounts and the management of your tax, call on MDG Services with several experiences in the field, in partnership with a financial and accounting expert.