Madagascar is a low-income, agriculture-driven economy, with most of the population working in farming and related sectors. The island nation has seen modest recovery, with GDP growth of around 4% in 2024 following a deep recession in 2020. With a population of roughly 30 million and a median age close to 20, Madagascar offers a large supply of entry-level workers.

Only about half of working-age adults hold formal employment, while an estimated 60 to 75% of jobs are in agriculture. The formal economy is concentrated in three core industries: agriculture, particularly vanilla and cloves; mining, including nickel, cobalt, and ilmenite; and textiles, which benefit from trade arrangements such as the African Growth and Opportunity Act (AGOA) and strong trade ties with the European Union.

Madagascar’s tax system is relatively straightforward for employers. Social insurance and payroll taxes fund retirement, disability, health, and vocational training programs, while a withholding income tax known as IRSA applies to wages. For a broader overview of the local business environment, see our Doing Business in Madagascar guide.

Payroll Taxes in Madagascar

In Madagascar, payroll taxes include compulsory social contributions and training funds paid on salaries, along with income tax withheld on wages. The main social insurance institution is the Caisse Nationale de Prévoyance Sociale (CNaPS), which covers pensions, disability benefits, and work-accident insurance.

Employers are required to contribute to CNaPS and to the national health insurance system, while employees also make smaller social contributions. Together, these payments finance Madagascar’s social security and public health systems. Employers must also contribute to a national vocational training fund to support workforce skills development.

Salary income tax in Madagascar is known as Impôt sur les Revenus Salariaux et Assimilés (IRSA). IRSA is a progressive personal income tax withheld by the employer. Both IRSA and social contributions are calculated on gross salary up to a statutory ceiling. Employer and employee social contributions are capped at eight times the legal monthly minimum wage, with flat contributions applied beyond this threshold. Employers must deduct IRSA each pay period and remit it to the tax authorities on behalf of employees.

Employers are also required to register employees with an inter-company occupational health organization, such as OSIE or OSTIE. In addition, employers contribute to the FMFP, a vocational training levy paid solely by the employer. This contribution funds professional training programs and supports skills development across the workforce.

Employer and Employee Responsibilities

Even though employees pay income tax and part of social security, the law holds the employer fully accountable for calculating, withholding, declaring, and paying these amounts to the authorities.

Employer’s Responsibilities

  • Registration: Before running payroll, an employer must register with the tax authority to obtain a Tax Identification Number (NIF) and a Statistical Card. The employer must also register with CNaPS and an approved health organization as soon as the first employee is hired. Without these registrations, payroll cannot legally operate.
  • Payroll Calculation: Each month, the employer must calculate taxable income for every employee, including gross salary plus taxable allowances and benefits in kind, such as housing or a company vehicle. The employer then deducts the employee’s allowed social contributions and applies the IRSA tax bands to reach the final tax amount.
  • Withholding: The employer must deduct the employee’s share of CNaPS, health insurance, and the full IRSA amount from gross pay.
  • Declaration and Payment: Employers must submit monthly IRSA declarations through the e-Hetra platform and quarterly declarations to CNaPS and health organizations. Payments usually fall due by the 15th of the following month. Late filing or payment leads to penalties.
  • Record Keeping: Employers must maintain a Livre de Paie (payroll book) showing salaries, deductions, and net pay. Labor inspectors often request this document during audits. Employers must keep it for at least five years.

Employer Contributions

Contribution Rate
CNaPS (Social Security) 13%
Health Insurance 5%
FMFP (Vocational Training Fund) 1%

Employee’s Responsibilities

  • Providing Documentation: Employees must submit personal documents such as ID, proof of residence, marital status, and children’s birth certificates. Employers need these documents to apply the correct tax reductions, especially deductions for dependents.

Employee Contribution

ContributionEmployee RateDescription
Social Security (CNaPS)1%Employee contribution calculated on gross salary, subject to statutory contribution caps.
Health Insurance1%Employee contribution to the mandatory health organization, providing access to approved medical services.

Industry-Specific Rules and Exemptions

Madagascar does not generally differentiate payroll taxes by industry. All employers must pay the same social contributions and withhold the same salary tax for their Malagasy employees. There are no lower rates or special caps for foreign-funded projects or development zones regarding payroll contributions. Employers in all sectors must register with CNAPS and Direction Générale des Impôts (DGI) and comply with the standard rates.

That said, Madagascar’s tax code does contain special rules for certain businesses, but these apply mainly to corporate income tax and investment incentives, not payroll deductions. For example, Malagasy cooperatives enjoy exemptions on corporate profit tax if most income comes from members. Likewise, companies in some economic zones may get reduced corporate tax or customs duties. However, these incentives do not change the mandatory employee social contributions or IRSA withholding.

Income Tax for Individuals (IRSA)

The state exempts the lowest income bracket and caps the top marginal rate at 20%, which is low compared to some other African countries. Employers withhold this tax from wages based on the following brackets:

Monthly Taxable Income (MGA)IRSA Tax Rate
Up to 350,0000%
350,001 to 400,0005%
400,001 to 500,00010%
500,001 to 600,00015%
Above 600,00020%

Benefits in Kind and Allowances

Many global employers offer housing, transport, or phone support. In Madagascar, most of these count as taxable income unless the law clearly exempts them.

  • Transport allowances: Fixed monthly transport allowances are treated as salary unless the employer reimburses actual business expenses and supports them with receipts.
  • Benefits in kind (BIK): Most benefits in kind are taxable, but the law caps their value to avoid excessive taxation.
    • Housing: The taxable value equals 50% of the actual rent paid by the employer, capped at 25% of the employee’s gross salary.
    • Vehicle: The taxable value equals 15% of the running costs paid by the employer, such as fuel, insurance, and maintenance.
    • Phone: The taxable value equals 15% of the invoice amount.
  • Cash allowances: Cash payments for meals, cost of living, hardship, or similar items are generally taxable.

Residency and Expats

Both Malagasy nationals and foreign residents are subject to the above salary tax on their Malagasy wages. A resident (someone with a home or primary stay in Madagascar) pays IRSA on worldwide income, whereas a non-resident pays tax only on income sourced in Madagascar.

A foreign worker sent to Madagascar who meets residency criteria will be taxed the same as a local on their Malagasy salary. Madagascar has income tax treaties with France, Mauritius, Canada, and Morocco, which may reduce double taxation for nationals of those countries. Employers should obtain a Malagasy tax number and local insurance card for every foreign employee working in-country to ensure they withhold taxes correctly.

Madagascar 2026 Outlook

Policy discussions for the 2026 Finance Act include a possible 25% tax bracket for very high earners, like salaries above 4,000,000 MGA per month.

Remote People Payroll Calculator

To help you budget labor costs in Madagascar, Remote People provides a free Global Payroll Calculator. Our online payroll calculator can estimate the total employer cost by accounting for gross salary, IRSA tax, and social contributions. You simply enter the desired gross salary, and the tool shows the employee’s net pay and employer charges (CNAPS, health, training fund, payroll tax, etc.).

Business Income Tax and Entity Setup

For employers setting up operations in Madagascar, corporate income tax (CIT) is charged at 20% of taxable profit for companies with annual turnover above MGA 400 million. Smaller companies with turnover below MGA 400 million may opt for a simplified synthetic tax regime, which applies 5% on 70% of turnover, subject to minimum tax payments.

Employers establishing a local entity must register with the tax authorities (DGI) and obtain a tax identification number. Companies are required to maintain proper accounting records, file monthly payroll and VAT returns, and settle CIT obligations in line with the fiscal year. Madagascar also applies a 20% Value Added Tax (VAT) on most goods and services, with 0% on exports and a reduced 10% rate on butane gas, which businesses must collect and remit.

Foreign companies may operate through a Madagascan subsidiary or a local representative. Each employee must be formally declared to CNaPS and the DGI. Beyond tax obligations, employers must also comply with local labor laws, including employment contracts, minimum wage requirements, and statutory social benefits.

Remote People’s Employer of Record (EOR) Service

If a company does not have a registered legal entity in Madagascar, it cannot meet these obligations directly. Tax and social security registration require local presence. In this situation, using an Employer of Record (EOR) or PEO service is the only compliant way to hire. Remote People offers an Employer of Record service in Madagascar to simplify hiring.

As your EOR, Remote People becomes the legal employer of record for your Madagascar-based staff while you retain control over their day-to-day work. We handle all administrative and compliance tasks, including drafting and filing local employment contracts, running payroll, withholding and paying IRSA, and making all required social contributions on your behalf.

Our team also manages mandatory filings with CNaPS and the tax office, along with reporting related to social benefits. Using our EOR service means you do not need to incorporate in Madagascar or manage local payroll directly. Employees are paid on time in local currency, with all statutory deductions handled correctly.

You simply pay $199 per employee per month and focus on your core business. This solution is well suited for employers looking to hire Madagascar nationals or relocate staff without taking on administrative complexity. Learn more on our Madagascar PEO services page.

Beyond payroll, Remote People also provides full recruitment support in Madagascar. Our international recruitment agency helps identify and hire qualified local talent, from executive search to local job postings, ensuring efficient and compliant hiring. Our recruitment team sources candidates locally, while our PEO team manages payroll and benefits for a seamless hiring experience.

Together, these services give you direct access to the Madagascar labor market. Whether you need a single specialist or a full local team, Remote People enables you to hire Malagasy employees safely and compliantly, in full alignment with local payroll and tax requirements.