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How To Start A Business in Madagascar

Start a business in madagascar

 

Start-up procedures to register a business (number) in Madagascar was last measured at 9 in 2015, according to the World Bank. 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. Data are for businesses with specific characteristics of ownership, size, and type of production. This page has the latest recorded value, an historical data chart and related indicators for Start-up procedures to register a business (number) in Madagascar.

 

 

This piece highlights issues for consideration when starting a foreign business in Madagascar in four areas: 1) foreign business start-up, 2) access to industrial land, 3) Foreign ownership issues across sectors, and 4) commercial dispute arbitration.

 

Foreign Business Start-Up

 

It takes 3 procedures and 12 days to establish a foreign-owned limited liability company (LLC) in Madagascar (Antananarivo). This process is among the shortest in Sub-Saharan Africa and much faster than the IAB global average. An LLC can be entirely foreign-owned; investment authorizations are no longer required. However, at least one of its executives must reside in Madagascar. If a newly established company (domestic or foreign) wants to engage in international trade, it must register with the Ministry of Commerce and Trade. Companies can obtain their statistical card, tax registration confirmation, commercial registration number, and professional card at the one-stop shop. They must also register for social security and health insurance, which can be done through the Economic Development Board of Madagascar (EDBM)’s one-stop shop. Companies in Madagascar are free to open and maintain bank accounts in foreign currency. Minimum capital requirements have been abolished.

 

Access to Industrial Land

 

Foreign companies seeking to access land in Madagascar have the option to lease or buy land from both private and public owners. Foreign companies must have authorization from the Economic Development Board of Madagascar before buying land. Such authorization determines the amount of land that the purchaser is allowed to acquire. If the land exceeds 10,000 ha, further authorization is required from the relevant minister. Lease contracts can be of unlimited duration for privately held land. For publicly held land, lease contracts are limited to a renewable term of 50 years. Foreign companies may transfer the land, but will need authorization to transfer it to another foreign entity. Lease contracts can offer the lessee the right to sublease, subdivide, or mortgage the leased land or use it as collateral. Land-related information can be found in the registry and cadastre. However, these are not linked or coordinated to share data. Currently, there are efforts underway to modernize the land registry and cadastre.

 

Foreign Ownership Issues across Sectors

 

The majority of the sectors covered by the report are fully open to foreign equity ownership in Madagascar. However, the country imposes foreign ownership restrictions in a number of service sectors. Foreign ownership in the telecommunications infrastructure (both fixed-line and mobile/wireless), for example, is limited to a maximum of 66%. Furthermore, foreign capital participation in companies providing fixed-line telecommunication services is also limited to 66%. In addition to these restrictions, foreign equity ownership is limited in the electricity transmission sector as well as in the port and airport operation sectors. These industries are currently dominated by large publicly owned enterprises.

 

Commercial Dispute Arbitration

 

Act 98-019 of December 15, 1998, and Articles 439 to 464 of the Civil Procedure Code (2003) govern domestic and international arbitrations in Madagascar. The Arbitration Act is based on the UNCITRAL Model Law. Most commercial disputes may be submitted to arbitration. However, domestic disputes involving the state, public authorities, and public establishments cannot be submitted to arbitration. Arbitration agreements must be in writing. The parties are free to select arbitrators of any gender, nationality, or professional qualifications in both domestic and international arbitrations and foreign counsel may represent the parties in arbitration proceedings. Parties are also free to choose any arbitral institution of their choice, including the Arbitration and Mediation Center of Madagascar (CAMM). Arbitration practice is limited in Madagascar, and foreign investors do not appear to have confidence in CAMM. Domestic courts have the power to declare an arbitral tribunal incompetent to settle a dispute. Enforcement proceedings for domestic awards take place in the competent court of first instance, and for international awards, in the Court of Appeal of Antananarivo. On average, it takes around 10 weeks to enforce an arbitration award rendered in Madagascar, from filing an application to a writ of execution attaching assets (assuming there is no appeal), and 12 weeks for a foreign award.

 

No.ProcedureTime to CompleteAssociated Costs
 1Obtain a provisional fiscal identification number
Agency: Tax registration - NIFONLINE

Prior to registration of the company, the entrepreneur has to obtain a provisional fiscal identification number. In order to do so, the entrepreneur has to apply online and then submit the registration form together with other documents to the EDBM fiscal.
1 day no charge
 2Stop at the front desk with the NIF and the necessary forms for registration
Agency: EDBM

Upon arrival at the one stop shop, the entrepreneur needs to stop at the front office for verification of the documents. The front office verifies whether the forms were correctly filled and no information is missing (these forms are available online and the entrepreneurs either print them at home or obtain them at the registry).
1 day no charge
 3Tax authority gives the amount to be paid
Agency: EDBM

Once the front office clears the documents and makes sure everything is compliant to the rules, the entrepreneur proceeds to the tax authority desk. There, they will analyze the information provided and then issue a bill.
1 day no charge
 4Obtain a nominal check at any commercial bank
Agency: Bank

Once the tax authority issues the carnet with the value, the entrepreneur goes to any commercial bank and obtains a nominal check with the amount owed.

The cost is typically 0.5% of share capital. The provisional income tax is around 320,000 and the bank usually charge 10,000 for the issuing of the check.
1 day see comments
 5Deposit registered statutes, apply for license (carte professionnelle), obtain a final fiscal identification number, and obtain statistical identifications
Agency: EDBM

Once the entrepreneur has the receipt confirming payment to the tax authority, she/he goes back to the front office to lodge the application for registration and payment of administrative fees to EDBM

Fee schedule:
• Commercial registration fee: MGA 16,000
• Deed registration costs: MGA 2,000
• Institut National de la Statistique Malgache (INSTAT) registration costs: MGA 40,000
4 days see comments
 6File a notice of constitution to be published in a French newspaper
Agency: EDBM or French Newspaper

Entrepreneurs must publish a legal notice of constitution in a French newspaper.

The publication can be requested at the EDBM or at a local French newspaper. The cost varies depending on the size of the ad. If contracted through EDBM, it will cost approximately MGA 18,000 as the ad will be shared with other companies. However, most companies prefer to do it directly at the newspaper so they can choose the size of publication that best suits them. In this case, it will cost approximately MGA 40,000.

The entrepreneur must provide the information from the tax ID, the statistics ID and the company registration number.
2 days MGA 18,000
 7Obtain the K-Bis
Agency: EDBM

The K-Bis is the document that compiles all the relevant information regarding the company. It shows the tax ID, the statistics ID, the registration number and the date of the newspaper publication.
1 day MGA 2,000
 8Register employees with Social Security
Agency: EDBM

The company must register its employees with the National Social Security Fund (Caisse Nationale de Prevoyance Sociale), and file two copies of an application form (bulletin d'adhesion nouveau membre) along with a list of names of all employees and their identity cards to enroll for health insurance.
1 day no charge
 9Register employees for health insurance
Agency: OSTIE

Registration with an insurance scheme is mandatory.

OSTIE is the public insurance scheme and registration is free of charge. However, companies can choose to offer the services of a private insurance scheme. In case they chose to do so, the additional cost is not deductible from taxes.
1 day no charge