In Mauritius, expenses are generally deductible if they are incurred exclusively in the production of gross income and are not of a capital or private nature. However, expenses incurred in the production of exempt income are not deductible. This principle ensures that only those expenses directly related to generating taxable income reduce the taxpayer’s overall tax liability.
Allowable deductions in Mauritius include a wide range of expenses, aimed at encouraging business investment, supporting charitable activities, and facilitating economic growth. These deductions are critical for businesses and individuals seeking to optimize their tax positions.
Key Allowable Deductions
- Annual and Investment Allowances on Fixed Assets: Businesses can deduct annual and investment allowances for depreciation on fixed assets. This includes machinery, buildings, and other capital equipment used in the production of income. For a detailed breakdown of how annual and investment allowances apply to Capital Allowances, you can read more in our blog dedicated to this topic, by simply clicking on the following link: ‘Annual and investment Allowances’.
- Additional Investment Allowance for Manufacturing Companies: Manufacturing companies benefit from an additional investment allowance on capital expenditure incurred for acquiring state-of-the-art technology equipment. This incentive aims to modernize and enhance the productivity of the manufacturing sector.
- Marketing and Promotional Expenses: Expenses incurred for marketing and promoting products or services are deductible, supporting businesses in expanding their market reach and increasing sales.
- Losses Incurred in the Production of Gross Income: Businesses can deduct losses that directly result from their income-generating activities, helping to offset profits in subsequent periods.
- Bad Debts and Irrecoverable Sums: Bad debts and sums that cannot be recovered are deductible, provided they arise from business operations and efforts to collect them have been unsuccessful.
- Pre-operational Expenses of Tax Incentive Companies: Companies that qualify for tax incentives can deduct pre-operational expenses, supporting new ventures in their initial stages.
- Donations to Charitable Institutions: Donations made to approved charitable institutions are deductible, encouraging corporate social responsibility and support for community projects.
- Contributions to Superannuation Fund and Employees’ Share Scheme: Contributions to employee retirement funds and share schemes are deductible, incentivizing businesses to offer benefits that enhance employee welfare.
- Gains on Profits Derived from Sale of Units and Securities: While not directly an expense, gains from the sale of units and securities are often exempt from tax, encouraging investment in financial instruments.
- Expenses Incurred in Setting Up Social Infrastructure: Costs related to establishing social infrastructure, such as schools and hospitals, are deductible, promoting corporate involvement in community development.
- Contribution to the National Ambulance Services: Contributions to national ambulance services are deductible, reflecting the importance of supporting public health infrastructure.
- Interest on Bonds and Debentures: Interest paid on bonds issued by statutory bodies and debentures from companies cultivating sugar cane or manufacturing sugar is deductible, encouraging investment in these sectors.
In summary, Mauritius provides a comprehensive range of allowable deductions aimed at fostering business growth, supporting charitable activities, and encouraging investment. By allowing deductions for these specific expenses, the tax system helps reduce the overall tax burden on businesses and individuals, thereby promoting economic development and social responsibility. Understanding and utilizing these deductions can significantly impact a taxpayer’s financial planning and tax efficiency.
