Budget 2017-2018 Synopsis 9 June 2017
Budget 2017-2018 Rising to the challenges in an increasingly volatile international environment
Contents Background The five challenges Disclaimer Page 3
Background Budget 2017-2018 is about "rising to the challenges of our ambitions" The Budget focuses on five main challenges: Fostering higher growth for more and better jobs; Investing massively in the infrastructure of the future; Further improving the quality of life of people; Ushering in a new social paradigm; and Consolidating macro-economic fundamentals The Budget is cast within the context of the Three-Year Strategic Plan 2017-2018 to 2019-2020 Exceptional financial support from the Government of India through a line of credit of USD 500million, other financial support of USD 130 million and a grant of Rs 12.7 billion Page 4
First challenge Fostering higher growth for more and better jobs The better the question. The better the answer. The better the world works.
Fostering higher growth for more and better jobs Setting up of an Economic Development Board to ensure greater coherence and effectiveness in the implementation of the strategies to foster higher growth The Government wants to build our footprint in the African continent Enhancing of bilateral cooperation with African countries in various sectors Inauguration of the Special Economic Zone in Senegal is due soon: this will give Mauritian companies access to warehouses and office spaces on 13 hectares Mauritian companies will be able to undertake development projects in Ivory Coast Negotiations on Free Trade Agreements with China and the European Free Trade Association will be pursued The Comprehensive Economic and Partnership Agreement with India will be finalized Page 6
Fostering higher growth for more and better jobs Building innovative Mauritius Accelerated depreciation of 50% per annum will be available on capital expenditure on research and development Double deduction will be available on qualifying expenditure on research and development up to year of assessment 2022-2023 Page 7
Fostering higher growth for more and better jobs Doing more to facilitate business Cost of connection to the electricity network will be reduced for qualifying projects The Board of Investment will perform a business process reengineering with a view to eliminate inefficiencies High tech machinery and equipment imported by an investor will be considered as part of the minimum expenditure required to obtain an Occupation Permit Page 8
Fostering higher growth for more and better jobs Stimulating growth and employment in key productive sectors Certain companies will be taxable on their profits from exportation of goods at a reduced rate of 3% Companies engaged in the manufacture of pharmaceutical products, medical devices and high tech products will benefit from a tax holiday of 8 years Introduction of the Innovation Box Regime for Intellectual Property assets developed in Mauritius: companies will benefit from an 8 year tax holiday where their income is derived from the totality of Intellectual Property assets The 8-year work permit policy for expatriate workers is being extended to all manufacturing activities Page 9
Fostering higher growth for more and better jobs Stimulating growth and employment in key productive sectors Issuance and renewal of work permits will be speed up: the proposed time frame is 15 instead of 40 working days Exemption from payment of Land Transfer Tax and Registration Duty on transfer of immovable property for the setting up of a company engaged in high-tech manufacture VAT refund scheme extended to the following: Replacement of old lorries used for sugarcane harvest Specified tools and equipment used in tea cultivation Additional equipment for planters, breeders, bee keepers, fishermen and bakers Exemption from payment of customs duty on all animal feed, with the exception of poultry and pets Page 10
Fostering higher growth for more and better jobs Non-citizens acquiring residential property costing less than USD 500,000 will be entitled to a Multiple-Entry Visa for a maximum of 180 days per year subject to 5 consecutive years. This is renewable every 5 years, depending on the status of ownership Page 11
Fostering higher growth for more and better jobs Financial services Challenges from the OECD and the European Union Opportunities also exist from the new global economic environment A blueprint will be elaborated in collaboration with various stakeholders in the sector: the forthcoming international requirements regarding taxation will be taken on board, without undermining the competitiveness of Mauritius Reform of tax regime for Global Business Companies to comply with new international standards Page 12
Fostering higher growth for more and better jobs Financial services An international capital market will be set up with the objective to attract Governments and corporates from Africa and other regions will be able to issue multi-currency bonds in Mauritius The minimum capital requirement for banks will be increased from Rs 200million to Rs400million. Existing banks will have a time frame of 2 years to increase their capital to the new minimum capital requirement Page 13
Fostering higher growth for more and better jobs Supporting Micro, Small and Medium Enterprises and Cooperatives Movable assets may be given as loan collaterals: the Code Civil Mauricien and the Code de Commerce will be amended in this respect to implement this measure An SME platform will be set up to provide more visibility to SME products. Export financing facility will be introduced to assist manufacturing enterprises in SME Government will continue to guarantee loans made to SME by commercial banks The Development Bank of Mauritius will provide finance to SME with interest at 6% per annum. The rate is halved for loans given to micro enterprises Page 14
Second challenge Investing massively in the infrastructure of the future The better the question. The better the answer. The better the world works.
Investing massively in the infrastructure of the future Around Rs 4.9billion will be invested over the next 3 years in various infrastructure projects Businesses will be able to claim deduction for investment in solar energy units against their taxable income Interest income on debentures issued to finance renewable energy projects will be exempted from tax for both individuals and corporates, provided that the tax free status has been granted by the MRA Page 16
Third challenge Improving the quality of life of people The better the question. The better the answer. The better the world works.
Improving the quality of life of people Water sector Water will be available round-the-clock for households as from 2020 The Central Water Authority will invest heavily in infrastructure for improving water distribution and replacement of pipes The water tank scheme is being extended by one additional year; the eligibility criteria for the beneficiary s income is being increased from Rs 15,000 to Rs 25,000 Consultancy services are being undertaken for a feasibility study for the construction of Riviere des Anguilles dam Investment in the construction, upgrading and cleaning of drains will be made over the next 3 years in several areas where flooding is a risk Page 18
Improving the quality of life of people Waste management Waste water networks in several regions will undergo rehabilitation 10,000 compost bins will be distributed to the population so as to encourage production of compost from organic waste Moris nou zoli péi campaign The infrastructure of several public beaches will be upgraded Trade Union Confederations Customs duty exemption on purchase of 15-seater motor vehicle Page 19
Improving the quality of life of people Sports and leisure Rs 25million will be earmarked for the implementation of a National Sports Policy 15 major sporting infrastructures will be upgraded A monthly allowance will be granted to retired athletes who have performed at African and international games Page 20
Improving the quality of life of people Health care 624 personnel will be recruited: these include specialists in various fields, student nurses and general staff Investment in hospital infrastructure and improving health care facilities: Linear accelerators for treatment of cancer patients New mediclinics and community health centers Construction of modern warehouse facility for pharmaceutical drugs and medical consumables New SAMU ambulances Increase of 20% in budget for acquisition of medicine, drugs and vaccines Page 21
Improving the quality of life of people Facilitating the day to day life of citizens Introduction of a People Facilitation Bill Citizens will be able to use the Citizen Portal to provide their views in helping prepare the legislation in a democratic way Improving basic infrastructure over the island An exceptional capital grant of Rs 500million is being provided to local authorities to address minor infrastructural work that have been long outstanding Page 22
Improving the quality of life of people Law and order Police patrols will be reinforced over the island, especially in crime prone areas Judiciary A modern computerized system will be developed to help monitor payment of fines and other court fees: online payment for these will be possible. The system will also help keep track of the progress of cases. Page 23
Improving the quality of life of people Consumer well-being The retail price of flour will be reduced to Rs 4.85 per pound with effect from 9 June 2017 As a consequence, the price of pain maison will decrease by 10 cents per unit Legislation will be amended so as to protect victims of sale by levy Value Added Tax on sanitary pads is being removed Page 24
Improving the quality of life of people Investing in education Funds have been earmarked for the construction, extension and improvement of infrastructure in public primary and secondary schools Recruitment of additional teaching staff members Yearly allowance for laureates pursuing post graduate studies in Mauritius will be increased by 10% Yearly living allowance for additional laureates studying abroad will also be increased by 20% Page 25
Fourth challenge Ushering in a new social paradigm The better the question. The better the answer. The better the world works.
Ushering in a new social paradigm Negative income tax system Employees in full-time employment with monthly emoluments of less than Rs 10,000 will benefit from financial support The effective date for implementation of this measure is 1 January 2018 The fund will be disbursed on semi-annual basis: the Mauritius Revenue Authority will make the first payment by 30 August 2018 No financial support will be provided where: The mandatory contributions to the National Pensions Fund and the National Savings Fund have not been made by both the employer and the employee; and The aggregate of the taxable and exempt income for a couple exceeds Rs 30,000 per month Page 27
Ushering in a new social paradigm Solidarity levy Individuals with a chargeable income and dividend income exceeding Rs 3.5million will be liable to the solidarity levy: the rate is 5% of the amount in excess of Rs 3.5million Increase in Income Exemption Thresholds ( IET ) Stepped increase in IET rather than a flat increase across all categories New category of IET introduced for taxpayers with 4 or more dependents Page 28
Ushering in a new social paradigm Relief for medical insurance premiums Increase of Rs 3,000 for the taxpayer and the first dependent accompanied by increase of Rs 4,000 for subsequent dependents Deduction for household employees Wages of household employees will be deductible against annual taxable income of the taxpayer subject to a maximum of Rs 30,000 where he is fully compliant regarding social security contributions obligations. Exemption from income tax Basic invalidity pension, carer s allowance and contributory invalidity pension will be exempt from income tax for disabled persons Page 29
Ushering in a new social paradigm Corporate Social Responsibility The mandatory contribution of the CSR liability to the National Foundation through the MRA will be 50% instead of 75% for CSR Fund set up as from 1 January 2018 Companies will be allowed to spend 50% of their CSR liability to implement their own CSR projects for one additional year Poverty eradication Social and low income housing units will be constructed Squatters in selected regions will be relocated The limit of 90% for credit facilities granted by commercial banks will be removed for first time buyers of residential property Page 30
Ushering in a new social paradigm Public sector reforms Establishment of the Mauritius National Investment Authority to invest the surplus funds of the NPF and NSF The funds of other public sector bodies will be invested as well Investments will be made locally and globally Page 31
Fifth challenge Building more resilient macro-economic fundamentals The better the question. The better the answer. The better the world works.
Building more resilient macro-economic fundamentals Public finance management All revenues and expenses of the Build Mauritius Fund and the National Resilience Fund will be consolidated Total revenue is projected to increase to Rs 112.2billion, out of which it is expected that Rs 92.3billion will source from tax receipts Page 33
Disclaimer Page 34
Disclaimer 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. Page 35
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. 2017 EYGM Limited. All Rights Reserved. EYG no. DL1011 ED None In line with EY s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com