By Regan van Rooy
2020 has been a bad year for taxpayers in Mauritius, and it just gotten worse… The Mauritian Contribution Sociale Genéralisée (“CSG”) regulations were finally published on 8 September 2020. These are the regulations which govern the new mandatory national pension scheme, which has been in place since 1 September 2020.
In this newsletter, we summarise what you need to know.
Under the CSG, lower contribution rates apply to employees earning below Rs50 000 per month (i.e. 1,5% payable by the employee and 3% payable by the employer) but employees earning above Rs50 000 per month will be liable for the same contribution rates as levied under the previous National Pension Scheme, i.e. 3% for employees and 6% for employers. However, the main difference is that the maximum remuneration caps no longer apply, such that employers will be obliged to contribute 6% of total monthly remuneration, and employees 3% uncapped. This means the CSG will be a significant additional cost for both Mauritian tax-payers and employers, on top of the increased solidarity levy.
How will the CSG contributions be calculated?
The CSG regulations have clarified that the CSG contributions will be levied based on a participant’s basic wage or salary as defined in the Workers’ Rights Act 2019. Previously it was envisaged that the definition of salary for CSG would be the same as that contained within the National Pensions Act. The difference lies in the fact that allowances are specifically excluded under the National Pensions Act definition, whereas allowances would now be included for most participants under the Workers’ Rights Act (with the exception of participants whose terms and conditions of employment are governed by Remuneration Regulations or Wages Regulations or an arbitral award or agreement). Based on the definition contained in the Workers’ Rights Act, the CSG contributions will apply to ALL emoluments (i.e. any advantage in money or in money’s worth received by the participant, only excluding any bonus or overtime.
The definition of “basic wage or salary” for purposes of the CSG contributions also specifically includes any “payable additional remuneration”. Unfortunately no additional clarity is provided as to what is intended to be included in payable additional remuneration.
Who is required to contribute to the CSG
The CSG applies to all “participants”. The definition of a “participant” is defined in the CSG regulations as “a person who enters into or works under an agreement or a contract or apprenticeship… whether by cash work, manual labour, clerical work or otherwise and however remunerated”. A participant includes a person who is employed on a full time, part-time basis, and on a permanent or contract basis, i.e. it is very broad.
Although not explicitly stated, it appears that the CSG is intended to apply to all participants who work in Mauritius. Although reference is made to the fact that the CSG regulations would apply to a “non-citizen”, with only very specific exemptions applying e.g. in an export manufacturer or foreign contractor scenario, the regulations also do not define an employer or make any reference to a situations where a Mauritian resident individual is employed by a non-resident employer outside Mauritius.
The CSG regulations are therefore unclear in instances where a Mauritian tax resident provides employment services outside Mauritius, or where non-Mauritian employers employ Mauritian residents. However, we are of the view that the CSG is intended to apply to persons who are rendering employment services in Mauritius, and should be deducted and withheld by employers who are based in or have a presence in Mauritius.
Even household staff i.e. domestic workers are subject to the CSG (resulting in a large additional compliance burden for a relatively low impact) as are self-employed persons although their contribution is limited to Rs150 per month.
When are payments due?
A monthly return is required for the purposes of the CSG. The monthly return and payment are both submitted at the same time to the Mauritius Revenue Authority.
Except for the month of May and November, the CSG is generally payable within one month of the payment period. For the month of May and November, the CSG is payable two business days before the end of June and December of each year, respectively.
The CSG for the month of September 2020, i.e. the first month of application, should be paid by the end of November 2020.
As discussed in previous newsletters, the benefit obtained for the CSG is negligible and for anyone not intending to retire in Mauritius, it is nil. Therefore this CSG is really just an additional income tax by another name.