Expanding to Madagascar? Here’s everything you should know before taking the big step

As far as developing markets go, Madagascar is a goldmine of opportunities...both literally and figuratively. Its growing population of 32 million people, abundant natural resources such as fish, arable land, minerals, and semi-precious stones make it an interesting investment destination. To this, add the country’s need for greater development, and companies have fertile ground for business growth.

In this article, our Madagascar experts give you relevant information and up-to-date data to help make your expansion in Madagascar a breeze:

Economic overview

Madagascar’s economy shows promise in sectors such as agriculture, mining, tourism and textiles.

Agriculture

Madagascar’s main crop is rice, with other staple crops like cassava and maize supporting the country’s needs. Farmers also cultivate export crops such as vanilla, coffee, and cloves.

The standard corporate income tax rate is around 20%. Foreign-invested businesses may benefit from simplified tax regimes if turnover is under MGA 400 million (Malagasy Ariary) where the tax rate can be as low as 5 % of turnover. The infrastructure, including transport, banking and connectivity, is still developing.

Mining

In recent years, the country’s mining industry has generated between 4.5% to 5% of the country's GDP, a significant number for a singular industry. As such, mining plays an important role in the economy. It supports exports, boosts government revenue, and employment.

Tourism

Ecotourism and adventure together with resort-based tourism in places such as Nosy Be make up the bulk of tourism in Madagascar.

Textile

As of 2023, Madagascar topped the charts as Sub-Saharan African’s leading textile exports to the EU. The country also ranked second in the list as exporter of these goods to the U.S. The textile sector is the largest employer in Madagascar, providing more than 400,000 jobs, both direct and indirect.

Madagascar’s garment industry also accounted for 19.35 % of the country’s GDP in 2024.

Investors should plan for potential delays or higher logistic costs.

Business registration & legal framework

You can set up as a sole proprietor (entreprise individuelle) or a limited liability company (SARL) in Madagascar. Registration takes place at the Economic Development Board of Madagascar (EDBM) and includes obtaining a tax identification number (Numéro d’Identification Fiscale, NIF).

Many country-specific regulations exist. For example, even small businesses must use regular invoices to claim certain tax reductions.

The Free Zone (Special Economic Zone) regime may offer customs or tax relief for export-oriented activities.

Employment & labour considerations

Employers must register their employees with social security such as the Caisse Nationale de Prévoyance Sociale (CNaPS). For non-agricultural workers, the legal working time is 173.33 hours per month. Overtime may warrant additional pay between 30 %–50 % of the employee’s rate. The minimum wage has been recently updated (it now begins at MGA 238 800 monthly in January 2023) which affects contribution bases.

Taxation & compliance

Salaried income tax (IRSA) is progressive: it goes from 0 up to a threshold, then up to about 20 % for higher income.

Companies with turnover above MGA 400 million face a 20 % tax on profits; smaller businesses, on the other hand, may pay a tax of 5 % of turnover. Employers should track due dates and thresholds carefully, keeping up to date with them. Else, their calculations, withholdings, and remittances will all be off, warranting them fines and other penalties for non-compliance with the law.

Banking, currency & payment systems

The local currency is the Malagasy Ariary (MGA). 1 USD is equal to about MGA 4500 at the time of writing.

Some controls on foreign currency may apply in certain situation and repatriation of profits are typically delayed and/or complex. A corporate bank account is typically required.

It is worth noting that local entity setup and bank arrangements can take several months before completion. For companies that don’t have the luxury of spending this much time on administrative procedures, an African Employer of Record (EOR) like Africa HR Solutions offers the opportunity to legally expand into Madagascar without an entity. Expansion takes weeks, not months.

Cultural & operational insights

Malagasy business culture values human relationships, trust and local presence. Many staff speak French and Malagasy; English is typically less common. Transport, and energy ecosystems may prove to lack reliability, imposing time or cost overheads and occasionally impeding on business.

Working with local partners

Partnering with local service providers can help with:

• Compliance
• Labour law interpretation & application
• Tax filings & registrations

An Employer of Record (EOR) like Africa HR Solutions enables you to legally onboard employees without setting up a full legal entity, all while staying compliant. This approach is beneficial if you are testing the market or seeking rapid entry.

Risks & opportunities
Some risks include:

• Infrastructure gaps
• Evolving regulatory environment
• Local administrative delays

On the opportunity side of things, being an early bird in priority sectors or export-centric operations can offer lucrative first-mover advantages, especially when offering tax or customs relief.

Expand to Madagascar safely

Expanding into Madagascar can offer strong potential when you pair careful preparation with local compliance, labour law understanding, and proper tax planning.

Time again, we have seen how the market rewards those who invest in local knowledge, build good relationships and plan for both opportunities and challenges. As your Employer of Record partner in Madagascar, we take over vital functions like employee onboarding, payroll, compliance, and benefits administration among other things so you can focus on growing your business.

To find out how we can best help you, send a message to one of our consultants.