Small and Medium Enterprises (SMEs) - Introduction

1. Small and Medium Enterprises Act (SME Act)
2. Compliance with revenue laws
3. Keeping of records
4. Obligations under revenue laws
5. Tax Incentives and Exemptions

Small and Medium Enterprises Act (SME Act)

The SME Act came into operation on 18 January 2018 which repealed and replaced the SMEDA Act. Section 2 of the SME Act defines the following types of enterprises (as amended by The Finance Act 2022):

Compliance with revenue laws

To be tax compliant means:

1. Keeping proper records

2. Complying within due dates for submission of the returns and payment of taxes (if any).

3. Declaring the correct amount of income / revenue in the tax returns.

4. Paying the correct amount of tax.

5. Duly registered for the purpose of Income Tax and VAT.

Benefits of being compliant are :

1. Efficient and effective management of your business activities;

2. Improved decision making where proper records are kept.

3. Information is readily available to:

   • file the company’s returns,

   • apply for loans, and

   • bid for tenders.

4. Promote growth of your business and increase its goodwill

Keeping of records

You will have to keep records as follows:-

1. in computerised or manual form;

2. in English or French language;

3. in chronological order; and

4. for a period of 5 years

Benefits of keeping proper records

1. Sales

   Keeping copies of all receipts and invoices issued will help you to know:

   • items sold

   • value of sales

   • customers who have paid

   • what amount is still owed by customers

2. Purchases

   Recording all purchase invoices will help you to know:-

   • from whom you have purchased

   • value of purchases

   • what payment has been made

   • what amount is still owed to supplier/s.

3. Expenses

   Recording all expenses made will help you to know:-

   • what are the expenses relating to the business

   • amount of expenses paid

   • amount of expenses not paid.

4. Fixed Asset Register

   Keeping a fixed asset register including original invoices will help you to know:-

   • what assets have been purchased

   • on which date the assets have been acquired

   • the amount paid

   • annual allowance which may be claimed as a deduction.

5. Bank statements, cheque stubs, paying-in books, import bills, export bills and other documentary evidence will enable you to support the figures in the Revenue / Financial statements.

6. Cash book

   Recording the receipts from your clients and payment effected will help you to:

   • determine the cash flow position of the your business

   • Cash in hand at any time can easily be ascertained through Cash Book balance.

   • Any mistake in the book can be easily detected at the time of verification of cash.

   • Any defalcation of money can be detected while verifying cash.

7. Decision making

   Information from the business records will enable you to know:

   • the cash position of your business;

   • whether it is right to invest in new technologies, to upgrade production and to increase sales

8. Financial Statement

   • It will report about the financial position of the business.

   • Enable you to know whether the business is generating a profit or making a loss.

   • Help your business to apply for loans.

   • Help your business to file its income tax returns promptly.

Obligations under the revenue laws

1. Obligation under the Income Tax Act

   1. Self Employed

      Current Payment System

      A quarterly CPS Statement should be submitted by every self-employed deriving business income (Including Income from Profession, Vocation or Occupation) and rental Income where your gross income for preceding income year exceeds 4 million rupees and tax payable on chargeable income exceeds Rs 500.

      Note as from income year 2019/20, if your turnover for the preceding year did not exceed 10 million rupees and you are eligible to elect for the presumptive tax system, you need not submit CPS statements.

      Annual Income Tax return

      An annual income return should be submitted declaring income derived during the preceding year and effect payment of tax, if any.

   2. Company

      Advance Payment System (APS)

      AnAPS statement should be submitted to the Director-General by every company where, in respect of the preceding accounting year, the company’s gross income exceeded 10 million rupees and it had a chargeable income.

      Annual Income Tax return

      An annual income tax return should be submitted by every company whether or not it has a chargeable income.

      For the first year, a company may prepare accounts for a period not exceeding 18 months

      Tax Deducted at Source (TDS)

      Under this system, the payer is required to deduct tax at the time the payment is received by or credited to the account of the payee.

      A company whose annual turnover does not exceed 6 million rupees is not required to apply TDS. However, a company / société which awards contracts for construction works is required to apply for TDS even if its turnover does not exceed Rs 6 million.

      Corporate Social Responsibility (CSR)

      Every company is required to set up a CSR Fund equivalent to 2% of its chargeable income of the preceding year.

      As from year of assessment commencing on 1 July 2019 and onwards, CSR is also applicable for SMEs that benefit from the four years tax exemption under Item 11 of Sub Part C of the Second Schedule to the Income Tax Act.

      For instance, a company may be exempted from the payment of income tax for year of assessment 2019/20; however, it will have to account for CSR (2% of what would have been the chargeable income of year of assessment 2019/20) in its income tax return to be filed for year of assessment 2020/21.

2. Obligations as an Employer

   If you are an employer, you have to register as an employer and submit the following:

   1. Monthly PAYE / CSG / NSF / Levy Returns (If you have less than 10 employees , Mobile App developed by MRA can be downloaded from Google or App Store to submit the monthly return electronically )

   2. Return of Employees not later than 15 August every year

   3. Issue Statement of Emoluments to the employees not later than 15 August every year

3. Obligations under The Value Added Tax Act

   The business has to be compulsorily registered for VAT purposes where:

   • its annual turnover of taxable supplies exceeds or is likely to exceed 6 million rupees or

   • business activities fall within the 10^th Schedule to the VAT Act irrespective of its turnover of taxable supplies

   The business has to submit :

   • monthly VAT Returns when its taxable supplies exceed 10 million rupees or

   • quarterly VAT returns in other cases

Tax Incentives and Exemptions

The following tax incentives and exemptions may be applicable to your business:

1. Four years tax holiday for companies starting business (Under Item 11 of Sub Part C of the Second Schedule to the Income Tax Act)

   Conditions:

   1. Holder of a registration certificate issued by SME Mauritius.

   2. Has an annual turnover of less than 30 million rupees

   3. Is not involved in any of the following activities:

      • Information and communication technologies under the Information and Communication Technologies Act; or

      • Financial services under the financial Services Act.

   However, companies benefitting from the scheme will still have to account for Corporate Social Responsibility as per the provisions of the law.

   Note:During the period of exemption, if the annual turnover exceeds 30 million rupees, the exemption will lapse and the company will be taxable on its chargeable income

2. Presumptive Tax(starting as from year of assessment 2020/21)

   If your gross income does not exceed 10 million rupees, you may be eligible to elect for the presumptive tax system and pay tax at the rate of 1% of your gross income.

   Refer to Guide on Presumptive Tax

3. Tax Arrears Settlement Scheme (2022)

   Taxpayers may benefit from 100% waiver of its penalties and interest on tax arrears under the Income Tax Act, Value Added Tax Act or the Gambling Regulatory Authority Act outstanding as at 7 June 2022 provided that the the tax arrears are settled on or before 31 March 2023.

   An application must be made to the Director General on or before 31 December 2022.

4. Waiver of Penalties and Interest for SMEs

   1. Penalty for late submission of return

      An individual, a company, a trust or a resident societe who is a small and medium enterprise having an annual turnover not exceeding 100 million rupees may benefit from waiver of penalties for late submission of return or statement of income due as at 25 March 2022 provided that:

      • The due date of submission of the return or statement falls in the year 2020 or 2021 ; and

      • The tax payable in accordance with the return or statement has been duly paid.

   2. Penalty for late payment of tax and Interest payable on returns and statements

      An individual, a company, a trust or a resident societe who is a small and medium enterprise having an annual turnover not exceeding 100 million rupees may benefit from waiver of penalties for late payment of tax and interest on unpaid tax due as at 25 March 2022 provided that:

      • The return or statement has been submitted on or before 25 March 2022 ;

      • The due date for the payment of the tax falls in the year 2022 or 2021 ; and

      • The tax payable in accordance with the return or statement has duly been paid.