Against the backdrop of COVID-19, the World Tourism Organization (UNWTO) calls for:
- financial and political support for recovery measures targeting the tourism sector;
- planification and implementation of recovery measures and incentives in coordination with international development and donor organizations; and
- tourism support to be included in the wider recovery plans and actions of affected economies.
Mauritius tourism is certainly one of the sectors of our economy most affected by COVID-19. To alleviate the adverse impacts posed by the outbreak of COVID-19, the Government has taken targeted sectoral initiatives, in line with UNWTO calls, with the aim of providing adequate support to the tourism industry as well as to all economic operators across the economy.
We highlight below the key measures announced including from a general financial perspective to industry specifics:
- Drop of Key Repo Rate from 3.35% to 2.85% implying a reduction in lending rate on bank loans.
- The introduction of a Special Relief Programme of MUR 5 billion through commercial bank loans from 16th March to end July 2020 so that businesses can meet their cash flow and working capital requirements. The loans will be with a maturity of 2 years at an interest rate of 2.5% p.a. inclusive of a 6 months moratorium on capital and interest payments.
- Banks will provide a moratorium of 6 months on capital repayment for existing loans for those enterprises that are being affected by COVID-19.
- The launching of the State Investment Corporation (SIC) Equity Participation Scheme to overcome the financial difficulties of enterprises through the issue of redeemable preference shares up to an amount of MUR 2.7 billion.
- Support schemes by Investment Support Programme Ltd (ISP Ltd) and SME equity Fund Ltd through lower interest rates, factoring schemes and corporate guarantee amongst others.
- The Development Bank of Mauritius assistance to ease cash flow difficulties of companies with turnover of up to MUR10 million through DBM Revolving Credit Fund up to 31st December 2020. Under this scheme, the credit to companies will be free of interest, provided that it is repaid within 9 months. Otherwise, DBM Ltd will charge interest at commercial rate.
- Double Tax Deduction for enterprises affected by COVID-19 on their investment in Plant and Machinery for the period 1st March 2020 to 30th June 2020.
- All work permits that will expire this year will be extended automatically up to 31st December 2021.
- To minimise physical contact, Government will give full support to promote the Work at Home Scheme as announced in the 2018-2019 Budget Speech. Some measures were already included in the Income Tax Act like double deduction of salary and tax credit in respect of expenditure on information technology system subject to meeting required conditions.
- The introduction of Wage Assistance Scheme for employers where employers affected by COVID-19 may after payment of the salary, apply to Mauritius Revenue Authority (MRA) for financial support under the scheme.
- The introduction of Self-Employed Assistance Scheme (SEAS) through the MRA to assist self-employed persons who have suffered a loss of revenue as a consequence of the lockdown in the fight against Covid-19.
- SME Sector: A series of schemes set up for the small and medium enterprises.
- Suspension of the Environment Protection Fee (EPF) of 0.85% charged on the monthly turnover of hotels, guest houses and tourist residences up to 31st July 2020.
- Reduction of the training levy from 1% to 0.5% for operators in the tourism sector as from 1st April 2020 up to 31st July 2020.
- Targeted discounts and promotional fares.
Manufacturing and Trade sector:
- The waiving of export charges imposed by the Mauritius Ports Authority and Cargo Handling Corporation Ltd up to 31st December 2020.
- The extension of Freight Rebate Scheme on exports to South Africa and Tamatave up to 31st December 2020.
- Extension of Speed to Market Scheme for exports of manufacturing sector to Africa, Japan, Australia, Canada and Middle East up to 31st December 2020.
- Call to sugar estates for the disposition of land to small planters for vegetable cultivation.
- MUR 100 million earmarked to encourage local production of food crops.
Whilst there is a general drastic drop in economic activity and as such in revenue, the Government has intervened to:
- suspend some expenses for a defined period (e.g. EPF)
- reduce commercial expenses (e.g. interest expenses on bank loans)
- provide double tax deductions (capital expenditure on plant and machinery), in order to sustain the various industries in the short term
It is noted that some measures were announced before the complete lockdown/curfew period but are still valid until 31st July 2021. The recent Wage Assistance Scheme for employers and the Self-Employed Assistance Scheme also serve this purpose. Besides, the Ministry of Finance has set up COVID-19 Solidarity Fund (Fund) and has invited the public and the private sector to provide support to those affected by the pandemic through their contribution. To encourage the public, the Ministry announced, on 01st April 2020, the tax deductibility of the amount contributed to the Fund from the taxable income of any individual and company contributing therein. The tax deductibility is applicable to contributions made to the Fund up to 31st December 2020 and any unrelieved deduction may be carried forward for a maximum period of two successive income years (for individuals) and as a already prescribed by law for a company.
In addition, and to accelerate economic recovery post pandemic, wider recovery plans and actions are expected in the forthcoming National Budget. As the UNWTO is calling for global coordination for a quicker recovery, we hope the global initiatives coupled with domestic measures will re-boost our tourism industry along with other sectors of the economy.
In the meantime, every financial measure has a tax incidence and most of the above measures may have a direct impact on the corporate tax of the enterprises.
Should you require more clarifications on how the above measures would impact your tax calculations, feel free to contact us.