IRSA (Tax on salary) 2026 Madagascar: impact on employees in Employer of Record (EOR) companies and the role of the parties

Analysis & Opinion – Madeinmada / Portage Salarial Madagascar

The tax reform announced in the 2026  Finance draft bill introduces a major change in the taxation of salaried income in Madagascar. With an IRSA rate revised to 25% for incomes exceeding 4,000,000 ariary (888 usd) , this measure directly affects certain categories of staffs, including senior managers and executives, as well as employees working under umbrella companies (Employer of Record) in Madagascar , a sector experiencing rapid growth due to the development of teleworking and international assignments.

Beyond the tax itself, this development raises profound questions about tax fairness , talent retention , and how companies and umbrella companies will have to adapt their compensation strategies.

A more progressive tax framework for 2026: an inevitable evolution

With the rise of independent work under "umbrella company" status, Madagascar is seeing the emergence of a new class of better-paid professionals: IT consultants, accountants, engineers, international teleworkers, outsourced freelancers…

The IRSA-2026 reform responds to a logic of:

• enhanced tax progressivity ,
• increase in internal revenue ,
• better redistribution ,
• alignment with international tax standards .

The government wants to focus tax efforts on high incomes while protecting low and middle wages. This approach is theoretically consistent with a modernization strategy.

For employees using umbrella companies, including Madeinmada: an immediate impact on net income

Professionals working under umbrella companies in Madagascar , especially those working for foreign clients, are among the workers most likely to reach or exceed the 4 million ariary (888usd) mark.

Specifically, the increase in the rate:

• reduces the net amount payable
• may impact their competitiveness ,
• changes their billing strategy ,
• forces umbrella companies to revise their salary simulations and offers.

Main risk:

👉 A loss of attractiveness of Malagasy umbrella employment , especially in the face of competing countries in the outsourcing market (Mauritius, Senegal, Tunisia).

In relation to the reduction in net pay, employers and umbrella companies like Madeinmada | PSM are questioning the measures and position to adopt: the urgent need for a contributory salary adjustment.

One of the most neglected points in the debate on IRSA 2026 concerns the responsibility of employers , including umbrella companies.

Why is a salary adjustment becoming essential?

• To maintain the purchasing power of the highest-paid employees.
• To prevent talent from leaving for other employers or for work abroad.
• To make umbrella employment in Madagascar competitive , despite the tax increase.
• To guarantee attractive remuneration , which is essential for skilled workers.
• To ensure compliance with the expectations of international partners , who often require financial stability from consultants.

What is a contributory readjustment?

This is a jointly planned salary adjustment :

• based on the company's economic capacity,
• calculated to partially neutralize the impact of IRSA,
• integrated into a sustainable HR policy,
• including strategic additional benefits (health insurance, premiums, professional expenses, etc.).

In umbrella company arrangements, this can take the form of:

• of a reasonable and contributory increase
• through cost optimization ,
• a better structuring of the salary package ,
• of a hybrid model combining fixed salary and targeted bonuses.

Tax reforms and social perception: a delicate balance

To be accepted, the increase in IRSA must be accompanied by transparency on the use of revenue , a visible improvement in public services, a continuous modernization of the tax administration, and an improvement in the fight against corruption.  

Without this, even a technically fair measure can be perceived as penalizing, particularly by managers and consultants, who are often the source of added value in the Malagasy digital economy.

Risk to the competitiveness of the Malagasy labor market

The profiles impacted by the new IRSA are also those that:

• work with international partners
• generate foreign currency
• export know-how,
• occupy key positions.

Excessive taxation can lead to:

• a migration of talent towards more attractive countries,
• a withdrawal of foreign companies ,
• a loss of competitiveness for Malagasy umbrella companies ,
• an increase in the cost of skilled labor in the local market.

Conclusion: a useful reform, but a shared responsibility

The IRSA 2026 should not be analyzed solely as a tax increase.
It is a political, economic and social signal. 

✔ For the government: a way to increase domestic revenue.
✔ For employees: a significant change, especially for high earners.
✔ For companies and umbrella companies: a clear call to adopt a  more equitable and  contributory payroll management system .

The success of this reform will depend on the ability of all stakeholders to adapt intelligently,
if wage adjustments become the norm—not the exception. 

Madagascar can remain competitive, attract talent, develop its digital economy and consolidate  Employer of Record (EOR) as one of its emerging strengths.