IRSA in Madagascar: what will change in 2026

Comparative analysis, impacts and updated calculation method

Introduction

The Tax on Wage and Similar Income (IRSA) is one of the main direct taxes applied to wages in Madagascar. Withheld at source by the employer, it is based on a progressive scale designed to balance social equity and tax revenue.

From 2026, a major reform is introduced, combining:
✔️ a new tax bracket,
✔️ an adjustment of the minimum wage,
✔️ a modification of the ceiling for social security contributions.

This article presents:
– the situation before 2026 in comparison with Africa,
– the evolution from 2026 onwards,
– the regulatory framework and the date of application,
– the estimate of the employees concerned,
– the updated calculation method with a numerical example.

1. Situation before 2026: IRSA scale and position in Africa

IRSA scale in effect until 2025

The applicable tax scale was as follows (monthly taxable income):

• 0%: up to 350,000 Ar
• 5%: from 350,001 to 400,000 Ar
• 10%: from 400,001 to 500,000 Ar
• 15%: from 500,001 to 600,000 Ar
• 20%: above 600,000 Ar

This system allowed for a partial exemption of low wages while maintaining a relatively moderate ceiling rate.

Comparison with Africa

In most African countries, income tax for employees is also progressive, but the top marginal rates are often between 25% and 35%.
Before 2026, Madagascar, with a maximum rate of 20%, was among the jurisdictions with moderate tax pressure on labor income, such as Libya, Mauritius, Seychelles, Sierra Leone, and Sudan. 

2. Evolution and impact from 2026 onwards

From 2026 onwards, the scale is strengthened by the introduction of a new bracket:

• 25% for the portion of taxable monthly income exceeding 4,000,000 Ar (950 USD)

The other tranches remain unchanged.

Objectives of the reform

– increase the progressivity of the tax,
– strengthen state tax revenues,
– target high incomes as a priority.

The impact is therefore concentrated on a minority of employees receiving high salaries.

3. Regulatory text and date of application

The reform is provided for in the Finance Law for 2026.

Two key dates must be distinguished:

• January 1, 2026 : entry into force of the new IRSA scale (25% bracket),
• March 1, 2026 :
  ✔️ Application of the new social security contribution ceiling,
  ✔️ Increase in the minimum hiring wage (SME) to 300,000 Ar (72 USD)

These measures directly modify the taxable base used to calculate IRSA.

4. Estimated number of employees concerned

The 25% tax bracket only applies to employees earning more than 4,000,000 Ar (950 USD) per month.
However, the salary structure in Madagascar is characterized by:
– a majority of salaries close to or below the minimum wage,
– a concentration of high incomes in certain sectors (banking, telecommunications, international NGOs, senior management).

It is reasonable to estimate that less than 10% of employees in the formal sector will be directly affected by this new tranche.

5. IRSA calculation method from 01 March 2026

Step 1: Determine the taxable base

IRSA base = Gross salary
– Social security contributions (CNAPS + OSTIE)

New contribution ceiling: 2,400,000 Ar (572 USD)

Employee rates (indicative):

• CNAPS: 1%
• OSTIE : 1%

This represents a maximum of 3  % of the ceiling, i.e.:
2,400,000 Ar × 2% = 48 000 Ar

Step 2: Apply the 2026 progressive scale

Family allowance reduction:
-2,000 Ar per dependent (within regulatory limits).
Minimum IRSA allowance: 3,000 Ar per month.

Practical example of calculation (with new ceiling)

Hypotheses

• Gross monthly salary: 5,150,200 Ar (1,226 USD)
• Dependents: 2
• Social security contributions capped at 2,400,000 Ar

1. Calculation of social security contributions

2 400 000 Ar × 2 % =  48,000 Ar

2. Taxable Income IRSA

5,150,200 – 48,000 = 5,102,200 With

3. IRSA by tranche

• 0 – 350 000 → 0 % = 0
• 350 001 – 400 000 → 50 000 × 5 % = 2 500
• 400 001 – 500 000 → 100 000 × 10 % = 10 000
• 500 001 – 600 000 → 100 000 × 15 % = 15 000
• 600 001 – 4 000 000 → 3 400 000 × 20 % = 680 000

• 4 000 000 → 1 102 200 × 25 % = 275 550

IRSA brut = 983 050 Ar

4. Deduction for family expenses

2 × 2,000 = 4,000 Ar

net IRSA = 979,050 Ar

➡️ This amount is deducted monthly at source by the employer.

Conclusion

The IRSA reform of 2026 marks an important evolution of the Malagasy salary tax system:
✔️ strengthening of progressivity,
✔️ targeting of high incomes,
✔️ adjustment and adaptation to salary realities with a new SME (Minimum Hiring Wage) and a new social ceiling.

For businesses, it involves updating payroll settings.
For employees, it provides greater transparency regarding deductions and a fairer contribution based on income level.