How to apply TDS Tax Deduction at Source for Tour Operators and Holiday Rental agents in Mauritius
September 27, 2014
By now all those in the tourism industry since the 15th of December 2011 should know how TDS works. I made a small tutorial back then for my partners that collaborate with my agency Isla-Mauricia to get an overview of how TDS works and it has brought in additional steps to process when you handle payments. This article might also be useful for those aspiring to work directly with landlords as a holiday rental agency, property manager or property owners by setting up their own villa rental agency. If you own a property and you wish to rent it to tourists you will need to apply for a tourist enterprise licence at the tourism authority and when you collaborate with local agencies in Mauritius they will have to pay your TDS directly to the MRA. More to that in my article below.
By the way, TDS applies on many other types of goods and services in Mauritius. My article only addresses tour operators, agents and tourism rental properties. I have added a link at the bottom of the article of the MRA which covers TDS more in depth. It’s good to have a look and to know. Just an example why, did you know that: “Payments made to a non-resident for any services rendered in Mauritius pursuant to section 111B(h) of the Income Tax Act” is 10%.
When TDS was introduced, it made quite some work for many. I worked out a solution with my programmer which does all the calculations for me in my backend system in which I process reservations for bookings of beach villas and apartments. TDS actually has resulted in me having quite some costs in handling it! And also it requires you to spend additional time processing it, just like VAT.
After the introduction of TDS I was met with many landlords who felt confused. Many came to see me seeking for counsel. I then noticed that quite many villa owners do not have an accountant and seem to have great difficulty in finding one! It seems that many accountants on the island are picky and very busy and only take new clients upon recommendation! And those accounting firms that everyone knows their name of, well those are very pricey, to pricey for someone just renting a house to tourists who will on top be affected by low seasons.
Also agencies and tour operators from abroad do not need to pay TDS, one could perceive as an inconvenience for agencies and tour operators in Mauritius.
Now let’s talk about TDS which is the abbreviation for Tax Deduction at Source.
On the 15th December 2011 the legislation for TDS was implemented requiring tour operators or agents that carry out payments to landlords or their representative agent (EXCLUDING Hotels & Guest houses!) to deduct 5% from the rental amount. The 5% will need to be remitted to the MRA by latest the 20th of the following month.
25.05.17: Please note that any company having an annual turnover of less than Rs6m is not required to comply with TDS regulations. You can check here:
→ THE INCOME TAX ACT | Section 111A. Interpretation | (g) (b)
Now please pay good attention to when it comes paying the direct agent of a landlord
If you are paying to the agent, and the agent pays to the landlord, then it’s the agent who has to subtract TDS, not you. If the agent issues you an invoice where you pay directly into the account of the landlord, then you subtract TDS.
In other words, when you (Landlord/Owner/Direct Agent of owner for the landlord) issue us your invoice for payment, we will have to deduct 5% from this amount. There is an exception for Direct Agents which I will mention below – by Direct Agents I do not mean “us” working directly with an owner -or for this instance working directly with you, but someone that has exclusivity for example and deals with other tour operators and agencies like us.
Concerning property managers, the rule applies that 5% cannot be deducted twice. Since property managers deal directly with the owners, it will be the duty of the property manager to deduct the 5% TDS and not us (tour operators or agent). Keep this in mind.
PDF document link:
→ Income Tax Act 1995with FA2011/15 Dec 2011
Relevant for your to read:
Pages 68 to 71 – section 111A(i), section 111B(c) and section 111C(1), Page 129 – sixth schedule (give details of % amount to be deducted).
You may also refer to MRA website “legislation” – Finance Act 2011 – page 31.
Questions (Q) & Answers (A)
Questions I have had so far from some owners which might be of help to you, find the answers below:
Q: If we pay TDS, does the landlord also still have to pay TDS as well?
A: At first instance you do not have to do anything.
However when you do your personal tax, you can deduct the TDS amount from the tax payable required by you. The TDS represents an advance tax paid by YOU via IM Travel Services Ltd. (or the company/agent/tenant that has paid it in advance for you)
Example – tax rate is 15%. We have already paid on your behalf 5%.
You as a Landlord will then pay only the remaining 10% of this chargeable income.
Q: If you are an owner as a registered company and issue VAT Invoices, is the 5% TDS deducted on the total amount ?
A: NO. It is removed on the amount without VAT.
Q: I deal with property managers who manage properties and issue us invoices, do i deduct the 5% there?
A: First it depends what is written on the invoice, for example if its a service of the property manager to manage these payments. Since 5% cannot be deducted twice, I can answer this question with a NO as the property manager will deal directly with the owner concerning the remittance of payments, it will then be their duty to deduct the 5% TDS as mentioned above. Also I would prefer that the property manager carries this out which results in less work for me.
Concerning agents who represent an owner, it can be arranged that we do not deduct 5% TDS and that when you settle payment with your respective owners, you do the deduction.
This law is already effective and we will apply the 5% TDS on all open payments where we deal directly with owners or their direct representing agent – but we will prefer to find an arrangement with direct representing agents that they carry out the TDS.
The MRA also requires us (tour operators, agents) to make a list, to whom payment was made, which total amount, and how much the 5% represents.
At the beginning of the year, in January you have to issue certificates of the previous year to each person for whom you paid TDS. These certificates will state the total amount that you paid for them. Landlords can use these certificates to deduct this from their tax.
You will require the following details of those for whom you deduct TDS:
Payee Other Names:
Payee National Identity Card Number (NICN):
Payee Residential Address:
Payee Tax Account Number:
Payee Business Registration Number:
(if you are a property manager, representing agent etc. we do not require these details from you at current stage!)
Please also consult your accountant if TDS is unclear to you and if you have questions check with them directly.
I have gathered together these details in consultation with my accountant but I’m not a consultant and you should also check for yourself into the documentations about this subject.
There is definitely more to TDS, these are just the basics and still there is so much more you might want to know. By now the MRA website has also compiled a long list of Q&As which is very helpful. I haven’t documented how you submit TDS annually, I suggest you do that with your accountant, that’s what I do so I’m not going to cover that and it’s well explained on the MRA website. I’ll list all the links below.
I quote from the MRA: TDS Payers are hereby informed that, subsequent to changes brought by the Finance Act 2015, the fiscal year now ends on 30 June instead of 31 December. As a transitional measure to change over to the new fiscal year, the Annual TDS Return for the year of Assessment 2015/16 shall be in relation to the amount paid and TDS deducted during the six months period 01 January to 30 June 2015.
Please note that any company having an annual turnover of less than Rs6m is not required to comply with TDS regulations. You can check here:
→ THE INCOME TAX ACT | Section 111A. Interpretation | (g) (b)
Disclaimer: My article dates back to 2014. Some parts might not be up to date at the moment of reading. Make sure to double check with the MRA what are the current rulings!
→ Frequently Asked Questions about TDS answered on the MRA website
→ Tax Deduction at Source Download forms
→ Types of payments which are subject to TDS and the withholding rates of tax applicable
→ TDS Remittance Voucher
→ Search Keyword TDS on the MRA website
How has your experience with TDS been so far? How did the implementation affect you?
How to apply TDS Tax Deduction at Source for Tour Operators and Holiday Rental agents in Mauritius by Dietmar Reigber