Mauritius has been fighting the Covid-19 Pandemic for the second year in a row and has kept no stone unturned in rethinking its strategy to boost the economy. One among the various measures that is key to the strategy is to have a competitive tax environment to reinforce and maintain its sustainable growth.
Following the presidential assent of The Finance (Miscellaneous Provisions) Act 2021 on 05 Aug 2021, which regroups the measures announced by the Honourable Minister of Finance the 2021-2022 Budget Speech, it was noted that the government is trying to boost the medical, biotechnology and pharmaceutical sector.
The pandemic has pushed the Government to recognise the role and significance of the pharmaceutical industry in Mauritius as being critical in the efficient provision of healthcare services. It is an integral part of the health sector that contributes to the well-being of its people.
Mauritius is heavily dependent on importation of pharmaceutical products for supply to both public and private healthcare institutions. In 2019, the market value of pharmaceutical products imported and distributed in the country was estimated to be over MUR 5 billion (government expenditure around Mur 1 billion and private wholesalers around Mur 4 billion) or 20% of the total healthcare expenditure. As of mid-2019, there were 386 registered private drugstores and 33 registered pharmaceutical wholesalers in Mauritius.
The market for pharmaceutical products in Mauritius is a highly regulated one. Mauritius currently has 8 pharmaceutical-manufacturing companies among which are Ajanta Pharma (Mauritius) Ltd, Aspen Global Incorporated, Dyna Chem and Iotrad Co Ltd.
In order to boost the pharmaceutical industry and cease the dependence on imports, the following fiscal measures have been announced and enacted in the finance Act:
- Manufacturing companies holding an Investment Certificate issued by the Economic Development Board is taxed at the rate of 3% provided the latter satisfies substance requirements.
- 100% deduction on capital expenditure incurred for the acquisition of patents.
- Given the relatively low or no domestic pharmaceutical R&D and manufacturing capability, patents are rarely applied for in respect of IP protection of pharmaceuticals. This scheme will be of utmost support to companies.
- Large manufacturing entities are eligible for 110% deduction of the cost of purchases from other SMEs in the manufacturing sector.
- Double deductions for –
- investment in market research and product development
- direct expenses related to international accreditation for private health institutions
- acquisition of specialised software and systems
With these reforms, it is hoped that investors and international companies will be attracted to invest in the medical, biotechnology and pharmaceutical industry while expanding to the African markets. Private pharmaceutical wholesalers will be aspired by the export opportunities since they currently import about 75% of the total pharmaceutical products in Mauritius. As a member of SADC and COMESA, exports from Mauritius to members of these organizations benefit from duty-free access, provided the rules of origin are met.
Generally, with diseases like diabetes, cardiovascular diseases, cancer, hypertension which so common in Mauritius and countries of the region, there is great opportunity for running clinical trials in Mauritius. The latter has a growing clinical research industry which presents significant capacity for development.
The measures are encouraging for start-ups which want to take advantage of these opportunities to invest in medical, biotechnology and pharmaceutical sector.
Contributed by –
Yamisha Khadun
Tax Supervisor – Mazars
*The views expressed are personal.
