Two theoretical models available for the structure of personal income tax are called planned tax system and global tax system. A planned tax system is when tax rates are determined by separating income levels into different classifications, with each classification representing a different source of income, for example capital gains, business profits or employment income . They are taxed according to the provisions of the tax law to which it applies. Mauritius operates a global tax system in which an individual is taxed on their income from all over the world. In a pure world system, income category does not matter since all income and expenses are considered together to arrive at a single net gain subject to tax. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get Original Essay However, there is one application which restricts this system, namely Section 4 of the Income Tax Act, 1995, where it is clearly stated that every person has to pay tax on all income received in the previous year, other than exempt income, and it will be calculated on income taxable at a specified rate. What is exempt income? Following the above, the first question that will arise will certainly be that of knowledge concerning exempt income. Exempt income refers to certain types of income that are not subject to tax. The Second Schedule of the Income Tax Act provides a list of all income exempt from income tax. It is divided into two parts where part (i) includes exempt income bodies such as a charitable institution or trust, a trade union, the Mauritius sugar authority, the sugar employees fund, a trust relating to a fund retirement pension and many others. . Part (ii) mainly includes exempt income such as dividends from a resident company, transportation allowances, first 2 million lump sum payment, transit benefits, capital gains or emoluments from duties president and vice-president. Taxable personsTax is paid by both individuals and businesses. A natural person is classified as either a tax resident or a non-resident. According to section 73 (1) (a) of ITA 95, there are three conditions to classify an individual as a resident taxpayer: He is physically present in Mauritius for a total period of 183 days or more during a fiscal year. He has his domicile in Mauritius unless he resides permanently abroad. He is physically present in Mauritius for a total period of 270 days or more over the course of 3 income years. An individual is considered non-resident if he or she does not meet one of the three conditions and it will be taxed only on its Mauritian source. A single condition met is enough to be considered a resident. A resident individual is taxed on both the Mauritius source and the foreign source, but the foreign source is subject to the remittance basis, which means that all income is not taxed. On the other hand, according to section 73 (1) (b), a company is considered to be tax resident if it is incorporated in Mauritius and has its central management and control in Mauritius, i.e. the location of the company's board of directors. The directors meet and decide on major company policy issues. If a company is considered resident, it will be taxed on worldwide income whereas anon-resident company is taxed only on the Mauritian source. set dates without waiting for the tax administration to require it. Normally, the tax year begins on July 1 and ends on June 30 of the following year. Generally, tax is paid on September 30 but the deadline is extended to October 15 if payment is made electronically. Everyone must complete a tax return which indicates the amount of tax owed. The formula for calculating tax is:Gross incomeNetincomeTaxable incomeGross incomeGross income is an individual's total salary before taxes and other deductions, consisting of wages, salaries, overtime, bonuses and more, as shown in section 10. This is the income received for services rendered both past and present in terms of money and money value. There are six principles to consider before including income in gross income. To begin with, money received by an employee should accrue to them in respect of their employment rather than in their personal capacity or for any other reason. Taking the example of the tax case Hochstrasser V Mayes HL 1959, 38 in which the debate was whether the compensation for the loss on the sale of the house is a taxable emolument. The House of Lord held that the compensation was not a taxable emolument because the payment was not in respect of salary but rather in respect of his personal situation as a landlord. Second, the identity of the payer is irrelevant even if the payments were made in the course of employment. In Calvert V Wainwright 1947, tips received by a taxi driver were considered taxable even if the payment was made by the passenger and not the employer. Third, payments must be made with reference to the services the employee renders by virtue of his or her position and must be in some way a reward for past or future services. In the case of Cooper V Blakiston 1908, Easter offerings given to a vicar by parishioners were taxable because he received these offerings because of his position. Fourth, a one-time payment in the form of personal appreciation is not taxable. In the case of Moore V Griffiths 197248, the payment received by the captain of the English football team in recognition of his World Cup victory was found to be non-taxable because it was a one-off payment intended for highlight an achievement that is unlikely to happen again. Fifth, it depends on whether the payment is contractual and, if so, there are good reasons to include it in gross income. In Moorhouse V Dooland 1955, crowd collections for a professional cricketer were considered to be remunerative in nature because the collections formed part of the cricketer's professional income and were provided for in his contract. Last but not least, payments intended to compensate the taxpayer for certain sacrifices made in accepting employment are generally not taxable because they are not in exchange for services. According to article 17 of LIR 95, any expense which is entirely, exclusively and necessarily incurred in the exercise of the functions of an office or employment will be deductible from the gross income earned by that person during the year. of income during which they are engaged. Travel expenses such as bus tickets are not deductible as they are incurred before and after performing their duties, while expenses incurred by an architect when traveling from one place to another are deductible because they are carried out during working hours and are productive. Additionally, working from home is also a deductible expense. In Owen V Pook 1970 AC 244, the coststravel expenses of a physician were considered eligible at the time he began his duties when the hospital telephoned him, so that the expenses were incurred entirely, exclusively and necessarily in the exercise of his duties. The final step before arriving at the chargeable amount of income is deducting all the exemptions and reliefs to which the taxpayer is entitled. The first deduction that will be allowed is the Income Exemption Threshold (IET). This is the amount that a taxpayer can deduct from their net income before arriving at taxable income. However, this is only possible if the latter resides in Mauritius in the income year during which the income was received. The table below shows the different categories of EIT and the deductible amount for the income year ending June 2018. A child over 18 years of age who cannot earn a living due to a mental disability or physical. If a spouse works and earns less than Rs. 110,000, he or she may be considered a dependent but this amount must be included in the taxpayer's gross income. The second deduction allowed would be an additional exemption for undergraduate studies. The taxpayer will be allowed to deduct Rs 135,000 per dependent if he or she has a child pursuing undergraduate studies. However, in this article, the word dependent includes only the child, which means that if the taxpayer's spouse is pursuing an undergraduate degree, he or she will not be classified as a dependent and, unfortunately, he or she will not be classified as a dependent. There will be no additional exemption. Another deduction allowed is the interest on the home loan. but this relief is only suitable for the purchase of a first house. A person wishing to extend their house will not benefit from any relief, unless the house is not habitable. In the event that there are no dependents, the assistance must be distributed equally between each spouse. There are certain conditions for the taxpayer to be eligible for this relief, for example that the person must be resident in Mauritius during the income year or they must not be the owner of another residential property. Additionally, the taxpayer is entitled to medical relief. insurance premium, i.e. he can deduct from his net income the actual amount paid during that income year under a medical or health insurance policy taken out for himself and limited to Rs 15,000 and for dependents. The amount allowed for the first, second and third dependent is Rs 15,000, Rs 10,000 and Rs 10,000 respectively. In two situations, no relief will be allowed. The first would be if the insurance premium was paid by that person's employer and the second would be when the premium is paid as part of a combined medical and life insurance policy. After going through all these steps, we finally arrive at the taxable income which is taxed at the specified rate. Previously, the rate was 15%, but from July 2018 to June 2019, the rate will be applied based on the taxpayer's annual net income. If he earns more than Rs 650,000 per year, he will continue to pay 15% tax, but if his annual net income is less than Rs 650,000, he will only have to pay 10% income tax. However, some people are not subject to income tax even if they receive income in Mauritius only if their monthly salary is less than Rs 23,077 or if their annual salary is less than Rs 300,000. They are called individuals exempt. trade, profession, vocation, occupation or any other remunerative activity with a view to making a profit. Commerce refers to the regular exchange of goods and services for money. Subject to section 44B,.