Africa Tax in Brief
GHANA: Customs duty on spare parts abolished On 14 June 2017, pursuant to the measures proposed in the 2017 Budget, Parliament passed the Customs Amendment Bill, 2017, which amends the Customs Act, 2015 by abolishing customs duties on the importation of vehicular (including motorcycles and bicycles) spare parts. GHANA: VAT Flat Rate Scheme practice note issued The Ghana Revenue Authority published Practice Note No. IDT/2017/001 on 12 May 2017, providing guidance on the operation of the Value Added Tax Flat Rate Scheme (“VFRS”), introduced earlier this year, including the scope and coverage of the VFRS, mode of migrating taxpayers to the VFRS, record keeping requirements and returns to be submitted. GHANA: New import levy introduced On 10 June 2017, the President announced the imposition of a 0.2% import levy on all imports from outside the Member States of the African Union (“AU”). The import levy is aimed at financing the activities of the AU and is the result of a decision adopted by the heads of state and government during the 27th AU Summit held in Kigali, Rwanda in July 2016.
· a 150% investment deduction allowance for capital expenditure on buildings and machinery by special economic zone enterprises located outside of Nairobi and Mombasa is to be introduced with effect from 1 January 2018;
· local motor vehicle assemblers are to be subject to a reduced corporate income tax rate of 15% for the first five years of operations with effect from 1 January 2018. The reduced rate shall be extended for five years if the company achieves a local content equivalent to 50% of the ex-factory value of the motor vehicles;
· the period for repatriation of funds earned outside of Kenya subject to tax amnesty has been extended to 30 June 2018; and
· with effect from 1 January 2018, the registration of tax representatives shall be in the name of the non-resident person being represented.
· exempting fresh milk from value-added tax (“VAT”);
· broadening the scope of interest subject to withholding tax;
· imposing a 10% excise duty on television subscription fees; and
· revising the exemption granted for the import of buses and minibuses.
· that any artistic, scientific, sporting, entertainment, educational services or ancillary services, as well as transport services provided within the national territory, would be deemed to be located in Mozambique.
· increasing import duties on importation of second hand clothes from USD2.5/ per kg to USD4 per kg in further support of the “made in Rwanda” initiative.
· introducing a royalty charge of 0.5% on the turnover of every company or taxable person providing telecommunication services; and
· increasing the payroll tax rate for ECOWAS citizens from SLL500 000 to SLL1.5-million, and for non-ECOWAS citizens from SLL3-million to SLL5-million.
· a 5% final withholding tax is to be introduced on the market value of minerals for small-scale miners, but no guidance is provided regarding the basis for determining market value or the practical collection of such tax;
· new assemblers of vehicles, tractors and fishing boats are to qualify for a reduced corporate income tax rate of 10% for the first five years of operation. Tax advisors have questioned the efficiency of the proposed measure as taxpayers in all likelihood would start showing taxable profits only after expiry of the five-year period;
· expenditure qualifying for wear and tear allowances on non-commercial vehicles has been increased from TZS15-million to TZS30-million;
· the tax bands, rates and thresholds applicable to individuals, which were last amended in 2008, are to remain unchanged. No further cuts have been introduced to the skills and development levy, which remains at 4.5%;
· VAT, at the rate of 0%, is to be reintroduced on ancillary transport services in relation to goods in transit through Tanzania. Since July 2015, VAT at 18% has been charged on such services, which was not available as an input to non-residents not registered for VAT in Tanzania, thus significantly increasing their cost of doing business. Fertilised eggs for incubation, local produced compounded animal feeds and machinery and plant used in the edible oil, textile and pharmaceutical industries are to be exempt from VAT.
· the scope of anti-avoidance provisions is also to be expanded, granting powers to the tax authority to recharacterise transactions between “associates” not entered into on an arm’s length basis. Previously, the arm’s length requirement only applied to “taxpayers”, which are more narrowly defined than associates;
· after being repealed in 2016, a 15% withholding tax is to be reintroduced on winnings from sports or pool betting, but the gaming tax levied on operators on total amounts staked less total pay-outs is to be reduced from 35% to 20%;
· the in duplum rule is to be introduced, limiting interest accruing on unpaid tax to the principal amount due. It is also proposed that interest due and payable as at 30 June 2017, which exceeds principal tax and penalties due, is to be waived. The initial allowance of 50% of the cost base of property more than 50km outside of Kampala brought into use for the first time, is also to be reintroduced.
Africa regulatory and business intelligence executive cbecker@ENSafrica.com cell: +27 82 886 8744
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