Member Article

BOTSWANA: Protocol to treaty between Botswana and Sweden enters into force

The amending protocol to the Botswana/Sweden Income Tax Treaty (1992), which was signed on 20 February 2013, entered into force on 1 December 2015. The protocol generally applies from 1 December 2015 for the provisions on exchange of information and from 1 January 2016 for the remaining provisions.

GHANA: Income Tax Act 2015 amendment

On 3 February 2016, the Commissioner General of the Ghana Revenue Authority (“GRA”) announced that the Income Tax Act 2015 (Act 896) had been amended by the Income Tax Amendment Act 2015 (Act 902). The main amendments include the following revised income tax bands, applicable to resident individuals retrospectively, from 1 January 2016:

	Taxable income	Tax rate (%)
Up to	2 592	0
	2 593 – 3 888	5
	3 889 – 5 700	10
	5 701 – 38 880	17.5
Over	38 880	25

LESOTHO: 2016/17 Budget presented to parliament

The Budget for 2016/17 was presented to parliament by the Minister of Finance on 19 February 2016. The Budget does not propose significant tax amendments but includes proposed measures to revatilise the private sector, including the earmarking of prime government-owned land in Maseru for development by the private sector on behalf of the government.

NIGERIA: Tax Appeal Tribunal rules on applicability of VAT to services provided outside Nigeria by non-resident companies

The Lagos Tax Appeal Tribunal (“TAT”) recently ruled in favour of the Federal Inland Revenue Service (“FIRS”), in its case with Vodacom Business Nigeria Limited (“Vodacom”), that satellite-network bandwidth capacities provided to Vodacom outside Nigeria by New Skies Satellites (“NSS”) are liable to VAT in Nigeria.

In terms of the Nigerian VAT Act, VAT is chargeable on the supply of goods and services, other than those exempted under the VAT Act. Section 10 of the VAT Act requires a non-resident company (“NRC”) carrying on business in Nigeria to register for VAT purposes in Nigeria, using the address of the Nigerian party with which it has a subsisting contract (i.e. its Nigerian customer). Such NRC is also required to include VAT on the invoices it issues to the Nigerian customer and such VAT is to be remitted directly by the Nigerian customer to the FIRS.

In the case at hand, NSS entered into a contract with Vodacom for the supply of bandwidth capacities for Vodacom’s use in Nigeria. The bandwidth capacities were transmitted by NSS to its satellite in orbit and received in Nigeria by Vodacom via its earth-based satellite. NSS did not charge VAT on its invoice to Vodacom for the service rendered.

The FIRS assessed Vodacom to VAT on this transaction, and when the FIRS refused to accept objections by the company, Vodacom filed an appeal at the TAT.

Vodacom argued, inter alia, that NSS’ supply of bandwidth was a service provided outside Nigeria, and that based on the VAT Act, such services provided would only qualify as “imported services” if they were rendered in Nigeria. Accordingly, VAT should not be levied on the transaction.

The FIRS argued that:

· based on the destination principle under the International VAT/GST Guidelines, the services provided by NSS were effectively imported into Nigeria, because the bandwidth capacities were received in Nigeria through earth-based stations set up in Nigeria by Vodacom to receive them;

· the “imported service” enjoyed by Vodacom was liable to Nigerian VAT, since services supplied in Nigeria fell within section 2 to the Act, and “bandwidth capacities” were not on the list of VAT-exempt services as per the First Schedule to the VAT Act;

· by having a contract with Vodacom, NSS met the requirement of “doing business in Nigeria”; and

· the fact that NSS failed to register with the FIRS and issue a VAT invoice, did not preclude Vodacom from fulfilling its obligation to withhold and remit the VAT due on the transaction.

The TAT held that:

· section 2 of the VAT Act imposed tax on the supply of all services, other than those exempted under the First Schedule to the VAT Act. Given that bandwidth capacities were not exempted under the schedule, the services provided by NSS were liable to VAT in Nigeria; and

· as it was Vodacom, rather than NSS that was being taxed in Nigeria, it had the obligation to pay the VAT due on the transaction, irrespective of the fact that NSS did not have a presence in Nigeria.

NIGERIA: FIRS to collect tax on behalf of Federal Capital Territory Internal Revenue Service

In a joint statement issued by the FIRS and Federal Capital Territory Internal Revenue Service (“FCT-IRS”) on 14 March 2016, it was announced that the FIRS will continue to administer, inter alia, the following taxes on behalf of the FCT-IRS in anticipation of the FCT-IRS becoming fully operational: personal income tax, Pay-As-You-Earn, federal capital territory property tax, stamp duties, withholding tax and capital gains tax in respect of individuals and enterprises resident in the Federal Capital Territory.

The above taxes will be collected and payable into the relevant bank accounts of FIRS at designated banks. Tax clearance certificates for taxes paid to the FCT-IRS since the commencement of the FCT-IRS Act, 2015 will be issued by the FIRS and will be binding as if issued by the FCT-IRS.

SOUTH SUDAN: Financial Act 2014/2015 signed into law

On 21 March 2016, the Ministry of Finance and Economic Planning announced that the Financial Act 2014/2015, which amends the Taxation Act 2009, was signed into law. Amendments include changes to the classification of enterprises and the business profits tax rates payable, as well as changes to excise duties.

SOUTH SUDAN: East African Community admits South Sudan

According to a joint communiqué of the 17th Ordinary Summit of the East African Community (“EAC”) Heads of States, the EAC admitted South Sudan as a member of the EAC during the summit on 2 March 2016.

Sources include IBFD, IHS and other

Celia Becker

Africa regulatory and business intelligence executive

[email protected]

+27 82 886 8744