Africa Tax in Brief
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At its 27th summit recently held in Rwanda, the African Union (“AU”) decided to implement an import tax of 0.2% to be charged on all imports of goods (excluding basic necessities) in each member state. It is expected that EUR1-billion will be collected through this tax, making the AU financially autonomous. Morocco, the only African country currently not a member of the AU, is in the process of being reintegrated into the AU.
Angola: Inclusive framework for implementing measures against BEPS joined
Angola joined the inclusive framework for the global implementation of the Organisation for Economic Co-operation and Development’s (“OECD’s”) Base Erosion and Profit Shifting (“BEPS”) Project on 7 July 2016.
Cape Verde: 2016 Budget Bill adopted
The National Assembly adopted Budget Bill 2016 (the “Bill”) on 27 June 2016. Significant tax amendments include:
· exemption from social security contributions for employers who provide young workers with their first job, subject to certain conditions being fulfilled;
· exemption from stamp duty on notarial and private deeds on the transfer of immovable property for two years;
· exemption from urban real estate tax (Imposto U´nico sobre o Patrimo´nio) on immovable property for which the ownership is being regularised, for two years from registering the notarial or private deed;
· exemption from customs duty on the import of specified equipment and materials necessary for the implementation of the digital television project. The import of digital televisions remains subject to excise duty at the rate of 10%;
· exemption from value-added tax (“VAT”) (with effect from 1 January 2016) of waste removal services provided by public or private entities; construction of buildings to be used for administrative services by municipalities and the creation of infrastructure for sporting, cultural or educational activities, community meetings or municipal markets, social housing, roads or streets; and
· extension of the tourism tax to the entire fiscal year 2016, with retroactive effect as from 1 January 2016.
Democratic Republic of Congo: Refund of input VAT credit resumed
Following the suspension of the refund of input VAT credits on 18 April 2016 due to the decrease in tax revenues resulting from falling commodities prices, the Minister of Finance announced, on 6 July 2016, that the refund of input VAT credits to eligible taxpayers (mainly mining companies) is to be resumed.
Ghana: Supplementary 2016 Budget presented to parliament
The Supplementary 2016 Budget was presented to parliament on 25 July 2016. Significant tax proposals include:
· gradual removal of temporary taxes such the Fiscal Stabilisation Levy and the Temporary Import Duty; and
· rationalising and streamlining tax incentives and exemption policies by reviewing the free zones regime, improving the VAT refund and warehousing processes through electronic processes, improving coordination between the Ministry of Finance and the Ghana Investment Promotion Centre and limiting the use of clearing permits at ports.
Lesotho: Planned implementation of electronic tax filing system
The Deputy Commissioner of the Lesotho Revenue Authority announced the planned implementation of an electronic tax filing system (“e-filing system”) on 1 July 2016. The e-filing system will be operated concurrently with the existing manual filing system and aims to simplify tax compliance and record-keeping processes. The e-filing system is expected to be fully implemented in the next financial year.
Madagascar: Draft 2016 Amending Finance Law adopted
The Ministry of Finance and Budget published the draft Amending Finance Law 2016, draft No. 024/2016 on 2 July 2016, which is currently under discussion by parliament. Significant proposed tax amendments include:
· the introduction of a 10% withholding tax on dividends paid to non-resident individuals, companies and any other non-resident legal entities, payable to the tax administration by the resident distributor of the dividends before the 15th day of the month following the date on which the withholding tax arises; and
· for purposes of presumptive duty, income derived from public contracts subject to VAT under a special regime of withholding tax, according to article 06.02.02 of the General Tax Code, is not to be considered taxable income and is to be deducted when computing the taxable base.
Mauritius: 2016/17 Budget presented
The 2016/2017 Budget was presented on 29 July 2016 and outlines measures to give additional impetus to Mauritius’ regional integration strategy with Africa and Asia.
Corporate tax policies remained largely unchanged, but a five-year tax holiday is to be granted to organisations holding a treasury management centre licence, investment banking and corporate advisory licence, asset and fund managers licence or overseas family corporation licence, international law firms with a global legal advisory services licence providing international arbitration services to global business clients and foreign ultra-high net worth individuals investing a minimum of USD25-million in Mauritius.
An eight-year tax holiday is to be introduced for companies holding a global headquarters administration licence (subject to meeting certain employment creation and substance conditions) and industrial fishing companies.
Manufacturers of textile, wearing apparels, ships and boats, computers, pharmaceuticals and film production are to qualify for an increased investment tax credit of 15% per annum (previously 5%) over three years. Such investment credit will also apply in respect of capital investment made by a company in a subsidiary engaged primarily in the setting up and management of an accredited business incubator capped at MUR20-million investment. Unrelieved investment tax credits may be carried forward indefinitely.
Unrelieved income tax losses upon takeover or merger of a manufacturing company may be carried forward where the acquiree company remains in operation as a going concern and the takeover of a company or transfer of undertaking has been deemed to be in the public interest under the Land (Duties and Taxes) Act.
It is proposed that businesses are to contribute at least 50% of their corporate social responsibility (“CSR”) fund to a national CSR foundation, which will subsequently increase to 75% in the following year and any unspent balance should be remitted to the foundation. Previously, businesses were free to elect how to utilise their CSR funds according to their preferred areas of priorities.
It is proposed that the full interest relief currently available on secured housing loans contracted on or after 1 July 2006 to first time home buyers, whose total income does not exceed MUR2-million, be extended to all secured housing loans irrespective of the date the loan was contracted and the income limit be increased to MUR4-million.
The annual income exemption threshold for each category of individual taxpayers has been increased by MUR10 000 with effect from 1 July 2016. The VAT refund scheme for new homeowners on residential buildings or apartments has been amended with new conditions, including increasing the maximum VAT refund that can be claimed from MUR300 000 to MUR500 000, extending the scheme to include the purchase of houses (and not only apartments) from a property developer, increasing the limit on the cost or purchase price from MUR2.5-million to MUR4-million, removing the size restriction and increasing the eligibility threshold for refund from MUR650 000 to MUR2-million per annum.
Non-VAT registered persons are now required to charge VAT on the supply of services in Mauritius by foreign service providers and remit such VAT to the Mauritius Revenue Authority (“MRA”). Details regarding the mechanism for non-VAT registered persons to remit the VAT are not yet available.
Taxpayers having a VAT liability exceeding MUR50 000 will be obliged to effect payment electronically.
To promote responsible gambling:
· a 2% levy will be charged on net stakes of gambling operators;
· a 30% tax on winnings for online betting games will be introduced; and
· betting duty for bookmakers outside racecourse is to be increased from MUR16 000 to MUR30 000 for each race meeting.
A 15% levy is being introduced on pesticides, herbicides and fruit ripeners and a 25% levy on energy inefficient appliances, such as washing machines, lamps etc.
Tax deduction at source will be extended to services provided by accountants and tax advisors and management fees paid to individuals.
The MRA is to collect the pension contributions of the National Pensions Fund and National Savings Fund as well as the training levy on behalf of the Ministry of Social Security, National Solidarity and Reform Institutions.
Contractors tendering for government contracts exceeding MUR5-million are required to submit a tax clearance certificate from the MRA confirming that he/she has filed his/her tax returns and paid his/her tax before allocation of any such contracts.
A time limit of two years is being introduced for submission of amended income tax returns both by individuals and corporates.
Seychelles: Inclusive framework for implementing measures against BEPS joined
Seychelles joined the inclusive framework for the global implementation of the OECD’s BEPS Project on 7 July 2016.
Tanzania: Revised procedures for collection of non-tax revenues announced
The Tanzania Revenue Authority (“TRA”) released a public notice dated 20 July 2016, announcing that, in line with the directives of the Minister of Finance and Planning, electronic fiscal devices will be used in the collection of government revenue (i.e. non-tax revenues) with immediate effect. In terms of Finance Law 2016, the TRA will assume responsibility for the collection of non-tax revenues, previously levied and collected by government agencies, institutions and other public sector entities on behalf of the government. During the transition period, government agencies and institutions will levy and collect non-tax revenues on behalf of the TRA until the revenue collection process is fully operational.
Tanzania: Clarification issued in regarding VAT on financial services
The TRA issued the following press release clarifying the application of VAT on financial services, as proposed in the 2016/17 Budget:
· parliament has passed the amendments to the VAT Act 2014 imposing VAT on fee-based financial services by removing these services from the ambit of the exemptions schedule of the VAT Act;
· with effect from 1 July 2016, fee-based financial services will be subject to VAT at a rate of 18%;
· VAT will be collected by the bank or financial institution supplying the service and will follow normal rules of VAT accounting as per the VAT Act; and
· customer deposits are not subject to VAT.
Tanzania: Amendment to due date of VAT submission and payment
Following an amendment by the Finance Act 2016 to section 66 and 67 of the VAT Act 2014, VAT returns and payments are now due on the 20th day of the month following the end of the relevant tax period (instead of the last working day of the month).
The Finance Act is effective from 1 July 2016, meaning that the June 2016 VAT return and VAT payment will be subject to the new deadline (20 July 2016).
Tanzania: Finance Act 2016
Following the 2016 Budget Speech and the issuing of the 2016 Finance Bill 2016 (the “Bill”) on 9 and 14 June 2016 respectively, the Finance Act 2016 (the “Act”) was assented to on 30 June 2016. The amendments as per the Act are effective from 1 July 2016 and include the following changes to provisions originally proposed by the Bill:
· The Bill proposed removing the exemption for the disposal of shares listed on the Dar es Salaam Stock Exchange, but this exemption was reinstated by the Act.
· The Bill proposed an extension to the definition of the term “business” to cover “a transaction resulting into granting of gifts, benefits in cash, kind or any other way as a source of income received by any person”, but this proposed extension has been removed by the Act.
· The Bill proposed an amendment of the definition of the term “debt” for thin capitalisation purposes that would have extended its application to cover non-interest bearing debt. This proposed amendment has now been removed.
· The Bill originally proposed an increase in the corporate income tax rate for entities engaged in petroleum operations to 35%, but in terms of the Act, the rate is to remain at 30%.
· Withholding tax continues to apply to payments to resident professional service providers at a rate of 5%; however, the proposed amendment to treat this withholding tax as a final tax has been removed.
· Following the verdict against the TRA in the Appeal Court Case of Commissioner General, Tanzania Revenue Authority v. Pan African Energy Tanzania Limited, the Bill included a definition of the term “rendering of service” as transmitting or delivering of service in the United Republic of Tanzania irrespective of the place of performance of service to include any payments for services to non-residents in the ambit of withholding tax. In terms of the Bill, this definition was to be included under section 69 (the source rules), but has now been moved to the general definitions (in section 3).
· The Act reinstates the minimum payment requirement for objections to the higher of one third of the tax assessed (instead of all the tax assessed as proposed in the Bill) or tax not in dispute. However, the requirement to make this deposit within 30 days remains unchanged. Failure to make the tax deposit on objection within 30 days will result in the assessment being treated as final.
Sources include IBFD, IHS, taxnews.com, and other
For further detail on the above, please contact:
Africa regulatory and business intelligence executive
+27 82 886 8744
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