Africa tax in brief
BENIN: Public procurement holders to benefit from a tax regime derogating from indirect taxation
The 2017 budget law introduced a derogatory tax regime from which certain public procurement holders may benefit by the Benin tax authorities, assuming indirect taxation. This includes customs duties, internal taxes on turnover (mainly value-added tax (“VAT”)) on prices and values of goods and supplies acquired or incorporated into the realisation of the contract. The effective date of the relevant measures have not yet been announced.
CAMEROON: New rates of special tax on income received by non-resident companies
Law No. 2016/018 of 14 December 2016 on the Finance Act of the Republic of Cameroon for financial year 2017 introduced the following new rates of special tax on income by public partnership contractors or service providers that are not resident in Cameroon:
- a reduced rate of 5% on remuneration paid in the context of public contracts whose contractors are not resident in Cameroon; and
- a 10% average rate on the remuneration of punctual provisions paid to companies that are not resident in Cameroon.
The general rate of 15% continues to apply to all other remuneration for services and royalties paid to non-residents, subject to the provisions of relevant double tax agreements.
CENTRAL AFRICAN REPUBLIC: Tax ruling procedure introduced
Law 16-007 of 31 December 2016, which adopted the Budget for 2017, introduced the possibility for taxpayers to apply for tax rulings from the tax authority prior to the conclusion of any contract, legal act or project.
Taxpayers requesting such rulings must provide all information necessary to determine the scope of the transaction in question. The position taken by the tax authorities constitutes a guarantee for the taxpayer against any change in subsequent interpretation.
GABON: Implementation of country-by-country report and transfer pricing regulations
Law No. 026/2016 of 6 January 2017 introduced an obligation to file a country-by-country report (“CbC report”) and provided further details regarding the transfer pricing documentary obligation.
Parent or ultimate parent companies are required to file a CbC report within 12 months after the end of the fiscal year if the consolidated annual turnover excluding tax is at least FCFA491 967 750 000 for fiscal years beginning on or after 1 January 2017.
Failure to comply with this obligation will lead to a penalty equal to 0.5% of consolidated turnover excluding taxes, capped at FCFA100-million per fiscal year.
Article P-831 of the General Tax Code provides for an annual obligation for Gabonese companies that have commercial relations with associated foreign companies to transmit transfer pricing documentation in the modified format introduced by Finance law, 2017. The documentation must include a main and local file in French which must include:
- an analysis of the functions performed;
- the assets used and the risks assumed; and
- an explanation concerning the selection and application of the method(s) used.
Failure to comply with the transfer pricing documentary requirement exposes the company to a penalty equal to 5% of the company's total intercompany trading volume, with a minimum of FCFA65-million per fiscal year.
With effect from 1 January 2017, companies with a turnover of at least FCFA1.5-billion must report their results electronically.
GHANA: Revenue Administration Act 2016 entered into effect
The Revenue Administration Act, 2016 (Act 915) (“RAA”), which had been assented to by the President and gazetted on 10 August 2016, entered into effect on 1 January 2017, repealing the Petroleum Income Tax Act, 1989 (PNDCL 188) and the Taxpayer Identification Numbering System Act, 2002 (Act 632). The RAA provides for the administration and collection of revenue by the Ghana Revenue Authority.
GHANA: Tax Amendment Acts gazetted
The following four tax amendment Acts were assented to by the President and published in the government gazette on 15 March 2017:
- Income Tax Amendment Act, 2017\Special Petroleum Tax (Amendment) Act 2017;
- Special Import Levy (Amendment) Act 2017; and
- Customs and Excise (Petroleum Taxes and Petroleum Related Levies) (Repeal) Act 2017.
GHANA: VAT flat rate scheme introduced
On 24 April 2017, the Ghana Revenue Authority (“GRA”) issued a public notice announcing the enactment of the Value-Added Tax (Amendment) Act, 2017, which provides for the introduction of the VAT flat rate scheme with respect to VAT and the National Health Insurance Levy (“NHIL”) with effect from 7 April 2017 (the date of gazette notification) as follows:
- the standard tax rate 17.5% (comprising VAT at 15% and NHIL at 2.5%), has been reduced to a flat rate of 3% with respect to retailers and wholesalers of goods, whereas the standard rate remains applicable to imports;
a taxable person accounting for the value of taxable supplies under the VAT flat rate scheme is not eligible for an input tax deduction;
- the supply of domestic air transport, immovable property, including land to be used for, or intended to be used for, a dwelling, financial services and crude oil and residual fuel oil are exempt from VAT/NHIL:
GHANA: Various practice notes now available
The following practice notes, issued by the GRA on 6 October 2016, recently become available:
Taxation of employment income (Practice Note No. DT/2016/011)
The practice note provides the following guidance on the taxation of gains and profits from employment:
- gifts (eg tips, awards, appreciation, end of service benefit, ex-gratia payments etc) received in respect of an employment are taxable as part of employment income;
- reimbursement of the cost of passage incurred in respect of the family members of an employee are taxable as part of employment income;
- contributions and donations to a worthwhile cause are deductible expenses in computing taxable employment income;
- income received in respect of termination of employment is exempt from personal income tax (“PIT”);
- the market value of the following employer-provided benefits are taxable: education costs of employees' children, airfares of employees' family, goods or services (provided free or at a cost lower than the market value), domestic servants and security, bearing the employees' tax liabilities, payment of utility bills and share options;
- the following employer-provided benefits are not taxable provided they are granted on a non-discriminatory basis: free or subsidised meals (provided that the meals are not provided as part of a salary sacrifice), mobile phone usage (where there is no landline phone), bus services, annual staff parties and similar functions, recreational and sports facilities, counselling and welfare services and provision of parking facilities;
- overtime payments to a qualifying junior employee (a junior staff member whose employment income for a year of assessment does not exceed GHS18 000) are taxable at the rate of 5%, where the amount paid does not exceed 50% of the basic salary of that employee for the month or at the rate of 10%, if the amount paid exceeds 50% of the basic salary of the employee for that month;
- bonus payments are taxable at the rate of 5%, where the payment does not exceed 15% of the annual basic salary of that employee and any payments in excess of the threshold of 15% are included in the employment income and taxed at the standard PIT rates; and
- payments to casual workers are subject to a final withholding tax of 5%.
Change in ownership (Practice Note No. DT/2016/008)
The practice note provides the following regulation on the treatment of a change in ownership of a company through a sale, acquisition, merger, amalgamation or reorganization in line with the provisions of the Income Tax Act, 2015 (“ITA”):
- where there is outright sale/acquisition, the resultant realisation is subject to tax. Any gain is added to taxable income and any loss may be carried forward as appropriate;
- any gain realised on the disposal of an asset that accrues to, or is derived by, a company from a merger, amalgamation or reorganisation is taxable where the continuity of the underlying ownership in the asset is less than 50%. A realisation of assets and liabilities is deemed to have taken place where within three years there is a change in the share structure of an entity by more than 50%;
- unutilised financial costs incurred by the entity before the change are not deductible;
- contract losses incurred at the end of long-term contracts may not be carried back to periods before the change;
- bad debts that have been included in the calculation of taxable income under the provisions of the ITA before the change are not deductible; and
- the carry-forward of unrelieved losses incurred by the entity before the change are not permitted.
Deductible contributions or donations (Practice Note No. DT/2016/003)
The practice notes provides parameters for the deductibility of contributions and donations made by a taxpayer to an approved worthwhile cause. A taxpayer may claim a deduction for charitable contributions/deductions by submitting the following to the Commissioner General of the GRA:
- a completed "claim form for deduction for contribution/donation to a worthwhile cause"; and
- a written acknowledgement from verifiable beneficiaries of the worthwhile cause (such beneficiaries must have a valid Taxpayer Identification Number issued under the Taxpayers Identification Numbering System Act, 2002).
The amount to be claimed as a deduction is subject to the discretionary approval of the Commissioner General.
Capital allowances (Practice Note No. DT/2016/010)
The practice note provides the following regulations on the claim of capital allowances in line with the provisions of the Income Tax Act, 2015:
- all unutilised capital allowances granted under the repealed Internal Revenue Act, 2000 before the 2016 year of assessment (as certified by a tax audit carried out by the GRA) will be converted into tax losses and carried forward to be offset against future profits. The rules on the carry-forward of tax losses for the relevant sector will apply;
- capital allowances may only be claimed on the depreciation basis of the pool of depreciable assets at the end of the basis period for the year of assessment in which the temporary concession ends;
- where depreciable assets are used in the production of exempt income, or of income under a temporary concession, capital allowances are deductible for tax purposes;
- where a depreciable asset is destroyed by a natural disaster, accident, theft or burglary, the asset would be considered to be realised for zero consideration, subject to the presentation of proof of loss from a recognised institution, and additional capital allowance may be granted. However, where an asset is insured, the compensation received will be deducted from the written-down value of the asset before capital allowance is granted; and
- a depreciable asset must be owned by the person making a claim for capital allowances at the end of the basis period of the year of assessment.
Loss relief (Practice Note No. DT/2016/004)
The practice notes provides the following guidance on carrying forward tax losses in line with the provisions of the Income Tax Act, 2015:
- losses incurred by segments of a business which are taxable at different tax rates may only be relieved from income which is taxable at the same rate;
- where a business is segmented, but the income of the different segments is aggregated, the income of the business may be apportioned on a pro-rata basis according to the contribution of each business line to the total turnover of the business;
- unrelieved loss from a business may be deducted in calculating the taxable income from an investment; however, an unrelieved loss from an investment can only be deducted from similar investment income;
- losses from activities that are exempt from tax or from activities that are taxed at concessionary rates cannot be deducted from the income of other businesses; and
- companies which were required to carry forward losses under the repealed Internal Revenue Act, 2000 may continue with the dispensation up to the end of the basis period in which the dispensation would have ended.
GHANA: Tax exemptions on import duties guidelines issued
The GRA issued guidelines on the refund of import duties paid by qualifying applicants on 13 March 2017. In terms of the guidelines, qualifying applicants (those who are entitled to import duty concessions/exemptions) are required to fulfil the following requirements:
- submit an application for a refund to the Commissioner of the GRA;
- state the justification for the refund;
- provide their telephone number(s), tax identification number and email address; and
- present adequate supporting documentation such as:
- the proof of payment of the related duties, taxes and levies;
- the basis for the exemption, ie the enabling law, agreement or authorisation;
- a letter of recommendation from the relevant ministry, agency or institution;
- an import declaration form/electronic Ministries Departments and Agencies printout;
- bank receipts/evidence of payment;
- commercial invoices, packing lists, customs validated declaration, customs classification and valuation report, bills of lading, etc.;
- a tax clearance certificate issued by the GRA stating the specific purpose for its issue (ie "to obtain exemption refund");
- the master list of items to procure/import as approved by Parliament (if any); and
- any other supporting documents as may be requested by the Commissioner.
Upon submission of an application for a refund together with all supporting documentation/information, the applicant is issued a receipt in acknowledgment. The refund is to be processed within 30 days and applicants whose refunds are delayed may submit a petition to the Minister of Finance stating the grounds for the petition and the specific remedies sought. The Minister of Finance is required to adjudicate within 15 days of receiving the petition.
KENYA: 2017/18 Budget presented and Finance Bill published
Following the presentation of the 2017/18 Budget to the National Assembly by the Cabinet Secretary for the National Treasury on 30 March 2017, the 2017 Finance Bill was published on 3 April 2017. Its provisions, unless otherwise indicated, will apply from 1 January 2018:
- effective 3 April 2017, donations made to the Kenya Red Cross, county governments or any other institution responsible for the management of national disasters to alleviate the effects of a national disaster declared by the president are deductible;
- effective 3 April 2017, if any business dealings between a resident entity operating in a preferential tax regime and a related person not operating in a preferential tax regime produce less than ordinary profits for the entity not operating in the preferential tax regime, the gains of that entity will be deemed to be the amount that would have accrued if the business had been carried on between two independent persons dealing at arm's length;
- dividends paid by a special economic zone (“SEZ”) enterprise, developer or operator to any non-resident person will be exempt from tax;
capital expenditure incurred by an SEZ on buildings and machinery will be eligible to an investment deduction of 100%;
- the corporate tax rate for companies carrying on the business of assembling vehicles locally is reduced from 30% to 15% for the first five years from the year of commencement of operations;
- the annual resident personal relief will be increased from KES15 360 to KES16 896;
- the tax rates for individuals will be revised as follows:
- withholding tax for management, training and professional fees paid by an SEZ enterprise, developer or operator to non-residents will be reduced from 10% to 5%;
- withholding tax paid by an SEZ enterprise, developer or operator to non-residents in respect of royalties or natural resource income will be reduced from 20% to 5%;
- withholding tax paid by an SEZ enterprise, developer or operator to non-residents in respect of interest will be reduced from 15% to 5%;
- the current gaming tax rates of 5%, 7.5%, 12% and 15% will be consolidated (and increased) to a uniform tax rate of 50% for all categories;
- with effect from 3 April 2017, the following will be exempt from VAT: materials, articles and equipment including motor vehicles intended for educational, scientific or cultural advancement of people with disabilities, equipment and apparatus for the direct and exclusive use for construction of specialised hospitals, supply of liquefied petroleum gas, taxable goods used in the manufacture of liquefied petroleum gas cylinders by licensed manufacturers upon recommendation by the Cabinet Secretary responsible for energy and petroleum, aircraft spare parts imported by aircraft operators or persons engaged in the business of aircraft maintenance upon recommendation by the competent authority responsible for civil aviation, inputs for the manufacture of pesticides upon recommendation by the Cabinet Secretary for the time being responsible for agriculture, specially designed locally assembled motor vehicles for transportation of tourists, purchased before clearance through customs by tour operators upon recommendation by the competent authority responsible for tourism promotion, Sukuk in Islamic finance, asset transfers and other transactions related to the transfer of assets into real estate investment trusts and asset backed securities and financial services structured in conformity with Islamic finance;
- with effect from the same date, the following will be zero-rated: maize flour, ordinary bread and goods supplied to marine fisheries and fish processors.
- the transfer of Islamic property finance from one bank to another Sukuk will be exempt from stamp duty; and
- where the title or interest in a property is transferred to a financial institution from a vendor under an Islamic property finance arrangement and afterwards transferred to the purchaser, stamp duty will be chargeable on the transfer to the financial institution but not on the transfer to that purchaser.
KENYA: Treaty with the Republic of Korea enters into force
The Kenya/Korea (Rep.) Income Tax Treaty (2014) entered into force on 3 April 2017 and generally applies from 1 January 2018.
MALI: Transfer pricing regulation specified
The tax annex to Law No. 2016-056 of 21 December 2016, enacting the Finance Act for the financial year 2017 and Circular No. 0421/MEF-DGI of 17 February 2017, strengthens transfer pricing documentation requirements and introduces prior agreement on transfer pricing methods.
Associated companies located outside Mali must submit accounting documentation justifying their pricing policy at the time of a tax audit and provide documentation justifying the transfers carried out in connection with transactions of any kind with related companies established in Mali.
Under the new requirements, the documentation must also contain a general description of the functions performed and the risks assumed by the associated companies to the extent that they affect the audited company in Mali.
Failure to comply with the obligation to provide documentation justifying the transfer pricing policy will be subject to a penalty equal to 5% of the deemed profits transferred abroad, with the tax audit reassessment being set at a minimum of FCFA5-million for each audited financial year.
Any taxpayer may request from the tax authorities the conclusion of a prior agreement on the methods of determining transfer prices. In this case, the tax authorities will have to give a reasoned opinion within three months from the application. Failure to reply within that period, the taxpayer's request will be deemed to have been accepted by the tax authorities.
NIGERIA: Draft National Petroleum Fiscal Policy issued
On 20 September 2016, the Ministry of Petroleum Resources presented the draft National Petroleum Fiscal Policy (“NPFP”), which aims to establish a fiscal framework for planning and developing petroleum activities in a rational and sustainable manner. Highlights of the NPFP contained in the Petroleum (Fiscal Reform) Bill include:
- subjecting upstream petroleum operators to companies income tax;
- introducing the Nigerian Hydrocarbon Tax (“NHT”) in replacement of the petroleum profits tax (applicable to upstream petroleum operators) at the following rates:
- onshore – 40%;
- shallow water – 30%; and
- deep water – 20%;
- limiting/restricting certain deductions for NHT purposes;
- revising the rates of production allowances;
- introducing volume and price based royalties as follows:
- subjecting all production to royalties based on monthly production;
- introducing royalties on windfall profits with rates ranging between 5% and 40%;
- introducing a minimum royalty rate of 5% based on production rates; and
- increasing the capital gains tax rate on asset bound transactions within the petroleum industry from 10% to 30%;
- imposing a gas transportation tariff with an effective date of 1 January 2016;
- disallowing the deduction of NHT and gas flaring penalties for companies income tax purposes; and
- banning the deduction of acquisition costs under qualifying capital expenditure.
NIGERIA: Voluntary asset and income declaration proposed
On 16 March 2017, at a meeting of the Federal Executive Council, the Minister of Finance proposed the introduction of a Voluntary Asset and Income Declaration Scheme (“VAIDS”) to aid in tackling tax evasion perpetrated by multinational companies and high net-worth individuals.
The VAIDS proposes to grant amnesty during a window period within which defaulting taxpayers are to disclose previously undeclared assets and income and pay the taxes due thereon, encompassing all federal and state taxes such as the companies income tax, the personal income tax, the petroleum profits tax, the capital gains tax, the stamp duties, the tertiary education tax and the information technology tax.
The implementation of the VAIDS is subject to the institution of an operating framework, proposed to be implemented on 1 May 2017.
NIGERIA: Tax policy measures proposed
On 7 March 2017, the Ministry of Budget and Economic Planning published the Economic Growth and Recovery Plan (2017-2020), which contains, inter alia, the following proposals:
- increasing the VAT rate on luxury goods from 5% to 15% from 2018;
- introducing a system to allow for the immediate issuance of VAT and withholding tax certificates upon payment of invoices;
- reviewing all revenue-related laws and updating obsolete rates/tariffs;
- introducing tax on luxury items as well as other indirect taxes in the informal sector of the economy;
- increasing the level of verifying tax compliance prior to licensing a vehicle; and
- incentivizing investment through tax breaks (eg accelerated depreciation on equipment).
NIGERIA: National Housing Fund contributions proposed amendments
On 14 March 2017, the National Housing Trust Fund Bill, 2017 (the “Bill”) passed the first reading in the House of Representatives. If passed into law, the Bill proposes to repeal the National Housing Fund (“NHF”) Act, 1992 and:
- revise the threshold for employee contributions to the NHF from NGN3 000 to the national minimum wage of NGN18 000;
- reduce the interest rate on contributions from 4% to 2%;
- revising the rules for the refund of contributions made to the NHF; and
- increase the penalties due for offences under the Bill.
SWAZILAND: Central Process Hub introduced
On 24 March 2017, the Swaziland Revenue Authority (“SRA”) issued a notice to all importers and exporters of goods that effective 1 April 2017, all declarations submitted through the customs system (ASYCUDA World) will be processed centrally via the Central Process Hub.
This arrangement is targeted at improving operational efficiency and protecting traders from arbitrary searches or interventions in line with the World Trade Organization Trade Facilitation Agreement and discontinuing the current practice of following-up on declarations at the points of entry.
The operational hours of the Central Process Hub will be from 6am to 12am, with any declarations lodged outside the working hours to be processed the next day.
SWAZILAND: Guidelines on tax exemptions and exemption for donor-funded projects issued
On 27 February 2017, the SRA issued the Guideline on Domestic Taxes Exemptions (the “Guideline”). The Guideline provides guidance on the qualification requirements for an exemption from corporate income tax and VAT, as well as the tax treatment of qualifying organisations.
Applicants are required to submit the application with the required documents to the Commissioner. The approval or rejection of an application in any year of assessment is at the discretion of the Commissioner and an applicant may appeal the Commissioner's decision not to grant an exemption.
Exempt organisations are required to preserve all books of account, records, financial statement and other documents for a minimum period of five years. The exemption may be withdrawn where an organisation fails to submit the required documents.
On the same date, the Guideline on Donor Funded Projects (“the Donor Guideline”) was issued. This provides guidance on the qualification requirements for an exemption from VAT for donor-funded projects.
SWAZILAND: Budget for 2017/18 presented to Parliament
On 24 February 2017, the 2017/18 Budget was presented to Parliament by the Minister for Finance. The Budget proposes the following measures in respect of business and investment, including:
- establishing Special Economic Zones to stimulate growth, increase employment opportunities and reduce poverty;
- increasing several business licence fees, such as liquor, motor vehicle and driving licence fees;
- providing necessary infrastructure and grants to the agricultural sector;
- supporting local entrepreneurs to start green businesses through the National Environment Fund; and
- developing the Sidvokodvo Industrial Estate to provide land to investors involved in manufacturing activities.
UGANDA: National Budget Framework Paper 2017/18 published and VAT (Amendment) Bill, 2017 presented to Parliament
On 31 March 2017, the Ministry of Finance, Planning and Economic Development published the approved National Budget Framework Paper 2017/18, which proposes the following tax measures to be included in the Budget for 2017/18:
- amending the Income Tax Act to provide for the claim of initial allowances on qualifying capital assets;
- reviewing the extant tax exemptions;
- exempting irrigation equipment, animal feeds and crop extension services from VAT;
- imposing withholding tax at the rate of 15% on the winnings of sports betting; and
- imposing specific excise duties on beers, wines and soft drinks.
The Minister of on 4 April 2017 presented the VAT (Amendment) Bill 2017, which provides for the above exemptions to the parliament for consideration.
Sources include IBFD’s Tax Research Platform; www.allafrica.com; http://tax-news.com
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