tax ENSight | 13 June 2018

Africa tax in brief

by Celia Becker

COMOROS: Treaty with United Arab Emirates enters into force

The income tax treaty between the Comoros Islands and the United Arab Emirates, signed on 26 March 2015, entered into force on 2 January 2018 and generally applies from 1 January 2019. 

GHANA: VAT withholding agents appointed 

In an attempt to improve value-added tax (“VAT”) compliance, the Ghana Revenue Authority (“GRA”) announced the appointment of identified VAT withholding agents per industry on 17 May 2018. Such agents will be responsible for, inter alia:

  • withholding 7% of the 17.5% output VAT and National Health Insurance Scheme Levy (“NIHL”) charged on payments made to registered VAT suppliers. The remaining portion (ie, 10.5%) of the VAT and NHIL due will be payable to the registered VAT supplier;
  • issuing withholding VAT credit certificates in the form prescribed by the Commissioner-General of the GRA to serve as the basis for VAT input claims by the registered VAT supplier; and
  • submitting withholding VAT returns as well as remitting the VAT withheld to the GRA.

The published list of VAT withholding agents per sector is available on the GRA website.

GHANA: Tax Amnesty Act, 2017 guidelines issued 

The GRA published the Guidelines on the Tax Amnesty Act, 2017 on 3 May 2018, providing broad guidance on the operations of the time-bound amnesty scheme. 

GHANA: Taxation (Use of Fiscal Electronic Device) Act, 2018 enacted 

The Taxation (Use of Fiscal Electronic Device) Act, 2018 (Act 966), which provides for, inter alia, the use of approved fiscal electronic devices by specific taxable persons for VAT purposes and the promotion of cashless payments in sales transactions, was published in the Official Gazette of 4 May 2018. 

KENYA: Revenue Authority prohibited from raiding or seizing taxpayers' property

The High Court of Kenya in its decision in Dr. Robert K. Ayisi v the Kenya Revenue Authority & another, [2018] Eklr. (Petition 412 of 2016) on 16 May 2018, declared as unconstitutional provisions in the Tax Procedures Act, 2015 (the “TPA 2015”) that allowed the Kenya Revenue Authority (“KRA”) to search and seize goods and documents from taxpayers believed to have evaded tax. The court further declared unconstitutional provisions of the TPA 2015 that sought to waive the rights of individuals or organisations that are bound by a contractual duty of confidentiality, on the grounds that they contravened article 31(b) of the Constitution, which guarantees individuals' right to privacy and, specifically, the right not to have their possessions seized. 

KENYA: Stamp duty on land purchases payable without CGT

In 2016, the KRA configured its systems to accept online payment of stamp duty simultaneously with capital gains tax (“CGT”) due on the transfer of land. Previously, CGT was only payable upon registration of the transfer and the change effectively shifted the burden of paying CGT to a lender enforcing its security through the exercise of its power of sale in a charge. The Kenyan Bankers Association (“KBA”), a union including 42 commercial banks, a mortgage finance bank and microfinance banks, approached the High Court to compel the KRA to charge stamp duty without requiring the payment of CGT.

In Misc. Civil Case No. 510 of 2017, the High Court, on 13 March 2018, held that the requirement for lenders to pay CGT without first ascertaining whether there is in fact a capital gain, is unreasonable and required the KRA to permit purchasers of land in a forced sale to pay stamp duty without requiring the lender or purchaser to first pay CGT. The KRA has subsequently approached the Court of Appeal to overturn the High Court decision.

KENYA: Tax Appeals Tribunal rules that payments by banks to international credit card companies are subject to VAT

Kenya’s Tax Appeals Tribunal (“TAT”) ruled, on 16 March 2018, that VAT is due on transactions between banks and international credit companies, as well as on interchange fees payable by a merchant bank (acquirer) to a card holder’s bank (issuer). 

Banks previously considered usage fees paid to international credit companies and interchange fees as service charges incurred in the provision of financial services and therefore exempt supplies as per the First Schedule to the VAT Act, 2013. The TAT held that interchange fees were not expressly classified as exempt under the VAT Act and that payments to international credit companies constitute royalties.

The TAT ruled that dues and assessment fees, returned item fees, risk monitoring non-compliant fees and clearing and settlement costs paid by banks to international credit card companies for a right to use their network constitute royalties, which are subject to VAT and reverse charge VAT where applicable.

MALAWI: 2018/19 Budget presented to parliament

On 18 May 2018, the Minister of Finance, Economic Planning and Development presented the Budget for 2018/19 to parliament. Tax measures proposed include:

  • introducing thin capitalisation provisions with a general debt/equity ratio of 3:1 applying to direct or indirect related party debt in any sector;
  • clarifying the provision on taxable deemed interest;
  • increasing the tax-free income bracket under the pay-as-you-earn regime from MWK30 000 to MWK35 000 per month;
  • introducing a limit of MWK5-million on deductions allowed for individual donations made to charitable and non-profit organisations;
  • allowing for registration of VAT withholding agents that will be able to withhold VAT at source and remit it to the Malawi Revenue Authority (“MRA”);
  • introducing a requirement to submit VAT returns on imported services rendered by non-residents not registered for VAT purposes to the MRA;
  • allowing mining companies in the exploration phase to register for VAT purposes; and
  • introducing a requirement for the registration of salaried employees and the issuance of a taxpayer identification number by the MRA.

MAURITIUS: Arrangement on exchange of country-by-country reports between Mauritius and United States signed and entered into force

The Mauritius-United States Competent Authority Arrangement on the Exchange of Country-by-Country (CbC) Reports (2018), was signed and entered into force on 27 April 2018. 

MOZAMBIQUE: VAT exemption for projects included in government's five-year plan or funded by international partners

On 11 May 2018, the tax authority Autoridade Tributária de Moçambique (“MTA”) announced that strategic projects for the development of the country included in the government's five-year plan (2015-2019) will henceforth be exempt from payment of VAT on the purchase of goods and services. 

The MTA announced on 15 May 2018 that the purchase of goods and services for public projects financed by international partners will also be exempt from VAT, with the VAT on the purchase of goods and services for state projects to be borne by the government.

MOZAMBIQUE: Amendments to Commercial Code introduce new obligations for corporate taxpayers

In terms of amendments to the Commercial Code (Código Comercial), gazetted on 4 May 2018 through Decree-Law 1/2018 of 4 May 2018 and effective from the same date, all entities subject to corporate income tax with statutory accounts are required to lodge the annual financial statements with the Registrar of Companies (Conservatória do Registo das Entidades Legais) within 90 days from the general assembly meeting approving such financial statements. Under the law, the general assembly meeting for approving a company's accounts must take place within 90 days following the end of the company's tax period. 

NIGERIA: Stamp Duties Act (Amendment) Bill, 2018 passed by Senate 

The Senate passed the Stamp Duties Act (Amendment) Bill, 2018, previously passed by the House of Representatives, on 8 May 2018. The Bill, which is awaiting presidential assent, proposes, inter alia, to increase the threshold for charging duty on receipts from NGN4 to NGN3 000. 

NIGERIA: Court vacates order restraining Lagos State from enforcing consumption tax

The Federal High Court of Nigeria recently varied its orders restraining Lagos State from enforcing the 2009 Hotel Occupancy and Restaurant Consumption Law and its 2017 Regulations pending determination of the case of Registered Trustees of Hotel Owners and Managers v Attorney General Lagos State and Federal Inland Revenue Service.

In terms of the revised order, hotels, restaurants and event centres are required to comply with the current consumption tax law and continue to charge, collect and remit consumption tax as prior to the earlier order. However, Lagos State cannot carry out any new measures in relation to the “Fiscalisation Regulations” pending the determination of the case.

SENEGAL: Treaty with United Arab Emirates enters into force

The Senegal-United Arab Emirates Income Tax Treaty (2015) entered into force on 2 July 2017 and generally applies retroactively from 1 January 2015. 

SWAZILAND: Finance Bill, 2018 presented to parliament 

The Minister of Finance presented the Finance Bill, 2018 to parliament on 1 March 2018, giving effect to the proposals in the 2018/19 Budget. Key proposals include increasing the VAT rate from 14% to 15%.

Sources include IBFD’s Tax Research Platform; www.allafrica.com; http://tax-news.com

 

Celia Becker

Africa regulatory and business intelligence | executive
cbecker@ENSafrica.com
cell: +27 82 886 8744

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