Africa tax in brief
AFRICA: African Continental Free Trade Area Agreement developments
Botswana and Zambia signed the African Continental Free Trade Area Agreement (“ACFTA”) on 10 February 2019 at the 32nd summit of the African Union in Addis Ababa, whereas the Ethiopian Council of Ministers approved the ACFTA on 2 February 2019 and the Parliament of Senegal on 23 January 2019.
The Ivory Coast, Mali and Mauritania deposited their instruments of ratification for the ACFTA on 23 November 2018, 1 February and 11 February 2019, respectively.
ANGOLA: Value-Added Tax Code enacted
The Angolan National Assembly approved a bill enacting the new Value-Added Tax (“VAT”) Code in January 2019. The VAT system is to replace the current consumption tax regime, broadening the tax base and introducing a single tax rate of 14% with effect from July 2019.
VAT will be implemented in two phases, firstly in respect of large taxpayers and other (eligible) entities that opt for immediate application and, secondly, in respect of all taxable persons.
ANGOLA: 2019 State Budget Law published
Law No. 18/19 of 28 December 2018, approving the 2019 State Budget Law, was published on 28 December 2018.
In terms of the Law:
- the amnesty scheme in respect of outstanding income tax, customs duties and social security taxes for the period up to and including 31 December 2017, is approved;
- the special levy applicable to the transfer of funds abroad made under contracts for the provision of foreign technical assistance and management services is retained for the year 2019;
- the scope of the statutory provisions relating to the payment of taxes in instalments is expanded to apply to customs duties in cases where there has been a customs clearance procedure and where additional tax is assessed as a result of post-importation audit processes; and
- the president is authorised to:
- redefine the investment income tax exemption regime applicable to dividends distributed to companies resident in Angola that qualify as taxpayers for the purposes of industrial tax; and
- subject to stamp duty, the receipts of independent professionals, all contracts for the provision of services and employment contracts of non-resident foreigners.
BOTSWANA: 2019 Budget Speech
Botswana’s 2019 Budget was delivered by the Minister of Finance and Economic Development to the National Assembly on 4 February 2019. The minister announced the continued need to expand the tax base through a review of tax legislation and regulations and announced that:
- following a review of amendments to Botswana’s International Financial Services Centre Regime, the Organisation for Economic Cooperation and Development (“OECD”) declared the regime not to be harmful;
- following Botswana’s joining of the Base Erosion and Profit Shifting (“BEPS”) Inclusive Framework in June 2017, transfer pricing has been introduced as an amendment to the Income Tax Act; and
- during the course of the 2019/202 financial year, the Capital Transfer Tax Act is to be amended as follows:
- removing the ceiling of P15 000 for exemption of the transfer of property such as household goods and personal belongings to heirs;
- increasing the value of exempt gifts from P5 000 to P25 000; and
- exempting the transfer of immovable property currently exempted under the Transfer Duty Act.
CHAD: Finance Law 2019 published
The Finance Law 2019 was published under Law No. 37 for 2018 on 31 December 2018. Significant amendments, effective from 1 January 2019, include the following:
- the minimum lump-sum tax applicable to businesses under the standard tax regime is subject to a minimum amount of F.CFA2-million;
- a transport allowance (capped at 30% of the basic salary for each employee) is exempt from individual income tax subject to the condition that it is granted to all employees;
- the maximum value of certain benefits in kind for individual income tax purposes is amended as follows:
- accommodation: from 15% to 20%;
- water: from 2% to 4%;
- motor vehicles: from 8% to 10%;
- gas: from 1% to 2%; and
- food: from 25% (with a maximum of F.CFA50 000 per month for each person older than 15 years) to 15% (with a maximum of F.CFA75 000);
- non-compliance with transfer pricing documentation requirements is subject to a penalty of 5% of the value of intra-group transactions with a Chadian company to a minimum amount of F.CFA50-million per year.
DEMOCRATIC REPUBLIC OF CONGO (DRC): Free revaluation of corporate fixed and financial assets applicable to years 2018 and 2019
The Finance Minister tasked the Director General of the Tax Authority (Direction Générale des Impôts) and the Secretary General of the National Accounting Office (Conseil Permanenant de Comptabilité au Congo) on 20 December 2018 with developing a new tax regime for the free revaluation of corporate fixed and financial assets, taking into consideration the revised OHADA Accounting system (SYSCOHADA) applicable as of 1 January 2018. The relevant amendments are expected to be introduced in the draft Finance Law 2020.
DRC: New payroll tax return published
The tax authority on 2 February 2019, published Statement No. 01/005/DGI/DG/IS/BSE/NK/2019 introducing a new payroll tax return model (déclaration unique des impôts, cotisations sociales et contributions patronales sur les rémunérations) to be used as of February 2019, taking into consideration the new social contribution rates effective from 1 January 2019.
GHANA: VAT (Amendment) (No. 2) Bill 2018 presented to parliament
The Minister of Finance presented the VAT (Amendment) (No. 2) Bill 2018 to parliament on 3 December 2018. Significant amendments to the VAT Act 2013 (Act 870) proposed to become effective from 1 January 2019 include:
- including the supply of textiles locally manufactured by an approved manufacturer in the list of zero-rated supplies for a period of three years; and
- enabling the Ghana Revenue Authority (“GRA”) to refund excess credits attributable to locally manufactured textiles during the three-year moratorium upon the receipt of an application for a refund of the excess credit.
GHANA: Guidance notes on exchange of financial account information published
The GRA, on 21 January 2019, published guidance notes on the automatic exchange of financial account information in tax matters as required in terms of the Standard for Automatic Exchange of Financial Account Information Act 2018 (Act 967), which is based on the OECD Common Reporting Standard (“CRS”).
The guidance notes are limited to providing guidance on aspects of the CRS that are particular to Ghana and must be considered as supplementary to the OECD Commentary and related documents on CRS and the Multilateral Competent Authority Agreement on Exchange of Financial Account Information.
GHANA: Tax stamp policy on textiles suspended
The Ministry of Finance, on 21 January 2019, suspended implementation of the tax stamp policy (introduced earlier in February 2019) for the textile industry.
KENYA: High Court interprets "service exported out of Kenya"
On 21 December 2018, the High Court delivered judgment in the case of Commissioner of Domestic Taxes v Total Touch Cargo Holland, (Nairobi Income Tax Appeal No. 17 of 2013) on when services are deemed to be exported and thus zero-rated for VAT purposes.
The court ruled that for a service to be deemed an exported service, the determining factor is the location where that service is to be finally used or consumed, irrespective of where such service was performed. An exported service will, accordingly, be one which is provided for use or consumption outside Kenya.
MAURITANIA: Convention on Mutual Administrative Assistance in Tax Matters signed
On 12 February 2019, Mauritania became the 127th jurisdiction to join the multilateral Convention on Mutual Administrative Assistance in Tax Matters, as amended by the 2010 protocol.
MAURITIUS: Guidelines on appropriate use of information in CbC reports published
The Mauritius Revenue Authority (“MRA”) published guidelines on the appropriate use of information contained in country-by-country (“CbC”) reports on 22 January 2019, highlighting that information obtained through CbC reports needs to be appropriately used by the MRA during transfer pricing audits.
NAMIBIA: Inland Revenue Service launches e-service
The Namibia Inland Revenue Service launched its e-service portal, accessible on the Integrated Tax Administration System (ITAS) website, on 17 January 2019.
Existing taxpayers have to sign up and link their tax identification number (“TIN”) in order to create an e-service profile. Taxpayers must also create TINs with their commercial banks before making any tax payments after 17 January 2019.
NIGERIA: FIRS suspends bank account freezing directive
The Federal Inland Revenue Service (“FIRS”), on 15 February 2019, informed banks of a 30-day temporary suspension of the lien on accounts of taxpayers alleged to be in default of tax payments. The directive was necessitated by a significant number of taxpayers with frozen bank accounts having to regularise their tax positions.
NIGERIA: Court of Appeal rules on taxing of educational institution
The Court of Appeal in its judgement of 11 December 2018 upheld the judgment of the Federal High Court in Best Children International Schools Limited (“BCISL”) vs FIRS that BCISL, not being a company limited by guarantee which is exempt from tax, was liable to companies income tax.
REUNION: Public consultation on corporate income tax rules reform launched
The French Directorate of Tax Legislation (Direction de la législation fiscale) of the Ministry of the Economy and Finances launched a public consultation process in respect of interpretation issues regarding the new rules adopted in the Finance Act for 2019 with respect to, inter alia, new tax-free zones (zones franches d'activité) available in the overseas departments (Guadeloupe, Guyana, Martinique, Mayotte and Réunion).
SIERRA LEONE: Finance Act 2018 assented into law
The Finance Act 2019 was signed into law by the president on 11 January 2019. Significant amendments, effective from 1 January 2019 include the following:
- a reduction in the top band of progressive income tax rates for individuals from 35% to 30%;
- taxing of leave allowances exceeding one month’s basic salary of an employee at the highest marginal tax rate of 30%;
- authorising the National Revenue Authority to request a bank or other financial institution to suspend the bank account of a tax defaulter; and
- exempting local agricultural produce for manufacturing for goods and services tax.
SEYCHELLES: Preferential tax regimes assessed "not harmful"
The Ministry of Finance, Trade, Investment and Economic Planning, on 25 January 2019, announced that Seychelles does meet the requirements of OECD BEPS Action 5 “Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance”, following an assessment of its various preferential tax regimes by the Forum on Harmful Tax Practices.
The Inclusive Framework on BEPS assessed harmful tax practices in 24 jurisdictions on 57 preferential tax regimes and approved its progress report on 24 January 2019. Seychelles was assessed on the following eight preferential regimes:
- international business companies;
- companies' special licences;
- export services under the international trade zone;
- offshore banking;
- non-domestic insurance business;
- reinsurance business;
- securities business under the Securities Act; and
- fund administrator.
Seychelles has committed to adhering to international norms and best practices and made some significant amendments to its tax system in order to meet the BEPS Action 5 recommendations, including:
- amending the Business Tax Act to a full territorial tax system, removing the concessionary tax rate of 3% and the tax exemption for offshore banking business and reinsurance businesses;
- amending the International Business Companies Act to repeal tax exemption clauses;
- amending the Companies (Special Licences) Act to abolish the 1.5% business tax concession and withholding tax exemptions;
- amending the International Trade Zone Act to abolish concessions and exemptions granted to export services activities falling within the scope of BEPS Action 5 standards;
- amending the Insurance Act to abolish concessions and tax exemptions granted to non-domestic insurers; and
- amending the Securities Act and Mutual Fund and Hedge Fund Act by stating minimum substance requirements to obtain tax benefits.
TOGO: Finance Law 2019 published
The Finance Law 2019 was signed by the president and published under Law No. 2018-020 on 20 November 2018. Significant amendments, effective from 1 January 2019, include:
- introducing an exceptional tax regime with respect to business restructuring transactions of “enterprises going through financial difficulties” as defined by the Law; and
- introducing the following import taxes:
- the African Union levy (prelèvement de l'Union Africaine) applicable at a rate of 0.2% of the customs value on the import of goods from outside the African Union;
- an entrance tax (taxe de laissez-passez) applicable to the temporary import of vehicles at a rate F.CFA7 000 per vehicle; and
- the national solidarity levy (prelèvement national de solidarité) levied at a rate of 0.5% of the customs value of imported goods.
Sources include IBFD’s Tax Research Platform; www.allafrica.com; http://tax-news.com
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