BY Celia Becker
Africa tax in brief
BOTSWANA: Transfer pricing regulations became effective
The transfer pricing regulations gazetted on 21 December 2018 became effective on 1 July 2019.
The regulations, which apply to transactions entered into between Botswana companies and foreign connected persons as well as Botswana companies transacting with an IFSC registered connected company, require affected companies to keep documentation explaining relevant transactions and confirming that the conditions in any transaction with a connected person are consistent with the arm’s length principle.
Companies whose transactions with a connected person exceed BWP5,000,000 are required to file a master file upon request by the Commissioner General of the Botswana Unified Revenue Service (BURS).
ETHIOPIA: Directive amending threshold for reverse charge VAT issued
On 28 June 2019, the Minister of Finance issued a directive amending Directive No. 27/2009 on the collection of reverse charge VAT. In terms of the new Directive, all federal and regional government bodies (withholding agents) are to purchase goods or services with the value above ETB200,000 (previously ETB50,000) only from suppliers registered for VAT.
The withholding agents are also obliged to withhold VAT from payments for the procurement of goods or services if the value of a once-off supply exceeds ETB5,000.
MAURITIUS: 2019 Finance Act gazetted
On 25 July 2019, the Finance (Miscellaneous Provisions) Act No. 13 of 2019, implementing the measures announced in the 2019-2020 budget speech was gazetted.
MAURITIUS: Minimum and maximum basic wages for calculation of social security contributions reviewed
On 17 July 2019, the Mauritius Revenue Authority published an updated table of the minimum and maximum basic wages for the calculation of the National Pensions Fund (NPF) and National Savings Fund (NSF) contributions, which entered into force on 1 July 2019.
NIGERIA: Court rules that imported services are taxable in Nigeria
The Court of Appeal in the Lagos Judicial Division, in its decision on 24 June 2019 in the case of Vodacom Business Nigeria Limited (Vodacom) v. Federal Inland Revenue Service (FIRS) (CA/l/556/2018), ruled that the destination principle and reverse charge are implied in the VAT Act.
In the case at hand, New Skies Satellites (NSS), a non-resident company based in the Netherlands, supplied bandwidth capacities to be used in Nigeria to Vodacom. The bandwidth capacities were transmitted by NSS to its satellite in orbit and received in Nigeria by Vodacom via its earth station. NSS did not charge value added tax (VAT) on its invoice to Vodacom for the service rendered and similarly, Vodacom did not remit VAT for the transaction to the FIRS.
The FIRS assessed Vodacom to VAT on this transaction and Vodacom objected to the assessment on the basis that it had no obligation to remit VAT as the receiver of the service. Vodacom appealed to the Tax Appeal Tribunal (TAT), which ruled in favour of the FIRS. When the Federal High Court also ruled in favour of FIRS, Vodacom appealed to the Court of Appeal.
The Court of Appeal considered (1) whether the transaction qualifies as a supply and consumption of services in Nigeria within the context of the provision of the VAT Act and is, therefore, liable to VAT; (2) whether the obligation of consumers of services in Nigeria to remit VAT from the service is separate, distinct and independent of the obligation of the non-resident supplier of the services to register for VAT and include VAT in its invoice; and (3) whether the lower court had done substantial justice by applying the destination principle and reverse charge in upholding the judgment of the TAT, or whether the destination and reverse charge principles of tax laws the lower court alluded to in upholding the judgment of the TAT are provided for in the VAT Act.
The Court of Appeal held that, in so far as the bandwidth capacities are supplied in Nigeria, the foreign company is deemed to carry on business in Nigeria, as its services (the bandwidth capacities of the satellite in orbit) are being utilised in Nigeria and, accordingly, the transaction is liable for VAT in Nigeria.
In addition, since NSS did not issue a VAT invoice, the duty on Vodacom to remit the VAT on the transaction remained sacrosanct and the decision of the lower court affirming that the destination principle and reverse charge are implied in the VAT Act was upheld.
NIGERIA: TAT rules that taxpayer has the right to appeal against a paid assessment
The Lagos Tax Appeal Tribunal (TAT) on 22 July 2019 ruled in the case of United Capital Plc and Federal Inland Revenue Service (FIRS) that the payment of an assessment does not result in the forfeiting of a taxpayer’s right to appeal against the assessment.
TANZANIA: Finance Act 2019-20 gazetted
On 30 June 2019, the Finance Act 2019, which had been passed by the National Assembly on 27 June 2019, was published in Official Gazette No. 27, Volume 100. The Act, which implements the measures announced in the 2019/20 budget speech, entered into force on 1 July 2019.
TANZANIA: Tax ombudsman service office established
The amendments to the Tax Administration Act, which were passed by the National Assembly on 27 June 2019 through the Finance Act 2019, introduce a new section 28A establishing the ombudsman service as announced in the 2019/20 budget speech.
The office will be responsible for reviewing and addressing any complaints from a taxpayer concerning a service, or procedural or administrative matter arising in the course of administering of tax laws by the tax authority, commissioner general or tax authority's staff.
UGANDA: Premiums and rent paid for leasehold land not a tax-deductible expense
Following the Tax Appeals Tribunal (TAT) ruling case of Vivo Energy Uganda Limited v. Uganda Revenue Authority on 21 December 2018 the Commissioner Domestic Taxes of the Uganda Revenue Authority (URA) on 18 July 2019 issued a public notice on the treatment of rent and premiums paid to lessors for long-term leases with respect to leasehold land.
In terms of the notice, the premiums and rent paid on such leases must be capitalised and added to the cost base of the leasehold land, being of a capital nature, and can only be recovered when a disposal of the leasehold land has occurred.
ZAMBIA: Treaty with Switzerland enters into force
On 7 June 2019, the Switzerland-Zambia Income Tax Treaty (2017) entered into force and generally applies from 1 January 2020, replacing the Switzerland-United Kingdom Income Tax Treaty (1954), extended to Zambia by an exchange of notes of 30 May 1961.
Sources include IBFD’s Tax Research Platform; www.allafrica.com; http://tax-news.com
Celia Becker: Executive – Africa Business Intelligence
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