BY Celia Becker
Africa Tax in Brief
ANGOLA: Treaty with the United Arab Emirates enters into force
The Angola - United Arab Emirates Income Tax Treaty (2018) entered into force on 28 March 2020 and generally applies from 1 January 2021.
BOTSWANA: Protocol to treaty with Mauritius enters into force
According to a press release by the Mauritius Ministry of Finance dated 26 June 2020, the amending protocol to the Botswana - Mauritius Income Tax Treaty (1995), which was signed on 15 August 2015, entered into force on 27 February 2020 and generally applies from the same date.
CABO VERDE: COVID-19 pandemic amending state budget presented to parliament
The 2020 Amending State Budget, presented to parliament on 1 July 2020, includes several tax amendments aiming at a post-COVID-19 recovery. The measures are expected to enter into force on the day following the publication of the final law, but the measures regarding payment of tax debts in instalments are expected to apply retroactively from 4 April 2020.
Proposed amendments include:
Corporate income tax
- a corporate income tax credit of CVE20 000 for the hiring of unemployed people for a minimum 12-month period. (This benefit is cumulative with the existing benefits for job creation provided under article 34 of the Tax Benefits Code);
- in respect of the advance payments owed by corporate income tax taxpayers and due by September and December 2020 will be governed by the following provisions:
- the respective amount can correspond to 10% of the corporate income tax assessed in the previous tax year; and
- the payments can be waived if an effective and significant loss of activity (at least a 40% reduction in turnover as compared to the same period in the previous year) prior to the respective payment date can be proven.
Personal income tax
- in respect of advance payments owed by personal income tax taxpayers and due by September and December 2020:
- the respective amount can correspond to 2.5% of the taxable profit assessed in the previous tax year, and can be made in September and December 2020; and
- the payment can be waived if an effective and significant loss of activity (at least a 40% reduction in turnover as compared to the same period in the previous year) prior to the respective payment date can be proven;
- the proposed introduction of incentives for corporate entities and businesses operated by individuals:
- corporate income tax taxpayers and personal income taxpayers with organised accounting will be entitled to an additional deduction of 30% of eligible expenses, including expenses incurred in respect of the acquisition of personal protective equipment, cleaning equipment, cleaning services, fees charged by certified auditors and accountants for the certification of payments, incurred as from 25 April 2020;
- exemption from VAT and customs duty on the import of machinery and materials to be used for preparing premises to comply with the existing rules on matters of sanitisation required under the medical protocols applicable during the COVID-19 pandemic;
- a state allowance of up to 50% (capped at CVE25 000) of the salary received by at least two employees for taxpayers that create five or more jobs;
- a reduced value-added tax (“VAT”) rate of 10% (as compared to the standard rate of 15%) applicable to the following persons:
- tourism industry, on the rendering of services related to accommodation in hotels and similarly in the catering industry;
- tour operators who are resident micro, small and medium-sized companies, on all combined services rendered in Cabo Verde; and
- entities with tourist utility status that promote cultural events, on the rendering of the respective services;
- credit on the amount of VAT included in the respective invoice and incurred by qualified farmers on the acquisition of water for use exclusively in agricultural activities; and
- VAT exemption on the sale of laptops, desktops and tablets by educational and professional training institutions located in Cabo Verde;
- an exemption on the importation of:
- photovoltaic panels, inverters and batteries to store solar power, to be used in the production of water for agricultural purposes;
- laptops, desktops and tablets by educational and professional training institutions located in Cabo Verde, as well as by students of such institutions;
- optic fibre submarine cables as well as other materials to be used in project EllaLink and in any other projects to connect international submarine cables; and
- materials and equipment to be used in the maintenance, construction or refurbishment by the Central Sports Institute, of spaces for sports practice, sports associations and sports clubs.
- exemption from stamp tax in respect of the principal loan, interest and commissions on credits granted to Cabo Verde's educational and professional training institutions and respective students, for the acquisition of laptops, desktops and tablets.
- payments of tax debts, including in respect of VAT and withholding taxes, originating prior to April 2020, can be made in 60 interest-free instalments (except those already covered by the special regime of regularisation of tax debts, that allowed the payment in instalments until 31 December 2020); and
- tax debts under a tax enforcement procedure are suspended (interest-free) in case of renegotiation of an extension period, which cannot exceed 60 instalments.
The following initial measures, which were communicated via Decree-Law 37/2020 of 31 March, and Law No.83/IX/2020 of 4 April, became effective on 1 April 2020 (20 March for Boa Vista Island):
- the postponement of the deadline to file the 2019 corporate income tax return ("Modelo 1b") and payment of corporate income tax due until 31 July 2020;
- the postponement of the deadline to file the 2019 annual statement of accounting and tax information to September 2020;
- the postponement of the deadline for corporate income tax prepayments due in August and November 2020 to September and December 2020, respectively;
- the postponement of the deadline to file the 2019 PIT return ("Modelo 112") and payment of the personal income tax due until 31 July 2020;
- the postponement of the deadline to file the 2019 annual statement of accounting and tax information until November 2020;
- upon request, the payment in instalments until 1 December 2020 of withholding taxes due on income from Category A (employment income), Category B (business income) and Category C (real estate income) derived from April 2020 onwards, free of interest and penalties;
- the payment in monthly instalments until 31 December 2020 of VAT due (excluding VAT due through the reverse charge mechanism) in respect of March 2020 and following months (including the VAT due in respect of the month of November 2020), free from interest and penalties, provided that an effective and significant loss of activity exists (a reduction of at least 30% or more of the turnover as compared to the same period of the previous year);
- the suspension of custom statistics fee (taxas estatísticas aduaneiras) in certain situations; and
- an exemption from the payment of social security contributions to the National Institute of Social Security (Instituto Nacional de Previdência Social) in April, May and June 2020, subject to the submission of proof of effective and significant loss of activity (a reduction of at least 30% of turnover as compared to the same period of the previous year). The extraordinary regime is not applicable to companies in the public sector and financial institutions.
IVORY COAST: COVID-19 pandemic tax measures implemented
To implement the measures announced on 30 March 2020, the government issued ordinance No. 2020-357 of 8 April 2020, which clarifies as follows:
- the payment postponement is granted to all taxpayers experiencing cash flow difficulties with regard to:
- payments due in April, May and June 2020; and
- the second instalment of income tax and business licence duty;
- exemption from VAT for health equipment, materials and other health-related efforts used in the fight against the COVID-19 pandemic; and
- all charges and expenses incurred in the fight against the COVID-19 pandemic will be completely deductible for income tax purposes.
KENYA: Finance Act 2020 assented to
The Finance Act 2020 was passed by the national assembly on 23 June 2020 and assented to by the president on 30 June 2020. Most of the proposals in the Finance Bill 2020 have been adopted and generally apply from 30 June 2020. Significant amendments include:
- the introduction of a minimum tax at the rate of 1% of gross turnover, payable in four instalments due on the 20th day of the period ending on the 4th, 6th, 9th and 12th month of the year of income;
- the introduction of a digital service tax, payable at a rate of 1.5% of the gross transaction value by persons whose income from the provision of services is derived from or accrues in Kenya through the digital marketplace. The tax is not a final tax and is offset against the annual corporate income tax liability;
- the disallowance of a deduction in respect of:
- an entrance fee or annual subscription paid to a trade association;
- expenditure of a capital nature incurred on legal costs and other incidental expenses relating to the authorisation and issue of shares, debentures or similar securities offered for purchase by the general public;
- expenditure of a capital nature incurred on legal costs and other incidental expenses, for the purposes of listing on any securities exchange operating in Kenya, without raising additional capital;
- expenditure of a capital nature incurred on rating for the purposes of listing on any securities exchange operating in Kenya;
- club subscriptions paid by an employer on behalf of an employee; and
- expenditure of a capital nature incurred with the prior approval of the Cabinet Secretary to the National Treasury by a person on the construction of a public school, hospital, road or any similar kind of social infrastructure.
- the levying of minimum tax on individual income;
- increasing the lower limit to which residential rental income tax will apply from KES140 000 to KES288 000 in order to align it with the current lower individual tax band. The upper limit will be increased from KES10-million to KES15-million effective 1 January 2021;
- disallowing contributions in respect of the RHOSP as deduction effective from 1 January 2021;
- taxing income from employment paid in the form of bonuses, overtime and retirement benefits to employees whose taxable employment income before bonuses and overtime allowances does not exceed the lowest tax band (on the first KES288 000 per annum), which was previously exempt;
- exempting from VAT maize seeds and ambulance services;
- with effect from 1 July 2021, removing the exemption from VAT of inter alia:
- the hiring, leasing and chartering of helicopters;
- aeroplanes and other aircraft of an unladen weight not exceeding 15 000 kg;
- aircraft launching gear and parts thereof; deck-arrestor or similar gear and parts thereof;
- specialised equipment for the development and generation of solar and wind energy, including deep cycle batteries which use or store solar power;
- tractors other than road tractors for semitrailers;
- stoves, ranges, grates, cookers (including those with subsidiary boilers for central heating) barbeques, braziers, gas-rings, plate warmers and similar non-electric domestic appliances, and parts thereof;
- suspending the exemption from VAT the supply of maize (corn) flour, cassava flour, wheat or meslin flour and maize flour containing cassava flour by more than 10% in weight for a period of six months. During this period, these supplies will, instead, be zero-rated.
- confirming that the exemption of goods imported or purchased locally for use in projects under a special operating framework arrangement with the government will continue for existing projects for the remaining period of the agreement; and
- removing the zero-rating of the supply of liquefied petroleum gas, including propane, effective 1 July 2021;
Other indirect taxes
- amending the import declaration fee (“IDF”) for goods imported under the East African Community duty remission scheme from a flat fee of KES10 000 to 1.5% of the customs value;
- imposing the railway development levy (“RDL”) on goods which the Cabinet Secretary for National Treasury may determine to be in the public interest or to promote investments whose value is not less than KES200-million;
- the introduction of a voluntary disclosure programme (“VDP”) for a three-year period commencing on 1 January 2021 applicable to liabilities accrued within a period of five years prior to 1 July 2020. Under the VDP, persons that voluntarily disclose their tax liabilities are granted relief of penalties and interest.
KENYA: 2020/21 Budget presented to the National Assembly
On 11 June 2020, the Cabinet Secretary for the National Treasury and Planning delivered the 2020/21 Budget to the National Assembly. Significant proposals include:
- the introduction of additional measures on customs duty aimed at promoting local production as agreed at the regional level during the East African Community Pre-Budget Consultations meeting for the financial year 2020/21, including:
- an import duty rate of 35% on iron and steel products with the corresponding specific rates on a wide range of these products have been maintained for another year;
- an import duty rate of 25% on paper and paperboard products has been maintained for another year;
- the import duty on electrical parts and accessories has been increased from 25% to 35% for one year; and
- an import duty of 25% on the leather and footwear sector introduced in 2019 with the corresponding specific rates on a wide range of these products have been maintained.
MADAGASCAR: Treaty with Canada enters into force
On 3 June 2020, the Canada - Madagascar Income Tax Treaty (2016) entered into force and will generally apply from 1 January 2021.
MAURITIUS: 2020 Finance Bill released for consultation
The Finance (Miscellaneous Provisions) Bill 2020, incorporating the measures announced by the Honourable Minister of Finance in his Budget Speech on 4 June 2020, has recently been released for consultation. The legislation will become effective once approved by Parliament and the President of Mauritius.
MAURITIUS: COVID-19 pandemic: tax compliance deadlines extended
According to a Mauritius Revenue Authority communiqué published on 25 June 2020, companies engaged in tourism activities and eligible for the Wage Assistance Scheme for June 2020 and closing their accounts on any date between 1 September 2019 and 30 June 2020 are granted an extension to pay their corporate tax falling due between 1 March 2020 and 28 December 2020 as follows: 50% of the tax disclosed in the annual corporate tax return or the quarterly advance payment system return applicable for the calendar year 2020 must be paid by 28 December 2020 and the remainder by 28 June 2021.
As per an extension deadline notice published on the MRA’s website on 29 June 2020, the filing obligations under the country-by-country reporting (“CbCR”) regime for entities whose financial year ended on 30 June 2019 from 30 June 2020 to 31 July 2020, has been extended due to the effects of the COVID-19 pandemic.
In order to provide relief to companies that have not yet completed the audit of their financial statements due to the COVID-19 pandemic lockdown, companies with a financial year ending on 31 December 2019 is allowed to file their corporate tax return based on unaudited accounts. The filing of the return and payment of the tax should have been done by the statutory deadline of 26 June 2020. No penalties will be charged for late submission of the return if an amended return has to be submitted following any change in the figures after the completion of the audit, provided it is filed by 31 August 2020.
NAMIBIA: COVID-19 pandemic compliance and payment deadlines extended
In response to the adverse impact of the COVID-19 pandemic on the Namibian economy, the National Training Authority announced a two-month payment holiday on the Vocational Education and Training (“VET”) levy on 18 June 2020.
The payment holiday applies to payroll declarations for June and July 2020 that are due for payment on 20 July 2020 and 20 August 2020, respectively. Employers are, however, still required to submit their payroll declarations (returns) for those two months.
The Ministry of Finance announced on 15 June 2020 that the deadline for the submission of individual income tax returns will be postponed from 30 June 2020 to 30 September 2020 in order to allow employers to submit their employee tax template (the ETX template), required for the validation of individual income tax returns, on the Integrated Tax Administration System (“ITAS”) portal (the e-filing system). The payment of taxes remains due on 30 June 2020 (for salaried taxpayers) or 30 September 2020 (for farmers and sole proprietors).
The deadline for participating in the incentive programme, introduced on 31 October 2019 to encourage taxpayers to register and submit returns on the ITAS portal, was extended from 30 June 2020 to 30 September 2020. Under the incentive programme, penalties on all tax accounts will be automatically waived, provided that the taxpayer is registered as an e-filer on the ITAS portal and all outstanding tax returns for all tax types are submitted on the ITAS portal.
NIGERIA: FIRS issues public notice clarifying items not exempt from VAT
On 24 June 2020, the Federal Inland Revenue Service (“FIRS”) issued a Public Notice to clarify the following in respect of the tax-exempt status of some items included in Paragraph 2 of the recently published Value Added Tax (Modification Order), 2020:
- the main objective of the Order was to clarify the definitions of the items exempted in the First Schedule to the VAT Act by extending the list;
- inclusion of the Common External Tariff codes of the exempt items in Paragraph 2 of the Order was to guide importers, the Nigeria Customs Service and other stakeholders on items that would not be subject to VAT at the ports;
- The following items, which are not listed in Schedule 1 of the VAT Act or in previous ministerial orders are liable to VAT at 7.5% until they are exempted by an appropriate statutory instrument:
- natural gas;
- essential raw materials for the production of pharmaceutical products;
- renewable energy equipment; and
- raw materials for the production of baby diapers and sanitary towels.
TANZANIA: Transfer pricing guidelines published
The Tanzania Revenue Authority (“TRA”) published the Transfer Pricing Guidelines, 2020 (Guidelines), intended to provide guidance on the application of the Tax Administration (Transfer Pricing) Regulations (2018) (TP Regulations) and Income Tax Act (2004), on 1 July 2020.
The Guidelines provide illustrations and simplified examples about the procedures to be followed in the determination of arm’s length prices.
TANZANIA: 2020/21 Budget presented to parliament
The Minister of Finance presented the 2020/21 Budget to parliament by on 11 June 2020. Significant proposed amendments, which will generally apply from 1 July 2020, include:
Corporate income tax
- an increase in the minimum taxable threshold for corporative societies from TZS50-million to TZS100-million to provide tax relief to primary cooperative societies including savings and credit cooperative societies (SACCOs);
- the introduction of income tax for products produced in special economic zones for local consumption in order to provide equity amongst all producers;
- allowing a 100% deduction on contributions made to the AIDS Trust Fund;
- allowing as deduction contributions made to the government to fight against the COVID-19 pandemic;
- granting powers to the minister to grant income tax exemptions (not exceeding TZS1-billion) on strategic projects during the implementation period without seeking cabinet approval;
- introducing capital gains tax on net gains from the realization of licenses or concessional rights on reserved land;
- introducing 10% withholding tax on commission paid to banks and digital payment agents; and
- increase income tax rate bands for employees in order increase their annual tax relief as follows:
Up to 3 240 000
3 240 001 – 6 240 000
9% of the amount in excess of TZS3 240 000
6 240 001 – 9 120 000
TZS270 000 plus 20% of the amount in excess of TZS6 240 000
9 120 001 – 12 000 000
TZS846 000 plus 25% of the amount in excess of TZS9 120 000
Over 12 000
TZS1 566 000 plus 30% of the amount in excess of TZS12 000
- exempting agricultural crop insurance to enable farmers to insure agricultural crops against unforeseen disasters such as droughts and floods; and
- zero rating the export of raw products with the aim of enhancing competitiveness of the products in the international markets as well as abiding by the VAT destination principle;
Other indirect taxes
- the introduction of a service levy of 0.3% to be collected by local governments from telecom companies; and
- a reduction of the skills and development levy from 4.5% to 4%.
UGANDA: Income Tax (Rental Rates) Regulations 2020 issued
The Minister of Finance, Planning and Economic Development issued Income Tax (Rental Rates) Regulations 2020 (the Regulations) prescribing rental tax rates for taxpayers who fail to file returns and taxpayers whose returns are contested by the Commissioner by way of Statutory Instrument 2020 No. 42 on 13 March 2020. The rates will apply retrospectively from 29 January 2020.
UGANDA: TAT Rules that withholding tax credit and provisional tax payments for periods earlier than five years are allowable to offset current liabilities
On 25 May 2020, the Tax Appeals Tribunal (“TAT”) in the case of Red Chilli Hideaway Limited (“Red Chilli”) v Uganda Revenue Authority (“URA”) (TAT application No. 38 of 2018) ruled that withholding tax credits and provisional tax payments made in periods earlier than five years from the date of the assessment are allowed to be offset against current tax liabilities.
In the case at hand, in 2016 the URA audited Red Chilli and raised income tax assessments and penalties. Red Chilli objected to the assessments and stated that the URA could offset these tax liabilities using the withholding tax credits and provisional tax not utilized in the prior periods. The URA only used the credits for 2015 and 2016 to recover part of the liability and requested the applicant to apply for a refund of the credit of 2012 to 2013 to offset further liabilities of 2016.
Red Chilli did not apply for the refund as requested and, therefore, the URA considered that no tax credit was due to offset the tax liabilities and proceeded with the tax assessments.
Red Chilli argued that under section 128(3) of the Income Tax Act tax withheld from a payment is deemed to have been paid by the taxpayer unless it is a final tax and that it is not stated anywhere in the Act that a taxpayer must apply for a refund before utilising a tax credit.
According to the URA, Red Chilli failed to pay the tax assessed and a refund application must be lodged by the taxpayer within a period of five years (which in this case was past the required timelines). Red Chilli’s refusal to apply for a refund amounted to a waiver of its right to the refund.
In its ruling, the TAT held that, under 113 of the Income Tax Act, where any tax and any provisional tax paid exceeds the tax liability for that year the excess shall be either applied in reduction of any other tax due from the taxpayer, or the balance of the excess, if any, used in reduction of any outstanding liability of the taxpayer to pay other taxes not in dispute.
Even though Red Chilli did not apply for a refund, the URA should still apply the tax credit and provisional tax payments to clear any outstanding taxes. The time limit of five years applies in respect of an application for a refund and does not apply the credit and excess payments to offset tax liabilities. Therefore, no penalties would arise if the URA had applied the excess payments to meet the tax liabilities in time.
UGANDA: Public notice introduces electronic fiscal receipting and invoicing system
In a public notice of 17 June 2020 the URA announced the launching of the Electronic Fiscal Receipting and Invoicing system (“EFRIS”) with effect from 1 July 2020. The EFRIS is to be used by all businesses to manage issuance of e-receipts and e-invoices as per section 73 of the Tax Procedures Code Act.
UGANDA: 2020/21 Budget presented to Parliament
The 2020/21 Budget was presented to the parliament by the Minister of Finance, Planning and Economic Development on 11 June 2020. Significant proposals, which will generally apply from 1 July 2020, include:
- reducing the tax payable by a small taxpayer by any credit allowed for withholding tax paid in respect of an amount included in the gross turnover and any provisional tax paid by the taxpayer;
- other direct taxation as previously outlined in the Income Tax Amendment Bill 2020. However, the following proposals from the Bill were inter alia not approved for the 2020/21 financial year:
- introduction of a minimum tax at a rate of 0.5% on the gross turnover of a taxpayer after the sixth year;
- the levying of withholding tax at the rate of 0.5% on the purchase price of land purchased by a resident person from another resident person; and
- reinstatement of the 1% withholding tax on agricultural supplies;
- except for the measure requiring owners of more than one commercial building to account for VAT for each commercial building separately, all measures in the VAT Amendment Bill, 2020;
Other indirect taxes
- reducing the stamp duty rate on the following items to nil:
- debentures ,whether a mortgage debenture or not, being of a marketable security;
- equitable mortgages;
- any instrument imposing a further charge on mortgaged property; and
- instrument for any loan;
- introduction of stamp duty of UGX100 000 on professional licences or certificates.
ZAMBIA: Cabinet approves termination of treaty with Mauritius
On 22 June 2020, the Zambian Cabinet approved the termination of the Mauritius - Zambia Income Tax Treaty (2011) and the initiation for negotiating a new agreement which will introduce shared taxing rights and anti-abuse clauses. The treaty will cease to have effect in Mauritius on income for any income year beginning on or after the first day of July next following the calendar year in which such notice is given and in Zambia:
- with regard to other taxes withheld at source, in respect of amounts paid or credited after the end of the calendar year in which such notice is given; and
- with regard to other taxes, in respect of taxable years beginning after the end of the calendar year in which such notice is given.
ZIMBABWE: Revenue Authority (Reward for Information) (General) Regulations 2020 on Whistleblowing issued
The Minister of Finance and Economic Development issued the Revenue Authority (Reward for Information) (General) Regulations 2020 by way of Statutory Instrument 150 of 2020 on 26 June 2020. These Regulations support the principal whistle-blower legislation under section 34 of the Revenue Authority Act [Chapter 23:11] as enacted through Act 27 of 2001.
Sources include IBFD’s Tax Research Platform; www.allafrica.com; http:/tax-news.com
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