Africa tax in brief
AFRICA: ATAF issues statement on revised two-pillar solution on taxing digital economy
The African Tax Administration Forum (“ATAF”) has issued a statement commenting on the application of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) two-pillar solution to address the tax challenges arising from the digitalisation of the economy in Africa. ATAF:
- considers that the proposals in the blueprint are far too complex and result in insufficient profits being reallocated to market jurisdictions;
- proposes that the reallocation of profits be calculated as a portion of multinational enterprises (“MNEs”) total profits instead of its residual profits, based on the likely inequitable distribution of profits especially for digital businesses that do not have a taxable nexus in the market jurisdiction;
- recommends that the Inclusive Framework considers implementing an elective binding dispute resolution mechanism to be made available to African countries with limited capacity and no or a low level of mutual agreement procedure disputes;
- together with the African Union, continues to advocate for a higher minimum tax rate of at least 20% instead of the proposed 15%, which is deemed to be more effective in protecting African tax bases and stem illicit financial flows by reducing profit shifting by MNEs.
- welcomes the agreement by the Inclusive Framework on the inclusion of the Subject to Tax Rule as a minimum standard under Pillar Two, but is calling on the Inclusive Framework to widen the scope of the Subject to Tax Rule to cover payments of interest, royalties, capital gains and all service payments instead of only interest, royalties, and a defined set of payments as agreed upon by the Inclusive Framework; and
- recognises the need for further work to be done in order to finalise the new Pillar One and Pillar Two rules in order to ensure a more equitable tax allocation and to stem illicit financial flows from Africa.
BOTSWANA: Tax Treaty with Luxembourg enters into force
The Botswana/Luxembourg Income and Capital Tax Treaty (2018) entered into force on 6 July 2021 and generally applies from 5 August 2021 in respect of Botswana and from 1 January 2022 in respect of Luxembourg.
MAURITIUS: 2021/2022 Budget presented to the National Assembly
The Minister of Finance, Economic Planning and Development as he presented the 2021/2022 Budget to the National Assembly on 11 June 2021, announcing several tax amendments to provide relief from the economic impact of the COVID-19 pandemic. Significant proposed amendments include:
- allowing contributions made to the COVID-19 Vaccination Programme Fund as deductions;
- allowing a double tax deduction on expenditure incurred for research and development targeting African markets and acquisition of specialised software and systems;
- extending the carry-forward provision of unrelieved investment tax credit for manufacturing companies for 10 years;
- allowing a 110% tax deduction to large manufacturers on products purchased from local small and medium enterprises;
- introducing a concessionary tax rate of 3% for private universities set up in Mauritius;
- granting a full tax credit on the costs of acquisition of patents by the biotechnology and pharmaceutical companies subject to a tax rate of 3%;
- providing a five to 10-year tax holiday to family offices, fund and asset managers;
- providing an eight-year tax holiday to new companies in prescribed sectors or activities and that are registered with Economic Development Board;
- extending the partial exemption tax regime to investment dealers and companies engaged in activities relating to leasing of locomotives and train including rails leasing; and
- grating a 5% tax credit to manufacturing companies for new plant and machinery over three years until 30 June 2023.
Value-added tax (“VAT”)
- changes to the VAT refund scheme, including expanding the VAT threshold for residential apartments and buildings to MUR3-million, reducing the refund limit to MUR300 000 and reducing the household income threshold to MUR1-million;
- expanding the list of zero-rated supplies to include animals for the purpose of training, breeding and re-export, supply of dumplings made up of meat, fish, squid, crab, chicken, vegetables or milk; and plant, machinery, equipment and construction of buildings for research and development for provision of health care, nursing and residential care services.
- requiring all self-employed individuals are required to submit an income tax return; and
- confirming that the time limit of 30 days for issuance of income tax and VAT rulings shall run from the date additional information is sent to the Mauritius Revenue Authority and not from the application date.
SEYCHELLES: Ratification of Multilateral Convention (MLI) approved
On 23 June 2021, the Cabinet of Seychelles approved the ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (“MLI”), following the submission of its provisional MLI position, its reservations and notifications and the 28 tax treaties that it wishes to be covered by the MLI.
SEYCHELLES: Tax amnesty program introduced
The Ministry of Finance and Seychelles Revenue Commission introduced a Tax Amnesty Program in response to the economic crisis caused by COVID-19. The Tax Amnesty Program runs from 1 July 2021 to 31 December 2021 and applies to outstanding debts, under-declared assessable income; and unfurnished tax returns. Provision is made for a waiver of 100% of penalties and waiver of 25% to 75% of interest, depending on the date of payment of outstanding taxes.
TANZANIA: 2021 Finance Bill passed by parliament
The Finance Bill 2021, which includes various tax amendments aimed at increasing domestic revenue by widening the tax base, was passed by parliament on 12 June 2021. Significant amendments, which will take effect upon the president's assent of the Bill, include:
- empowering the Minister of Finance and Planning to grant exemptions in respect of projects funded by donors or through non-concessional loans without prior approval of the cabinet in order to fast track implementation of the projects;
- introducing a taxation regime for small scale miners;
- granting a capital allowance on a straight-line basis at a rate of 5% per annum on assets owned and employed by a person on an international pipeline;
- introducing withholding tax at a rate of 2% on payments to resident persons dealing in the supply of agricultural, livestock and fishery products other than selling such products through agricultural marketing cooperative societies and cooperative unions;
- reducing the tax rate for the lowest personal income tax rate band for resident individuals to 8% from 9%
- extending the list of VAT exempt supplies to include:
- raw materials imported for manufacturing long lasting mosquito nets;
- importation by or supply of goods or services to a government entity to be used solely for implementation of projects funded by government, concession and non-concession loans, grants, and donor funds;
- importation or supply of goods or services for the relief of a natural calamity or disaster;
- importation or supply of goods or services to an entity(s) having an agreement with the government for the purpose of operating or executing a strategic project, provided that the agreement provided for VAT exemption; and
- importation of smart phones, tablets, modems; aluminium and stainless-steel milk cans; crude oil, minerals and mineral concentrates designated by the Mining Commission; contactless smart cards and consumables imported by the National Identification Authority; cold rooms imported by a person engaged in horticulture; and artificial grass for football pitches located in city councils imported by the Tanzania Football Federation;
- scrapping the VAT exemption for solar lights
- introducing a mandatory requirement for employees to apply for taxpayer identification numbers in order to facilitate proper accounting of tax on employment income;
- imposing a requirement for submission of officially translated documents by taxpayers with documents that are not in an official language; and
- requiring every taxpayer that maintains data in electronic format to maintain a primary data server within Tanzania for effective accessibility of the information.
Sources include IBFD’s Tax Research Platform; www.allafrica.com; http://tax-news.com
Africa Regulatory and Business Intelligence | Executive
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