Africa tax in brief
BURKINA FASO: Transfer pricing reporting requirements clarified
Ministerial Order No. 2022-101/MEFP/SG/DGI of 15 April 2022 was issued by the Ministry of Economy and Finances to clarify that under Burkina Faso’s transfer pricing reporting requirements the following information is to be disclosed:
- identification of the resident company;
- information on the multinational enterprise (“MNE”) of which the resident company is part, including identification of the ultimate parent company, main activities of the MNE, transfer pricing policy of the MNE in relation to the resident company, intangible assets held by the MNE and used by the resident company and any MNE restructuring affecting the resident company;
- information on the resident company and related companies concerning operations carried out for no consideration, loans and borrowings, any advance pricing agreement (APA) or tax ruling between the related company and tax administration of another country and justification of the pricing policy in relation to compliance with arm's length principles; and
- financial information, including annual financial statements, the correlation between financial statements and the transfer pricing policy and an analysis of financial data used for the determination of comparables and sources of such data.
BURKINA FASO: Administrative developments
- In a statement issued on 30 March 2022, the General Director of Tax Administration informed taxpayers that the mandatory issuance of standardised invoices was to commence with effect from 1 May 2022;
- three new tax declaration forms (the beneficial owners declaration form, transfer pricing declaration form and cadastral value declaration form) were published on 4 April 2022 under the provisions of Finance Law 2022;
- the electronic tax platform (eSINTAX) has been updated with a new module called "eRegistration" for purposes of digitising the public procurement contract registration process;
- with effect from 11 March 2022, it is mandatory for all taxpayers to use stickers for issuing standardised invoices. The stickers are available at tax offices and at the Chamber of Commerce and Industry with prices ranging from CFA3 000 for 50 stickers to F.CFA10 000 for 100 stickers depending on the taxation regime.
DEMOCRATIC REPUBLIC OF THE CONGO: VAT on cement and essential goods suspended
In terms of Ministerial Order No.CAB/MIN/FINANCES/2022/013 and No.CAB/MIN/FINANCES/2022/014 of 15 April 2022, the Democratic Republic of the Congo (“DRC”) has suspended VAT on the sale of cement and new buildings for a period of 12 months starting from 15 April 2022. The suspension applies to:
- the local purchase and import of raw materials used for cement production;
- all sales of cement produced in the DRC; and
- sales of new buildings not older than three years by real estate enterprises.
The suspension also applies to essential goods for a six-month period starting from 15 April 2022, which is renewable depending on the economic situation.
DEMOCRATIC REPUBLIC OF CONGO: Mandatory electronic submission of tax returns suspended
In an official statement No. 01/015/DGI/DG/DESCOM/CD/TMN/CK/2022 of 25 April 2022, the Revenue Authority informed taxpayers that mandatory submission of tax returns by electronic means before 30 April 2022 is suspended. The submission of the tax return for fiscal year 2021 must be done physically as in previous years.
ESWATINI: Tax amendments aimed at widening tax base announced
The Government of Eswatini is proposing the following amendments to the Income Tax Order 1975 through the Income Tax (Amendment) Bill 2021:
- reducing the corporate tax rate from 30% to 25%;
- taxing residents on worldwide income (income from all geographical sources);
- allowing for the reasonable apportionment of deductions relating to more than one class of income among the classes of income to which they relate;
- introducing capital gains tax on gains derived on the disposal of a business asset, other than trading stock, and gains derived on the satisfaction or cancellation of business debt, whether or not the asset or debt is of a revenue or capital nature;
- allowing, as a deduction, losses incurred on the disposal of a business asset other than (trading stock) or on the satisfaction of a business debt whether or not the asset or debt was of a revenue or capital nature;
- reducing the initial allowance in respect of machinery or plant, infrastructural machinery, plant or facilities including transmission equipment, lines and pipes brought into use by the taxpayer for the first time for the purposes of the taxpayer's business from 50% to 30%;
- capping the deductibility of interest owed by a taxpayer who is a member of a group (except financial institutions and insurance companies) at 30% of tax earnings before interest, tax, depreciation, and amortization (EBITDA) with the excess interest allowed for carry-forward for up to three years;
- relieving double taxation of residents by way of foreign tax credits on foreign income tax paid in respect of foreign-source income included in the gross income of the resident. The amount of the credit shall not exceed the Eswatini income tax payable on that foreign source income;
- introducing detailed transfer pricing provisions;
- increasing the withholding tax rate on interest payments to non-residents from 10% to 15%; and
- introducing 10% withholding tax on dividends and interest derived from society shares, a financial institution, unit trust company, building society, or mutual loan.
GHANA: Second phase of the E-Levy Act implemented
Following the first implementation of the modified phased approach of the Electronic Transfer Levy Act, which commenced on 1 May 2022, the Ghana Revenue Authority (“GRA”) has now implemented the second phase.
With effect from 1 July 2022, charging entities such as banks, payment system providers, and electronic money issuers are required to connect to an electronic levy management system (“ELMAS”) through an application programming interface developed by the GRA to ensure all transactions on the ELMAS are visible and can be tracked.
The Electronic Transfer Levy Act, 2022 imposes an electronic transfer levy of 1.5% on electronic transfers at the time of transfer with effect from 1 May 2022. On 4 May 2022, the Supreme Court of Ghana denied an application by the opposition members of the parliament to block the implementation of the levy.
KENYA: Amendments to Tax Laws enacted by Finance Act 2022
Following the presentation of the 2022/2023 Budget before parliament on 7 April 2022, Kenya has enacted a series of amendments to various tax laws through Finance Act 2022 which was gazetted on 8 July 2022. Significant amendments, which apply from 1 July 2022, unless otherwise indicated, include:
- the introduction of a KES95-billion threshold for country-by-country reporting with effect from 1 January 2023;
- the exemption of permanent establishments in Kenya from the payment of digital services tax. However, the proposal by Finance Bill 2022 to increase the tax rate of the digital services tax from 1.5% to 3% of gross turnover has not been implemented;
- increasing the rate of capital gains tax from 5% to 15%, subject to certain exclusions;
- limiting the deductibility of foreign exchange losses on all loans realised by a company whose gross interest paid or payable to related persons and third parties exceeds 30% of the company's earnings before interest, taxes, depreciation, and amortization (“EBITDA”). The realised foreign exchange loss will only be deductible in the year when the interest payable or paid by the company is 30% or less than its EBITDA;
- with effect from 1 January 2023, the limitation of interest deduction rules in Kenya, where the gross interest paid or payable to related persons and third parties in excess of 30% of the EBITDA is not deductible in any financial year, will not apply to listed entities;
- extending the end date for the 150% investment deduction on capital expenditure of at least KES5-billion incurred on the construction of bulk storage and handling facilities for supporting the standard gauge railway operations with a capacity of 100 000 metric tons of supplies to 31 December 2023;
- applying the accelerated investment allowance of 150% to cases where the cumulative investment value for the preceding four years or the cumulative investment for the succeeding three years outside Nairobi city county or Mombasa county is at least KES2-billion;
- announcing that transfer pricing rules are to apply to resident persons carrying on business with related resident persons operating in a preferential tax regime. The definition of a “preferential tax regime” has also been widened;
- applying a 15% tax rate for the first 10 years of operation to companies operating a carbon market exchange or emission trading system that is certified by the Nairobi International Financial Centre Authority and companies operating a shipping business in Kenya;
- introducing a withholding tax of 7.5% of the gross sum payable for interest and deemed interest arising from a bearer bond issued outside Kenya of at least two years duration and interest, discount, or original issue discount;
- subjecting gains from financial derivatives to tax at the rate of 15% with effect from 1 January 2023;
- introducing a KES5-million VAT registration threshold for non-resident suppliers of digital services to match the threshold for the normal VAT regime of Kenya;
- limiting the time within which taxpayers may claim input VAT to six months;
- scrapping the VAT exemption of goods for direct and exclusive use in the construction and equipping of specialised hospitals with a minimum bed capacity of 50;
- allowing registered manufacturers making supplies to official aid funded projects to apply for a refund of input VAT within 12 months from 1 July 2022;
- exempting from VAT taxable goods, inputs, and raw materials imported or locally purchased by a company engaged in business under a special operating framework; goods purchased by a company incorporated for purposes of undertaking the manufacture of human vaccines and whose capital investment is at least KES10-billion; and capital goods which in the view of the Cabinet Secretary promote the manufacturing sector provided that the value of such investment is not less than KES2-billion;
- scrapping the VAT exemption of exported services;
- zero-rating for VAT purposes the exportation of taxable services in respect of business process outsourcing; fertilisers and inputs or raw materials locally purchased or imported by manufacturers of fertilisers as approved from time to time by the Cabinet Secretary responsible for Agriculture;
- granting powers to the Kenya Revenue Authority (“KRA”) to dispose of a defaulting taxpayer's property where the taxpayer fails to pay the tax liability within two months after receipt of a notification stating that his property is security for the unpaid taxes;
- exempting a registered manufacturer whose investment value in the preceding three years from the commencement of the Finance Act 2022 is at least KES3-billion from the provisions of withholding VAT;
- allowing taxpayers having overpaid tax to either offset the overpaid tax against future tax liabilities or apply for a refund of the overpaid tax. Such application must be made within five years, or six months in the case of VAT, after the date on which the tax was overpaid; and
- setting a time limit of 14 days within which the Commissioner must inform a taxpayer if its objection is invalid.
KENYA: Comments on Draft National Tax Policy invited
In a public notice dated 8 July 2022, the National Treasury presented to the public a draft National Tax Policy aimed at enhancing fairness and equality in the tax system, embracing international best practices in tax administration, creating predictability of tax rates and tax bases, enhancing tax compliance and reducing tax expenditure, among others.
The draft policy provides the framework within which tax-related laws, regulations, and rules are to be formulated and implemented. It provides broader perspectives of taxation in Kenya, existing legal and regulatory frameworks, challenges, and policy guidelines. It articulates the principles governing tax administration and revenue collection in Kenya. It specifically provides an in-depth understanding of the income tax, VAT, excise tax, import duty, and customs-related taxes.
National Treasury has invited the public to comment on the draft National Policy by no later than 5 August 2022.
LIBERIA: Import taxes on select off-grid solar energy products suspended
The Government of Liberia, in Executive Order No. 107 of 27 April 2022, issued on 11 May 2022 suspended import taxes on selected solar energy products in an attempt to attract private sector investment in the renewable energy sector. The duration of the suspension has not yet been announced.
MAURITIUS: Alternative investment funds treated as tax transparent
The Mauritius Revenue Authority, on 1 July 2022, issued a communique to clarify that alternative investment funds (“AIFs”) will be treated as tax transparent vehicles for income tax purposes. As a result, income earned by a Mauritius company from an AIF will be subject to tax in Mauritius as if the income derived or received by the AIF is received directly at the level of the Mauritius company.
MOZAMBIQUE: Special VAT regularisation regime for mining and petroleum companies introduced
Decree No.30/2022, dated 23 June, approved amendments to the VAT Refund Regulations to establish a special VAT regularisation regime for companies operating in the mining and petroleum industry, during the prospecting and research, development, and production phases.
Under the decree, these companies and those that contract directly with them, as well as those that, by government authorisation, are registered as special purpose entities under the respective concession contracts may, if they so elect, request the Tax Authority for inclusion in the special regime for the regularisation of VAT paid by their suppliers of goods and services.
In order to benefit from the special VAT regulation regime, companies must submit an application supported by:
- a list of goods and services that it intends to acquire, the supplier tax number, and a statement that the goods and services to be acquired are intended exclusively for the application taxpayer; and
- export document for taxpayers in the production phase.
NIGERIA: eTax-general bill reference for tax payments introduced by LIRS
The Lagos State Internal Revenue Service (“LIRS”) has issued a public notice introducing the eTax-generated bill reference to facilitate and optimise the ease of tax payments in line with its digitalisation policy.
With effect from 1 August 2022, taxpayers will be required to generate a bill reference for payment of pay-as-you-earn, withholding tax, and other taxes due to the LIRS. The use of other payment references and codes will be discontinued.
NIGERIA: Enforcement stepped up by revenue authorities
- in an announcement on 12 July 2022, the Federal Inland Revenue Service (“FIRS”) informed the general public that it will immediately embark on a full-scale enforcement exercise, including prosecuting defaulting taxpayers who have not taken advantage of the voluntary assets and income declaration scheme.
- According to a circular published by the FIRS on 9 June 2022, it is set to perform a nationwide VAT and withholding tax compliance monitoring exercise commencing from 1 July 2022. The exercise is to cover the 2016 to 2020 accounting years for taxable persons whose records have been audited by the FIRS up to the 2015 accounting year. For taxpayers whose records have not been audited up to 2015 by the FIRS, the exercise will include the prior years.
- In a public notice issued on 1 June 2022, the FIRS has also resolved to take drastic measures to recover all unremitted tax deductions (VAT and withholding tax) by states and local governments.
- The FIRS has signed a Memorandum of Understanding with the Nigerian Export Processing Zones Authority (NEPZA) for the effective administration of taxes in free zones in Nigeria on 8 May 2022.
- The Cross River Internal Revenue Service (“CRIRS”) also notified the general public on 7 June 2002 that it started a state-wide compliance and monitoring exercise from 13 June 2022. The CRIRS is reviewing the personal income tax (ie, pay-as-you-earn, direct assessment, and withholding tax), tourism development levy, and ministerial revenue tax records from tax years 2016 to 2021 of selected taxpayers and taxable persons.
- The LIRS reminded the general public (particularly operators within the stock exchange and financial securities market) in a public notice issued on 27 June 2022 that persons making payments to the beneficiaries of interest on bonds and short-term securities are required to deduct a final withholding tax of 10% and remit it to the LIRS within 30 days.
- In a public notice issued on 20 June 2022, the LIRS reminded individuals liable to capital gains tax on the transfer of shares to comply with the law and include such gains in their annual income tax returns.
NIGERIA: Collection of new sugar-sweetened beverages tax commenced
Following the introduction of a tax on sugar-sweetened beverages by the Finance Act 2021, the Nigerian Customs Service (“NCS”) has commenced with the implementation and enforcement of the newly introduced excise duty at a rate of NGN10 per litre with effect from 1 June 2022.
The NCS stated that all businesses in the country must remit the first set of appropriate taxes to the government on or before 21 July 2022.
NIGERIA: Deadline for companies submitting 2022 income tax returns extended
On 4 July 2022, the FIRS announced the extension of the deadline for submitting corporate income tax returns for the 2022 year of assessment falling due between 30 June 2022 and 31 August (both days inclusive) until 31 August 2022.
NIGERIA: Reduced 7.5% withholding tax rate on investment income with treaty partners terminated
In a circular issued on 11 May 2022, Nigeria has terminated the flat 7.5% withholding tax rate previously applicable on dividends, interest, and royalties earned by taxable persons resident in countries with a tax treaty with Nigeria with effect from 1 July 2022.
Going forward, the withholding tax rates under domestic law (ie, 5% for individuals and 10% for companies on dividends, interests, and royalties) will apply also to payments to residents of treaty countries unless the rates in the tax laws exceed the maximum rate under the tax treaty, in which case, the maximum rate specified in the tax treaty will apply.
However, where the payment is connected to a permanent establishment or a fixed base in Nigeria, the domestic withholding tax rate applies on the dividend, interest, and royalties, regardless of the withholding tax rate specified in the relevant tax treaties.
NIGERIA: 1% levy on companies to be imposed
On 21 June 2022, the Nigerian Senate passed a National Youth Service Corps Trust Fund (Establishment) Bill 2022, which will impose a 1% levy on the net profits of companies operating in Nigeria. The Bill has been forwarded to the president for his assent.
NIGERIA: Public notice on critical tax issues for operation of bank holding company structure in Nigeria issued
On 11 May 2022, the FIRS issued an information circular summarising the tax implications for the operation of a holding company structure in Nigeria in response to the Regulations published by the Central Bank of Nigeria (CBN) on Scope of Banking Activities & Ancillary Matters, No. 3, 2010, which modified the scope and framework for banking in Nigeria.
NIGERIA: Public notice on deadline for submission of the certificate of acceptance on capital allowances issued
On 9 May 2022, the FIRS issued a public notice on the submission of certificates of acceptance on capital allowance, which requires all companies that enjoyed capital allowances on qualifying capital expenditure exceeding NGN500 000 between the 2016 and 2021 years of assessment to submit their certificate of acceptance to the tax offices where their respective tax file is domiciled before 31 October 2022.
The certificate of acceptance is issued by the Industrial Inspectorate Division of the Federal Ministry of Industry, Trade, and Investment and should be submitted annually by the relevant companies going forward.
NIGERIA: National Health Insurance Agency denies reports of a new telecommunications tax
The National Health Insurance Agency (“NHIA”) has refuted claims that the Federal Government of Nigeria had introduced a new tax known as "telecommunications tax" through the National Health Insurance Authority Act 2022, which was recently signed into law by the president.
The NHIA, stated that the Act does not make provision for a telecommunications tax as a source of funding for the NHIA, contrary to media reports.
REPUBLIC OF CONGO: Tax treaty with China enters into force
The income tax treaty between China and the Republic of Congo, signed on 5 September 2018, entered into force on 6 July 2022. The treaty applies from 1 January 2023.
REPUBLIC OF CONGO: Global Forum on Transparency and Exchange of Information joined
Following the 11th meeting of the Africa Initiative, held in Nairobi from 14 to 16 June 2022, it was announced that the Republic of Congo has become the 165th member of the Global Forum on Transparency and Exchange of Information for Tax Purposes.
The Republic of Congo has committed to implementing the international standards on transparency and exchange of financial account information with other members of the organization, upon request and on an automatic basis.
RWANDA: Tax treaty with China enters into force
The income tax treaty between China and Rwanda, which was signed on 7 December 2021, entered into force on 25 June 2022. The treaty applies from 1 January 2023.
RWANDA: Effective date for updated East African Community Common External Tariff announced by Revenue Authority
Following the adoption of the common external tariff (“2022 CET”) by the East African Community (“EAC”) Council of Ministers in May 2022, the Rwanda Revenue Authority (“RRA”) has informed the general public in a public notice dated 7 June 2022 that the implementation of the 2022 CET will take effect on 1 July 2022.
The EAC CET applies uniformly across all EAC partner states on all goods imported from other countries, except where a partner state has requested a stay of application.
RWANDA: Public ruling on requirements for allowing input VAT and VAT refunds issued
The RRA issued a public tax ruling on 21 March 2022 to clarify the requirements for allowing input VAT and VAT refunds as provided for under the VAT Law.
According to the ruling, a taxpayer is allowed to input VAT only when such VAT has been declared in the quarterly or monthly VAT period to which it relates and is supported by relevant documentation.
The following three conditions are to be complied with for purposes of processing a VAT refund:
- an electronic billing invoice approved by the tax administration should be available;
- the declared input VAT should be on the prescribed form; and
- input VAT declared by the taxpayer must have been paid by the supplier to the public treasury.
RWANDA: Accession process to Convention and Protocol on Mutual Administrative Assistance in Tax Matters completed
On 18 March 2022, the President of Rwanda signed Presidential Order No. 015/01 approving Rwanda's accession to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, as amended by the 2010 protocol. The order was published in Official Gazette No. Special of 19 March 2022.
TANZANIA: 2022 Budget Speech announces several tax amendments
In his 2022 Budget Speech to parliament on 14 June 2022, the Minister of Finance proposed several tax amendments, including:
- introducing a digital service tax at a rate of 2% on turnover of non-resident service providers, as well as VAT on digital services;
- reducing the royalty charges on minerals used in energy and fertiliser products;
- extending the list of zero-rated VAT supplies to include, inter alia, locally produced edible oil for a period of one year, locally produced fertilizer, and refrigerated trucks;
- extending the list of VAT-exempt supplies to include, inter alia, unprocessed tree products, inputs for the local manufacture of gas cylinders, various electronic readers, detectors, and meters;
- introducing withholding tax obligations for individuals on rent paid for residential houses, apartments, and commercial premises;
- exempting coupons for corporate and municipal bonds from withholding tax;
- introducing a final withholding tax at a rate of 2% on payments made to small-scale miners; and
- granting the Minister for Finance powers to exempt strategic investors from VAT, subject to approval by the National Investment Steering Committee (NISC).
UGANDA: Non-resident suppliers of digital services reminded to register for VAT and file returns
In a public notice dated 7 July 2022, the Uganda Revenue Authority (“URA”) reminded non-resident suppliers of digital services to non-taxable persons in Uganda to charge VAT on their supplies, file quarterly returns, and make payments within 15 days from the end of each quarter. The simplified system for registration, online filing of VAT returns, and payment of VAT is accessible through the URA web portal.
The relevant requirements have been introduced In a public notice dated 27 January 2022 and a public announcement on the URA’s website on 22 April 2022.
UGANDA: Budget 2022/23 announces amendments to tax laws
The Minister of Finance, Planning, and Economic Development announced various amendments to tax legislation in the 2022/23 Budget which were included in the Income Tax (Amendment) Act 2022, the Tax Procedures Code (Amendment) Act 2022, the Stamp Duty (Amendment) Act 2022, and the VAT (Amendment) Act.
Otherwise indicated, the following amendments apply with effect from 1 July 2022:
- reversal of the 2021 amendment relating to rental income tax which allowed 75% of the rental income as expenditure and losses incurred by a person in the production of such income. This applied to both individuals and companies and the applicable tax rate was 30%. As of 1 July 2022, the rental tax applicable to an individual or partnership is 12% of the rental income in excess of UGX2 820 000;
- allowing all expenditures and losses incurred in the production of rental income by companies as deductible expenses. The allowable deductions are, however, capped at 50% of the rental income for that year of income and any excess may be carried forward to the subsequent year of income. The rate applicable to companies is 30%;
- amending the definition of “beneficial owner”;
- exempting research institutions whose objective is not to make a profit from tax;
- extending the tax holiday for the Bujagali Hydro Power Project for one year from 2022-2023. The Income Tax (Amendment) had earlier proposed a period of five years from 2022 to 2027;
- clarifying that income derived from the carriage of passengers who do not embark or cargo or mail that is not embarked in Uganda is not income derived from a Ugandan-source service contract;
- adding the International Development Law Organisation to the list of tax exempted institutions;
- repealing the exemption from VAT on imported services that are used by businesses in making exempt supplies, an exemption from VAT on items such as certain assistive devices for persons with disabilities, supply of airport user services charged by the Civil Aviation Authority, and a provision for equal treatment of supplies of educational materials from the East Africa Community partner states;
- extending the list of VAT-exempt supplies to include oxygen cylinders or oxygen for medical use, assistive devices for persons with disabilities, and airport user services charged by the Civil Aviation Authority;
- zero-rating the supply of educational materials including educational materials manufactured in a Partner State of the East African Community;
- allowing the cash basis accounting method for persons supplying goods or services to the government;
- repealing the VAT exemption on imported services used in the provision of an exempt supply;
- introducing fines and imprisonment for a term not exceeding 10 years for a person who fails to file an information return and/or fails to maintain records for the automatic exchange of information, who makes false or misleading statements in the information return, and who makes omissions from a statement made in the information;
- requiring persons engaged in the construction or extractive industry to disclose to the URA the names of the persons contracted in the course of performance of duties or business within 7 days from the date of signing the contract, subject to the imposition of a penalty; and
- imposing a fine not exceeding UGX30-million or imprisonment not exceeding 10 years or both a taxpayer/person who:
- fails to use electronic receipting or invoicing or fails to employ an electronic fiscal device;
- forges or is found in possession of a forged electronic receipt or invoice; or
- interferes with the software or hardware of an electronic fiscal device or electronic dispensing control device.
Africa Regulatory and Business Intelligence | Executive