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Africa Tax in Brief

AFRICA: African Tax Administration Forum raises concerns about complexity of OECD Pillar One Amount A Rules

On 3 August 2022, the African Tax Administration Forum Cross Border Taxation Technical Committee raised concerns regarding the complexity of proposed model rules for Amount A of the OECD Pillar One, as set out in the Progress Report on Amount A released by the OECD Secretariat on 11 July 2022. The Committee is concerned that the complexity of the rules will place a high administrative burden on tax authorities and multinational enterprises which may not justify the expected minimal tax revenue gain from amount A.

The Committee also proposed that the scope for Amount B should be expanded to include sales agency and commissionaire arrangements alongside the baseline marketing and distribution activities under the current proposals for Amount B.

AFRICA: OECD Working Paper assesses impact of tax incentives in seven sub-Saharan African countries

The OECD published a taxation working paper on 22 September 2022, assessing the impact of tax incentives on the effective tax rates in Angola, Botswana, Eswatini, Kenya, Mauritius, Senegal and South Africa.

Empirical results show that tax incentives substantially lower corporate taxation across these countries. On average, tax incentives reduce effective tax rates by 30% in the food and automotive industries compared to the standard tax treatment. Effective tax rates may differ by up to 55% among taxpayers in the same sector and country. The most generous tax treatment is typically offered within Special Economic Zones, where tax incentives can reduce effective tax rates to near zero.

AFRICA: Democratic Republic of the Congo deposits instrument of ratification for the African Continental Free Trade Area Agreement

The Democratic Republic of the Congo deposited its instrument of ratification for the African Continental Free Trade Area Agreement (“AfCFTA”) on 23 February 2022. The AfCFTA has so far been signed by 54 countries. It entered into force on 30 May 2019 and became effective on 1 January 2021.

ANGOLA: Taxpayers granted option to pay VAT in instalments

The General Tax Administration of Angola announced on its website on 18 September 2022 that, with immediate effect, taxpayers with Value Added Tax (“VAT”) payable of at least AOA3-million has the option to pay the VAT in five instalments.

The instalment payments must reflect the equitable division of all items that make up the total amount payable (i.e., VAT payable, legal surcharges and penalties, and interest if applicable).

ANGOLA: Tax treaty with Mauritius signed

On 15 April 2022 and 25 May 2022, respectively, Mauritius and Angola signed a tax treaty in Port Louis and Luanda.

ANGOLA: Mineral resources royalty tax form approved

Through Executive Decree 244/22, which entered into force on 4 July 2022, Angola published the approved Model D Form for filing resources royalty tax returns, as prescribed in article 255º of the Mining Code. The returns are due before or on the 15th day of each month and include fields related to the quantity of minerals produced, type of mineral, classification, bases used to determine the price and forex exchange rate applied.

ANGOLA: Withholding tax on service fees paid to non-resident companies to be reduced from 15% to 6.5%

An amendment to article 73 of the Corporate Income Tax Code which was published through Law No. 27/22 of 22 August 2022 provides for the reduction in withholding tax on service fees paid to non-resident companies from 15% to 6.5%. The amendment is to take effect on 1 January 2023.

ANGOLA: Special tax regime for Cabinda Province approved

Angola approved a new special tax regime for the province of Cabinda, applicable to companies domiciled there, properties located there and tax residents, under Presidential Legislative Decree No. 4/22 of 23 July 2022 published in the Official Gazette.

Key features of the regime, which entered into force on 23 July 2022, include:

  • the regime is not applicable to the oil industry;
  • introducing customs duty at a rate of 2% on light passenger vehicles and alcoholic beverages;
  • introducing VAT at a rate of 2% on the provision of port services and public water distribution;
  • introducing customs duty and VAT at a rate of 1% on the import and distribution of food products;
  • exempting from customs duties and other taxes food products from neighbouring countries imported for personal consumption;
  • taxing agricultural activities and activities in the industrial sector at corporate income tax rates of 3% and 10%, respectively;
  • subjecting the distribution of profits or dividends by companies in the agricultural sector and industrial sector to investment income tax at the rate of 5%;
  • assessing property tax on income and on properties at the rates of 10% and 0.05% respectively;
  • taxing transfers of real estate at the rate of 1% of the property tax rate; and
  • in cases where the general or special legislation grants broader tax benefits than those established under this law, applying the more advantageous legislation.

BOTSWANA: Transition rules issued with regard to the reduced VAT rates

The Minister of finance in early August 2022 announced a temporary reduction in the rates of VAT from 14% to 12% (standard rate) and 14% to 0% (cooking oil and liquid petroleum gas) for the period 1 August 2022 to 31 January 2023.

On 10 August 2022 the Botswana Unified Revenue Service (“BURS”) issued transition rules with regard to the reduced VAT rates, providing that:

  • BURS has developed a return that will accommodate dual rules for the months affected by the VAT rate change;
  • registered persons who introduced the reduced rate on 1 August 2022 will be allowed to report using the rate of 12% accordingly;
  • registered persons who introduced the rate on 3 August 2022 must account for VAT supplies made on 1 and 2 August 2022 at the rate of 14% and supplies made on 3 August 2022 and thereafter at the rate of 12%;
  • registered persons who, because of administrative challenges, were unable to immediately transition from 14% to 12% are advised to remit all the VAT charged at 14% to BURS. Registered persons who were charged at the rate of 14% after 3 August 2022 are allowed to claim input tax credits the rate of 14%.

BURKINA FASO: Mandatory usage of stickers for issuing standardised invoices extended

The Minister of finance on 6 September 2022 issued Circular No 2022-001624/MEFP/SG/DGI of 6 September 2022 which extends the mandatory use of stickers (costing F.CFA100 per sticker) for issuing standardised invoices to taxpayers under an unspecified tax regime (régime dit non déterminé).

The extension applies to taxpayers who have not been specifically exempted by law, including;

  • public bodies;
  • associations;
  • non-governmental organisations;
  • international and diplomatic institutions;
  • individuals; and
  •  

CABO VERDE: Customs processes digitalised

The National Directorate of State Revenue has started the implementation of a pilot project to digitise customs clearance procedures in order to modernise the customs process.

The pilot project, which is currently limited to the customs delegation of Praia and Maio, includes notification of the status of dispatches of goods, which allows the economic operator to receive, electronically and automatically, all relevant information on the status of the respective dispatch (registered, settled or paid), the series and references of the order, value associated with the order and the date.

CABO VERDE: Post Office to charge VAT on exports to Europe

In a statement made on 12 September 2022 by the Cabo Verde Post Office on social media, it announced that it will start charging VAT on all goods exported to Europe.

The previous exemption from VAT of up toon exports to Europe is repealed and VAT will be charged on all goods without exception, regardless of the value of the exported item and the date on which it was acquired.

The Cabo Verde Post Office requires a commercial invoice for the customs clearance process of goods sent by post.

ETHIOPIA: Electric vehicles exempted from tax

Art 129 of Proclamation NR.859/2006 EC as amended, and Art.8(4) of Proclamation no. 285/1994 grant the following tax incentives to the importers of electric vehicles with effect from 18 September 2022:

  • an exemption from VAT, excise duty and surtaxes; and
  • a reduction of customs duties on fully assembled electric vehicles and semi-assembled electric vehicles to 15% and 5% respectively.

ETHIOPIA: Share premiums to be exempt from income tax

The Federal Council of Ministers of Ethiopia is proposing to exempt share premiums issued to non-residents through a resolution to amend existing Income Tax Regulation No. 410/2017. In order for a non-resident to be eligible for exemption:

  • the income should be the result of the sale of newly issued shares by a company rather than the sale of existing shares by the shareholders;
  • the issuance of new shares must be issued by a company that has the potential of continuing in the business for a foreseeable period; and
  • the exemption is only applicable if the buyers of the new shares are non-residents.

The amendment will take legal effect upon its official publication in the Federal Negarit Gazette.

GUINEA-BISSAU: Plan to implement VAT in 2023 supported by the IMF

The International Monetary Fund (“IMF”) has announced its support to the Guinean government regarding the implementation of VAT, with payments to be made through Konctatu, a digital tax and customs authority portal, in 2023. Currently Guinea-Bissau has a general sales tax (imposto geral sobre vendas e serviços) which is levied at a standard rate of 19% on taxable supplies of goods and services, as well as on the importation of goods into Guinea-Bissau.

KENYA: Services delivered through the digital marketplace exempted from reverse charge VAT

Amendments to the Value Added Tax (Digital Marketplace Supply) Regulations 2020 were introduced through the VAT (Digital Marketplace Supply) (Amendment) Regulations 2022, published in the Kenya Gazette on 27 May 2022.

Significant amendments include:

  • deleting the definitions of the business-to-business (B2B) transaction and business-to-consumer (B2C) transaction;
  • deleting the requirement for VAT on B2B transactions to be accounted for through the reverse charge VAT mechanism;
  • removing the requirement for business entities that were liable to reverse charge VAT on B2B transactions to notify the non-resident supplier of their obligation; and
  • excluding educational services provided by:
    • pre-primary, primary, or secondary schools;
    • technical colleges or universities; or
    • institutions facilitating adult education, vocational training or technical education, from the ambit of digital marketplace supplies subject to VAT.

The exemption of services provided via the Internet, an electronic network or through a digital marketplace from the reverse charge VAT mechanism has been in effect as from 1 July 2022 through the Finance Act 2022.

KENYA: Non-resident suppliers of digital services to be exempt from issuing electronic tax invoices

In its public notice of 19 August 2022, the Kenya Revenue Authority clarified that registered non-resident suppliers of digital services are exempt from issuing electronic tax invoices as required under the Value Added Tax (Electronic Tax Invoice) Regulations 2020. Non-resident suppliers of digital services are, however, required to issue invoices or receipts showing the value of the supply and the tax charged.

MAURITIUS: English synthesized text of various tax treaties published

The Mauritius Revenue Authority recently published the English synthesized text of the following tax treaties, displaying the modifications made to the treaties by the Multilateral Instrument (“MLI”), which entered into force for Mauritius on 1 February 2020:

MAURITIUS: Amendments to Tax Laws enacted

The Minister of Finance, Economic Planning and Development announced a series of amendments to Mauritius’ tax laws in the 2022-2023 budget presented to the National Assembly on 7 June 2022. The amendments were assented to by the president on 2 August 2022 and legislated under the Finance Act 2022 and are effective from 1 July 2022. Significant amendments include:

Direct taxation

  • introducing a qualified domestic minimum top-up tax which may be required by the Director-General to be computed and paid by a company forming part of an MNE group which is liable to a top-up tax in a year;
  • increasing the rate of additional deduction allowed for manufacturing companies whose annual turnover exceeds MUR100-million in an income year and who incurs expenditure on the direct purchase of products manufactured locally by small and medium enterprises whose turnover does not exceed MUR100-million from 10% to 25%;
  • introducing an angel investor allowance for individuals who have invested a minimum of MUR100 000 to the seed capital of a qualifying start-up SME by the acquisition of shares, which entitles them to a tax relief equivalent to 50% of the amount invested in that income year, subject to certain terms and conditions;
  • introducing an eight-year income tax holiday for persons deriving income by using an innovative agricultural method under the Integrated Modern Agricultural Morcellement Scheme administered and managed by the Economic Development Board; persons engaged in sustainable agricultural practices and registered with the Economic Development Board, starting from the income year in which the person starts the activity; and a newly set up company issued with a certificate as a freeport operator or private freeport developer under the Freeport Act, subject to certain terms and conditions;
  • expanding activities from which a deduction of tax is made at source, including sums or amounts made available by way of payments by any person, other than an individual, to consultants other than those specified in the Fifth Schedule; payments by any person, other than an individual, to a provider of security services, cleaning services, pest management services and other ancillary services; and payments by insurance companies to motor surveyors and mechanics for repairs of motor vehicles of policy holders;
  • replacing the publication of names of companies not submitting returns in two newspapers in wide circulation in Mauritius by publishing the names on the website of Mauritius Revenue Authority;
  • subject to certain terms and conditions, granting a waiver of penalties and interest to small and medium enterprises which have an annual turnover not exceeding MUR100-million which have outstanding penalties or interests as of 25 March 2022 for late submission of returns or statements of income required to be submitted or the late payment or non-payment of tax payable in accordance with returns or statements submitted;

Individual taxation

  • increasing an additional deduction from taxable income from MUR225 000 to MUR500 000 in respect of a dependent child pursuing tertiary studies;
  • increasing the maximum allowable deduction for donations made through electronic means to charitable institutions or religious bodies from MUR30 000 to MUR50 000 in an income year;
  • increasing the maximum allowable deductions in respect of contributions made by a person to their own individual pension scheme approved by the Financial Services Commission under the Insurance Act from MUR30 000 to MUR50 000;
  • allowing a person whose emoluments, pension, annuity and similar payments does not exceed MUR230 769 in a month to request for the solidarity levy to be withheld from those payments at a rate of 10% or 25% as requested by the person;
  • stipulating the eligibility criteria and new amounts payable in respect of financial assistance for salary compensation for the year 2022 for eligible employees;
  • amending the income tax bands and tax rates for individuals as follows:

Annual net income (MUR)

Rate of income tax (%)

Less than 700,000

10%

700,000 to 975,000

12.5%

More than 975,000

15%

Indirect taxation

  • charging VAT on the sale of goods received under consignment by an agent who is a registered person;
  • introducing forced VAT registration where a taxable person fails to apply for compulsory registration;
  • charging VAT on the sale of goods made by an agent acting on behalf of a registered principal;
  • introducing the use of an e-invoicing system that allows a business to connect electronically to the system for registering of all invoices including debit notes, credit notes and issuance of fiscal invoices to customers;
  • increasing the penalty for failure to issue fiscal invoices from MUR5 000 to MUR10 000 for every month or part of the month;
  • increasing the maximum amount of the total penalty that can be payable for failure to issue fiscal invoices from MUR50 000 to MUR200 000; and
  • re-introducing VAT withholding by public agency sector from payments made to a registered person in respect of goods and services specified;

Tax administration

  • reintroducing the tax arrears settlement scheme (“TASS”), where there is a waiver of penalties and interests included in the tax arrears outstanding as of 7 June 2022, under the Income Tax Act, the VAT Act or the Gambling Regulatory Authority Act are to be fully paid on or before 31 March 2023, provided the application for the reduction is made to the Director-General on or before 31 December 2022;
  • increasing the number of experienced persons to sit on the revenue board from four to five persons; and
  • allowing the hearing of objections or representations by the relevant panel to be done through video conferencing.

MOZAMBIQUE: Fiscal measures for growth promotion introduced

The Government on 9 August 2022 announced an Economic Acceleration Package which includes fiscal and economic stimulus measures and measures to improve the business environment, transparency and governance.

 Fiscal incentive measures include:

  • reducing the VAT rate from 17% to 16%;
  • exempting from VAT the import of inputs for agriculture and electrification;
  • reducing the corporate tax rate for agriculture, aquaculture and urban transport from 32% to 10%;
  • reducing the withholding tax rate from 20% to 10% on payments to foreign entities providing services to national agricultural companies;
  • eliminating withholding tax on interest from external financing for agricultural projects; and
  • creating, within the next three years, tax incentives for new investments in the agriculture, agro-processing, manufacturing, tourism and urban transport sectors through accelerated depreciation (for half of the useful life) for investments made in facilities and equipment related to the company’s production activity, provided it creates at least 20 permanent jobs.

NIGERIA: National Agency for Science and Engineering Infrastructure levy implemented

Through information circular No. 2022/23, published on 1 September 2022, the Federal Inland Revenue Service (“FIRS”) has announced that companies liable to the National Agency for Science and Engineering Infrastructure (“NASENI”) levy shall be chargeable on the profit before tax of 2021 financial statements for the 2022 year of assessment.

Pursuant to the Finance Act 2021, companies in the banking, maritime, aviation, mobile telecommunications, information and communications technology, and oil and gas sectors with a turnover above NGN100-million are required to pay a NASENI levy of 0.25% on their profit before tax with effect from 1 January 2022.

NIGERIA: 5% Excise duty on telecommunications services suspended

After the Federal Minister of Finance, Budget and National Planning, earlier announced the government’s intention to commence the implementation of the 5% excise tax on telecommunication services (including voice calls, SMS and data services), provided for under extant provisions in the Finance Act 2020, with effect from 2023, the government at the beginning of September 2022 has decided to suspend the implementation of the tax in order to help reduce the nation’s budget deficit

A committee has been set up to review the levy.

NIGERIA: Federal High Court rules that Finance Act amendments do not apply to income earned prior to enactment

The Federal High Court judgement delivered in the case of Accugas Limited (Accugas) v. the Federal Inland Revenue Service (FIRS) & the Attorney-General of Nigeria FHC/ABJ /CS/1289/2020 on 27 June 2022 confirmed that, for a new law to be applied retrospectively, the government must state this expressly in clear terms in the enactment.

RWANDA: Parliament approves tax treaty with Republic of Congo

On 13 September 2022, the Rwandan Parliament approved the income tax treaty with the Republic of Congo, signed on 24 November 2021.

SENEGAL: Multilateral Instrument enters into force

The Multilateral Convention, 2016 (“MLI”) entered into force in respect of Senegal on 1 September 2022. Senegal signed the convention on 7 June 2017 and deposited its final MLI Position on 10 May 2022, including the following ten tax treaties to be covered by the MLI:

SENEGAL: Tax treaty with the Czech Republic enters into force

The Income Tax Treaty between the Czech Republic and Senegal, which was signed on 22 January 2020, entered into force on 29 August 2022 and applies with effect from 1 January 2023.

UGANDA: Proposal to scrap levies on exports of refined and unprocessed gold

The government of Uganda has proposed to repeal the 5% and 10% levies imposed on every kilogram of refined gold and unprocessed gold, respectively, exported out of Uganda in order to address the slump in shipments overseas.

ZAMBIA: Mandatory requirement to include employee TIN numbers on PAYE returns introduced

The Zambia Revenue Authority (“ZRA”) has introduced a requirement for all monthly PAYE returns to include Taxpayer Identification Numbers (“TINs”) for all employees. The requirement is to be implement with effect from the October 2022 return, which is due for filing by 10 November 2022.

ZIMBABWE: Customs duty on commercial tyre imports suspended for two years

Statutory Instrument 160 of the 2022 Customs and Excise (General) (Amendment) Regulations 2022 (No. 262), gazetted on 2 September 2022, has suspended duty on commercial tyres for use on buses or lorries imported by approved importers, for a period of two years effective from 2 September 2022.

To qualify for the suspension of duty on commercial tyres, the approved importer must:

  • have a valid tax clearance certificate;
  • have a valid licence issued by the Minister responsible for industry and commerce; and
  • provide a signed declaration that the tyres will be used on commercial buses and lorries.

The prevailing customs duty rate for importers who fail to meet the above conditions is 15%.

ZIMBABWE: Mid-year Budget 2022 proposes revenue enhancement and tax relief measures

The Minister of Finance and Economic Development presented the mid-year budget for the 2022 fiscal year before the National Assembly of Zimbabwe on 28 July 2022. Significant proposed amendments include:

Income tax

  • requiring persons liable to pay income tax in foreign currency to show the foreign currency and Zimbabwean currency receipts in tax returns;
  • deeming any expenditure in excess of allowable deductions to be a dividend subject to resident shareholder tax;
  • Pay-As-You-Earn:
    • increasing tax free band from ZWL300 000 to ZWL600 0000 per annum;
    • increasing the top income tax bracket from ZWL6-million to ZWL12-million per annum, above which a 40% tax rate is applied, effective 1 August 2022;
  • taxing tuition levies and boarding fee benefits for staff working at schools at 50% and limiting the number of children to a maximum of three children at any given time;
  • increasing the withholding tax on imports by cross-border informal traders without a withholding exemption certificate from 10% to 30%, charged on the value of commercial imports of goods with effect from 1 January 2023;
  • increasing the bonus free tax threshold from ZWL100 000 to ZWL500 000, effective 1 November 2022;
  • for purposes of intermediated money transfer tax (“IMTT”), with effect from 1 August 2022:
    • increasing the value of tax-exempt transactions from ZWL1 000 to ZWL2 500 for individuals;
    • increasing the maximum tax payable per transaction from ZWL1 320 000 to ZWL3 300 000 for transactions above ZWL165-million, for corporations;
    • increasing the maximum tax payable for transactions in foreign currency from USD10 000 to USD20 000 for transactions above USD500 000;
    • extending the application of IMTT to internal transfers of money by authorised dealers with limited authority registered in terms of the Exchange Control Act;

Other taxes

  • levying capital gains tax at 40% on shares on the Zimbabwe Stock of Exchange if held for less than 270 days; and
  • with effect from 1 January 2023, increasing the minerals royalty on platinum from 2.5% to 5% and introducing a minerals royalty at the rate of 5% on lithium.

ZIMBABWE: Customs duty rebate for National Railways extended

Statutory Instrument 139 of the Customs and Excise (General) (Amendment) Regulations, 2022 (No. 111) has extended the customs duty rebate for engine spare parts, special purpose motor vehicles and components imported by the National Railways of Zimbabwe for a period of two years with effect from 5 August 2022.

The previous rebate was also granted for a period of two years, from 1 January 2020 to 31 December 2021.

ZIMBABWE: Customs duty on public service buses suspended for 12 months

Statutory Instrument 138 of the 2022 Customs and Excise (Suspension) (Amendment) Regulations, 2022 (No. 261) has amended customs regulations governing the importation of public service buses, effective retroactively from 1 July 2022.

The amendments, which aim to reduce the cost of importing buses, provide that:

  • customs duty on the importation of public service buses by approved importers registered in terms of part 111 of the Road Motor Transportation Act are suspended;
  • the approved importer may not import more than 20 buses in any 12-month period, commencing from 1 July 2022;
  • the imported buses shall not be disposed of before the expiry of five years without the written authority of the Commissioner General;
  • the importer must be compliant with income tax laws and have a valid tax clearance certificate;
  • the Minister of Finance and Economic Development, in consultation with the Minister for Transport and Infrastructural Development, shall cause any approved importer who charges unreasonable fares or engages in any activity other than that for which the suspension of duty was granted to account for such duty and any applicable penalties; and
  • the Secretary for Transport and Infrastructural Development and the Commissioner General shall submit independent reports to the Secretary for Finance and Economic Development containing the make, chassis number and value of the imported bus, by the tenth day of every month.

The amendments are to remain in effect for 12 months.

Sources include IBFD’s Tax Research Platform; www.allafrica.com; http://tax-news.com; www.oribtax.com

Celia Becker

Executive |Africa Regulatory and Business Intelligence

cbecker@ENSafrica.com

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