Africa Tax in Brief
AFRICA: African Tax Administration Forum (“ATAF”) develops plan for African minimum domestic tax to counter revenue leaks and illicit financial flows
The Executive Secretary of the ATAF at its General Assembly held at the beginning of November 2022 announced that it is developing a proposal to the African Union (“AU”) to introduce an African minimum domestic tax. The tax aims to counteract revenue leakages and illicit financial flows from Africa, resulting from granting tax waivers to certain companies that pay their taxes in other jurisdictions.
CABO VERDE: 2023 Budget announces various tax amendments
Cabo Verde’s 2023 Budget has proposed a series of amendments to various tax laws. Significant amendments, which come into effect from 1 January 2023 unless otherwise indicated, include:
Corporate income tax
- a reduced corporate income tax rate of 5% for the first five years of activity available to companies that carry on, directly and as a main activity, an economic activity eligible within the scope of the start-up program;
- exempting from corporate income tax profits reinvested by technology-based companies authorised to operate in the special economic zone for technologies;
- a 130% deduction of expenses for the acquisition of accounting equipment and software and invoicing ("SAFT-CV"), as well as expenses incurred for the certification of management systems;
- allowing companies involved in commercial agricultural, industrial, and services sectors to deduct a percentage of the amount corresponding to research and development (“R&D”) at a base rate of 40% of R&D expenses incurred in that period and an incremental rate of 50% of the increase in R&D expenses incurred in that period compared to the means of the two previous periods;
- allowing as a deduction CVE20 000 for each intern hired for a minimum period of six months;
- allowing as a deduction CVE20 000 per contract of each new employee (i.e. a previously unemployed person) for a minimum period of 12 months;
- exempting companies that hire persons of 35 years and younger for their first job from the mandatory contribution to social security schemes for employers;
- disallowing as deduction expenses or losses incurred with life insurance and operations; contributions for pension funds and any supplementary security schemes for social security;
- reducing the amount of instalment payments for taxpayers under flow-through regimes and with business and professional income (i.e. Category B) from 60% to 15%. These calculations are based on the taxable income of the preceding year, and the payments are split into three instalments due at the end of March, July and November;
- announcing that the government will adopt the necessary measures to create Technological Free Zones and define the governance model for the promotion of technology-based innovation; and
- launching a remote workers program which exempts from income tax, for one year, employees and independent professionals carrying on professional activities remotely for companies domiciled or headquartered outside the national territory of Cabo Verde.
- decreasing the VAT rate applicable to electricity and the supply of water to end consumers from 15% to 8%;
- exempting from VAT the importation of:
- heavy vehicles (with a capacity of more than 30 seats) to be used for passenger public transportation;
- new light passenger vehicles intended for executive transport;
- electric vehicles and automatic machinery for data processing: and
- their units (portable, desktop and tablet computers), for use by vocational education; and training establishments located in Cabo Verde.
- Announcing an amnesty programme for debt settlement (including debts in the tax execution phase) under which the tax authority and the National Institute of Social Security have been authorised to accept payments in instalments for outstanding tax and social contributions. This will apply to debts arising in periods prior to January 2023 and must occur within a period of six months after the entry into force of this law (1 January 2023). The payments should not exceed 240 instalments and are subject to compliance with the current tax regime.
GHANA: Tax Bills assented into Law
Following presidential assent on 12 September 2022, the Penalty and Interest Waiver Act, 2022 (Act 1081), Value Added Tax (Amendment) Act, 2022 (Act 1082), Exemptions Act, 2022 (Act 1083) and Income Tax (Amendment) Act, 2022 (Act 1084) became effective. Significant amendments introduced by the Acts include:
- Penalties and Interest Waiver Act: a waiver of penalties and interest on accumulated tax arrears up to December 2020 for persons who make arrangements to settle their principal tax liability by December 2022 and to provide for related matters such as resolving taxpayers’ complaints. The Act repeals the Penalty and Interest Waiver Act, 2021 (Act 1065), which provided a waiver of interest and penalties to June 2022;
- Exemptions Act: regulating the application of tax and other exemptions, including;
- provisions relating to the limitation or variation of the scope of current tax exemptions; eligibility criteria;
- administration of exemptions and a mechanism for monitoring; and
- evaluation, reporting and enforcement of tax exemptions;
- VAT Act:
- requiring an unregistered, non-resident person who provides telecommunication services or electronic commerce to persons for use or enjoyment in Ghana, other than through a VAT registered agent, to register if they make taxable supplies. The threshold for VAT registration in the VAT Act does not apply to such persons;
- an upfront payment of 12.5% of the CIF value of the imported taxable goods, in addition to already existing penalties payable by importers not registered for VAT;
- zero-rating the supply of locally assembled vehicles under the Ghana Automotive Development Programme from 1 September 2022 to 31 December 2022;
- requiring the issuance of a tax invoice through a certified invoicing system integrated with the invoicing system of the Commissioner-General, subject to penalties for failure to comply;
- Income Tax Act: extending the concession given for income tax stamps and vehicle income tax systems and suspending the quarterly income tax instalment payments for the first, second, third and fourth quarters of 2022 for inter alia retail traders, dressmakers, butchers and owners of some classes of vehicles, among others.
KENYA: High Court rules that a decision on the abandonment of taxes is upon initiation and determination by the Commissioner of the Kenya Revenue Authority (“KRA”)
Following an application for judicial review filed by a local alcohol distiller (the “Applicant”) against the KRA, the High Court on 16 September 2022 ruled that a decision for abandonment of taxes by the Cabinet Secretary (“CS”) of National Treasury was upon evaluation and recommendation by the Commissioner.
In the case at hand, the Applicant had made an application to the CS of National Treasury, for abandonment of taxes and in January 2022 the National Treasury allowed the application and approved the abandonment of 80% of the outstanding principal taxes and waived 100% of penalties and interest. However, in March 2022, the KRA advised the Applicant that the earlier approval of abandonment had been rescinded.
The High Court ruled that, in accordance with the Tax Procedures Act, 2015 (“TPA”), any decision for abandonment of taxes and waiver of penalties and interest had to be upon initiation and determination by the Commissioner. The CS of National Treasury could not act in its own motion without consulting with the Commissioner.
The issue for determination by the Court was whether the decision by the KRA to demand full payment of the taxes despite the decision by the National Treasury was irrational, illegal and untenable. The Court noted that under section 37 of the TPA, only the KRA can invoke the provisions for abandonment of taxes, upon which it refers the matter to the CS of National Treasury for approval.
In this regard, the National Treasury had no business to allow for the abandonment of 80% of the demanded taxes and this was an abuse of power and office on the part of the National Treasury. The Court, accordingly, ruled that the KRA’s decision to collect the full taxes was lawful and not illegal, irrational or unprocedural as contended.
LESOTHO: Multilateral Instrument (“MLI”) enters into force
On 1 November 2022, the MLI entered into force in respect of Lesotho. Lesotho signed the convention on 9 February 2022 and deposited its final MLI Position on 28 July 2022, including the six tax treaties that it wishes to be covered by the MLI. For a treaty to be covered by the MLI, both signatories need to have joined the convention, included each other in their list of covered tax agreements, and deposited their instrument of ratification, acceptance or approval. In the case of Lesotho, this means that its treaties with Seychelles, South Africa and the United Kingdom will now be affected by the MLI.
MADAGASCAR: Tax Treaty with Morocco enters into force
On 14 November 2022, the Madagascar – Morocco Income Tax Treaty (2016) entered into force, following the exchange of ratification instruments between the two countries in Madagascar on the same day. The treaty generally applies from 1 January 2023 for withholding and other taxes.
MAURITIUS: Global Forum confirms that the Automatic Exchange of Information (“AEOI”) standard has been successfully implemented
The Organisation for Economic Cooperation and Development (“OECD”) Global Forum on Transparency and Exchange of Information for Tax Purposes released its report, Peer Review of the Automatic Exchange of Financial Account Information 2022, on 9 November 2022. The report includes first peer reviews with effectiveness ratings for 99 jurisdictions that committed to starting the automatic exchange of information under the OECD Common Reporting Standard (“CRS”) in 2017 or 2018.
The report confirms inter alia that Mauritius has in place the necessary legal framework, has successfully started an exchange of information under the CRS since 2018 and that the Mauritius Revenue Authority is actively conducting compliance activities to ensure financial institutions correctly conduct due diligence and report accurate information
MOZAMBIQUE: Government approves Bills providing for tax cuts
On 8 November 2022, the Council of Ministers announced the government's approval of various bills that primarily aims to reduce the tax burden on taxpayers. Significant amendments, which will become effective once approved by parliament, include:
Corporate income tax
- reducing the standard corporate tax rate from 32% to 10% for agriculture, aquaculture and urban transport businesses;
- reducing the withholding tax rate with respect to services provided by non-residents to national agriculture companies from 20% to 10%, and removing the 20% withholding tax on interest from external finance destined for agricultural projects until 31 December 2025;
- reducing the VAT standard rate from 17% to 16%;
- repealing the "fuel tax" (Taxa Sobre os Combustíveis), with the respective rates to be incorporated into the excise duty; and
- integrating the small taxpayers' simplified tax system into the General Tax Law, (previously it operated under a separate law).
NAMIBIA: 2022/23 Mid-Year Budget Review Statement proposes tax relief measures
Finance Minister Iipumbu Shiimi presented the Mid-Year Budget Review Statement for the 2022/23 fiscal year to parliament on 25 October 2022. Significant proposals, most of which have been announced previously and are expected to be included in a bill to be tabled in parliament this fiscal year (FY2022/23) include:
- reducing the non-mining company tax rate from 32% to 31% in the 2024/25 fiscal year, and from 31% to 30% in the 2025/26 fiscal year;
- inserting into the Income Tax Act an acceptable debt-to-equity thin capitalisation ratio;
Personal income taxation
- increasing the tax-free threshold for income tax on individuals from the current NAD50 000 to NAD100 000, subject to assessment by the Ministry of Finance and to be confirmed in the upcoming budget statements;
- increasing income tax deduction on the pension fund and educational policy contributions by individuals from NAD40 000 to NAD150 000;
- zero-rating of the supply of sanitary pads.
NIGERIA: Telecommunication companies and money deposit banks appointed to withhold VAT on supplies received
The Federal Inland Revenue Service (“FIRS”) issued a notice appointing telecommunication companies MTN and Airtel and all money deposit banks (as defined by the Central Bank of Nigeria (“CBN”) Guidelines) as VAT collection agents to withhold or collect VAT charged on all taxable supplies provided to them with effect from 1 January 2023. Failure to comply will result in a penalty of 150% of the amount not collected, plus 5% interest above the CBN monetary policy rate as prescribed by the VAT Act.
The VAT withheld or collected shall be remitted in the currency of the transaction to the FIRS on or before the 21st day of the month immediately following the month the tax was withheld or collected.
A supplier whose output tax is withheld may deduct input tax paid on goods purchased or imported to provide the taxable supply from the output tax collected on other taxable supplies and, where the input tax paid to provide the supply is not fully recovered from the output tax on other taxable supplies, the balance is refundable to the supplier. The refundable amount may be used to offset future VAT liability, or the taxpayer may request a cash pay-out. The FIRS indicated that it has put measures in place to ensure prompt payment of cash refund if the taxpayer requests a cash refund.
NIGERIA: Government approves new tax incentives for investments in sport and agriculture
At the Nigerian Federal Executive Council meeting, held on 2 November 2022, the Nigerian government approved a series of tax incentives for investing in sport under the National Sports Industry Policy (“NSIP”). Key incentives include:
- a tax exemption and rebate for five years for investors in the value chain of sports;
- land provision and waiver for certain fees on land meant for sports activities;
- single-digit loan interest rates for corporate organisations and private individuals investing in the sports value chain; and
- independent government grants through the establishment of an independent Athletes Welfare Fund from which athletes can draw support.
The Minister of Agriculture and Rural Development on 27 October 2022 announced that the government has also approved new incentives for investors in the agricultural sector. Key incentives include:
- a five-year tax holiday (including all duties) for agricultural production and processing;
- tax-free agricultural loans with moratoria of at least 18 months and repayment terms of no more than seven years; and
- zero-tariff rates on the importation of agrochemicals.
NIGERIA: Government to collect gaming taxes electronically
The FIRS in a public notice dated 26 October 2022 announced that it has commenced the deduction and collection of taxes at transaction points from online gaming companies/transactions using the Sentinal National Payment Gateway and Electronic Solution (“SNPGES”). The deployment of the SNGPGES will automate the administration of taxes for online gaming transactions, enable the FIRS to collect taxes in real time, and simplify tax compliance for companies engaged in online gaming activities.
The fee for using Sentinal will be deducted from the payments due to the online gaming operators, which may pass the additional cost to their customers. All operators (including non-resident online gaming companies) offering online gaming services in Nigeria are required to connect to the SNPGES, deduct tax from online gaming transactions in Nigeria and remit the same directly to the government's treasury not later than 31 December 2022.
RWANDA: New Income Tax Law enters into force
On 28 October 2022, Rwanda's new Income Tax Law (law no. 027/2022 of 20/10/2022) entered into force, repealing its predecessor, law no. 016 / 2018 of 13/04/2018. The new law introduces various significant changes, including:
- treating partnerships as tax transparent entities with their income being taxable in the hands of the partners;
- extending the application of thin capitalisation rules to realised foreign exchange losses, which will also be subject to the 4:1 debt-to-equity ratio limitation;
- disallowing the deduction of unrealised foreign exchange losses;
- introducing corporate tax and the payment of advance taxes to gambling companies at a rate of 13% of the difference between wagers received and winnings paid out. Prior to 28 October 2022, the taxation of gambling companies was governed by a separate law;
- expanding the definition of “permanent establishment”, to include:
- instances where an agent plays a significant role leading to the conclusion of contracts by a non-resident enterprise; and
- insurance companies collecting premiums or insuring risks in Rwanda;
- expanding the list of payments subject to withholding tax to include repatriated profits, reinsurance premiums and the capitalisation of retained earnings;
- introducing general anti-avoidance tax provisions (“GAAR”) which permit the tax administration to disregard or recharacterize transactions/arrangements lacking commercial substance/rationality and those whose principal purpose is to obtain tax benefits.
Personal income tax
- increasing the tax-exempt threshold for personal or employment income tax from RWF30 000 to RWF60 000 per month; and
- introducing a new income tax band from RWF100 001 to RWF200 000 per month, taxable at a rate of 20%, effective from the second year of the new law.
SEYCHELLES: 2023 Budget Statement presented to National Assembly
On 4 November 2022 Mr Naadir Hassan, the Minister of Finance National Planning and Trade, presented a Budget Statement to the National Assembly. Some proposed measures aimed at increasing tax revenue include:
- introducing a new levy under the environmental protection law to counter the impact of tourists on the environment. The levy will come into effect on 1 April 2023 and apply to every visitor, based on how long they stay in Seychelles, the levy will apply as follows:
- small hotels with 24 rooms or less, at a rate of SCR25 per night per room;
- medium sized hotels of between 25 and 50 rooms at a rate of SCR75 per night per room; and
- large hotels of more than 50 rooms, at a rate of SCR100 per night per room.
The levy will also apply to yacht charters;
- introducing a 2% tax on the turnover of medium and large hotels with effect from 1 January 2023;
- increasing the tax rate on immovable property belonging to foreign residents from 0.25% to 0.50%, effective from 1 January 2024;
- increasing the tax rate under the Securities Act from 1.5% of assessable income (if the company has substance) to 3% with effect from 1 January 2023;
- introducing a new preferential business tax rate of 15% for a period of 10 years on all profits made in the fish processing and aquaculture sector from 1 January 2023;
- amending the Income and Non-Monetary Benefits Tax Act to provide that employers should, with effect from 1 January 2023, pay a tax equivalent to 15% (previously 20%) of non-monetary benefits such as lodgings, meals at work, and transportation to the Revenue Commission and exempting:
- the provision of food for employees;
- any medical expenses made by employers on behalf of their employees;
- any expenses incurred by an employer for the education of their employees; and
- transportation expenses to take employees to and from work.
SOUTH SUDAN: Finance Act 2022/23 enacts various amendments
Following presidential assent on 7 October 2022, the government published the Finance Act for the 2022/23 fiscal year on 11 November 2022. Amendments include:
- introducing a single rate for business profit tax at 30% for small, medium and large business enterprises and insurance companies. Previously, various business profits tax rates were applicable depending on the size of the business and the sector as follows:
- small business enterprises (20%);
- medium business enterprises (25%);
- large business enterprises (30%); and
- insurance companies (20%);
Personal income tax
- increasing the tax exemption threshold for personal income tax from SSP2 000 to SSP5 000 per month;
- adjusting the number of income brackets and tax rates as shown in the table below:
- adjusting personal income tax from entrepreneurial activities of sole proprietors with no audited financial statement previously set at the standard rate of 20%, as shown in the table below:
- introducing a surcharge or surtax on personal income tax income at a rate of 30%; and
- exempting from personal income tax persons from countries that have signed a double taxation agreement with South Sudan;
- introducing a sales tax on imported goods, locally manufactured goods, hotel, bar and restaurant services, telecommunication services and commissions at 20%; and
- zero-rating vehicles other than railways, tramways, rolling stock, parts and accessories thereof.
UGANDA: changes made to PAYE return
Employers are now required to confirm whether they are the primary or secondary employer when accounting for PAYE on employment income and a secondary employer is required to select the fixed rate option for secondary employees under Schedule 1 of the PAYE return template, where the employee earns a monthly amount that exceeds UGX10-million.
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