South Africa: Africa Tax In Brief (July 2015)

ANGOLA: Special Contribution Regime for Foreign Technical Assistance and Management Services

A Special Contribution Regime for Foreign Technical Assistance and Management Services was introduced through Presidential Legislative Decree number 2/15 of 29 June and became effective on the same date.

In terms of the Regime, the following requirements apply to payments by both private and public companies for technical assistance and management services to foreign entities:

• the maintenance of organised accounting records and supporting documentation, to be retained for a period of five years, identifying transactions subject to the Regime;
• the levying of a special contribution of 10{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} on the amount of the transfer due by the entity requesting the cross-border payment of funds; and
• submitting proof to the commercial bank that the special contribution was paid prior to submitting the request for payment of the services.

BURKINA FASO: New Mining Code passed by Parliament

The Burkina Faso acting parliament passed a new Mining Code on 26 June 2015. The adoption of the new code, which replaces 12-year-old mining regulations, was among requirements set by the World Bank for the release of $100 million in budget support for the West African country. The funds were frozen in February pending passage of the new code and an anti-corruption law, which was adopted in March.

In terms of the new code, companies with industrial mining licenses are to pay 1{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} of monthly turnover excluding taxes or 1{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} of the value of extracted minerals into a fund designated for the development of local mining communities. The government undertook to pay 20{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} of its mining revenues into the fund.

The code also provides for the removal of a 10{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} tax break on profits. Under the new regulations, companies with exploitation permits will pay the normal tax rate on profits of 27.5{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}.

The new mining code includes provisions for the creation of funds to rehabilitate artisanal mining sites, finance geological research and support education in earth sciences.

GHANA: Value Added Tax (VAT) legislation amended

The VAT Act 2013 (Act 870), was amended as follows by Act 890, gazetted on 15 April 2015:

• paper used for the production of reading and exercise books and imported mild carbon steel of the manufacture of machetes are exempt from VAT; and
• a 5{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} flat rate VAT on the taxable supply of immovable property by real estate developers was introduced.

The amendments became effective on 15 April 2015.

GHANA: Tax exemptions to be granted only by parliament

In terms of the Budget 2015, implementation instructions issued by the Minister of Finance to all funding sources, including Government of Ghana (“GoG“) funds, Development Partner Funds and retained Internally Generated Funds (“IGFs“), all Ministries, Departments and Agencies (“MDAs“) are required to cease the granting of tax exemptions in their contracts, as the authority to grant tax exemptions is vested only in the Parliament.

KENYA: Alternative Dispute Resolution mechanism announced

The Kenya Revenue AuthorityTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is... (“KRA“) has indicated that it is in the process of developing an Alternative Dispute Resolution (“ADR“) mechanism which is set to lower costs, enhance expediency, confidentiality and the relationship with taxpayers involved in disputes.

It is intended for the ADR process to apply to disputes at all stages, including:

• disputes with respect to which a tax assessmentA tax assessment is a formal determination made by a tax authority to calculate the amount of tax an individual or entity owes. It is a comprehensive evaluation based on financial records, declared income, expenses, deductions, and any applicable tax laws or regulations. Tax assessments may arise from routine self-assessments by taxpayers, or they may be conducted by revenue authorities... has not been confirmed;
• disputes with respect to which a tax assessmentA tax assessment is a formal determination made by a tax authority to calculate the amount of tax an individual or entity owes. It is a comprehensive evaluation based on financial records, declared income, expenses, deductions, and any applicable tax laws or regulations. Tax assessments may arise from routine self-assessments by taxpayers, or they may be conducted by revenue authorities... has been confirmed, but with the parties concerned having mutually agreed to a self-review; and
• disputes brought before the Courts, but with the parties concerned desiring an out-of-court settlement.

The ADR process may be initiated by either the taxpayer or the KRA and during the process, taxpayers will have access to their tax advisorsA Tax Advisor is a professional who provides specialised advice to individuals, businesses, and organisations on various tax-related matters. They play a crucial role in guiding clients through complex tax laws and ensuring compliance with the latest regulations while identifying opportunities for tax efficiency. Tax Advisors must stay updated on legislative changes and understand the impact of international tax treaties,... or other representatives and may be entitled to appoint an external member to a Facilitation Panel. Such Panel will consist of experienced technical experts drawn from independent KRA staff or externally appointed experts.

The KRA is also in the process of reforming the tax auditA Tax Audit is a comprehensive review or examination conducted by a government’s tax authority. The primary objective of a tax audit is to verify the accuracy of a taxpayer's financial records, tax returns, and overall tax compliance. This process ensures that the reported income, expenses, and deductions align with the applicable tax laws and regulations. Tax audits serve as... process to create more transparency and fairness.  It is intended for audits to specify, in advance:

• the reason for selection, which has to be specific enough for the taxpayer to understand and possibly respond to; and
• the scope of work to be covered, including the tax area and tax periods, allowing the taxpayer to respond to the issues raised prior to audit commencement.

KENYA: 2015/16 Budget presented

Kenya presented its 2015/16 Budget on 11 June 2015. Significant proposed tax amendments include an increase in the carry forward period for tax losses from four to ten years and an exemption from the previous 20{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} withholding tax for foreign actors and film crews. Non-resident mining sub-contractors will now be subject to a final 5.625{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} withholding tax on gross service fees, whereas training fees paid by petroleum or mining companies to non-resident entities will be subject to a rate of 12.5{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}.

In order to address the administrative complexities around calculating capital gainsCapital gains refer to the profit earned when an asset, such as real estate, stocks, bonds, or even a collectible, is sold or exchanged for a price that exceeds its original purchase cost. These gains are a critical component of personal and corporate finance, as they influence investment strategies and tax obligations. Capital gains are realised when an asset is... on the sale of shares, it is proposed to levy capital gains taxCapital Gains Tax (CGT) is a tax imposed on the profit an individual or entity earns from the sale or disposal of a capital asset. This tax is not levied on the total sale price of the asset but rather on the capital gain, which is the difference between the asset’s acquisition cost (or “base cost”) and its sale price.... through a withholding mechanism at a rate of 0.3{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} on the transaction proceeds of the sale of listed shares. Landlords earning less than KES10 million from the rental of residential property are to pay a final withholding tax of 12{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} on the gross rental value.

MAURITIUS: Expeditious Dispute Resolution of Tax Scheme 2015 guidelines published

The Mauritius Revenue AuthorityTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is... (“MRA“) on 19 June 2015, released guidelines on the Expeditious Dispute Resolution of Tax Scheme (“EDRTS“) 2015. The Scheme allows taxpayers that were unable to appeal against any income taxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... or VAT assessment imposed by the MRA prior to 1 January 2015 to apply for an assessment review before 30 September 2015. The EDRTS also covers assessments imposed under the Gambling Regulatory Act.

In order to be eligible for the scheme, the taxpayer must waive its right to initiate any proceedings before any Mauritius Court in respect of any decision of the Director-General of the MRA based on a three-member panel’s decision.

The taxpayer will be informed as to whether its request for review has been accepted or not within 1 month of receipt of its application. The panel will reach a decision based on information submitted within 6 months from the date on which the application for review was referred to it. The panel’s decision will be final and conclusive.

The taxpayer will have to sign an agreement regarding the terms and conditions for the settlement of its tax liabilityTax liability represents the total amount of tax owed by an individual or business to a tax authority, whether local, national, or international. This obligation arises through various forms of income, profits, or transactions subject to taxation laws and regulations. Understanding tax liability is essential for compliance and efficient financial management for corporations and individuals. It influences how businesses structure.... If no agreement is reached, the amount set by the panel will be due immediately.

NIGERIA: ECOWAS Common External Tariff approved

Although the Federal Ministry of Finance already on 12 January 2015 issued a Circular approving the implementation of the Economic Cooperation of West African States (“ECOWAS“¹) Common External Tariff (“CET“) 2015 – 2019 with effect from January 2015, the CET only became effective in Nigeria from April 2015 and was officially launched in Lagos on 23 June 2015.  The CET seeks to ensure uniform tariff as well as a uniform valuation system in the region.

NIGERIA: Tax Appeal Tribunal decision on VAT on imported services

The Tax Appeal Tribunal (“TAT“) in Abuja, in the case of Gazprom Oil & Gas Nigeria Ltd v. Federal Inland RevenueTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is...Revenue ServiceTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is... (TAT/ABJ/APP/030/2014), on 10 June 2015 held that VAT is not applicable on services provided by a non-resident company (“NRC“) to a Nigerian company where the services are provided outside Nigeria, and to the extent that the NRC providing the services is not carrying on business in Nigeria, there is no legal obligation on the NRC to register for, or charge, VAT in Nigeria. Additionally, a Nigerian company that has not received a VAT invoice from such NRC is not required to charge and/or remit VAT.

RWANDA: 2015/2016 Budget presented

Rwanda presented its 2015/16 Budget on 11 June 2015. The country is currently undergoing comprehensive tax reforms and, consequently, no significant amendments have been announced in this year’s Budget Speech. However, a 1.5{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} infrastructure development levy has been introduced on all goods imported from outside the East African Community in order to finance infrastructure projects.

TANZANIA: 2015/16 Budget presented

Tanzania presented its 2015/16 Budget on 11 June 2015. Tax proposals aimed at improving revenue collection include elimination of discretionary tax exemptions (with the exception of strategic investors) and improving  the business climate to attract informal businesses to formalise their operations in order for tax to be collected from them.

The marginal tax rate for individuals has been reduced by from 12{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} to 11{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} on the lowest tax band (monthly income from TZS170,000 to TZS360,000). Gaming prize winners are to be taxed at 18{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} on the prize received.

Income earned on bonds issued by the East African Development Bank in the Tanzania domestic market is to be exempt from tax, whereas Government projects financed through commercial loans will no longer be exempt from income taxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... with effect from 1 July 2015.

Special strategic investment status is to be granted to investors who invest at least USD300 million (in cash or assets), employ at least 1,500 Tanzanians and generate foreign exchange or reduce importation.

TANZANIA: 2014 VAT Act effective from 1 July 2015

A Government Notice signed on 3 June 2015 announced the commencement date of the new Tanzania VAT Act (VAT Act 2014), which received Presidential assent on 11 December 2014 as 1 July 2015.  The new VAT Act repeals the existing VAT Act 1997.  Significant amendments include:

• the application of reverse VAT on imported services only where a taxpayer makes exempt supplies of 10{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} or more of total supplies;
• broader restrictions on the claiming of input tax on entertainment, sporting, social or recreational clubs or associations, spare parts and repair and maintenance of passenger vehicles;
• the six month time limit for the claiming of input VAT now commences on the date of the time of supply, and no longer only with reference to the date of the relevant supporting documentation such as the tax invoice;
• a more comprehensive definition of “export” in relation to goods;  and
• subject to certain limitations and exceptions, services will be zero-rated if performed in Tanzania for a person based outside of Tanzania who effective uses or enjoys the service outside Tanzania.

TANZANIA: Workers Compensation tariff effective from 1 July 2015

With effect from 1 July 2015, employers in mainland Tanzania are subject to the Workers Compensation Fund tariff at a monthly rate of 1{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} of cash payments (wages, salaries, leave pay, sick pay, payment in lieu of leave, fees, commission, bonuses and any subsistence, traveling, entertainment or other allowances) to employees in the private sector and 0.5{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} in the public sector.

Payments are to be submitted at the end of the month following the month in which earnings was paid together with form WCP-1 and an annual return is due by no later than 31 March.

UGANDA: 2015/16 Budget presented

Uganda presented its 2015/16 Budget on 11 June 2015. The VAT threshold (UGX50 million since 1997) is to be revised to UGX150 million. The threshold for using a cash basis of accounting for VAT purposes is to be increased from UGX200 million to UGX500 million.

The thin capitalisation rules have been amended to allow firms to deduct interest on loans if the loans do not exceed their share capital by 150{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}. Thin capitalisation rules have also been extended to branches of non-resident companies.

The withholding tax on reinsurance premiums, which was introduced at 15{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} in July 2014, has been reduced to 5{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}.

In an attempt to bring informal businesses into the tax net, taxpayers will not be allowed to claim a tax deduction in respect of amounts exceeding UGX5 million incurred on goods or services acquired from suppliers without a valid tax identification number (TIN).

Services rendered by a non-resident for a period exceeding 90 days in a 12 month period are to be specifically included in the definition of “branch” as per the Income TaxIncome Tax is a direct levy imposed by governments on the income generated by individuals, corporations, and other entities within a specific jurisdiction. It serves as a major source of revenue for governments and funds various public expenditures, such as infrastructure projects, healthcare, education, national security, and welfare programs. The tax is generally calculated as a percentage of the taxable... Act.

ZAMBIA: Mines and Minerals Development bill presented

The Mines and Minerals Development Bill, 2015 (which is to repeal and replace the Mines and Minerals Development Act, 2008) was presented for first reading to the parliament on 25 June 2015. In terms of the Bill:

• the mineral royalty rate for underground mining operations is to be reduced from 8{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} to 6{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e};
• the mineral royalty rate for open cast mining operations is to be reduced from 20{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} to 9{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}.

Sources include IBFD, IHS and other

Footnote

1 The member states of the Economic Community of West African States (ECOWAS) are Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo.

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