Africa tax in Brief

Africa tax in Brief

by Celia Becker

Africa regulatory and business intelligence | executive

cbecker@ENSafrica.com cell: +27 82 886 8744

African Tax AdministrationTax 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... Forum launches transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... risk assessment toolkit

During the International Conference on Tax in Africa held in Abuja from 26 to 28 September 2017, the African Tax AdministrationTax 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... Forum launched its “Toolkit for Transfer PricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... Risk Assessment in the African Mining Industry”, providing tax administrations a step-by-step guide on how to review transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... risks associated with related party transactions involving marketing arrangements, intercompany financing, procurement services and management services. As part of its role in driving transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... initiatives across Africa, an Excel-based risk model which can assist tax authorities to identify and flag potential cases for transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... audits was also published.

CAMEROON: Treaty with South Africa enters into force On 13 July 2017, the Cameroon/South Africa 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...Tax TreatyA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and..., 2015 entered into force and generally applies from 1 January 2018. Key features of the treaty include:  the residence tie-break for dual-resident companies is the mutual agreement procedure between the two tax authorities;  the definition of “permanent establishment” largely follows the Organisation for Economic Co-operation and DevelopmentThe Organisation for Economic Co-operation and Development (OECD) is an international organisation comprising 38 member countries, established to foster economic growth, trade, and development on a global scale. Founded in 1961, the OECD provides a forum for governments to collaborate, share policy experiences, and develop solutions to common economic challenges. The OECD's core mission is to promote policies that improve... Model Convention with a six-month threshold for building sites and installation projects. Specifically included in the definition are situations where an enterprise renders services (through its employees or other personnel) for an aggregate of 183 days or more in a 12-month period;  in respect of 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..., gains from the alienation of shares deriving more than 50{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} of their value from immovable property situated in a state are taxable in the such state; and  a maximum tax rate on dividends of 10{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} if the beneficial owner is a company holding at least 25{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} of the capital of the company paying the dividends, or 15{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} in all other cases are allowed for and the tax rate is limited to 10{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} in the case of interest and royalty payments.

GHANA: VAT Flat Rate Scheme clarification On 2 October 2017, the Commissioner-General of the Ghana 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... (“GRA”) clarified that the Value Added Tax (“VAT”) Flat Rate Scheme, in terms of which VAT/National Health Insurance Levy (“NHIL”) is charged at a reduced rate of 3{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} (implemented on 1 July 2017), is only applicable to retailers and wholesalers. Manufacturers and service providers are required to continue charging VAT/NHIL at the standard rate of 17.5{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}. GHANA: Reviewed policy on tax exemption on import duties The Ministry of Finance on 18 September 2017 issued a statement announcing the review and reversal of the administrative policy on the tax exemption regime introduced by the 2017 budget in terms of which tax exemption holders are required to provisionally pay import duty and taxes upfront and subsequently apply for a refund in line with the guidelines issued by the Commissioner-General of the GRA. In order to counter perceived abuse of the exemption regime, the statement provides that with effect from 1 October 2017:  an application for exemption is to be accompanied by the required supporting documents;  “exemption status” is not transferable and no person or business will qualify for exemption by virtue of their association or relationship with an exemption holder;  no imported goods will be exempted from the payment of import duties and taxes unless the original importer of the goods (as stated on the bill of lading or customs declaration) is an exemption holder, or the goods are generally exempted from import duties and taxes by law;  no exemption letter from the Ministry of Finance will be issued for the purpose of clearing any consignment of goods imported by exemption holders unless the application for the exemption includes an undertaking (in the standard form) signed by the company’s Chief Executive Officer affirming compliance of the imports to all applicable laws and requirements;  the GRA is required to institute a post-audit desk to audit exemption holders for compliance regarding goods that have been cleared under exemptions; and  criminal charges and/or penalties will be sanctioned on the beneficiaryIn tax law, a beneficiary is the person or entity entitled to receive funds or other benefits from an arrangement, such as a trust or a will. Beneficiaries are often named explicitly in legal documents, ensuring that their rights and interests are protected. The concept of a beneficiary also extends to corporate contexts, such as when a company or trust... company and its Chief Executive Officer if the post audit review reveals any infractions.

GHANA: Excise tax stamp policy launched In an attempt to combat counterfeiting and smuggling, as well as improving revenue generation by effectively monitoring the payment of excise taxes, the Minister of Finance on 31 August 2017 launched the Excise Tax Stamp Policy, which will become effective from 1 January 2018. In terms of the policy, tax stamps will be affixed to specific excisable products and local manufacturers and importers of excisable products are required to register with, and obtain the tax stamps from, the GRA. The government has undertaken to bear the full costs of the tax stamps supplied to businesses from 1 January 2018 to 30 June 2018 and half of the cost from 1 July 2018 to 31 December 2018. The position will be reviewed subsequently, depending on the cost burden of providing the tax stamps.

IVORY COAST: Treaty with Portugal enters into force On 18 August 2017, the Ivory Coast/Portugal 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...Tax TreatyA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and..., 2015 entered into force and generally applies from 1 January 2018. LESOTHO: 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...Tax RegulationsTax laws form the backbone of any nation’s revenue system, setting the rules that govern how individuals and corporations contribute financially to support government functions. These laws define the types of taxes, the applicable rates, and the regulations regarding payment and compliance. They also outline the rights and obligations of taxpayers, ensuring a balanced and fair approach to funding public... 2017 published On 22 September 2017, 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... (Amendment of Monetary Amounts) Regulations, 2017 were published in the Official Gazette, giving effect to some of the tax measures proposed in the budget for 2017/18, including:  increasing the annual tax credit from LSL6 732 to LSL6 960;  amending the minimum annual taxable incomeThe tax base is a fundamental concept in taxation, representing the total amount of economic activity or assets upon which a tax is levied. It is the foundation upon which governments calculate the amount of tax owed, based on factors like income, property value, sales, or corporate profits. Understanding the tax base is essential for tax professionals, businesses, and policymakers,... from LSL33 660 to LSL34 800; and  revising the threshold of the tax bracket from LSL56 964 to LSL58 680.

MALAWI: Road access fee introduced On 19 September 2017, the Malawi 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”) announced, with effect from 1 November 2017, the imposition by the Road Fund Administration of a Road Access Fee (“RAF”) of USD20 on all foreign registered small vehicles issued with a temporary importation permit and not currently paying the international transit fee, including motor cycles and trailers. The MRA will be responsible for the collection of the RAF.

MOZAMBIQUE: Transfer PricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... Regulations approved The Mozambican Council of Ministers on 12 September 2017 approved Transfer PricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... Regulations which will become effective from 1 January 2018.

NIGERIA: Public notice on valuation of employee accommodation benefit published The Lagos State Internal 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... (“LIRS”) recently issued a public notice clarifying the valuation of accommodation benefits provided by employers to their employees. According to the notice, the taxable value of a leased accommodation is the rent paid and where the accommodation is owned by the employer, this shall be the commercial rental value of comparable properties in a similar location. The taxable benefit of hotel accommodation exceeding 90 days is the amount paid by the employer for the hotel room or the room rate.

NIGERIA: Public notice on taxing of compensation for loss of employment issued The LIRS also issued a public notice confirming that compensation for loss of employment will qualify for exemption under the Personal 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 (“PITA”) if the amount paid is not pre-agreed, but such payments would be liable to 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.... (“CGTCapital 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....”) under the CGTCapital 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.... Act. All pre-agreed payments, on the other hand, are taxable under the PITA. A distinction is made between “terminal benefits” and “termination benefits”. A termination benefit is a redundancy lump sum accruable on premature termination of employment or contract, which may not be fully tied to the employment duties performed. A terminal benefit is a retirement or resignation lump sum payment such as gratuity and pension usually based on predefined terms and satisfactory performance of employment duties. Termination benefits are capital in nature, subject to CGTCapital 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...., whereas terminal benefits are revenue in nature, subject to personal 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.... NIGERIA: Public notice on taxation of foreigners published The LIRS issued a public notice on the taxation of foreigners performing employment duties in Nigeria, which also specifies the compliance requirementsReporting obligations refer to the mandatory requirements imposed by tax authorities on entities or individuals to disclose specific financial and operational information. These obligations are designed to ensure transparency in taxation, help detect and prevent tax evasion, and support compliance with national and international tax standards. Such requirements can vary widely in scope, depending on jurisdiction and the nature of... for foreigners holding a Temporary Work Permit (“TWP”). The notice defines a non-national with a TWP as an individual who is a national of another country with a visa to work in Nigeria on specialised projects such as installations and repair for a period not longer than 90 days and clarifies the tax treatment of such individuals, generally in line with the provisions of the PITA. It also stipulates that, non-nationals acting as independent contractors in Nigeria would be subject to tax in Nigeria if their activities result in the creation of a fixed base there. In contradiction with the conditions for the creation of a fixed based as per section 6 of the PITA, the notice indicates that a fixed base can be created simply where a work permit other than a business visa is required by the contractor. Such individuals will also be subject to tax when, in the view of the LIRS, there is profit shiftingProfit Shifting is a strategic practice employed by multinational enterprises (MNEs) to reduce their global tax liability by shifting profits from high-tax jurisdictions to low- or no-tax jurisdictions. The primary method involves transferring income-generating activities, intangible assets, or other high-value components within the group to countries with favourable tax regimes. Profit Shifting is a critical concern for tax authorities and... or pricing that is not supported by appropriate transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... analysis. NIGERIA: Public notice on the employees’ tax and withholding tax treatment of employee outsourcing arrangements published The LIRS further published two public notices respectively addressing the employees’ tax (pay-as-you-earn (“PAYE”)) and withholding tax treatment of employee outsourcing arrangements. In arrangements where workers, who are not part of the ultimate employer’s regular workforce, are employed through an outsourcing firm or labour broker, but economically employed by the ultimate employer, the ultimate employer pays the outsourcing firm a fee for procuring the staff on its behalf, while the outsourcing firm pays salaries to the staff through its payroll. According to the LIRS, the outsourcing firm is responsible for the deduction and remittance of PAYE on outsourced employees, and filing of the related PAYE tax returnsA Tax Return is a formal statement filed by an individual or entity that details income, expenses, and other pertinent tax information to a tax authority. Its primary purpose is to assess tax liability, determine refunds owed, or highlight outstanding taxes due. Tax returns may include information about earnings, capital gains, allowable deductions, and credits, depending on the tax regulations.... However, any tax exposure arising from improper deduction of PAYE tax from the employees will be extended to the ultimate employer as per the Operation of PAYE Regulations. In respect of payments by the ultimate employer to the outsourcing firm, the amount liable to withholding tax is the margin earned by the outsourcing company on the service (ie the difference between the contract sum and the payroll cost of the outsourced employees). However, it is a prerequisite that the margin is clearly specified on the face of the invoice, with clear documentary evidence of the salary cost incurred and evidence that PAYE tax has been properly accounted for.

NIGERIA: Public notice on taxation of employees’ share schemes issued As per a public notice issued by the LIRS clarifying the taxation of share schemes where an employee derives a gain or benefit from the arrangement, it is stipulated that employers are required to deduct PAYE on the benefit (calculated as the difference between the price paid for the shares and the value of the shares at the date of exercise) at the date of exercise. For listed entities, the value of the shares will be the price of the stock as traded on the relevant exchange, whereas for non-listed entities, the value of the stock will be the net asset per share. Where the employee does not make any payment, the total number of the shares (based on market value) awarded to the employee will be subject to tax. Any gains accruing to the employee following exercise will be treated as 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... which is currently exempt from tax. Any dividend or phantom dividend earned by the employee during the vesting period will be treated as employment income and taxed at applicable rates rather than withholding tax.

NIGERIA: Public notice on taxation of interest benefit on employee loans issued The tax treatment of the interest benefit arising from employee loans is also clarified in a public notice issued by the LIRS. In terms of the notice, a taxable benefit is deemed to arise where an employer grants a loan to an employee at an interest rate which is more than 3{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} lower than the adjusted monetary policy rate, currently 14{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}. Accordingly, if an interest rate of less than 11{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} per annum is charged, a taxable benefit would accrue.

SAO TOME: Treaty with Portugal enters into force On 12 July 2017, the Portugal/Sao Tome and Principe 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...Tax TreatyA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and..., 2015 entered into force and generally applies from 1 January 2018.

ZAMBIA: 2018 budget On 29 September 2017, Minister of Finance presented the budget for 2018 to the National Assembly. Key proposals include:  replacing the five-year tax holiday regime for investments in the priority sectors under the Zambia Development Act with accelerated depreciation allowances;  amending the definition “residence” for corporate taxCorporate Tax refers to the tax imposed by governments on the income or capital of corporations. Corporations, considered separate legal entities, are taxed on their profits, meaning the income generated from their operational activities, investments, and other financial undertakings. This tax is generally a key revenue source for governments, helping to fund public services, infrastructure, and other essential functions. The... purposes to the effect that a company will be deemed to be resident in Zambia if either it is incorporated or formed under the laws of Zambia or it has its place of effective management in Zambia, instead of having its place of “central management and control” in Zambia; and  amending the definition of “management or consultancy fee” to include payment in any form, other than an emolument, for or in respect of any administrative, consultative, managerial, technical, or any service of a like nature or any creation, design, development, installation and maintenance of any information technology solution, programme, system, or a combination;  introducing a requirement for mandatory disclosure of all related-party transactionsIntra-Group Transactions are interactions between entities within the same multinational enterprise (MNE). Such transactions form the backbone of related-party dealings and are essential in managing global operations and aligning business objectives across jurisdictions. Understanding intra-group transactions is critical in international tax and transfer pricing, as they directly impact a company's tax obligations, profitability, and compliance standing. Tax professionals, accountants, lawyers,... for transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... purposes;  discontinuing the deductible contribution to approved pension funds of ZMW3 060 for personal tax purposes;  changing the due date for payment of withholding taxes from the 10th to the 14th day of the month following that in which the transaction is occurred;  increasing the presumptive tax on public transport operators by 50{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e};  exempting re-insurance premiums from the insurance premium levy of 3{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e};  exempting tobacco from VAT;  changing the due date for submission of VAT returns from the 16th to the 18th day of the month following that in which the transaction is made; and  including intellectual property (ie, trade marks, patents, brands, etc.) and the indirect transfer of shares in the definition of property for property transfer tax purposes.

Sources include IBFD’s Tax Research Platform; www.allafrica.com; http://tax-news.com Celia Becker Africa regulatory and business intelligence | executive cbecker@ENSafrica.com cell: +27 82 886 8744