Angola Publishes New Investment Law
Introduction
A new private investment law, No. 14/15, was published on August 11, 2015 in Angola.
The new law, which revokes the former law, No. 20/11 of May 20, came into force on the same day of its publication and introduces a new private investment regime in Angola. It aims to make the procedure for the admission of investment less bureaucratic, and amend the incentives and benefits system for tax and customs to fit the current economic dynamic of the country.
Scope
Contrary to the former regime, which required an external investment of at least $1 million, the new private investment law in Angola is applicable to external investments of any amount, as well as internal investments of at least 50 million kwanzas (approximately $396,000).
The regime is not applicable to investments carried out by entities governed by private law in cases where at least 50{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} of the share capital is held by the State or other public entity subject to its own regulation.
Investment Benefits
Although the new regime applies to external investments of any amount, to be eligible for the investment benefits and incentives, the total amount of investment must correspond to the exchange value in kwanzas of at least $1 million. With regard to internal investments, the minimum amount of investment required must correspond to an amount equivalent to $500,000.
In these cases, in order to introduce and refine guidelines for granting benefits, under the new regime, tax incentives are granted based upon a case-by-case analysis of the projects, taking into consideration the following criteria:
• employment creation for national workers;
• investment value;
• investment location;
• sector of activity;
• export activity;
• participation of Angolan shareholders; and
• added value to national economy.
For the purpose of granting tax incentives for investment operations, the new law recognizes two different zones.
• Zone A (includes the province of Luanda, the head municipalities of Benguela, Huíla and the municipality of Lobito).
• Zone B (includes the provinces of Cabinda, Bié, Cunene, Huambo, Cuando Cubando, Lunda-Norte, Lunda-Sul, Moxico, Zaire, Bengo, Cuanza-Norte, Cuanza-Sul, Malanje, Namíbe, Uije and remaining municipalities of Benguela and Huíla).
The available benefits involve industrial tax, real estate transfer tax and 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.... reduction, for a period of 1 up to a maximum of 10 years, depending on the particular case. The benefits should cease immediately once the 10-year period elapses or if the investor has already benefitted from tax savings by an amount equal to the amount of the investment made.
The law also provides for an extraordinary granting of tax benefits to investments of which the total value corresponds to an amount equivalent to $50 million and creates at least 500 and 200 jobs to national citizens in Zone A and Zone B respectively.
Repatriation of Profits and Dividends
Following the completion of the external private investment project, and where proof of its implementation is provided, it is guaranteed that the external or internal investor has the right to transfer abroad: (i) the distributed dividends or profits; (ii) the result of liquidation of their investments, including 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...; (iii) the result of compensation; and (iv) royalties.
Additional Rate on 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....
Although the right of repatriation of profits no longer depends on a minimum invested amount, the new law stipulates that the amount of distributed dividends and profits are subject to a payment of an additional charge on 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...., on the component that exceeds the share of the investor’s own funds, by: (i) 15{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} when the excess value is up to 20{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}; (ii) 30{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} when the excess value is above 20{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} to 50{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}; and (iii) 50{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} when the excess value exceeds 50{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e}.
This regime is not applicable to dividends and profits reinvested in Angola.
Partnership Requirement
The new law also includes a requirement to have an Angolan partnership in one of the following sectors to qualify for foreign investment:
• electricity;
• water;
• hotel business;
• tourism;
• transport;
• logistics;
• the construction industry;
• telecommunications;
• information technology; and
• social media.
Foreign investment is only allowed in the sectors listed above in the case of partnerships with Angolan citizens, with public capital or state-owned companies, or Angolan companies, which hold at least 35{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} of the share capital of the relevant entity and have an effective participation in the management of the investment project.
Indirect Investment
The internal or external investment that contains, isolated or cumulatively, a loan; shareholder loans; supplementary payment of capital; patented technology, process or assistance; industrial secrets and models; franchising; trademarks and other forms of access to their use, either on an exclusive basis or under the form of restrictive licensing per geographic area or industrial or commercial field, is considered indirect investment.
In respect of the shareholder loans, the new regime stipulates that such a loan should not exceed 30{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} of the amount of investment made by the incorporated company and is only refundable after three years following the corresponding date of registration in the company accounts.
Finally, this regime stipulates that operations qualifying as indirect investment, should not exceed an amount corresponding to 50{780f53c297e2c008074d23b865a0ce0b35a4f08852d8e1e49466a5a902c4e44e} of the total amount of investment, either in cases where an internal investor is involved, or in cases involving an external investor.
Application in Time
The law and its regulations are not applicable to investment projects approved before the entry into force of the relevant legislation. These investment projects continue to be governed by the provisions of former legislation and by the terms or specific contracts on the basis of the authorization granted previously.
Investors may however require the application of the new law to their investment projects. The decision should be issued by the competent body taking into consideration the investment amount and its characteristics.
The tax and customs benefits already granted under the former law remain in force within the period established and extensions are not allowed.
Regulation
Even though this law has entered into force, the new regime should be subject to regulation, the details of which are expected to be published soon.
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