Africa Tax In Brief (9 June 2015) - Sales Taxes: VAT, GST

ANGOLA: Urban real estate tax clarified

The General Tax Administration (Administração Geral Tributária, AGT) delivered a formal session on 4 June 2015 to provide the following clarification regarding the urban real estate income tax ("URET") regime:

the URET taxable base is the registered (cadastral) value of the immovable property or, if the property is leased, the rentals derived from the property;
the applicable rates vary from 0.5% when the cadastral value of the houses or apartments exceed KWZ 5 million, and 25% on 60% of the rent paid if the property is leased;
the value of the property depends on several factors, including the municipality where it is located, the year it was built, its designated use, its access to services such as water, electricity and basic sanitation, and the constructed area.

Dedicated URET teams have been formed to register non-declared urban properties, update the value of properties that are already registered, and review the URET payment.

EAST AFRICAN COMMUNITY: 2015/16 Budget presented to East African Legislative Assembly

The Budget of the East African Community ("EAC") for the financial year 2015/16 was presented to the East African Legislative Assembly on 14 May 2015. The Budget announced:

Consolidation of the Single Customs Territory ("SCT") by developing and implementing the requisite systems and administrative mechanisms to enhance and stabilise the interconnectivity of customs systems of EAC partner states, with the ultimate objective of establishing a regional integrated customs system that will enable seamless and real-time clearance of goods between partner states.
Implementation and consolidation of the EAC Customs Union, supported by amendments to the EAC Customs Management Act now awaiting assent by the heads of state of partner states.
Signing of the Tripartite Free Trade Area Agreement (the Agreement), encompassing 26 partner states from the Common Market for Eastern and Southern Africa ("COMESA"), the Southern African Development Community ("SADC") and the EAC.
Enhancement of market access (removal of non-tariff barriers, NTBs), trade and competitiveness, including harmonization of administrative procedures and regulations. The East African Community Competition Authority (established by the East African Community Act 2006, as amended, which entered into force in December 2014) is set to begin operations in January 2016.
All EAC partner states have ratified the Protocol for the establishment of the East African Monetary Union ("EAMU"), with the process of establishing four institutions to underpin the EAMU being underway. These institutions are the East African Financial Services Commission; the East African Monetary Institute; the East African Statistics Bureau; and the East African Surveillance, Compliance and Enforcement Commission.
Promotion of investment and private sector development (formulating the Model EAC Bilateral Investment Treaty, promoting public-private partnerships dialogue and showcasing investment opportunities in the region).

GHANA: Multilateral Competent Authority Agreement on automatic exchange of information signed

Ghana signed the Multilateral Competent Authority Agreement on the Automatic Exchange of Information ("MCAA") on the introduction of the automatic exchange of information in tax matters on a reciprocal basis on 19 May 2015. In accordance with their commitment to the Global Forum, Ghana intends to start collecting data in 2017.

The state will exchange information automatically based on the international standard for the exchange of information developed the OECD.

KENYA: Automated iTax filings clarified

The Kenya Revenue Authority ("KRA") introduced a single number for taxpayers using the iTax system, with taxpayers being required to use only their PINs (personal identification numbers) when submitting their returns for PAYE (pay-as-you-earn), excise and VAT (value-added tax) purposes, in a bid to enhance the system's effectiveness as an easy tax compliance.

In a public notice, the KRA confirmed that taxpayers who are required to file nil returns for both VAT and PAYE (pay-as-you-earn) purposes, are required to file their tax returns with effect from May 2015 through the iTAx system. No paper/manual nil tax returns will be accepted or considered by the KRA.

KENYA: Qatar treaty ratified

Qatar's Emir ratified the Kenya - Qatar Income Tax Treaty (2014) on 25 May 2015.

LESOTHO: VAT Mutual Assistance Agreement with South Africa enters into force

The Value-Added Tax (VAT) Mutual Assistance Agreement between South Africa and Lesotho entered into force on 11 May 2015. The Agreement is effective retrospectively from 29 October 2014.

MALAWI: 2015/16 Budget

The Malawi 2015/16 Budget recently presented to parliament proposals to levy income tax on deemed interest earned on interest-free loans, where the deemed interest income will be taxable in the hands of the lender with effect from 1 July 2015.

MAURITIUS: Memorandum of Understanding signed with South Africa on Treaty

On 22 May 2015, the Mauritius Revenue Authority ("the MRA") and the South African Revenue Service ("SARS") entered into a Memorandum of Understanding concerning the application of Article 4(3) of the agreement signed on 17 May 2013 between the Government of the Republic of Mauritius and the Government of the Republic of South Africa for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

The understanding was reached in relation to the below factors to be considered when endeavouring to settle the question of dual residence:

Where the meetings of the Board of Directors are usually held;
Where the Chief Executive Officer and other senior executives usually carry out their activities ;
Where the senior day-to-day management is carried out;
Where the headquarters are located;
Which country governs the legal status;
Where the accounting records are kept ;
Any other factors listed in paragraph 24.1 of the 2014 OECD Commentary on paragraph 3 of Article 4 of the OECD Model Convention (Definition of "Resident"); and
Any other factors relevant in determining the residency.

NIGERIA: Court of Appeal upholds rulings on capital allowances and dividend payments

In March 2015 the Court of Appeal ("the Court"), in a case between a company engaged in the marketing of petroleum products and the manufacture of lubricants ("the Taxpayer") and the Federal Inland Revenue Service (the FIRS), upheld an earlier ruling by the Federal High Court ("FHC"), which rejected a claim for 100% claim in a tax year of capital allowance by a company not fully engaged in the agro-allied or manufacturing industries.

According to the Taxpayer the 2nd Schedule of the Companies Income Tax Act ("CITA") does not set any threshold to be met by a company engaged in manufacturing activities to be entitled to claim the full capital allowance. Once a company is found to engage in manufacturing activity, it is entitled to the full claim of capital allowance.

The FIRS argued that companies whose nature of business fall under agro-allied industries and companies engaged in the trade or business of manufacturing are entitled to a 100% capital allowance, but other businesses that do not fall under either of the two mentioned categories are only allowed a restricted (66.66%) capital allowance. According to the FIRS the Taxpayer was not solely engaged in the manufacture of lubricants, but also in the extensive marketing of petroleum products.

The Court held that, although the Taxpayer was engaged in manufacturing activities, such activities were not sufficient to justify a full claim of capital allowance on all its activities (including marketing activities). For this unrestricted claim to suffice, a company must be engaged in either the agro-allied or manufacturing industry as an indisputable fact. For a company engaged in manufacturing activities in addition to other business activities, the claim to the full capital allowance is limited to the portion of its assessable profits relating to the manufacturing activity. This must be clearly shown in its annual returns and financial statements.

The Court also sustained an assessment for Excess Dividend Tax on the basis that the dividends were paid out of profits which has not been subjected to tax.

NIGERIA: Federal High Court rules that bottled water is "basic food item" exempt from VAT

On 11 May 2015, in a case brought before it by a group of water manufacturers, the Federal High Court ("the Court"), sitting in Lagos, ruled that bottled and/or packaged water is exempt from value-added tax (VAT).

According to the FIRS, the process of bottling/packaging water removed it from the realm of "basic food item", and the bottling/packaging process represents the addition of value to the water and is therefore subject to VAT under the VAT Act.

The manufacturers argued that the process of bottling/packaging water does not remove it from the realm of "basic food item" and, therefore, bottled/packaged water is exempt from VAT as per the First Schedule to the VAT Act.

The Court ruled that water is a basic food item, regardless of any value addition such as purification and/or packaging. Accordingly, bottled/packaged water is exempt from VAT in line with the First Schedule to the VAT Act.

SEYCHELLES: Tax Amnesty Programme

The Revenue Commission informed taxpayers on 8 May 2015 that the tax amnesty programme ("TAP") for taxpayers who have outstanding debts and returns presented in March 2015 is still available.

The TAP covers business tax arrears in respect of the 2013 and prior tax years and withholding and other taxes in respect of the 2014 and prior tax years. Taxpayers may qualify for waiver of penalties and interest of between 25% and 100%, depending on the payment date of relevant taxes.

SEYCHELLES: Multilateral Competent Authority Agreement on automatic exchange of information signed

Seychelles signed the Multilateral Competent Authority Agreement on the Automatic Exchange of Information ("MCAA") on the introduction of the automatic exchange of information in tax matters on a reciprocal basis on 19 May 2015,. In accordance with their commitment to the Global Forum, Seychelles intends to start collecting data in 2018.

The state will exchange information automatically based on the international standard for the exchange of information developed by the OECD.

Sources include IBFD, IHS and other

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

South Africa: Africa Tax In Brief (9 June 2015)