South Africa: Africa Tax In Brief - July 2013

Last Updated: 2 August 2013
Article by Celia Becker

Most Read Contributor in South Africa, September 2018

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Botswana Amendments to exchange of information provisions

In an attempt to disprove impressions that the country may be a tax haven, Botswana is in the process of amending its Income Tax Act and Banking Act, identified by the Global Forum on Transparency and Exchange of Information to address some deficiencies in respect of the exchange of information for tax purposes.

Parliament approved the amendment of the Income Tax Act in December 2012 to allow the Botswana Unified Revenue Service to exchange information for tax purposes.  The Banking Act is being amended to repeal strict banking secrecy provisions to allow for banking information to be provided for the purposes of exchange of information with treaty partners.

In addition, Botswana has concluded negotiations of Protocols to amend the Article on Exchange of Information in the double tax treaties with Sweden, Seychelles and South Africa to allow for the effective exchange of information for tax purposes.  Negotiations to amend the treaties with Barbados and France are also at an advanced stage.

Isle of Man Information Exchange Agreement The Isle of Man has signed a Tax Information Exchange Agreement with Botswana on 14 June 2013 and announced that the country is currently negotiating similar agreement with six other SADC countries.
East Africa 2013/14 Budget The 2013/14 Budget speech was presented to the East African Legislative Assembly on 30 May 2013.  The Customs and International Trade related priorities for the coming financial year include:
  • Consolidating the Common Market with emphasis on operationalization of the free movement of labour provisions as well as the integration of the regional financial markets to enhance movement of capital;
  • Interventions in the Customs Union leading to establishment of a single customs territory.  Under the single customs territory, payment of duty will be at the first port of entry, legal framework will be common to all EAC states, circulation of goods will have minimum border control and there will be an interconnected payment system;
  • Completion of the movement towards the East African Monetary Union;
  • Investment promotion and private sector development through the public private partnership framework with a regional dimension; and
  • Cooperation in cross border infrastructure through joint projects to improve infrastructure.
Ghana Social security contributions for expatriates

The Ghana Social Security and National Insurance Trust (SSNIT) has announced that it will be enforcing compliance with the National Pensions Act, 2008 (Act 766) in respect of expatriate social security contributions with effect from 2 July 2013.

In terms of the Act, the mandatory First Tier Basic Social Security Scheme applies to every employer and worker of an establishment in Ghana, unless expressly exempted by the Constitution or any other Law.  In respect of non-Ghanaians, exemption is only provided for in respect of diplomatic agents and the United Nations and its specialised agencies which have diplomatic status.  Accordingly, all other expatriates working in Ghana are thus required to register and contribute to the Social Security Scheme.

However, in terms of the SSNIT's current practice, it will allow for an exemption of expatriates where they are in Ghana on a short term basis (not more than 3 years) and are undertaking the installation of equipment or machinery acquired by a Ghanaian company under a Suppliers Contract and for training of local workers or undertaking a Technology Transfer Agreement under the Investment Promotion Centre Act or where proof is provided by the employer that such expatriate is still a worker in his/her home country and a member of the Pension Scheme of that country.

Internal Revenue Amendment Act 2013 The Ghanaian Parliament has passed into law the Internal Revenue Amendment Act, 2013 (Act 859) on 23 May 2013.  With effect from 24 May (effectively for the month of June 2013) the following annual individual income tax bands apply:

Year 2013

Chargeable Income (GHS)

Rate (%)

First 1 584 0
Next 792 5
Next 1 104 10
Next 28 200 17.5
Exceeding 31 680 25
Additional taxes and levies introduced The Government has announced that it is considering introducing inter alia the following fiscal measures to boost the country's revenue and reduce the current budget deficit:
  • Re-introduction of National Fiscal Stabilisation Levy ("NFSL");
  • Imposition of additional import levies;
  • Increase in excise duties;
  • A special audit of the revenue administration to plug revenue leakages.
Kenya 2013/14 Budget review The 2013/14 Budget Speech of 13 June 2013 announced the:
  • Re-introduction of Capital Gains Tax;
  • Introduction of a railway development levy of 1.5% on all imported goods to fund construction of a standard gauge railway line from Mombassa to Kisumu;
  • Re-tabling of a VAT Bill aimed at simplifying, modernizing and reducing the cost of compliance.  Amendments as per the Bill include the introduction of advance rulings, the reduction of the period for claiming input tax from 12 to 3 months, accounting for reverse VAT only on exempt supplies, zero rating supplies to Oil and Gas Exploration Companies and the introduction of Tax Representatives.
Mauritius Renegotiation of double tax treaty with South Africa The amended South Africa / Mauritius double tax treaty, recently signed and expected to come into effect in 2015, introduces a number of material amendments.
  • The tax residence of entities resident in both Contracting States will no longer be determined by the "place of effective management" test.  Instead, the competent authorities of the two states must "by mutual agreement endeavour to settle the question" and determine how the double tax treaty will apply to such person.
  • There has been wide-spread criticism of these provisions in light of the uncertainty it would create – not only would taxpayers have to rely on the tax authorities in the two countries to reach agreement on this issue, but also to do so in an expeditious manner.  Should the two authorities not be able to reach agreement, the taxpayer will not be entitled to rely on the double tax treaty.
  • However, where a Mauritius incorporated subsidiary of South African group is able to substantiate that it is truly effectively managed in Mauritius (as is required currently), this amendment to the treaty should not have an impact on such companies.
  • The new double tax treaty replaces the exemption for withholding tax on interest with a cap on the tax on interest which may be imposed by the source country to 10%.
  • In terms of the current double tax treaty, the withholding tax on dividends will be reduced to 5% if the beneficial owner holds at least 10% of the capital of the company paying the dividends, while in all other instances, the dividends tax may not exceed 15%.  The fall-back position has now been amended to reduce the maximum dividends tax rate to 10%.
  • The current exemption from royalties withholding tax has been replaced with a 5% maximum rate.
  • These amendments to the withholding tax provisions should in principle only be relevant to Mauritius entities receiving payments from South Africa, as Mauritius does not levy withholding tax.
  • The current double tax treaty provides protection against South African capital gains tax for a Mauritian company owning shares in a South African company holding immovable property.  However, the capital gains article of the new double tax treaty now specifically provides that a country may tax gains derived from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in such country.
Mauritius Monaco double tax treaty Mauritius has signed a double tax treaty with the Principality of Monaco on 13 April 2013.
Namibia Income Tax Amendment Act 4 of 2013

The Income Tax Amendment Act 4 of 2013, the Transfer Duty Amendment Act 6 of 2013 and the Stamp Duties Amendment Act 7 of 2013 were gazetted on 31 May 2013.

The following individual income tax rates are effective from 1 March 2013:

Taxable amount (N$)

Amount (N$)

Marginal (%)

From

To

0 50 000 0 0
50 001 100 000 0 18
100 001 300 000 9 000 25
300 001 500 000 59 000 28
500 001 800 000 115 000 30
800 001 1 500 000 205 000 32
1 500 001 and over 429 000 37

The corporate tax rates effective for years of assessment commencing on or after 1January 2013 are:

Type of taxpayer

Rate (%)

Non-manufacturing 33
Branch of a foreign company 33
Registered manufacturer 18% for the first 10 years of registration, thereafter 33%
Hard rock mining and hard rock mining services 37.5%
Diamond mining and diamond mining services 55%
Oil and gas extraction 35%
Insurers 33% (long term insurers are subject to 40% tax on investment income)
Nigeria Guidance on tax implications of adoption of IFRS

Nigeria's Federal Inland Revenue Service (FIRS) has issued an Information Circular dated 23 April 2013 as a guide to taxpayers regarding the tax implications of the adoption of International Financial Reporting Standard (IFRS) by the Nigerian government in 2010.

Key provisions of the Circular include

  • an extension of time for filing of returns by first-time adopters of IFRS and additional documentation requirements; and
  • the tax treatment of excess dividends, inventory, changes in accounting policy, the exchange of assets, leases and allowable and non-allowable deductions.
Rwanda 2013/14 Budget review The 2013/14 Budget Speech of 13 June 2013 announced the:
  • Introduction of a 4% royalty tax on the value of extracted minerals on basic metals and 6% on precious metals and precious stones;
  • Introduction of Electronic Billing Machines (EBM) to be used by all registered taxpayers; and
  • Revision of the double tax agreement between Rwanda and Mauritius.
Tanzania 2013/14 Budget review The 2013/14 Budget Speech of 13 June 2013 announced the:
  • Reduction of the minimum tax on income of a resident individual from 14% to 13%;
  • Introduction of a 10% withholding tax on commissions on mobile money transfer services;
  • Introduction of a 5% withholding tax on services, irrespective of whether a supplier has a tax identification number of not;
  • Introduction of 2% withholding tax on the supply of goods to the government;
  • Abolishment of the exemption of withholding tax on rental charges of aircraft lease payments to a non-resident by a person engaged in air transport business;
  • Abolishment of VAT exemption on tourist services; and
  • Proposal to reduce the skills development levy from 6% to 5%.
Uganda 2013/14 Budget review The 2013/14 Budget Speech of 13 June 2013 announced the withdrawal of VAT exemption for hotel accommodation, making it subject to the standard VAT rate of 18%. This would result in significantly higher cost for tourists and conference participants.
Zambia Mining companies to receive proceeds of export sales in Zambia A new law in Zambia, which cam into force in June 2013, requires mining companies to bring the proceeds of export sales back to Zambia.  The Zambian tax authorities will scrutinise dividend and other payments prior to granting approval for repatriation from the country.
Zimbabwe Increase in National Social Security

Monthly contributions to the National Social Security Authority (NSSA) for employers and employees have been increased from 3% to 3.5% of the first $700 (previously $200) of basic monthly earnings with effect from 1 June 2013.

Contributions apply to employees who are ordinarily resident in or citizens of Zimbabwe

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.

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