Most Read Contributor in South Africa, September 2016
New Tax Acts
The following five new Bills referred to in our August 2013
newsletter have now been passed into Law by Parliament, having been
assented to by the President and duly gazetted:
Value Added Tax (Amendment) Act, 2013 (Act 860);
Special Import Levy Act, 2013 (Act 861);
National Fiscal Stabilisation Levy Act, 2013 (Act 862);
Customs, Excise (Duties and Other Taxes) (Amendment) Act, 2013
(Act 863); and
Communication Services Tax (Amendment) Act, 2013 (Act
The main provisions of these Acts do not differ significantly
from the details as per our August 2013 newsletter.
The VAT Bill re-tabled during the 2013/14 Budget Speech was
assented to on 14 August 2013 and enacted as the Value Added Tax
Act, 2013 ("the Act").
The commencement date of the Act is by notice, which notice has
not yet been published.
The Act incorporates current subsidiary legislation (VAT rules,
orders and regulations) into the principal regulations and
introduces the following sections:
place and time of supply;
application of technology; and
invoices, records and returns.
The 12% VAT rate on industrial heavy diesel oil, residual fuel
oils and electrical energy has been abolished and replaced with the
standard rate of 16%.
The Act significantly reduces the number of exempt and zero
The current VAT Act allows for inputs to be claimed up to a
period of 12 months from the invoice date. The Act provides that
input tax shall be allowed as a deduction for six months after the
end of the tax period in which the supply or import occurred.
Under the current VAT Act, importers of taxable services must
declare and pay reverse VAT. Under the new Act, where a service is
imported by a registered person, such person shall be deemed to
have made a taxable supply to himself and where a full input credit
is payable on the imported service, the value of the taxable
service shall be reduced to nil.
Where a non-resident supplier makes taxable supplies to
non-registered persons, the non-resident shall be required to
appoint a tax representative in Kenya who will be responsible to
account for VAT on behalf of the non-resident supplier.
Tax Appeal Tribunal Ruling on Recharges
The Tax Appeal Tribunal (TAT) has ruled against two non-resident
taxpayers on the question of whether their taxable turnover in
Nigeria for purposes of calculating corporate income tax on the
deemed profit basis should be determined by exclusion of any part
thereof paid to a Nigerian subsidiary engaged to support local
execution of a contract.
A superior court may overturn this ruling on appeal. However,
the implication of the ruling is that where a foreign entity is the
sole signatory to a contract, the total receipts attributable to
the contract will form the turnover liable to corporate income tax
for purposes of assessing the foreign entity on a deemed profit
Practice note on withholding tax on service fees
Following the announcement of a 5% withholding tax on domestic
service fees in the 2013/2014 Budget Speech of 13 June 2013, the
Tanzania Revenue Authority has issued Practice Note 01/2013 in
August to address administrative problems arising from the wide
scope of the withholding tax.
The withholding tax is due on payments of a service fee with a
source in Tanzania by a resident to another resident or domestic
permanent establishment of a non-resident.
The service fee should be for providing professional or
consultancy services or other such services of an independent
business nature, and specifically includes scientific, literary,
artistic, educational or training activities, as well as activities
of physicians, surgeons, lawyers, architects, engineers, surveyors,
dentists, accountants and auditors.
The supply of water and electricity shall be regarded as goods
and therefore not subject to withholding tax.
The Practice Note further provides guidance on what is regarded
as a service fee with a source in Tanzania and lists payments
excluded from the withholding tax.
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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Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
In response to information provided by FIRS, NSE has sent letters to publicly listed companies, who were purportedly identified by FIRS as non-compliant.
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