Most Read Contributor in South Africa, September 2016
KENYA: Amnesty granted to landlords
In terms of the new section 123C, introduced into the Income Tax
Act by Finance Act 2015 (the "Act"), the
Kenya Revenue Authority ("KRA") has
granted a tax amnesty to landlords with effect from 1st January
The Act provides amnesty for persons who shall willingly declare
their 2014 and 2015 rent, pay the implied principal tax and file
returns (original or amended) between 1 July 2015 and 30 June 2016.
For the two years (2014 and 2015), penalties and interest shall be
waived, as well as the principal, interest and penalties for 2013
and prior years.
The provisions of Section 123C are wide and do not limit the
scope of the amnesty, save for the instances relating to issued
assessments and on-going audits or investigations. As such,
individuals and any body of persons, be they incorporated or
unincorporated, resident or non-resident, can take advantage of the
amnesty. Taxpayers are also at liberty to apply the amnesty to
rental income generated from residential, retail or commercial
In addition, where a person has no documentation to support
expenditure, such person shall be allowed a deduction of forty
percent of the gross rent, premium or similar consideration for the
use or occupation of immovable property.
NIGERIA: Recharges are not tax deductible under deemed profits
basis of assessment
On 18 December 2015, the Lagos Tax Appeal Tribunal
("TAT") gave its decision in VF
Worldwide Holdings Limited (VFW) v. Federal Inland Revenue
Service (TAT/LZ/019/2012), reinforcing the decision of the
Court of Appeal in Federal Board of Inland Revenue (FIRS) v.
Halliburton Limited (CA/L/320/2009) that a taxpayer filing
returns under the deemed profit basis is not entitled to any
deduction other than the 80% deemed cost. Accordingly, recharges
are not allowable deductions when computing a non-resident
company's income tax under the deemed profits basis of
In the past, the FIRS accepted tax returns filed by non-resident
companies ("NRCs") under the deemed
profits basis. Under this regime, NRC's profits are deemed to
be 20% of its turnover. In terms of section 30(1)(b) of the
Companies Income Tax Act ("CITA"), the
FIRS has the discretion to assess and charge a company for that
year of assessment on such fair and reasonable percentage of that
part of the turnover attributable to the fixed base, where such
company has no assessable profits or in its opinion, the profits
are less than expected or cannot be ascertained.
In the case at hand VFW, a NRC, was awarded a contract to render
visa-related services to the Secretary of State for Foreign and
Commonwealth Affairs of the United Kingdom
("UKBA") in various countries including
Nigeria. In order to execute the Nigerian portion of the contract,
the Appellant set up a Nigerian company, VF Nigeria Limited
("VFNL"). VFW executed a service
agreement with VFNL under which VFNL would be compensated for its
services at cost plus 8%.
VFW filed its Nigerian tax returns on the deemed profit basis,
calculating its deemed profit as 20% of its net turnover, after
deducting the amount paid to VFNL. The FIRS disallowed the
deduction on the basis that tax should be imposed on the gross
turnover, as all costs are deducted under the 80% deemed costs.
The FIRS issued a public notice on 28 January 2015 directing
NRCs to henceforth file their tax returns based on actual profits
in line with section 55 of the CITA.
NIGERIA: Financial transactions subject to stamp duty
On 15 January 2016, the Central Bank of Nigeria issued a
circular CBN/GEN/DMB/02/006 (the
"Circular") directing all deposit money
banks ("DMBs") and other financial
institutions to charge and collect NGN50 stamp duty on all receipts
issued in acknowledgement of banking transactions on electronic
transfers and teller deposits of at least NGN1,000.
The following receipts are exempt from stamp duty:
payments, deposits or transfers from self to self, whether
inter- or intra-bank; or
any form of withdrawals or transfers from savings
The directive takes immediate effect.
Sources include IBFD, IHS and other
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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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