South Africa: Africa Tax In Brief - July 2013

Country

Topic

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.

• 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.

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.

• 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.

• 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.

• 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.

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:

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

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.

• 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.

• 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%.

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