AFRICA: African Tax Administration Forum Model Tax Agreement under review
On 29 April 2025, the African Tax Administration Forum ("ATAF") announced that it has commenced a review of its ATAF Income Model Convention (2019), aimed at strengthening the ability of African countries to negotiate tax treaties that reflect their economic and policy interests, protect taxing rights and enhance domestic resource mobilisation.
Many tax treaties in African jurisdictions are based on international models that do not always accommodate the specific needs of developing economies. The revised model seeks to ensure a more balanced allocation of taxing rights, particularly in light of global tax developments, such as digitalisation and base erosion. It should also provide practical guidance to African countries in treaty negotiations and reflect best practices adapted to regional realities.
The review is being conducted by a working party consisting of experienced tax officials from ATAF member states, including Nigeria, Kenya, Zambia, Rwanda and Tanzania. Once completed, the revised model will continue to serve as a key reference for ATAF member countries and other stakeholders in shaping fair and effective bilateral tax treaties.
KENYA: Tax Tribunal reverses decision on default net profit calculation
The Kenyan High Court issued a verdict in the case of Cipla Kenya Ltd v. Commissioner of Domestic Taxes ([2025] KETAT 223), (Tax Appeal E422 of 2024), ruling that the tax authority was not justified in applying the median rate in computing the appellant's net profit.
In the case at hand, Cipla Kenya Ltd ("Cipla Kenya") is a limited liability company incorporated in Kenya and a subsidiary of Cipla Medpro South Africa, with the ultimate holding company Cipla Limited India ("Cipla India"). Cipla Kenya was engaged in the distribution and marketing of pharmaceutical goods imported from its parent company in India for sale in Kenya. In 2023, the Kenya Revenue Authority ("KRA") audited the appellant's 2018 tax records and assessed a corporate income tax liability of KES78 million, comprising principal tax, interest, and penalties. Cipla Kenya objected to the assessment, prompting the KRA to partially reduce the assessed tax. Dissatisfied with the outcome, Cipla Kenya appealed the decision to the Tax Appeals Tribunal ("TAT").
The core of the dispute centred on the KRA's transfer pricing adjustments. Specifically, the KRA insisted on applying the median point of a benchmarking range, even though Cipla Kenya's operating margin already fell within the acceptable inter-quartile range. Additionally, the KRA disallowed employment expenses totalling KES91-million, citing insufficient documentation and non-compliance with the deductibility requirements under the Income Tax Act. Cipla Kenya challenged these positions, arguing that all necessary documentation had been submitted. They also contended that KRA's insistence on using the median reflected a misinterpretation of international transfer pricing principles.
The case was filed in the High Court, which ruled that:
- The OECD Transfer Pricing Guidelines provide that the median rate is usable to minimise the risk of error due to unknown or unquantifiable remaining comparability defects;
- Since the KRA had identified comparability defects such as regulation, target market and branding, it could not, therefore, rely on these provisions of the OECD Transfer Pricing Guidelines to state that the comparability defects were unknown or unquantifiable. It was, accordingly, not justified in applying the median rate in computing Cipla Kenya's net profit;
- The adjustments proposed by the KRA, based on disallowed expenses, would alter Cipla Kenya's profit as determined under the Transactional Net Margin Method ("TNMM");
- The TNMM examines the net profit relative to an appropriate base that a taxpayer realises from a controlled transaction. In contrast, in Cipla Kenya's case, the basis upon which TNMM was used is the turnover. Since the margin applied to turnover already determines the taxable profit, further adjustments through disallowed expenses would result in double taxation, and
- The KRA erred in adjusting the profit by disallowing Cipla Kenya's expenses.
KENYA: Budget 2025: Finance Bill 2025 Tabled Before Parliament
Following its approval by the Cabinet on 29 April 2025, the Cabinet Secretary for National Treasury and Economic Planning has tabled the Finance Bill 2025 before the parliament for consideration and approval. Significant proposed amendments include:
- Reducing the rate of tax on digital assets from 3% to 1.5%;
- Exempting all gratuity payments, whether in public or private pension schemes;
- Requiring employers to apply all eligible tax reliefs and exemptions when calculating pay-as-you-earn (PAYE) taxes for employees;
- Providing for tax incentives aimed at attracting investment through the Nairobi International Financial Centre (NIFC), with the goal of strengthening Kenya's position as a regional financial hub and promoting foreign direct investment (FDI);
- Allowing the Commissioner of the KRA to enter into advance pricing agreements (APAs) with a multinational company having a permanent establishment in Kenya;
- Clarifying the due date for payment of the minimum top-up tax (MTT) to be at the end of the fourth quarter after the end of the year of income; and
- Providing for waivers of interest and penalties in justifiable cases.
KENYA: Multilateral Instrument (MLI) enters into force
On 1 May 2025, the Multilateral Convention (2017) (MLI) entered into force in respect of Kenya. Kenya signed the convention on 26 November 2019 and deposited its final MLI position on 8 January 2025, including the 17 tax treaties that it wishes to be covered by the MLI. The extent to which the MLI will modify Kenya's bilateral tax treaties will depend on the final adoption positions taken by other countries.
MALAWI: Taxation and VAT Amendment Bills assented to
On 21 May 2025, the Malawian President assented to the Taxation (Amendment) Bill No. 11 of 2025 and VAT Amendment Bill No. 12 of 2025, thereby enacting them into law. The amendments take effect immediately.
MAURITIUS: Moves to replace the Assessment Review Committee with a new Revenue Tribunal
Mauritius has released the Revenue Tribunal Bill (No. XII of 2025), which proposes the establishment of a Revenue Tribunal to replace the Assessment Review Committee (ARC) under the Mauritius Revenue Authority Act. The proposed Tribunal aims to streamline the appeal process for revenue determinations, simplify proceedings, and enhance the efficiency, transparency, and accessibility of resolving tax disputes. Key provisions of the Bill include:
- The requirement that:
- appeals must be lodged within 28 days of the determination;
- preliminary hearings must be fixed within 120 days of lodging the appeal; and
- final decisions must be made within 90 days after the hearing concludes;
- Introducing a mediation process to promote amicable settlements and reduce procedural formalities, making the appeal process more accessible;
- Providing for a comprehensive transitional arrangement so that ongoing cases before the ARC will be transferred to the Revenue Tribunal, with the same panel members continuing where possible;
- Ensuring staff continuity, with all ARC personnel to be absorbed into the Tribunal under the same terms and conditions, preserving employment rights and institutional expertise;
- Maintaining procedural consistency, with appeals already lodged with the Supreme Court under the ARC regime continuing under the existing legal framework; and
- Establishing offences for non-compliance with Tribunal proceedings, including failure to attend, refusal to take an oath, or providing false evidence.
The Bill has been presented to the National Assembly. After debate and approval, subject to any amendments, it will be sent to the President of the Republic for assent. Once assented to, the Bill will be published in the Government Gazette of Mauritius, after which it will become an Act of Parliament and have the force of law.
MAURITIUS: Supreme Court rules in favour of taxpayer in VAT zero-rating dispute
The Supreme Court of Mauritius (SCM) has delivered its judgment in The Director General, Mauritius Revenue Authority v. Rogers Aviation International Ltd & Anor (2025 SCJ 203), ruling that the services provided by Rogers Aviation International Ltd ("RAIL"), in its capacity as a general sales agent for international airlines, were classified as zero-rated for VAT purposes.
RAIL, a company incorporated in Mauritius under a global business licence, acts as a general sales agent for international airlines such as Kenya Airways and Air Mauritius. Under contractual agreements, RAIL represents these airlines in foreign jurisdictions including Comoros, Madagascar, Reunion, Mozambique, Mayotte and South Africa. RAIL appoints subsidiaries in these territories to sell air tickets, collects the proceeds (less a service fee retained by the subsidiaries) and retains a portion as an "overriding commission" before remitting the balance to the airlines. RAIL classified this commission as zero-rated for VAT purposes.
The MRA disagreed, arguing that the services had been performed and utilised outside Mauritius and thus fell outside the scope of the VAT Act. Consequently, the MRA disallowed a portion of the input VAT and issued a notice of assessment claiming additional VAT, penalties and interest.
The ARC ruled in favour of RAIL, following which the MRA appealed to the Supreme Court. The Supreme Court dismissed the appeal lodged by the MRA on the basis that inter alia the services provided by RAIL under its general sales agent agreement, such as monitoring, administration and reporting, were performed in Mauritius and formed an integral part of the overall supply of services to the airlines These services were not merely incidental but were essential to the execution of the GSA agreement.
The Supreme Court agreed with the ARC that the overriding commission received by RAIL was considered for the full suite of services rendered, not just for the sale of tickets abroad. As such, the services were deemed to fall within the scope of the VAT Act and qualified as zero-rated supplies. The Supreme Court upheld the ARC's decision and dismissed the MRA's appeal with costs.
MOZAMBIQUE: VAT Code amended
The Mozambican Parliament has approved Law No. 3/2025, of 21 May, which amends the VAT Code, in order to extend the VAT exemption period for certain transactions related to the sugar, cooking oil and soap industries, until 31 December 2025.
NIGERIA: Tax Reform Bills passed
The Nigerian Senate has passed the final two remaining tax reform bills, the Joint Revenue Board Establishment Bill and the Nigeria Tax Bill, marking the completion of a key legislative effort to overhaul the country's tax framework.
The Joint Revenue Board Bill provides for the establishment of the Joint Revenue Board, the Tax Appeal Tribunal and the Office of the Tax Ombud with regard to certain types of taxation. With this Bill, the government aims to consolidate and strengthen the legal framework governing tax administration. The Nigerian Tax Bill sets out provisions for the taxation of income, transactions and instruments.
The approval of the Bills follows the Senate's earlier passage of the Nigeria Revenue Service (Establishment) Bill and the Nigeria Tax Administration Bill during a plenary session on 7 May 2025. Both Bills were passed following their presentation by the Senate's Special Committee and Finance Committee and their consideration by the Senate during the third reading. The Senate, however, turned down a proposal to increase the VAT rate from 7.5% to 10%, and elected to maintain the existing rate.
The Senate has set up a conference committee to harmonise the versions of the Bills with the House of Representatives. Once this process is complete, the final versions will be forwarded to the President for assent.
NIGERIA: National e-invoicing inter-agency steering committee inaugurated and E-invoicing platform launched
The federal government has inaugurated the national e-invoicing solution inter-agency steering committee to oversee the rollout of a new e-invoicing platform referred to as the Merchant Buyer Solution ("MBS"). All VAT-registered businesses will use the Federal Inland Revenue Service ("FIRS") MBS (e-Invoice) platform to issue e-invoices in line with the Tax Administration and Enforcement Act, 2007.
The platform aims to modernise Nigeria's fiscal infrastructure, enhance transparency, curb tax evasion and enable real-time monitoring of commercial transactions. The system supports interoperability among stakeholders, enabling seamless data sharing and integration with existing enterprise resource planning (ERP) systems used by businesses and government agencies.
NIGERIA: Immediate closure of unauthorised tax collection accounts ordered by Nigerian Revenue Service orders
The FIRS has directed all banks in Nigeria to immediately identify and close any unauthorised accounts used to collect taxes and levies on its behalf. If the assessments were not generated through the FIRS digital solution, the TaxPro-Max platform. Participating banks were also instructed to process only transactions generated from the TaxPro-Max platform.
This directive aims to enhance real-time reconciliation of collections, minimise revenue leakages, and support its broader digitalisation agenda.
NIGERIA: Tax compliance enforcement for non-resident companies ramped up
The International Tax Department, under the Non-Resident Person's Tax Office of the FIRS, has commenced intensified efforts to enforce tax compliance among non-resident companies ("NRCs") that operate in or derive income from Nigeria.
As part of its initiative, this special tax operations group of the FIRS has engaged in strategic collaborations with Nigerian regulators to gain deeper insights into the operations of NRCs within Nigeria. The FIRS has also been reaching out directly to NRCs and their tax advisors, requesting compliance with the relevant tax disclosure and payment obligations. Notably, NRCs that derive capital gains from Nigeria, or have a taxable presence (via physical or virtual/digital means) in Nigeria, are required to regularise their capital gains tax, corporate tax and other tax filings, as applicable.
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