AFRICA | Africa Tax Administration Forum comments on OECD global tax agreement

The African Tax Administration Forum ("ATAF") on 8 October 2021 issued a statement commenting on the progress made towards the OECD global tax agreement that envisages implementing a two-pillar solution towards addressing the tax challenges arising from the digitalization of the economy.

ATAF and various African members of the Inclusive Framework ("IF") have been heavily involved in the negotiations and the ATAF has been providing technical support to its members to ensure that the new Pillar One and Pillar Two rules address the needs of African countries.

Pillar One rules

The Pillar One rules incorporate a number of ATAF's recommendations on the Pillar One proposals contained in the OECD blueprint report of October 2020, including broadening the proposed scope to include all sectors, instead of the narrower scope proposed by the OECD.

The ATAF welcomed the nexus threshold reduction from EUR5-million to EUR1-million and the lower threshold of EUR250,000 for jurisdictions with GDP lower than EUR40-billion, expressing the view that this should ensure that no member of the IF will be excluded from receiving its reallocation of profit under the so-called Amount A.

The ATAF has succeeded in obtaining an agreement that there will be no mandatory dispute resolution mechanism imposed on many African and other developing countries, which could be a costly process with countries with limited capacity and where there is little risk of double taxation. An elective binding dispute resolution mechanism will be available for issues related to Amount A for developing economies that are eligible for deferral of their BEPS Action 14 peer review and that have no or low levels of mutual agreement procedure disputes.

The ATAF previously called for at least 35% of the so-called residual profit to be allocated to market jurisdictions, whereas the agreement only reallocates 25% to market jurisdictions under Amount A. The ATAF acknowledged that the additional allocation of the global profits of the most profitable Multinational Enterprises ("MNEs") to market jurisdictions is a step in the right direction in the reallocation of taxing rights. However, it will not result in the substantial shift in the allocation of taxing rights between residence and source countries that ATAF and African countries have been advocating for.

Pillar Two rules

The ATAF highlighted that, for the minimum tax rule to be effective in stemming artificial profit shifting away from the continent, the minimum effective rate should be at least 20% instead of 15% as most African countries have a statutory corporate income tax rate of between 25% and 35%.

The ATAF notes that the agreement gives priority to the Income Inclusion Rule (IIR), with the Undertaxed Payments Rule (UTPR) being only applicable in very limited circumstances. The ATAF is of the view that a source-based rule such as the UTPR or the Subject to Tax Rule (STTR) should be the primary rule under Pillar Two to assist in redressing the current imbalance in the allocation of taxing rights between residence and source jurisdictions.

Implementation

The ATAF will work closely with the African Union and African countries on the implementation of the new rules within the timetable of the end of 2023 set out in the IF plan, taking into consideration that not all countries have a similar capacity to implement the rules.

Regarding the few IF members that have not joined the agreement and the other African countries that are not members of the IF, the ATAF has expressed concern about how the new rules will impact upon those countries and that political pressure should not be brought on such countries to apply these rules or to join the IF.

BOTSWANA | Protocol to tax treaty with France enters into force

The amending protocol to the Botswana - France Income Tax Treaty (1999), signed on 27 July 2017, entered into force on 1 January 2021 and generally applies from 1 January 2018 for France and from 1 July 2018 for Botswana.

BOTSWANA: Tax treaty with the United Arab Emirates ("UAE") enters into force

According to an update of 9 August 2021, published by the Ministry of Finance of the UAE, the Botswana - UAE Income Tax Treaty (2018) entered into force on 27 March 2020. The treaty generally applies retroactively from 1 July 2018 for Botswana and in respect of the UAE from 1 July 2018 for withholding taxes and from 1 July 2019 for other taxes.

BOTSWANA: Public Notice on filing of returns for the 2020/2021 tax year issued

The Botswana Unified Revenue Service has issued a Public Notice, providing that:

  • individuals with gross income of less than BWP480 000 per annum are not required to file a tax return for the 2020/2021 tax year, provided their income meets the exceptions provided for; and
  • employers are required to ensure that:
    • employees share their taxpayer identification numbers (TIN) for purposes of submission of their withholding annual tax returns;
    • they issue certificates of tax deducted (ITW8s) to all employees from whom tax has been deducted and to finalise annual returns of tax deducted as required by law; and
    • they register for and use e–services platforms for filing returns and making payments.

These measures shall remain in place until the Commissioner General advises otherwise.

CAMEROON: Tax treaty with the UAE enters into force

The same Ministry of Finance update also announced that the Cameroon - UAE Income Tax Treaty (2017) entered into force on 16 April 2021 and generally applies retroactively from 1 January 2021.

ETHIOPIA: Tax treaty with the UAE enters into force

Similarly, the Ethiopia - UAE Income Tax Treaty (2015) entered into force on 6 November 2018 and generally applies retroactively from 1 January 2018 in respect of the UAE and from 8 July 2019 in respect of Ethiopia.

IVORY COAST: Council of Ministers approves Multilateral Convention ("MLI")

On 20 October 2021, the Council of Ministers of the Ivory Coast approved a bill authorizing the President to ratify the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI).

The Ivory Coast submitted its provisional MLI position at the time of signature, listing its reservations and notifications and including 11 tax treaties that it wishes to be covered by the MLI.

KENYA: Reservations on global tax plan expressed

Kenya has expressed its reservations on joining the OECD agreement introducing a new international tax framework, finalised on 8 October 2021. The country is concerned that backing the agreement may hamper future revenue mobilisation as a market jurisdiction. Members that join the agreement are obliged to withdraw their unilateral measures such as digital services tax (which Kenya has introduced recently) and similar measures imposed on non-resident companies which do not have a physical presence in the market jurisdiction.

There is also the concern that withdrawing other similar measures may be extended to cover withholding taxes on fees for technical services and royalties which are generated by MNEs without physical presence.

The Kenya Revenue Authority ("KRA") Commissioner General stated that, although Kenya has not signed the agreement, it is fully aware of the developments and will continue engaging to arrive at a win-win outcome.

KENYA: Ruling on the treatment of tax losses in computing profits withdrawn

On 21 September 2021, the KRA issued a Public Notice to withdraw its ruling on the treatment of tax losses in computing profits with effect from 1 October 2021.

The ruling, issued as a letter to the Institute of Certified Public Accountants of Kenya (ICPAK) in 1979, waived the requirement of Section 15(7) of the Income Tax Act that a person who derives income from one or more specified sources must submit a separate account and a separate computation in respect of each specified source. In the event of a loss, that loss may only be deducted from gains or profits of that person derived from the same specified source in the following year or subsequent years of income in so far as the loss has not already been deducted.

Following the withdrawal of the ruling, all taxpayers will be required to comply with Section 15(7).

MAURITANIA | Tax treaty with UAE enters into force

According to an update of 9 August 2021, published by the Ministry of Finance of the UAE, the Mauritania - UAE Income and Capital Tax Treaty (2015) entered into force on 18 July 2019 and generally applies from 1 January 2020.

MAURITIUS: Communiqué re e-Appointment Assistance for e-fling of returns issued

The Mauritius Revenue Authority ("MRA") on 9 September 2021 issued a Communiqué announcing that an e-Appointment system has been put in place to help taxpayers get assistance through a WhatsApp Video Call to file their individual income tax / CSG returns.

The e-Appointment system is available on the MRA website (www.mra.mu) and allows taxpayers to reserve a time slot on a particular day, at their convenience.

MAURITIUS: Statement of Practice on trusts and foundations issued

The Mauritius Revenue Authority ("MRA") on 24 August 2021 issued Statement of Practice (SP24/21): Trusts and Foundations to provide clarification in the application of sections 73A and 116 of the Income Tax Act pertaining to trusts and foundations in light of the amendments brought to sections 46 and 49A of the Income Tax Act by the Finance Act.

MOZAMBIQUE: Guide on the requirements for the issuance of tax clearance certificates issued

The Mozambique Revenue Authority issued a guide on the requirements for the issuance of tax clearance certificates, setting out practical requirements for the issuance of tax clearance certificates, which vary depending on the nature of the tax clearance certificate, in relation to:

  • work permits;
  • salary payments abroad;
  • renewals (employment contracts, DIRE);
  • offshore transfers;
  • cost refund transfers; and
  • reinsurance transfers.

NAMIBIA: Details of reservations and notifications to the MLI released

Following Namibia's signing of the Multilateral Convention (MLI) on 30 September 2021, the government of Namibia released its provisional list of expected reservations and notifications to the MLI, which will be confirmed upon deposit of the instrument of ratification.

NIGERIA | Reluctant to endorse the OECD proposal on digital economy

On Tuesday 21 September 2021, the Federal Government of Nigeria provided reasons for its delay in endorsing the two-pillar solution proposed by the OECD in addressing the tax challenges of the digital economy.

The Minister of Finance, Budget and National Planning expressed concern that Nigeria may experience a reduction in revenue collection if the OECD's proposal is implemented as proposed. She is of the view that only 100 MNEs fall within the revenue threshold under the new special purpose nexus rule which permits allocation of Amount A to a market jurisdiction when the MNEs derive at least EUR1-million in revenue from that jurisdiction, with the exception of smaller jurisdictions with a GDP lower than EUR40-billion, where the nexus was set at EUR250,000. MNEs will continue to exploit the digital space, whereas the potential revenue that could have been collected from other MNEs operating in the digital space would be reduced.

In addition, the requirement of a mandatory binding dispute resolution mechanism for Amount A would be in violation of Nigeria's constitution as it relates to the resolution of tax dispute which falls within the exclusive jurisdiction of the Federal High Court.

NIGERIA: Scope of VAT exempt supplies expanded

The Federal Government of Nigeria has published the VAT (Modification Order), 2021 in its Official Gazette No. 167, Vol.108 of 21 September 2021. The Order, with a commencement date of 30 July 2021, expands and clarifies the scope of VAT exempt supplies provided under the First Schedule to the VAT Act. The following has been added as VAT-exempt goods and services:

  • petroleum products;
  • renewable energy equipment;
  • raw materials for the production of baby diapers and sanitary towels;
  • raw materials for the production of pharmaceutical products;
  • locally produced animal feeds;
  • military hardware, arms, ammunition, and locally manufactured military uniforms used by the Armed forces, para-military, and other security agencies of governments in Nigeria;
  • gas supplied by gas-producing companies to electricity-generating companies (GENCOs), and electricity generated by GENCOs and supplied to National Grid or Nigeria Bulk Electricity Company and Electricity transmitted by Transmission Company of Nigeria to Electricity Distribution Companies;
  • agricultural seeds and seedlings; and
  • shared passenger and road-transport services.

NIGERIA: Relief from interest and penalties provided for late filing of returns via TaxPro-Max

In Nigeria the TaxPro-Max platform became mandatory for filing all Naira (NGN) denominated tax returns with effect from 7 June 2021.

In order to support migration to the new platform, Nigeria's Federal Inland Revenue Service ("FIRS") issued a public notice on 8 October 2021 announcing interest and penalty relief for the late filing of corporate income tax returns for the 2021 year of assessment that were due on or before 30 June 2021. The public notice provides that Naira (NGN) denominated tax returns filed via the new TaxPro-Max e-filing solution by 30 November 2021 will be relieved from interest and penalties. Any returns filed after this date will be subject to late return penalties and interest from the due date of such returns.

RWANDA: Automatic exchange of financial account information to commence by 2024

According to an OECD press release of 28 September 2021, Rwanda has committed to implement the international standard for the OECD Automatic Exchange of Financial Account Information Agreement, 2014 ("AEOI"), by September 2024. This commitment makes Rwanda the 120th Global Forum member to commit to start AEOI by a specific date, and the ninth African country to do so.

RWANDA: Income Tax Law Amendment Bill approved by Cabinet

On 21 September 2021, the Cabinet approved the income tax law amendment bill. Details are to follow.

RWANDA: Announcement regarding electronic billing machines ("EBMs") issued

The Rwanda Revenue Authority on 21 September 2021 issued Announcement: Termination of "Local Audit" services on EBM V.1. The announcement provides that:

  • "Local Audit" services on EBM V.1 will no longer be offered effective 1 November 2021, in pursuit of streamlining service delivery and updating to the most recent and efficient technology;
  • taxpayers who have been using EBM V.1 are requested to migrate to the new version of EBM V.2.1 before 1 November 2021; and
  • suppliers of EBM V.1 who usually offer technical support will terminate the service on 1 November 2021.

SEYCHELLES: Removed from European Union ("EU") list of non-cooperative jurisdictions

The Council of the EU has removed Seychelles from the its list of non-cooperative jurisdictions. The delisting comes as a result of the OECD's Global Forum for Transparency and Exchange of Information regarding the exchange of information on request decision to review the jurisdiction's tax transparency criteria.

However, the jurisdiction remains on the list of jurisdictions with pending commitments.

TANZANIA: Tax Regulations issued

In a bid to enhance tax administration in Tanzania, the Minister for Finance and Planning has issued the Tax Administration (Remission of Interests and Penalties) (Revocation) Regulations, the VAT (General) (Amendment) Regulations, and the VAT (Exemption Management Procedures) Regulations.

The Tax Administration (Remission of Interests and Penalties) Regulations, 2020 have been revoked in line with the Finance Act of 2021, whereas the VAT (General) Regulations, 2015 have been amended to accommodate the procedures for goods transferred to Mainland Tanzania as well as application for refund of goods purchased by registered taxpayers in Zanzibar. The VAT (Exemption Management Procedures) Regulations provide for removing the powers of granting exemptions from the Minister and vesting the same with the Commissioner General and require an application for tax exemption to be made to the Commissioner General in a prescribed form.

ZIMBABWE: Tax treaty with UAE enters into force

According to an update of 9 August 2021, published by the Ministry of Finance of the UAE, the UAE - Zimbabwe Income Tax Treaty (2018) entered into force on 7 February 2021. The treaty generally applies retroactively from 1 January 2018.

Sources include IBFD's Tax Research Platform;  www.allafrica.com;  http://tax-news.com, orbitax.com

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.