AFRICA: African Tax Administration Forum publishes suggested approach to minimum domestic supplementary tax
The African Tax Administration Forum ("ATAF") published a proposed approach to a domestic minimum top-up tax ("DMTT") on its official website in August 2023.
The ATAF is encouraging member states to introduce broader reforms to corporate tax and incentives to ensure that multinationals operating in their countries pay taxes equivalent to an effective tax rate of at least 15%. With the Global Anti-Base Erosion (GloBE) rules to be implemented by many developed countries with effect from January 2024, member states are urged to start the reform programme with the introduction of a DMTT as soon as possible to avoid ceding taxing rights to residence jurisdictions.
AFRICA: West African Tax Administration Forum advises members on OECD Global Tax Deal
Following the publication and subsequent endorsement of the Organisation for Economic Co-operation and Development ("OECD") Inclusive Framework on Base Erosion and Profit Shifting (BEPS) by member countries, the West African Tax Administration Forum (WATAF) has advised its members to:
- scrutinise the OECD's two-pillar global tax reform plan and carry out revenue impact analysis of Amount A rules to carefully weigh its economic impact before committing to its implementation;
- only make a decision to sign a Multilateral Convention ("MLC") where the benefits of such MLC can be empirically confirmed to outweigh its cost, including the cost of administration and the cost of forgone Digital Service Taxes ("DST");
- adopt reforms in respect of Pillar 2 to weed out wasteful tax incentives and be more prudent with respect to tax incentives and measures to protect their domestic tax base;
- prioritise the introduction of alternative minimum taxes, domestic top-up taxes and similar fiscal policy measures; and
- continue building capacity in the area of international tax and the taxation of the digital economy so as to better understand the issues and their impact on member states.
ANGOLA: Various tax amendments proposed
During a press conference held by the Minister of State for Economic Coordination on 14 July 2023, it was announced that the government plans to reduce the rate of value-added tax ("VAT") on essential food items from 14% to 7% in order to reduce the cost of living.
It is also proposed to:
- exempt property transfers valued at AOA40-million or less from property tax;
- grant a 50% exemption on property transfers valued between AOA40-million and AOA100-million;
- eliminate stamp duty on real estate development and registration of share capital for companies; and
- allow companies to update their balance sheets by providing monetary and accounting updates to fixed assets at fair value without incurring any tax implications.
The effective date of implementation of these measures is yet to be announced.
ANGOLA: Expiry date for VAT self-invoicing regime removed
Presidential Decree No. 144/23, published on 29 June 2023, announced the removal of the expiry date for the VAT self-invoicing regime.
The VAT self-invoicing requirement was introduced on 16 August 2020 and is set to expire on 31 December 2022. The regime is applicable:
- to entities tax resident in Angola keeping accounting records (ie, not under the simplified regime) and operating in the agriculture sector, such as forestry, aquaculture, beekeeping, poultry, fisheries, livestock, and other activities like handicrafts, manufactured products, as well as services of diverse nature;
- where the transfer of goods or the provision of services is carried out by natural persons without the capacity to issue invoices or equivalent documents; and
- to the transfer of movable property subject to registration by natural persons for personal use for more than six months.
The Decree came into force 30 days after its publication. Self-invoicing carried out by taxpayers after the expiry date and before the grant of extension is subject to the former regime, which entered into force on 16 August 2020.
BURKINA FASO: Tax treaty with France to be terminated
In a confidential Note No. 2023-609/MAECRBE/CAB issued to the French Ministry for Europe and Foreign Affairs on 7 August 2023, the Ministry of Foreign Affairs, Regional Cooperation and Burkinabè Abroad of Burkina Faso has notified France of the termination of the Burkina Faso - France Income, Inheritance, Registration and Stamp Tax Treaty (1965), as amended by the 1971 protocol. The termination follows the refusal by France to renegotiate the treaty despite two requests from Burkina Faso on 5 January 2020 and at the end of 2021.
As per the terms of the treaty, a notice of termination must be provided by 30 June for termination to apply from 1 January of the following year. However, Burkina Faso's notice to France states that the termination will be effective within three months from receipt of this note.
BURKINA FASO: New tax, customs incentive measures to aid small and medium-sized enterprises proposed
On 18 July 2023 the transitional parliament of Burkina Faso adopted a new bill establishing tax and customs incentive measures for the benefit of small and medium-sized enterprises (SMEs). Proposed measures include:
- exemption from VAT on the import of production equipment and utility vehicles (particularly for the transportation of goods);
- exemption from business license duty and payroll tax for the first two years and a 50% reduction for in the third year;
- a fixed registration fee of CFA6 000 (as opposed to a variable fee of 5% of the annual rent) for the lease contract for the first three years; and
- exemption from the minimum lump-sum tax for the second year of operation.
The bill is still awaiting promulgation.
BURKINA FASO: Tax registration procedure for taxpayers under Undetermined Tax Regime clarified
In a practical guide published on 19 July 2023, the Department of Medium-sized Enterprises Center IV ("DME-C IV") of Burkina Faso has clarified the requirements for issuing Tax Identification Numbers to taxpayers under the Undetermined Tax Regime (Régime Indéterminé).
Taxpayers subject to the undetermined tax regime include:
- public administration services;
- diplomatic and consular representatives, regional and international organisations;
- natural persons; and
- branches of non-resident companies.
These categories of taxpayers should address a request to the DME-C IV with:
- an application form with a CFA200 stamp;
- proof of existence of the entity;
- the cadastral address or a registered lease contract as well as a location form to be collected from the DME-C IV;
- a certified copy of the identification document of the manager, the director or the legal representative of the entity;
- proof of payment or proof of exemption from residence tax (where applicable); and
- their last three payslips (for employees).
BURKINA FASO: Conditions for issuing tax clearance certificates clarified
The Minister of Economy, Finance and Forward Planning of Burkina Faso adopted Decree No. 2023-0351/MEFP/SG/DGI, adopted on 12 July 2023, clarifies relevant provisions pertaining to tax clearance certificates, as introduced by the Finance Law 2023.
The tax clearance certificate, which may be issued by the General Directorate of Taxes (Direction général des Impôt, DGI), certifies that the person to whom it is issued is in compliance with their tax obligations. The Decree clarifies that the term "person" includes:
- any natural person or legal entity (NGO, association or foundation) wishing to provide proof of tax compliance;
- any director, majority shareholder or beneficial owner; and
- any company that has ceased, sold or relocated its activities outside the national territory.
The tax clearance certificate is:
- issued subject to payment or proof of exemption from all due taxes, including income tax, withholding taxes, motor vehicle tax, property use tax and registration duties; and
- only valid if it is endorsed by a relevant tax department director and subject to payment of stamp duty of CFA500.
GHANA: Mid-year Budget Review announces administrative interventions
The Minister of Finance presented the 2023 Mid-year Budget Review to Parliament on 31 July 2023. With the aim of addressing the revenue mobilisation gap and ensuring fiscal consolidation, the following tax administration interventions have been announced:
- reviewing and updating the government's policy on tax treaty negotiation to conform with international standards;
- the preparation of a draft Legislative Instrument to the Fees and Charges (Miscellaneous Provisions) Act, 2022 to ensure the competitiveness of the fees and charges imposed by the various Ministries, Departments and Agencies;
- the development of draft administrative guidelines offering detailed guidelines on the Tax Exemption Act, 2022;
- the development of practice notes to guide the implementation of the minimum chargeable income system, scheduled to be implemented in the last quarter of 2023; and
- the roll-out of administrative guidelines, processes and returns on the taxing of gross betting.
KENYA: Collection of affordable housing levy commenced
The Cabinet Secretary, Ministry of Lands, Public Works, Housing and Urban Development has issued a Public Notice dated 3 August 2023 announcing that it has appointed the Kenya Revenue Authority ("KRA") as the agent to collect the affordable housing levy with effect from 1 July 2023.
The levy includes a monthly contribution of 1.5% on gross monthly salary for both employers and employees. Employers are required to declare the levy on its PAYE return on the iTax system.
KENYA: Amendments to Tax Laws enacted through Finance Act 2023
Following the Court of Appeal's lifting on 28 July 2023 of the conservatory orders issued by the High Court on 10 July 2023 suspending the implementation of the Finance Act 2023, the Act, which introduces various tax measures aimed at widening the tax base and increasing revenue, took effect. Significant amendments include:
- allowing interest on loans from non-residents as a deduction limited to 30% of earnings before interest, taxes, depreciation, and amortization in a year of income. Excess interest may be carried forward and claimed as a deduction in the subsequent five years of income;
- introducing a 10% capital allowance on industrial buildings and docks;
- exempting from tax:
- investment income from post-medical retirement medical funds from income tax; to an extent of 15% of the amount of contribution paid or KES60 000 per annum, whichever is lower;
- royalties paid to a non-resident person and interest paid to all persons by a company undertaking the manufacture of human vaccines;
- payments in the form of transfers from a post-medical retirement medical fund to a medical insurance cover provider;
- gains on transfer of property within a special economic zone enterprise, developer and operator; and
- royalties, interest and fees of any kind paid by a special economic zone developer, operator or enterprise, in the first 10 years of its establishment, to a non-resident person;
- subjecting income of a company undertaking the manufacture of human vaccines to a 10% income tax rate;
- increasing the rate of turnover tax from 1% to 3% of gross receipts of the business of a taxable person;
- introducing a digital asset tax at 3% on persons deriving income from the transfer or exchange of digital assets effective 1 July 2023;
- introducing a 15% tax on repatriated profits by non-resident persons carrying on business through a permanent establishment, in addition to the reduced income tax rate of 30% with an allowable deduction of executive remuneration and administration expenses;
- introducing a 20% income tax on income earned by non-residents from digital content monetization;
- introducing a 5% withholding tax on sales promotion, marketing, advertising services and digital content monetisation;
- reducing the withholding tax paid by non-residents on rent or premiums for use of immovable property from 10% to 7.5%;
- reducing the maximum threshold for turnover tax paid by resident persons carrying on business from KES50-million to KES25-million;
- charging capital gains tax on gains from the sale of shares or comparable interests in a partnership or trust if at any time during the past 365 days, the transfer of such derived more than 20% of their value from land situated in Kenya;
- subjecting permanent establishments in Kenya owned by non-resident companies to 6% tax for each KES20 earned for the year of income of 2024 and for each subsequent year;
- reducing residential rental income tax rates from 10% to 7.5%;
- revising individual income tax rates as follows:
Amount of Income (KES)
- no longer recognising a wife's income as part of a husband's income;
- regarding a travelling allowance provided to an employee when on official duties as a reimbursement, not taxable in the hands of the employee if it is based on the standard mileage rate approved by the Automobile Association of Kenya;
- allowing club entrance and subscription fees paid by an employer as a deduction if the same has been taxed on an employee;
- excluding joining fees, welfare contributions, and subscriptions when determining the gross income of members clubs and trade associations;
- increasing the advance tax rates charged on motor vehicles:
- from KES1 500 to KES2 500 per tonne, with a minimum of KES5 000 per annum (previously KES2 400) for vans, pick-ups, trucks, prime movers, trailers, and lorries; and
- from KES60 to KES100 per passenger per month with a minimum of KES5 000 per annum (previously KES2 400) for saloons, station-wagons, minibuses, buses, and coaches.
- increasing the VAT rate on liquefied petroleum products such as petrol, kerosene, aviation fuel, jet fuel and others from 8% to 16%;
- allowing an input VAT deduction only where a person is in possession of a valid sales invoice and the supplier has declared and paid the VAT;
- subjecting compensation for loss of taxable goods on which input tax had been claimed to 16% VAT, including insurance compensation;
- requiring persons supplying imported digital services over the internet, an electronic network or through a digital marketplace to register for VAT, irrespective of whether they meet the registration threshold of KES5-million;
- allowing registered persons who make supplies and account for and pay taxes on such supplies without having received any payment from the persons liable to pay the taxes to apply for a refund of the tax involved after a period of three years from the date of the supply;
- exempting from tax specified medical equipment and products, aircraft, space craft and spare parts;
- expanding the list of zero-rated supplies to include:
- inbound international sea freight services offered by a registered person;
- electric buses;
- tea and coffee locally purchased for the purpose of value addition before exportation subject to approval by the Commissioner General; and
- locally assembled and manufactured mobile phones
Other indirect taxes
- reducing the import declaration fee ("IDF") on the customs value of imported goods from 3.5% to 2.5%;
- abolishing the reduced rate of IDF on imports by manufacturers and players in the construction of affordable housing market and goods imported under the East African Community ("EAC") duty remission scheme;
- reducing the rate of railway development levy ("RDL") from 2% to 1.5%;
- exempting from the IDL and RDL:
- the liquified petroleum gas;
- aircraft, helicopters, spacecraft, and their parts including aircraft engines imported by aircraft operators or persons engaged in the business of aircraft maintenance upon recommendation by the competent authority responsible for civil aviation;
- goods imported for official use by international and regional organizations that have bilateral or multilateral agreements with Kenya;
- goods imported for official use by diplomatic and consular missions, the United Nations and its agencies, and institutions or organisations; and
- supply of denatured ethanol;
- introducing an export and investment promotion levy on specified goods imported for home use, except goods originating from EAC partner states that meet the EAC rules of origin; and
- requiring employers and employees to contribute to the National Housing Development Fund (NHDF) at a rate of 1.5% of their gross salary;
- introducing an electronic billing system through which
taxpayers issue electronic tax (e-tax) invoices during the exchange
of goods and services and maintain stock records, as follows:
- an electronic tax invoice required to ascertain the tax liability of a resident person or the permanent establishment of a non-resident person must be generated through the electronic billing system;
- the electronic billing system does not apply to payments relating to emoluments, interest, imports, investment allowances, interest, airline passenger ticketing and similar payments, and other persons exempted by the Commissioner General of the KRA through a notice in the Gazette;
- a taxpayer who fails to comply with the requirements of an electronic billing system is subject to a penalty equal to two times the tax due;
- providing that multilateral tax agreements or treaties concluded by the government of Kenya for mutual administrative assistance in tax collection are to be implemented as specified in the agreements;
- granting amnesty to taxpayers with penalties, interest or fines on unpaid tax where principal taxes were due before 31 December 2022, provided that outstanding principal taxes are paid not later than 30 June 2024;
- subjecting all registered manufacturers to withholding VAT, which is required to be remitted by appointed agents within five days after deduction;
- allowing overpaid taxes to be used to offset outstanding current and future tax liabilities in the case of the KRA's failure to refund such amount; and
- increasing the tax shortfall penalty from 75% to double the amount due on tax shortfalls resulting from deliberate actions or omissions of a taxpayer.
KENYA: New rates of interest for determination of tax on fringe benefits, deemed and low-interest benefits announced
The KRA in a public notice issued on 24 July 2024 has announced the following new rates of interest for the determination of tax on fringe benefits, deemed and low-interest benefits:
- 11% market interest rate to determine fringe benefit tax payable by employers who advance loans to related parties at an interest rate lower than the market interest rate for the months of July, August and September 2023;
- 11% prescribed rate of interest for deemed interest, which is subject to 15% withholding tax for the months of July, August and September 2023; and
- 10% prescribed rate of interest to determine the low-interest benefit tax payable by individuals who receive loans by virtue of their position or employment, including loans from an unregistered pension or provident fund from the month of July to December 2023.
KENYA: High Court rules that KRA must issue an objection decision within 60 days
The High Court has ruled on 17 July 2023 in the case of Eastleigh Mall Ltd vs Commissioner of Investigations & Enforcement Appeal No. E0686 of 2020 that the KRA's failure to issue an objection decision in a dispute relating to corporate income tax, VAT on commercial rent and Pay As you Earn (PAYE) within the stipulated 60 days meant that the objection by the appellant had been automatically allowed.
The Tax Appeal Tribunal initially ruled that the 60-day timeline was a technicality that could be bypassed through discretion as discussions between the parties had the effect of extending the time limit. However, the High Court ruled that the provisions of the Tax Procedures Act providing for the 60-day time limit are mandatory and that the Tribunal erred in dismissing the objection raised by the appellant.
RWANDA: Amendments to tax laws approved by parliament
On 20 July 2023, the parliament approved amendments to:
- the Income Tax Law;
- the VAT Law;
- the Excise Duty Law; and
- the law determining sources of revenues of decentralised entities.
The laws will enter into force following its promulgation by the president and its publication in the official gazette.
SÃO TOMÉ AND PRÍNCIPE: Taxpayers requested to pay VAT due before filing returns
The Directorate of Taxes on 25 July 2023 made an announcement requiring all VAT taxpayers to pay taxes due for the month of June 2023 before the end of 31 July 2023, even if they have not yet submitted their monthly VAT returns.
The monthly VAT returns, which were originally scheduled to be submitted on 31 July 2023, could not be filed due to technical issues with the electronic portal (ePortal) used for lodging the returns.
SENEGAL: Content of transfer pricing documentation clarified
On 1 August 2023, the Minister of Finance and Budget issued an order setting out the content of transfer pricing documentation provided for in article 638 of the General Tax Code (Code Général des Impôts, GTC).
The documentation follows the model proposed by the OECD as part of Action 13 of the BEPS project and consists of a main file providing an overview of the organization of the group concerned and a local file providing information enabling the arm's length nature of the international intra-group transactions of the audited company to be analysed.
The documentation must be presented to the tax authorities on the date a tax audit is initiated, in both paper and electronic formats, and in one of the languages used by the tax authorities.
SEYCHELLES: Environmental sustainability levy introduced
Following the announcement in the 2023 Budget Speech that an environmental levy is be charged on every visitor to the Seychelles, the government has issued a press release on 27 July 2023, announcing the implementation of the levy with effect from 1 August 2023. The levy was supposed to take effect on 1 April 2023, but its implementation was postponed. It will be charged as follows:
- small hotels with 24 rooms or less: SCR25 per night per room;
- medium-sized hotels of between 25-50 rooms: SCR75 per night per room; and
- large hotels of more than 50 rooms: SCR100 per night per room.
Tourism establishments are required to charge and collect the levy and remit funds to the Seychelles Revenue Commission on or before the 21st day of the month following the month in which the levy is collected.
Citizens and residents of the Seychelles, children of 12 years and younger, and airline and yacht crew members are exempt from the levy.
TANZANIA: Amendments to Tax Laws enacted through the Finance Act, 2023
A series of changes to tax laws, aimed at stimulating various economic activities, improving domestic revenue mobilisation and tax administration, which have been announced in the 2023/24 Budget, have been enacted through the Finance Act 2023. Significant amendments, which are effective from 1 July 2023, include:
- exempting from income tax:
- gains derived from the internal restructuring of mining companies pursuant to the requirement of a Framework Agreement entered into between the government and an investor to form a partnership entity; and
- revenue derived by the National Health Insurance Fund (NHIC) from investment returns on fixed deposits, treasury bonds, treasury bills or dividends;
- exempting from capital gains tax gains from the realisation of investment assets by entities changing ownership as a result of the allotment of new membership or the transfer of membership interest of a resident entity to another resident person;
- introducing a final withholding tax on:
- payments made by residents for precious metals, gemstones, and other precious stones supplied by a holder of a primary mining license or artisanal miner at the rate of 2%; and
- payments made to a resident person in respect of verified carbon emission reduction at the rate of 10%;
- exempting from withholding tax payments made by individual tenants for renting non-commercial properties;
- requiring a resident who receives interest income from land or buildings and does not have records of costs of the asset to pay income tax through a single instalment at a rate of 3% of the greater of the income or the approved asset value;
- introducing a presumptive tax regime at varying rates for resident individuals engaged in the transportation of passengers and goods and whose gross sales do not exceed TZS100-million in a year of income;
- reclassifying income on which digital service tax is imposed as income in respect of electronic services rendered by a non-resident person to a resident individual;
- extending the period within which non-resident providers of electronic services are required to file and pay income tax from 17 days to 20 days of the month following the month to which the payment relates;
- exempting from VAT:
- importation of raw materials used to manufacture packing materials of pharmaceutical products;
- importation of prefabricated structures for use in poultry farming to the extent that there are performance agreements with the government;
- sale of a house not exceeding TZS50-million by a real estate developer;
- supply of aircraft, aircraft engines, aircraft parts and aircraft maintenance to a local operator of air transportation;
- supply of automobile accessories used in the conversion of motor vehicle fuel systems to natural gas or electricity to persons engaged in the conversion of such motor vehicles; and
- supply of precious metals, such as gemstones and other precious stones, at refineries, buying stations or mineral and gem houses designated by the Mining Commissioner;
- expanding the definition of "electronic services" to include online intermediation and advertisement services;
- introducing VAT deferment relief on locally manufactured capital goods;
- announcing that VAT deferment relief on imported capital goods is set to expire on 30 June 2026; and
- subjecting the supply of locally manufactured garments made from locally grown cotton to 0% VAT for the period 1 July 2023 to 30 June 2024;
- revising penalties in relation to the issuance of fiscal
receipts as follows:
- amending the penalty for failure to use fiscal devices from TZS3-million or TZS4.5-million to the higher of 20% of the value of sales or TZS1.5-million; and
- amending the penalty for failure to demand a fiscal receipt or reporting a failure to issue fiscal receipts to the higher of 20% of the tax evaded or TZS30 000 (previously TZS30 000 to TZS1.5-million);
- requiring entities engaged in the construction and extractive industries to disclose the names of all persons contracted and sub-contracted within 30 days from the date of executing a contract;
- clarifying the definition of a "storage facility";
- expanding the definition of a "primary data server" to include a physical, virtual or any other server; and
- extending the period required for a taxpayer who maintains documents in electronic form to maintain the primary data server to 1 January 2024.
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.