BOTSWANA: Related party transaction threshold for transfer pricing documentation established
The Commissioner-General of the Botswana Unified Revenue Service ("BURS") on 1 September 2021 issued a ruling determining that if the arm's length value of total related party transactions in a tax year does not exceed BWP5-million, taxpayers would not be required to prepare and submit transfer pricing documentation with their tax returns.
The threshold applies retroactively from the 2020 tax year commencing on 1 July 2019 and will continue to apply until revised by the Commissioner-General or amended through the transfer pricing regulations.
BURUNDI: Instrument of Ratification for the African Continental Free Trade Area Agreement deposited
On 26 August 2021, Burundi became the 38th country to deposit its instrument of ratification for the African Continental Free Trade Area Agreement ("AfCFTA"). The AfCFTA, which has been signed by 54 countries, entered into force on 30 May 2019 and became effective on 1 January 2021
KENYA: High Court declares minimum tax unconstitutional
Kenya introduced a minimum tax, to be levied at the rate of 1% of gross turnover with effect from 1 January 2021, through the Finance Act 2020. However, in a ruling delivered on 19 April 2021 by the High Court granted conservatory orders restraining the Kenya Revenue Authority ("KRA") from enforcement of the minimum tax pending the hearing and determining of a petition challenging the minimum tax filed at the High Court.
On 20 September 2021, the High Court declared the minimum tax provisions unconstitutional on the basis that it will be subjecting taxpayers to double taxation and is punitive in nature. The Court was of the opinion that taxation cannot be fair when a system of tax is introduced to diminish the capital of a business.
An order was issued restraining the KRA from implementing, further implementing or enforcing the relevant provisions of the Income Tax Act.
KENYA: Tax amendments enacted
On 29 June 2021, the Kenyan President assented to the Finance Act 2021 which, unless otherwise indicated, will apply from 1 July 2021. The Act adopts most of the proposals in the Finance Bill 2021, but also introduces new amendments that were not in the Finance Bill 2021. The significant new amendments include:
- exempting the following persons from minimum tax:
- persons whose retail price is controlled by the government;
- persons engaged in insurance business;
- persons engaged in manufacturing businesses whose cumulative investment from 2017 to 2021 is at least KES10-billion; and
- persons engaged in distribution businesses whose income is wholly based on a commission and persons licensed under the Special Economic Zones Act;
- exempting income of registered family trusts from tax;
- providing that the new limitation of interest deductibility rule (which limits the deductible interest expense to 30% of the earnings before interest, taxes, depreciation and amortization (EBITDA)), which will take effect on 1 January 2022, will not apply to banks or financial institutions licensed under the Banking Act or to micro and small enterprises registered under the Micro and Small Enterprises Act 2012;
- introducing investment deductions at 100% with effect from 1
January 2022 where:
- the investment value outside Nairobi City County and Mombasa County in that year of income is at least KES250-million;
- a person has invested in a special economic zone; and
- the cumulative investment value in the preceding three years outside Nairobi City County and Mombasa County is at least KES2-billion: Provided that where the cumulative value of investment for the preceding three years of income was KES2-billion on or before 25 April 2020, and the applicable rate of investment deduction was 150%, that rate shall continue to apply for the investment made on or before 25 April 2020;
- the re-introduction of excise duty on betting services;
- increasing excise duty on telephone and internet data services from 15% to 20%;
- exempting additional supplies from VAT;
- zero rating for VAT purposes the transportation of goods originating from Kenya to a place outside Kenya;
- requiring persons carrying out business over the internet or an electronic network including through a digital marketplace, to have a PIN; and
- permitting the offsetting of future tax liabilities against verified refunds with effect from 1 January 2022.
The proposals in the Bill that were not adopted in the Act include:
- the proposal to increase the time required to keep records from five to seven years;
- the proposal to allow the Commissioner General of the KRA to issue an assessment within seven years as opposed to five years;
- the proposal to delete the provision that permits the Cabinet Secretary to publish regulations for group registration of companies for VAT. This means that group companies can continue to account for VAT jointly; and
- the provision to table VAT regulations before the National assembly for approval.
LIBERIA: Convention and Protocol on Mutual Administrative Assistance in Tax Matters enter into force
Following Liberia's depositing of its instrument of ratification with the OECD on 26 August 2021, the multilateral Convention on Mutual Administrative Assistance in Tax Matters, as amended by the 2010 protocol, will enter into force in respect of Liberia on 1 December 2021. The convention and the amending protocol will generally apply from 1 January 2022.
MALAWI: Tax Amendment Acts gazetted
The Taxation (Amendment) Act 2021, Value Added Tax (Amendment) Act 2021, and Customs and Excise (Amendment) Act 2021 were assented to by the President and were gazetted on 13 August 2021.
Significant amendments, introduced as a result of some of the proposals announced in the 2021/2022 Budget include:
- the introduction of a presumptive tax regime to ease the compliance burden on small taxpayers;
- the introduction of new table of tax rates for presumptive tax, payroll tax, and individual income other than from employment income;
- the introduction of advance income tax on the importation of goods at a rate of 3% of the customs value of the goods at the port of entry into Malawi, except for an importer holding a valid withholding tax exemption certificate;
- increasing the VAT registration threshold from MWK10-million to MWK25-million;
- including printed books and fish feeds on the list of zero-rated supplies;
- exempting from VAT undenatured ethyl alcohol, portable and other agricultural or horticultural sprayers and banking services provided by a bank licensed under Financial Services Law and Life Insurance Services; and
- reducing the validity period for invoices for claiming input VAT from 12 to six months.
MALAWI: Effective date of individual tax changes in Taxation (Amendment) Act 2021 confirmed
The Malawi Revenue Authority has published an update on Pay As You Earn, confirming the effective date for the individual income tax brackets/rates for annual taxable employment income as introduced by the Taxation (Amendment) Act 2021 are effective for employment income from 13 August 2021.
NIGERIA: Supreme Court approached following decisions by Federal High Court and Appeal Court in River State VAT case
On 6 September 2021 the Federal High Court in Port-Harcourt dismissed the Federal Inland Revenue Service ("FIRS") application for Stay of Execution filed against its judgment that the FIRS lacks the constitutional basis to demand and collect VAT, withholding tax, education tax and technology levy in Rivers State or any other parts of the country.
The Rivers State Governor, on the same day, directed the Rivers State Internal Revenue Service to commence the implementation and enforcement of the Rivers State VAT Law, 2021.
On 10 September 2021 the Court of Appeal delivered a decision which ordered all the parties to maintain the status quo on the collection of VAT pending the determination of the FIRS's appeal against the Federal High Court's earlier.
The Rivers State Government has, in turn, approached the Supreme Court to dismiss the decision of the Court of Appeal. Clearly, the matter has not yet been resolved and taxpayers are encouraged to stay abreast of developments to ensure ongoing compliance.
NIGERIA: State Attorney Generals sue the Attorney General of the Federation of stamp duty administration
The Attorney Generals of the 36 States in Nigeria recently filed a suit against the Attorney General of the Federation ("AGF") at the Supreme Court in Abuja to determine the authority of States to collect stamp duties on instruments executed between persons within their respective States, as provided by Stamp Duties Act.
It is hoped that a ruling by the Supreme Court will clarify the issue of the appropriate authority to collect stamp duties with respect to transactions between persons resident in different States and provide certainty to taxpayers.
NIGERIA: Lagos State presented State VAT Bill, 2021 to House of Assembly
The Lagos State Government on 8 September 2021 presented the State VAT Bill, 2021 to the House of Assembly. Significant proposals include:
- VAT is to be charged at the rate of 6% on taxable supplies of goods and services, other than those expressly exempted or designated as zero rated in the Schedules to the Bill;
- the Lagos State Internal Revenue Service ("LIRS") will be responsible for administration and implementation of the Bill;
- companies resident in Lagos State are required to register with LIRS for VAT within six months of commencement of the Bill, or six months from commencement of business, whichever is earlier;
- monthly VAT returns and remittances would be due by the 21st day of each month following the month of the transaction;
- failure to submit VAT returns to the LIRS attracts a penalty of ?500,000 for each month of default; and
- failure to remit VAT will attract a penalty of 5% per annum plus interest at the commercial rate of the amount of tax remittable, in addition to the outstanding tax.
NIGERIA: Levy to fund National Agency for Science and Engineering Infrastructure introduced
FIRS has recently been directed to commence collecting a levy for the funding of the National Agency for Science and Engineering Infrastructure ("NASENI"), at a rate of 0.25% on the turnover of commercial companies. Under the law, the levy is imposed on turnover exceeding NGN4-million, although the NASENI Board has reportedly increased the turnover threshold to NGN100-million.
TOGO: Inclusive Framework for Implementing Measures Against BEPS joined
Togo has joined the Inclusive Framework for the global implementation of the Base Erosion and Profit Shifting (BEPS) Project in August 2021, becoming the 140th country to do so.
Through its membership, Togo has also committed to addressing the tax challenges arising from the digitalisation of the economy by joining the two-pillar plan to reform the international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate, bringing to 134 the total number of jurisdictions participating in the agreement.
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