Africa tax in brief


transfer pricing 100Author: Celia Becker (ENSafrica).

BOTSWANA: Exchange of information agreement with Isle of Man enters into force

The Botswana/Isle of Man Exchange of Information Agreement (2013) entered into force on 5 March 2016 and generally applies from 5 March 2016.

KENYA: Stamp duty on nominal share capital

Following publication of Legal Notice No. 60 of 2016 dated 12 April 2016, the initial nominal share capital of a limited liability company is now exempt from stamp duty.

MALAWI: 2016/17 Budget presented to parliament

On 27 May 2016, the Minister of Finance, Economic Planning and Development presented the Budget for 2016/17 to parliament.

Proposed measures include:

  • increasing the corporate tax rate from 21% to 30% for life insurance businesses;
  • removing the tax exemption previously granted on the first MWK10 000 of interest income on saving accounts;
  • imposing the standard VAT rate of 16.5% on certain goods that are currently exempt or zero-rated; and
  • permitting miners in the minerals exploration stage to register for VAT and make VAT claims.

These changes take effect from 1 July 2016, upon passage of the bill.

MALI: Amendment to employment income tax rates gazetted

Law No. 2016-010 amending the General Tax Code was published in the Official Gazette No. 19 of 6 May 2016. With effect from 1 July 2015, the following tax rates apply:

NIGERIA: 2016 Budget signed into law

On 6 May 2016, President Buhari signed the Budget (“2016 Appropriation Act“) into law. The Budget Speech did not contain any proposal or indications to increase tax rates or impose new taxes in 2016 and is silent on the proposals by the National Assembly to introduce a National Security Tax and Communication Service Tax as well as the proposed increase in Tertiary Education Tax (“TET”) by the TET Fund.

The government is, however, focused on measures to increase the tax base and overall compliance rate in the country. It was announced that luxury tax is expected to generate NGN15-billion and smaller businesses are to enjoy a reduced tax rate, but the measures to implement these provisions have not been published yet.

SWAZILAND: 2016/17 Budget presented to parliament

The Budget for 2016/17 was presented to parliament by the Minister of Finance on 4 March 2016. The Budget proposes converting the national provident fund into a pension fund and announced various measures to improve tax administration.

TANZANIA: Court of Appeal decision that payments for services rendered outside Tanzania are not liable to withholding tax

On 16 May 2016, in the case of Commissioner General, Tanzania Revenue Authority (“TRA”) v Pan African Energy Tanzania Limited (“PAE”) (Civil Appeal No. 146 of 2015), the Court of Appeal in Dar es Salaam held that withholding tax is not applicable to services rendered outside Tanzania.

PAE is a limited liability company registered in Tanzania, and it is engaged in exploration, production, distribution and marketing of natural gas in Tanzania. PAE obtains technical services from both resident and non-resident service providers, including the analysis of drilled samples and report-writing by non-resident service providers. PAE did not withhold tax on these service provider payments.

The TRA conducted a tax audit on PAE and demanded payment of tax that should have been withheld on the payments for technical services. PAE disputed the demand and appealed to the Tax Revenue Appeals Board (the “Board”), which decided in favour of the TRA.

PAE then appealed to the Tax Appeals Revenue Tribunal (the “tribunal”) which reversed the decision of the Board, and stated that since the service providers were not resident in Tanzania and all the services were performed outside Tanzania, PAE was under no obligation to withhold tax on the payment of the service fees in terms of the provisions of the Income Tax Act (“ITA”).

The TRA appealed to the Court of Appeal and argued that the payments were subject to withholding tax, regardless of where the services were performed and that the guiding principle was that the payment was made from Tanzania (the place where the samples were drilled and sent to the non-resident service providers), by a resident of Tanzania, thereby denoting territorial nexus.

PAE argued that, in terms of section 69(1) of the ITA, only payments made by the government are deemed to be sourced in Tanzania, regardless of where the service is exercised or rendered and withholding tax applies thereto.

The Court held that section 69(i) read with section 83(1)(c) of the ITA does not impose a liability to withhold tax where the payment is made by a person (other than the government) in relation to services rendered outside Tanzania and since the payments were not liable to withholding tax, the PAE cannot assume liability for the payment of tax not so withheld.

TANZANIA: Tax Tribunal rules that registration of company can constitute being “formed” for purposes of determining residence status

On 31 March 2016, in African Barrick Gold Plc v. Commissioner General (Tax Appeal No. 16 of 2015), the Tax Revenue Appeals Tribunal (the “tribunal”), sitting in Dar es Salaam, held that the word “formed” as used in section 66(4)(a) of the Income Tax Act 2004 (the “ITA”), can be construed to include the registration of the company.

African Barrick Gold Plc (now called Acacia Plc) (“ABG”), is a company incorporated in the United Kingdom, with its corporate headquarters in London. ABG owns several subsidiaries globally, some of which are incorporated in Tanzania. The Tanzanian subsidiaries, which are the only ABG subsidiaries engaged in business, operate four mines in Tanzania.

In 2010, ABG registered with the Business Registration and Licensing Agency (“BRELA”) under a certificate of compliance (“CoC”). Its activities in Tanzania were carried on through its registered office in Dar es Salaam.

In 2012, the Tanzania Revenue Authority (the “TRA”), following an inquiry into the affairs of ABG, formed the view that ABG was a resident of Tanzania; that it carried on business in Tanzania; and that it earned income from Tanzania by providing management services to its Tanzanian subsidiaries and several other exploration companies operating in Tanzania. The TRA also contended that dividends paid to ABG’s offshore shareholders were directly connected to income earned from Tanzania and thus, were liable to withholding tax.

In 2013, the TRA issued a notice to ABG confirming that it had been registered and issued with a tax identification number (“TIN”) and a VAT registration number (“VRN”), thereby requiring it to file statutory returns, remit withholding tax on dividend and service payments, Pay-As-You-Earn tax, staff development levy and stamp duty on instruments executed relating to activities conducted in Tanzania.

The Tax Revenue Appeals Board (the “Board”) dismissed ABG’s appeal, who then appealed to the tribunal. ABG argued that it was not resident in Tanzania as no decision-making powers were held in Tanzania and that the Tanzanian companies had been making losses and never declared dividends.

Furthermore, holding a CoC and having subsidiaries in Tanzania does not amount to carrying on a business or having a tax presence in Tanzania.

The TRA argued that ABG was resident for tax purposes on the basis that it:

  • had a CoC and had its regional office in Dar es Salaam;
  • was rendering management and coordination services to its local subsidiaries at its Dar es Salaam office;
  • had a member of the company’s senior management team, heading a strong team of personnel that offered management services to its local subsidiaries; and
  • as a holding company, had been declaring and paying dividends to its shareholders at a time when its only subsidiaries that were engaged in business had been declaring losses. This was merely a scheme designed to enable it to evade tax.

The tribunal held that the word “formed” as used in section 66(4)(a) of the Income Tax Act 2004 (the “Act“), can be construed to include the registration of the company under the Act. Accordingly, the issuance of a CoC under the Companies Act would also be covered by this interpretation. Therefore, although the registration does not amount to incorporation of the company in Tanzania, it can be concluded that it amounted to the company’s formation in Tanzania as a foreign company.

However, the tribunal agreed with ABG’s contention that the fact that it held (at least) one meeting of its board of directors every four years in Tanzania did not constitute “management and control”. According to the tribunal, for such activity to constitute “management and control”, supervision of the company operations and the decision making process must be on a continual basis.

With regard to obtaining a CoC, the tribunal observed that the relevant regulations require every foreign company applying for cross-listing not only to register as a foreign company under the Act, but also to “establish a place of business”. Furthermore, it belies the legal requirement contained in the said regulation to contend that after complying with all legal requirements and cross-listing, ABG did not establish a place of business in Tanzania. As to whether it actually carried on business in Tanzania, was a different question altogether.

The appeal was dismissed.

ZAMBIA: Amendment to the Mines and Mineral Development Act 2015
On 4 May 2016, parliament passed the Mines and Minerals Development (Amendment) Bill 2016 (the “bill”) for presidential assent. The bill proposes the following amendments to the Mines and Minerals Development Act 2015:

  • a reduction in the royalty rates for both underground and open cast mining operations as follows:

  • a specification of the pricing thresholds and a reduction in the royalty rates applicable to the mining of copper as follows:

The amendments apply retrospectively from 1 April 2016.

Sources include IBFD, IHS,, and other