Author: Celia Becker.
ANGOLA: Securities Code Regulations enacted
The Securities Code Regulation (Regulation No. 6/16) (the “Regulation“) was approved by the Council of Administration of the Capital Market Commission and gazetted on 7 June 2016. The Regulation contains the organisation rules and administrative requirements for open companies and other issuers of securities admitted to trading in regulated markets.
CAMEROON: Tax amnesty on property tax announced
On 21 June 2016, Cameroon’s National Treasury published a notice on its website introducing tax amnesty on property tax. According to the notice, provided that payments of property tax are made before 31 December 2016, no penalties will be levied.
Property tax payments and returns can be submitted through the tax authority’s “mobile tax services” facility.
GABON: Finance Law 2016 – direct taxes
Finance Law 2016 (Law 021/2015 of 1 February 2016), published in the Official Gazette No. 286bis on 15 February 2016, introduces a number of tax amendments, effective as of 1 January 2016 unless otherwise indicated. Significant amendments include:
- an increase in the branch profit tax rate from 15% to 20%;
- an increase in the withholding tax rates on interest, royalties and services paid to non-resident persons from 10% to 20%;
- allowing a deduction for rental payments on immovable properties, provided that they do not exceed the average rental value of similar properties;
- extending the taxable base used for calculating minimum tax to include income other than consideration for the sale of goods or services, such as reimbursement payments received from insurance companies and provisions reincorporated into the taxable income;
- extending the deadline for filing corporate tax returns from 30 April 2016 to 31 May 2016 for taxpayers who elect to file their tax returns electronically;
- disallowing an input value-added tax (“VAT”) deduction on the supply of services by non-resident persons when the same services are available in Gabon;
- applying a zero VAT rate on the supply of oil to aircrafts and vessels operating in international traffic as well as their maintenance and reparation services;
- clarifying that the supply of immovable property is to be subject to VAT at the standard rate of 18%. The taxable base consists of the sale price or market value (whichever is higher). In respect of the self-supply of immovable properties, the taxable base is the cost of construction including the cost of land, notary fees, financial costs, wages and salaries, and other costs directly linked to the construction; and
- introducing a voluntary disclosure scheme, available in respect of taxpayers’ liabilities up to 1 January 2016, which will be applicable until 31 December 2016. Taxpayers who are already under a tax audit procedure may not apply for the scheme.
KENYA: Budget and Finance Bill 2016
The 2016/17 Budget and Finance Bill 2016 was presented to the National Assembly by the Cabinet Secretary for the National Treasury on 8 June 2016. Proposed amendments include:
- a reduction in the corporate income tax rate from 30% to 20% for companies that construct at least 1 000 residential units annually;
- an increase in the resident personal relief from KES13 944 to KES15 360 and the tax brackets for individual income are to be expanded as follows:
Amount (KES) per annum
on the first KES134 164
on the next KES126 403
on the next KES126 403
on the next KES126 403
on all income over KES513 373
- an exemption for bonuses, overtime and retirement benefits paid to employees whose income before the bonus and overtime does not exceed the lowest income tax band (KES134 164);
- the gazetting of regulations on the tax incentive available for graduate apprenticeships where at least 10 graduates are employed. Under this incentive, employers will be entitled to an additional tax deduction of 50% of the cost of the apprenticeship emoluments;
- resident withholding tax on rental income on the use of immovable property has been reduced from 12% to 10% with effect from 1 January 2016. A minimum threshold of KES12 000 for the application of the withholding tax has been proposed. In addition, the Commissioner may appoint withholding tax agents for rental tax;
- gains made from the transfer of assets between spouses and to immediate family will be exempt from capital gains tax;
- the re-introduction of withholding VAT at the rate of 6%;
- VAT exemptions are to be extended to include, inter alia:
- motor vehicles purchased or imported for direct and exclusive use of official aid funded projects;
- liquefied petroleum gas;
- taxable supplies for direct and exclusive use for the construction of recreational parks;
- taxable supplies for the direct and exclusive use for construction of specialised hospitals with accommodation facilities;
- services offered by tour operators on commission;
- entry fees into national parks;
- non-residents without a fixed place of business in Kenya and who are required to register under a tax law are now required to appoint a tax representative in Kenya. If the non-resident fails to do so, one will be appointed by the Kenya Revenue Authority;
- the introduction of amnesty for persons earning taxable income from investments outside Kenya, provided they submit their returns for the 2016 year of income by 31 December 2017; and
- the period for application for a refund for a tax overpayment other than VAT is increased from one year to five years.
LESOTHO: new tax treaty with South Africa enters into force
The new Lesotho/South Africa Income Tax Treaty (2014) entered into force on 27 May 2016 and generally applies from 1 April 2017, replacing the existing 1997 treaty. In terms of the new treaty:
- it applies to normal tax, withholding tax on royalties, dividend tax, withholding tax on interest and the tax on foreign entertainers and sportspersons in South Africa;
- in the case of dual-resident entities, residency will no longer automatically be allocated to the state where an entity is effectively managed but, similar to the provisions of the new South Africa/Mauritius treaty, in terms of the residence tie-breaker clause, where an entity is a resident of both contracting states, the competent authorities of the states shall endeavour to determine the country of residence by mutual agreement;
- the furnishing of services, including consultancy services would create a permanent establishment where such activities in a contracting state continue for a period(s) in aggregate 90 days (previously six months) in any 12-month period;
- dividends paid by a resident of a contracting state may be subject to a maximum withholding tax rate of 10% in such state if the beneficial owner is a company resident in the other state which holds at least 10% of the capital of the company paying the dividend. A withholding tax rate of 15% applies in other cases. In terms of the previous treaty, the maximum withholding tax rate was 15%, irrespective of the level of shareholding;
- the maximum withholding tax rate applicable to technical fees is reduced to 7.5% (10% in the previous treaty); and
- a specific capital gains tax article (Article 14) is introduced. In terms of the article, gains from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in a contracting state may be taxed in that state.
NIGERIA: electronic payment platforms rolled out
The Federal Inland Revenue Service (“FIRS”) rolled out three electronic tax (“eTax”) payment platforms to enable taxpayers to remit taxes via electronic channels on 20 June 2016. The eTax payment platforms (“ePPs”) are hosted by Remita, Interswitch and NIBSS. While companies and individuals may utilise any of the newly introduced ePPs, ministries, departments and agencies are restricted to the use of Remita.
The ePPs have a robust and user-friendly interface which includes fields for the type of tax, the taxpayer’s tax identification number (“TIN”) and other relevant details. The eTax payment platforms provide a test for accuracy as details provided are validated with the taxpayers’ TIN. Taxpayers can set up standing orders for the payments of taxes to ensure they do not miss payment deadlines and thereby avoid interest and penalties on late remittances.
Currently, taxpayers remit taxes through the deposit money banks (“DMBs” or “banks”) through a long and often protracted process, plagued by inadequate network connectivity to access the banks’ platforms and the restrictive operating hours of the banks. The ePPs will provide around-the-clock access to taxpayers for the remittance of tax due.
NIGERIA: deductible expenses must satisfy the wholly, reasonably, exclusively and necessarily test.
On 31 May 2016, the Tax Appeal Tribunal (“TAT”), in Nigerian Breweries Plc v. Federal Inland Revenue Service (“FIRS”) (TAT/LZ/CIT/EDT/043/2015), held that deductible expenses must satisfy the wholly, reasonably, exclusively and necessarily (“WREN”) test.
Nigerian Breweries Plc (“NB Plc”) and International Beverages Corporation SA (“IBECOR”), both part of the Heineken Group, entered into an arrangement for the procurement of goods outside Nigeria. In terms of this arrangement, IBECOR purchased goods on behalf of NB Plc and invoiced NB Plc for the costs (handling charges and buying commission) of the goods.
FIRS disallowed the deduction of the charges and the commission on the basis that the disputed expenses were incurred outside Nigeria and are therefore non-deductible under the provisions of section 27(i) of the Companies Income Tax Act (“CITA”) and raised additional tax assessments.
NB Plc objected to the assessments on the grounds that, despite the fact that in terms of section 27(i) of the CITA, “any expenses of any description incurred outside Nigeria for and on behalf of any company…” are not tax deductible, it does not refer to expenses incurred by a company for itself outside Nigeria and the guidance on the deductibility of expenses provided by section 24 of the CITA should be considered.
In terms of section 24 of the CITA, a deduction shall be allowed in respect of all expenses for that are wholly, exclusive, necessarily and reasonable incurred in the production of those production of profits.
Therefore, the disputed expenses satisfy the WREN test and are fully deductible in the period incurred.
The FIRS contended, inter alia, that:
- the disputed expenses were incurred outside Nigeria and therefore non-deductible under the provisions of section 27(i) of the CITA;
- the procurement arrangement between NB Plc and IBECOR was artificial;
- the provisions of section 27(i) of the CITA apply to the exclusion of other sections in the CITA and section 24 of the CITA is irrelevant in determining the deductibility of the disputed expenses; and
- the disputed expenses do not pass the WREN test as the amounts paid to IBECOR were “outrageous”.
The issue to be decided was whether expenses incurred outside Nigeria on behalf of another company are deductible.
The TAT ruled in favour of NB Plc, on the grounds that:
- an appropriate interpretation of the provisions of section 27(i) of the CITA shows that it refers specifically to expenses incurred by the taxable company outside Nigeria on behalf of another company;
- section 24 of the CITA is the general deduction rule and can only be overruled by a specific provision and, as section 27(i) of the CITA does not specifically refer to the disputed expenses, it cannot controvert section 24 of the CITA; and
- the disputed expenses satisfy the WREN test and are deductible.
The assessments were set aside.
NIGERIA: Tax Appeal Tribunal rules that reimbursable expenses not liable to VAT and withholding tax
The Tax Appeal Tribunal (“TAT”) on 2 June 2016, in Brasoil Oil Services (Nigeria) Limited v. FIRS ((TAT/VAT/008/2015) and (TAT/WHT/009/2015)), ruled that reimbursable expenses are not liable to VAT and withholding tax (“WHT”).
Petrobras SA (“Petrobras”), a non-resident company, and Brasoil Oil Services (Nigeria) Limited (“Brasoil”) entered into a Technical Services Agreement (“TSA”) for the provision of technical support services, in terms of which Petrobras invoiced Brasoil for the cost of the services provided at a mark-up of 12%, and for the reimbursable expenses incurred on its behalf.
FIRS assessed and charged VAT and WHT on the expenses incurred by Brasoil under the TSA.
Brasoil objected to the assessments on the grounds that, inter alia, reimbursable expenses do not constitute a taxable supply as defined under section 2 of the VAT Act and the TSA was concluded at arm’s length. Hence, only the mark-up portion of the invoice was liable to WHT.
The FIRS argued that the supply of technical support services is neither an exempt service nor an exported service, as it was rendered in Nigeria and to a Nigerian company and the TSA was not concluded at arm’s length. Therefore, VAT and WHT should be charged on the contract sum, i.e. cost plus mark-up.
The TAT held, inter alia, that all reimbursable expenses paid by Brasoil in line with the TSA are not subject to VAT and WHT.
NIGERIA: revocation of withholding tax at source
The Federal Ministry of Finance has recently approved FIRS’s recommendation to revoke the Withholding Tax Regulations which were effective from 1 January 2015 and reduced the withholding tax rate applicable to payments in respect of all aspects of building, construction and related activities (excluding survey, design and deliveries) from 5% to 2.5%.
Once the Regulations are officially revoked via publication in the Federal Republic of Nigeria Official Gazette, the withholding tax rate applicable to payments in respect of building, construction and related activities will revert to 5%.
RWANDA: 2016/17 Budget
The Budget 2016/17 was presented to the parliament by the Minister of Finance and Economic Planning on 8 June 2016. Proposed amendments include:
- full income tax exemption to international companies headquartered in Rwanda with investments of not less than USD10-million;
- a seven-year tax holiday to companies not headquartered in Rwanda with investments of not less than USD50-million;
- a reduced income tax rate of 15% on priority sectors including exports, manufacturing, energy, tourism, transportation and information and communication technology;
- an increased investment allowance of 50% to all qualifying investments (minimum duration of three years) exceeding RWF30-million in Kigali and the priority sectors;
- introduction of capital gains tax at the rate of 5% on disposal proceeds of immovable property (excluding affordable residential properties and inherited immovable property); and
- a requirement for taxpayers to submit transfer pricing (“TP”) documentation with their annual corporate income tax returns and maintaining a TP policy detailing all transactions with related entities.
TANZANIA: Budget 2016/17 – direct taxation
The Budget for 2016/17 was presented to the National Assembly by the Minister of Finance and Planning on 8 June 2016. Proposed amendments include:
- reducing in the skills and development levy from 5% to 4.5%;
- reducing the margining tax rate for individuals on the lowest tax band (monthly income of between TZS170 000 and TZS360 000) from 11% to 9%;
- removal of the tax exemption on the disposal of shares listed on the Dar es Salaam Stock Exchange. Currently, the exemption applies to residents, or non-residents owning less than 25% of the share capital;
- granting the Commissioner General of the Tanzania Revenue Authority (“TRA”) powers to determine rental income based on the minimum market values for purposes of withholding tax on rental income;
- exempting the following from VAT:
- raw soya beans;
- unprocessed vegetables and unprocessed edible animal products;
- vitamins and food supplements (micronutrient compound);
- water treatment chemicals;
- bitumen products; and
- aviation insurance.
- imposing VAT on specified tourism services;
- introducing VAT on fee-based financial services (but excluding interest paid on loans); and
- mandating the TRA to ensure compulsory use of electronic fiscal devices.
UGANDA: Uganda Income Tax (Amendment) Bill 2016 – details
The 2016/17 Budget was presented to parliament by the Minister of Finance, Planning and Economic Development on 8 June 2016. Proposed amendments include:
- limiting the carry forward of tax losses where there is a change, by 50% or more in the underlying ownership of the company, unless such company continues to carry on the same business;
- introducing withholding tax on rent paid to non-residents at a rate of 15%;
- limiting the benefits of double tax treaties to persons who are the beneficial owners of the income earned, have full and unrestricted ability to enjoy the income and determine its full uses and have economic substance in the country of residence;
- excluding taxable supplies made to contractors on aid-funded projects from VAT;
- allowing relief from VAT on business inputs for producers of solar, wind and geothermal energy;
- VAT imposed on imported services used by business process outsourcing companies will be refunded at the time of export or offset, if the services are consumed in Uganda; and
- increase stamp duty on transfer of property from 1% to 1.5%.
The measures became effective on 1 July 2016.
Sources include IBFD, IHS, taxnews.com, and others.
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