Africa: Tax in brief
23 July 2014
Posted by: Author: Celia Becker
Author: Celia Becker (Tax ENSight)
KENYA: Mauritius Double Tax Agreement ratified
The double tax agreement (DTA) between Kenya and Mauritius, which was signed by the Mauritian government in May 2012, has been ratified by the Kenyan parliament on 23 May 2014 and will come into effect on 1 January 2015.
The DTA provides for, inter alia, a reduction in the dividend withholding tax rate to 5 percent of the gross amount in the case of a minimum shareholding of 10 percent and 10 percent in other cases and a maximum withholding tax rate on interest and royalties of 10 percent.
KENYA: 2014/15 Budget Overview
Kenya’s 2014/15 Budget was presented to Parliament on 12 June 2014. Significant proposed tax amendments are summarised below:
Commencing on 12 June 2014, expenses incurred by employers in respect of vacation expenses of employees within Kenya will be deductible for corporate income tax purposes for a period of 12 months.
The Cabinet Secretary proposes to amend the current definition of "permanent establishment” in the Income Tax Act to be aligned with the OECD definition of the term, which is wider than the current domestic definition.
It is also proposed to enforce arm’s length transactions between local branches and their non-resident head offices in line with the Transfer Pricing Regulations.
In order to enhance transparency and tax compliance, it is proposed that taxpayers will be required to provide the Commissioner with up-to-date information regarding any changes in their business and corporate structures.
The net gain on the disposal of shares or property in oil and mineral prospecting companies, which used to be subject to withholding tax at a rate of 10 percent on resident entities and 20 percent on non-residents, will in future be subject to corporate income tax at the standard rates.
The introduction of a Tax Procedures Bill, containing uniform tax procedures for income tax, value added tax and excise duties was announced. This Bill is aimed at easing tax administration and reducing the cost of compliance.
The Government has undertaken to address the VAT refund claims backlog and introduce VAT Regulations to clarify and streamline the implementation of VAT Act 2013 in the near future.
NIGERIA: Pension Reform Bill signed into law
President Goodluck Jonathan signed the Pension Reform Bill 2014 into law on 1 July 2014, after the Bill was passed by House of Representatives and Senate on 27 May and 6 June 2014 respectively.
The new Act, which repeals the Pension Reform Act 2004, provides for stiffer penalties in the case of mismanagement or diversion of pension funds, including the institution of criminal proceedings against employers who persistently fail to deduct and/or remit pension fund contributions of their employees within the stipulated time.
The Act expands the coverage of the Contributory Pension Scheme (CPS) in the private sector to organisations with at least three employees and increases the minimum rate of pension contribution from 15 percent to 18 percent of monthly emoluments, where 10 percent is to be contributed by the employer and 8 percent by the employee. An employer is also to be compelled to open a Temporary Retirement Savings Account (TRSA) on behalf of an employee who failed to open a Retirement Savings Account within three months of assumption of duty.
RWANDA: 2014/15 Budget Overview
Rwanda’s 2014/15 Budget, which was delivered on 12 June 2014, focuses on infrastructure development to accelerate export growth.
The excise duty on telephone airtime is to be increased from the current 8 percent to 10 percent and the Rwanda Revenue Authority intends to increase its efforts to ensure uptake of the Electronic Billing Machines (EBM) which have been introduced in the previous fiscal year.
TANZANIA: 2014/15 Budget Overview
Tanzania’s 2014/15 Budget proposes the reduction of the lowest marginal tax rate for individuals applicable to income of between TZS170 001 and TZS360 000 from 13 percent to 12 percent.
The presumptive income tax rate applicable to small businesses with an annual turnover of between TZS4 million and TZS7.5 million who maintain proper accounting records is to be increased from 2 percent to 4 percent of turnover. The presumptive tax on similar businesses not maintaining accounting records is to be increased from TZS100 000 to TZS200 000.
It has been confirmed that directors’ fees will be subject to 15 percent withholding tax and directors whose only income consists of directors’ fees will not be required to file personal income tax returns.
It is proposed that lease rental charges paid to non-resident aircraft lessors by a person engaged in air transport operations be subject to a 10 percent withholding tax.
The following institutions are to be exempt from the Skills Development Levy: Diplomatic Missions, the United Nations and its organisations, international and other foreign institutions dealing with aid and technical assistance (but not undertaking business activities), religious institutions whose employees are solely employed to administer places of worship, give instructions or administer religious activities, charitable organisations not performing any business activities, local government authorities and education and training institutions that offer free services.
A new VAT Bill has been tabled on 4 June 2014, which is due to repeal and replace the current VAT Act 1997. It is expected that the new Bill will come into effect on 1 January 2015.
Foreign investors applying to be recognised as "strategic investors” eligible to negotiate tax incentives will now be required to invest a minimum capital amount of USD50 million, instead of USD20 million as required previously.
Cement will no longer be categorised as "deemed capital goods”, eligible for relief from import duty and VAT.
UGANDA: 2014/15 Budget Overview
Uganda’s 2014/15 Budget, presented on 12 June 2014, proposes the removal of a variety of items from the list of exempt and zero rate supplies for VAT purposes.
The following supplies will no longer be exempt from VAT: new computers, printers, computer parts and accessories and software licenses, hotel accommodation in tourist lodges and hotels outside the Kampala district, liquefied petroleum gas, feeds for poultry and livestock, agriculture and diary machinery, packaging materials to the dairy and milling industries, salt, insurance services (except medical insurance and life assurance), specialised vehicles, plant and machinery services and civil works related to roads and bridges construction, agriculture, water, education and health.
It is proposed that the following supplies will no longer be zero-rated for VAT purposes: printing services for educational materials, cereals grown, milled or produced in Uganda, processed milk and milk products, machinery and tools for agriculture and seeds, fertilizers, pesticides and hoes.
The presumptive tax applicable to businesses with a turnover of less than UShs50 million is to be increased from 1 percent to 3 percent.
A separate capital gains tax is to be introduced on income from the sale of commercial properties, which is currently taxed as business income.
It is proposed to scrap the initial (accelerated depreciation) allowance of 50 percent and 75 percent respectively on newly acquired eligible plant and machinery.
The current thin capitalisation rules are also to be revised to restrict the deduction of interest paid to non-resident associated persons to 50 percent of earnings before interest and depreciation. What must be clarified is whether this will replace the current required debt to equity ratio of 2:1 or will be an additional requirement.
This article first appeared on ensafrica.com.