Africa tax in brief
19 November 2014
Posted by: Author: Celia Becker
Author: Celia Becker (ENSafrica)
ANGOLA: Investment Income Tax Code republished
Presidential Legislative Decree no 2/14 of 20 October 2014 approves the revision and re-publishing of the Investment Income Tax Code (IITC) which enters into force 30 days after publication on 19 November 2014. In terms of the amendments:
repatriation of profits from permanent establishments (including branches) to their foreign head offices will be subject to Investment Income Tax (Imposto de Aplicação de Capitais: IAC) at 10%;
- amortisation and redemption premiums from bonds, participation bonds and similar securities issued by any company, Treasury Bills and Treasury Bonds and Central Bank securities as well as interest arising from such securities will be subject to IAC at 10% (a reduced rate of 5% will apply if the corresponding financial instruments are negotiated under a regulated market and have a maturity of at least three years);
- amounts paid or attributed to companies or individuals that undertake business operations as indemnity for the suspension of their activities will be subject to IAC at 5% (reduced from 15%);
- dividends paid or attributed to shareholders are generally subject to IAC at 10%, but a reduced rate of 5% will apply if the corresponding shares are negotiated under a regulated market;
- in the case of the disposal of shares, the taxable basis will be calculated, on an annual basis, as the difference between capital gains and capital losses;
- only 50% of the capital gain arising on the disposal of shares or any of the securities referred to above will be subject to tax if the transactions are carried out on a regulated market.
ANGOLA: Collective Investment Vehicle Tax regime introduced
Presidential Legislative Decree no 1/14 of 13 October 2014 introduces a tax regime for collective investment vehicles which determines that collective investment vehicles will be subject to corporate income tax (Imposto Industrial: CIT) on their annual profit determined according to the accounting rules, including rent from real estate, investment income and the difference between realised capital gains and capital losses at a rate of 7.5% and 15% for investment and immovable property collective investment vehicles respectively.
Income received by unit holders from distribution, sale or redemption will be exempt from IAC and CIT.
KENYA: Capital Gains Tax introduced
After having suspended capital gains tax (CGT) since 1985 to boost growth in the stock and real estate markets, an amendment in the 2014 Finance Act reintroduces capital gains tax. CGT at 5% will be levied on gains on the transfer of property (which is widely defined) situated in Kenya accruing to companies and individuals on or after 1 January 2015.
KENYA: Tax Treaty with South Africa ratified
Legal notice of Kenya’s ratification of the Kenya/South Africa Income Tax Treaty dating from 2010 was published in the Kenyan Official Gazette of 10 October 2014.
MOZAMBIQUE: New Oil & Gas and Mining Tax regimes introduced
The Mozambique Government enacted Laws No. 27/14 and 28/14 on 23 September 2014, introducing new tax frameworks for the Oil & Gas and Mining Industries respectively. Both laws replace the previous applicable regimes and will become effective on 1 January 2015.
Oil and Gas
In terms of the new Petroleum Tax Law, crude oil and natural gas will be subject to Petroleum Production Tax (PPT) at a rate of 10% and 6% respectively. Oil and gas used in Mozambique for development of the domestic industry may benefit from a 50% reduction of the PPT rate. Historic rates applicable under existing Exploration Production and Concession Agreements (EPCCs) must be respected by the Government. The determination of the taxable income and deductible expenses for corporate income tax purposes is determined separately in respect of each concession area and no offsetting amongst concession areas is allowed.
Transactions between different EPCCs or concession areas of the same taxpayer are to be treated as transactions between independent entities and should comply with Mozambique’s transfer pricing provisions. Petroleum rights are regarded as rights relating to immovable property and capital gains arising from the direct or indirect transfer of such rights between non-resident entities will be subject to tax at 32%. The transferee and transferor are jointly liable for the payment of the relevant tax.
The stability period, which may be negotiated, has been limited to 10 years. An additional period of stabilisation may be granted from the 11th year until the expiry of the initial concession in exchange for an increase of 2% in the PPT rate.
The new law introduces the following Mining Production Tax (Royalty) rates, based on the value of the product after treatment (previously the tax was assessed on the value of the mining product extracted from the earth):
- diamonds: 8%
- precious metals and stones, semi-precious stones and heavy sands: 6%
- base minerals: 3%
- coal, ornamental stones and remaining products 1.5%.
On the same basis as the Petroleum Tax Law, the Royalty rate is reduced by 50% in respect of minerals to be used by local industry; each exploration license, mining concession and mining certificate are ring-fenced and subject to Mozambique’s transfer pricing provisions; capital gains arising on mining rights disposed of between non-residents are subject to tax in Mozambique at the rate of 32% and the stability period is limited to 10 years.
NIGERIA: VAT exemption for commission on stock market transactions
With effect from 25 July 2014, commission on transactions in the Nigeria Capital Market will be exempt from VAT for a period of five years. Specifically included in the exemption are commissions earned on the traded value of shares, payable to the Securities and Exchange Commission, Nigeria Stock Exchange and the Central Securities Clearing System.
NIGERIA: Interest rate on unpaid taxes clarified
The Federal Inland Revenue Service (FIRS) in September 2014 issued the ‘Public Notice on the Administration of Penalty and Interest Regime under the Companies Income Tax Act AP C21 LFN 2004’ to confirm that penalty and interest payments that would apply to unpaid taxes are 10% and 15% respectively for the 2014 year of assessment.
However, the Federal Inland Revenue Service (Establishment) Act (FIRSEA) provides that unpaid taxes would attract interest at the prevailing minimum discount rate, which is currently the monetary policy rate (MPR) of the Central Bank of Nigeria, plus a spread determined by the Minister of Finance on unpaid Naira denominated taxes. In light of this, although the newly published rates would provide welcome relief for taxpayers, the notice does not appear to have any legal basis.
ZAMBIA: 2015 Budget proposals
The Zambian Government issued its 2015 Budget proposals on 10 October 2014. Significant proposed amendments include:
- the definition of "permanent establishment’ as per the Income Tax Act is to be amended to align it with international definitions;
- businesses will no longer be required to submit financial statements and other information together with electronically field annual income tax returns. Such documentation would only be required to be submitted when requested by the Tax Authorities;
- bad and doubtful debts incurred by banks and financial institutions will only be allowed as a deduction to the extent that the debt is not covered by security or collateral pledge.
In respect of the Mining Tax Regime, the corporation and variable profits taxes are to be replaced with a mineral royalty of 8% for deep mining and 20% for open cast mining.
This article first appeared on ensafrica.com.