Africa tax in short – Lexology

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Africa tax in brief - Lexology

BOTSWANA: Tax treaty with Czech Republic enters into force

On 26 November 2020, the Botswana – Czech Republic Income Tax Treaty (2019) entered into force and generally applies from 1 January 2021 for the Czech Republic and from 1 July 2021 for Botswana.

CAMEROON: Multilateral Convention approved by the National Assembly

The National Assembly of Cameroon on 20 November 2020 approved a draft bill for the ratification of the OECD Multilateral Convention (“MLI”) (2017).

Cameroon submitted its MLI position at the time of signature, listing its reservations and notifications and including five tax treaties that it wishes to be covered by the MLI.

CAPE VERDE: Decree-Law on binding rulings published

Cape Verde’s Ministry of Finance published Decree-Law 74/2020 in the Official Gazette on 12 October 2020, setting out the conditions for taxpayers requesting binding tax information rulings. The Decree Law became effective on the same day.

Once the application is submitted, the tax administration is obliged to respond and notify the applicant within a maximum of 75 days. However, an urgent response within 45 days may be provided for justified requests, provided that the request is accompanied by a legal-tax framework proposal. The tax authority must notify an applicant within 30 days on whether a request is accepted as urgent.

Once issued, a ruling is binding on the tax administration and may not be deviated from, except in compliance with a judicial decision. The term of validity of a binding ruling must be indicated by the tax administration at the time of issuance. A binding ruling may expire, however, if there are subsequent changes in the factual or legal assumption on which the ruling is based.

CAPE VERDE: Legal regime on electronic invoices amended

Decree-Law No. 79/2020 (Legal Regime of Electronic Invoices) of 12 November 2020 became effective on 13 November 2020 and repeals Decree-Law No. 42/2006 (Legal Regime for Electronic Invoices) of 31 July 2006 and Regulatory Decree No. 4/2007 (Electronic Invoice Conditions and Requirements) of 29 January 2007.

The Decree-Law approves the legal regime establishing electronic invoices and electronic tax documents, as well as the conditions for their issuance, retention and archiving and regulates the electronic processing of documents, computer billing and accounting systems, and filing obligations.

DEMOCRATIC REPUBLIC OF CONGO: Business income tax fourth instalment payment due

In an Official Statement, No. 01/0045/DGI/DG/DESCOM/MT/2020 of 12 November 2020, the Tax Administration (Direction Générale des impôts, DGI) has reminded taxpayers of the 30 November 2020 deadline for the payment of the fourth and last instalment of business income tax.

The fourth instalment is to be calculated as 20% of the business income tax paid for the 2019 financial year, including any additional payment due by the taxpayer. Taxpayers are entitled to impute their tax credits up to 20% of the amount due.

EAST AFRICA: Revenue authorities agree to develop joint strategy for the taxation of the digital economy

The 48th East Africa Revenue Authorities Commissioner Generals Meeting, held virtually on 11 November 2020, reached an agreement on developing a joint strategy for the taxation of the digital economy by addressing issues to do with the legal framework in terms of definitions, identification of players and legal mechanisms. Other administrative issues to be addressed include leveraging on technology and building technical skills.

The revenue authorities have also agreed, inter alia, on the continued use of the alternative dispute resolution mechanism to unlock revenue, the use of technology and data analytics to enhance revenue collection, compliance and identification of potential revenue as well as enhancing support to taxpayers and fast tracking the integration of domestic taxes systems in the region.

The East African Community Secretariat is to come up with an agreed framework on how to address base erosion and profit shifting and illicit financial flows within the East African Community. This will be addressed through legislation covering the various business models and administrative measures.

GHANA: Transfer Pricing Regulations, 2020 published

Transfer Pricing Regulations, 2020, Legal Instrument No. 2412 of 2020, was published in November 2020 and repeal the Transfer Pricing Regulations, 2012 (L. I. 2188). The repealed Regulations will continue to apply to an assessment pending under said Regulations before the entry into force of the new Regulations.

The new Regulations incorporate various revisions introduced by the July 2017 edition of the Organisation for Economic Co-operation and Development’s (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines) and, inter alia:

  • require the consideration of the allocation of economically significant risks in arrangements of associated persons in determining the comparability of transactions;
  • provide specific factors to be considered in determining an arm’s-length price for financing arrangements;
  • provide transfer pricing rules for business restructuring; and
  • require persons who enter into arrangements with persons with whom they have a controlled relationship to maintain contemporaneous documentation (information and documents which exist or were created at the time the person was developing arrangements which might raise transfer pricing issues).

IVORY COAST: Tax administration to process VAT credit refunds from 1 December 2020

In a statement issued on 23 November 2020, the General Director of the Ivorian Tax Administration (Direction générale des Impôts, or “DGI)” has informed taxpayers eligible for value-added tax (“VAT”) credit refunds to submit their requests only online from 1 December 2020 via the DGI website.

Assistance and additional information are available at the tax teleservices centre (Centre des Téléservices Fiscaux).

KENYA: Court of Appeal rules that bank interchange fees and payments to international credit card service providers are liable to withholding tax

In its judgment of 6 November 2020 in Commissioner of Domestic Taxes (Large Taxpayer Office) v. Barclays Bank of Kenya Ltd [2020] eKLR, the Kenyan Court of Appeal held that interchange fees between banks are management and professional fees, and that payments to international card services providers (Visa International Services Association, MasterCard Incorporated and American Express Ltd) are royalties for the use of their trade marks and are, therefore, subject to withholding tax.

The court based its decision on the view that, for Barclays Bank to access and participate in any of the networks set up by the card companies, it must use the particular company’s cards bearing that company’s trade marks and logos, which are distinct and distinguish one card company from the other. The debit and credit cards issued by the bank to its customers bear the distinct logos and trade marks of the respective card companies and it is the court’s view, from the trade mark agreements referred to, that this is a precondition for the bank to access and use the card networks.

The court was satisfied that the KRA was able to demonstrate that the relevant transaction fee constituted payment for the right to use the card companies’ trade marks and logos, which constituted a royalty for the use of a trade mark.

It was the court’s view that while paying interchange fees, the bank, who is both an issuer and an acquirer, is actually acting in his latter capacity. There is clear co-ordination, managerial, professional, and contractual services rendered by the issuer to the acquirer, for which the latter pays. The KRA proved that those payments by the bank in its capacity as acquirer to the issuer banks, satisfy the definition of management and professional fees as defined in the Income Tax Act.

KENYA: Public notice on fringe benefit tax issued

The KRA issued a public notice on fringe benefit tax and deemed interest rates on 28 October 2020. The public notice provides that:

  • in relation to fringe benefit tax and for the purposes of section 12B of the Income Tax Act, a market interest rate of 6% is applicable for October, November and December 2020;
  • in relation to deemed interest rate and for purposes of section 16(5), that a prescribed rate of interest of 6% is applicable for the months of October, November and December 2020; and
  • the withholding tax rate of 15% on the deemed interest shall be deducted and paid to the KRA by 20th of the month following the month of computation.

MAURITIUS: Deferment of tax payment and renewal of tax arrears settlement scheme announced

The Mauritius Revenue Authority (“MRA”) issued a Communiqué on 6 November 2020 announcing a deferment of tax payment and the renewal of the tax arrears settlement scheme.

According to the Communiqué, the MRA has taken the following measures to assist taxpayers and employers in improving their cashflow by deferring tax payments under the Advance Payment System (“APS”), the Current Payment System (“CPS”), and by renewing the Tax Arrears Settlement Scheme (“TASS”):

APS

  • The last date for the submission of APS statements and payment of the corresponding tax by companies for any quarter where the due date falls in November 2020, and up to May 2021, is being deferred to 28 June 2021.
  • Companies whose accounting period ends in November 2020 are not required to submit an APS statement for the third quarter ended in August 2020. They will have to submit their annual income tax return by 31 May 2021.

CPS

  • Individual taxpayers are not required to submit CPS statements where the due date falls in December 2020, March 2021 and June 2021. The tax payable will be paid at the time of submission of annual income tax returns in September/October 2021.

TASS

  • Where tax arrears, outstanding as at 31 October 2020, under an assessment issued or a return submitted on or before 31 October 2020 under the Income Tax Act, the VAT Act and the Gambling Regulatory Authority Act, are fully paid by a person on or before 31 December 2021, any penalty and interest included in the tax arrears will be fully waived, provided that an application for the waiver is made to the MRA on or before 30 June 2021.
  • Taxpayers having assessments pending before the Assessment Review Committee, the Supreme Court or Judicial Committee of the Privy Council, and who wish to take advantage of the scheme, may do so by withdrawing the case before these institutions.
  • Where the arrears, outstanding as at 31 October 2020, consist of training levy and/or surcharges payable under the Human Resource Development Act, the surcharges shall be reduced by 80% provided that an application for the reduction is made to the MRA on or before 30 June 2021 and the outstanding training levy along with the balance of surcharges is paid on or before 31 March 2022.

NAMIBIA: Electronic filing tax relief programme for outstanding taxes launched

The Ministry of Finance on 4 November 2020 issued a media release providing for relief to taxpayers with outstanding balances, with effect from 1 February 2021. The relief measures include:

  • taxpayers with outstanding taxes can take part in the relief programme which is applicable to all taxes administered by the Inland Revenue Department (“IRD”);
  • the Ministry of Finance will write off and reverse all penalties for taxpayers who settle the capital amount within a period of three months from 1 February 2021. The benefit also applies to taxpayers who settle their capital before the commencement date and only have outstanding interest; and
  • for taxpayers who settle the capital amount within a period of 12 months from 1 February 2021, the Ministry of Finance will write off 75% of the interest balance and reverse all penalties.

No capital amount owing to the IRD will be written off and therefore, taxpayers who fail to settle the outstanding capital will not benefit from the relief programme. Penalties and interest settled or set off prior to the effective date of the relief programme shall not be refunded or credited to the account. Taxpayers are required to first register as electronic filers on the Integrated Tax Administration System to qualify for the relief programme.

NIGERIA: Proposed Finance Bill 2020 to presented to National Economic Council

The Federal Government on 19 November 2020, presented the proposed Finance Bill, 2020 to the National Economic Council Meeting, following the approval of the Bill by the Federal Executive Council the previous day.

Key proposals include:

  • a 50% reduction in minimum tax rate from 0.5% to 0.25% of gross turnover for financial years ending between 1 January 2020 and 31 December 2021;
  • exemption of small companies with less than ₦25million turnover from payment of tertiary education tax under the Tertiary Education Trust Fund (Establishment, Etc.) Act, 2011;
  • granting of tax relief to companies that donated to the COVID-19 relief fund under the Private Sector Coalition against COVID;
  • introduction of software acquisition as a qualifying capital expenditure to improve the ease of doing business; and
  • reduction in the rate of import duties payable on tractors and motor vehicles to 10% and 5%, respectively.

The Bill is to be presented to the National Assembly for review and passage.

SAO TOME AND PRINCIPE: Tax Directorate releases Binding Information excluding leases from consumption tax

The Sao Tome and Principe Tax Directorate has issued a Binding Information on 25 September 2020 clarifying that lease agreements are not subject to the consumption tax on the basis that article 1 of the General Tax Code, which levies the consumption tax on the provision of services, refers only to tangible movable property and omits immovable property in defining services.

SEYCHELLES: Circular on lodgement programme for 2020 tax returns published

The Seychelles Revenue Commission (“SRC”) recently published a circular to all tax agents regarding the lodgement programme for 2020 tax returns and other forms.

The circular provides that: the SRC is launching its extended lodgement programme for 2020 business tax returns and other tax related forms throughout the year 2021 and all tax agents are invited to submit their 2021 client listing of 2020 returns to be lodged throughout the year 2021 by close of business on 31 December 2020, as per the 2021 lodgement program procedures and additional points attached to the Circular.

TANZANIA: Tribunal rules Board has no jurisdiction over tax waiver appeals

The Tax Revenue Appeal Tribunal in Commissioner General (TRA) vs. Mek One, Tax Appeal Nos. 69 & 70 of 2019, confirmed its earlier position that the Tax Revenue Appeals Board has no jurisdiction to hear and determine waiver rejection appeals on account that such appeals are not emanating from objection decisions as required by the Tax Revenue Appeals Act.

Under Tanzanian tax law, it is a mandatory requirement for a taxpayer intending to file an objection against an assessment issued by the Commissioner General to deposit one-third of the amount assessed or tax not in dispute (whichever is greater), or obtain a waiver to make such a deposit. Uncertainty exists as to what an aggrieved taxpayer should do when an application for a one-third waiver is rejected by the Tanzania Revenue Authority as a result of an inconsistent position by tax courts on whether an aggrieved taxpayer can directly appeal a waiver decision to the Tax Revenue Appeals Board or is required to file a second objection before appealing to the Board.

UGANDA: Uganda Revenue Authority issues guidance on the payment of stamp duty by professionals

With effect from 1 July 2020, professionals in Uganda are required to pay stamp duty on every professional license or certificate at an amount of UGX100 000 per annum, following an amendment to the Stamp Duty Act, 2014.

The Uganda Revenue Authority (“URA”) recently published a detailed notice on its website guiding professionals on how to acquire a declaration form using the URA web portal, make payments and generate a stamp certificate.

UGANDA: Interest paid by the National Social Security Fund to its members is an allowable deduction

On 2 November 2020, the High Court of Uganda ruled in National Social Security Fund (“NSSF”) vs URA (Civil Appeal No. 29 of 2020, arising from TAT application No. 3 of 2019) that interest paid by the NSSF to its members is a deductible expense for income tax purposes.

The court had to consider, inter alia: whether interest incurred by the NSSF when paying its members formed a debt obligation; whether this interest was deductible for tax purposes; and whether the amounts received is gross income in the hands of the NSSF.

It was the court’s view that the Income Tax Act provides a clear and unambiguous definition of a debt obligation and that contributions of the members of the NSSF constitute a debt obligation and any interest payments incurred due to this is an allowable deduction under section 25 of the Income Tax Act.

On the issue of whether the interest formed part of the gross income of the NSSF, the judge stated that the nature of business of the NSSF ought to have been examined since the NSSF mainly receives contributions for employees as specified under the NSSF Act and it is these amounts that are invested in various ventures on which the members earn interest. These earnings form part of the gross income of the NSSF and it is therefore clear that the interest deducted is part of the production of this income.

ZAMBIA: New customs regulations on exportation of maize published

Customs and Excise (Suspension) (Maize) Regulations, 2020, Statutory Instrument No. 90 of 2020 was published on 6 November and are effective from 20 September 2020 to 31 December 2020.

The Regulations suspend the export duty on maize exports by various farms in Zambia to 0%, provided certain quantities from each farm, as specified in the Regulations, are exported.

ZIMBABWE: Finance Act, 2020 published

The Zimbabwe Revenue Authority has published the Finance Act 2020 (Act No. 8 of 2020), which was gazetted on 28 October 2020.

Significant amendments include:

  • the introduction of the following new individual income tax tables for employment income in Zimbabwe dollar (ZWD) or foreign currency (USD reference) with effect from 1 August 2020:

Employment income (ZWD)

Tax rate

up to ZWD25 000

0%

ZWD25 001 – 75 000

10%

ZWD150 001 – 300 000

30%

ZWD75 001 – 150 000

25%

ZWD300 001 – 500 000

35%

ZWD500 001 and above

40%

Employment income in foreign currency (USD)

Tax rate

up to USD350

0%

USD351 to 1 500

10%

USD1 501 to 5 000

30%

USD5 001 to 10 000

25%

USD10 001 to 15 000

35%

USD15 001 and above

40%

  • splitting the year of assessment for employment income beginning on 1 January 2020 into the seven-month period 1 January to 31 July 2020 and the five-month period 1 August to 31 December 2020;
  • the introduction of new non-resident shareholders’ (withholding) tax rates on dividends effective 1 August 2020:
    • 10% in the case of a dividend distributed from a security which, on the date of distribution, is listed in the official list kept by a registered securities exchange (other than the Victoria Falls Stock Exchange) in terms of the Securities and Exchange Act;
    • 5% in the case of a dividend distributed from a security which, on the date of distribution, is listed in the official list kept by the Victoria Falls Stock Exchange; and
    • 15% in the case of any other dividend;
  • the introduction of changes to the intermediated money transfer tax (“IMTT”) effective 1 August 2020, including:
    • new IMTT flat rates effective are ZWD50 000 on single transactions exceeding ZWD2.5-million and USD2 000 on single transactions exceeding the equivalent of USD100 000; and
    • the IMTT exemption for local transactions is set at a transaction value of ZWD300 or USD5 or below.
  • the introduction of new rules for the taxation of certain income deemed to be from a source within Zimbabwe, including income derived from persons resident in Zimbabwe by non-resident e-commerce platform operators. Such non-residents or their representative taxpayer are required to submit a return in the prescribed form, declaring total income derived in every quarter of a year of assessment by the following deadlines provided for the payment of tax due, which must be paid in foreign currency:
    • the first quarter payment shall be paid on or before 25 March in the relevant year of assessment;
    • the second quarter payment shall be paid on or before 25 June in the relevant year of assessment;
    • the third quarter payment shall be paid on or before 25 September in the relevant year of assessment; and
    • the fourth quarter payment shall be paid on or before 20 December in the relevant year of assessment;
  • limiting the deduction of donations in the determination of taxable income to the ZWD equivalent of USD100 000 with effect from the year of assessment commencing on 1 April 2020, and
  • an exemption from capital gains tax for amounts received or accrued on the sale or disposal of any shares or other marketable securities listed on the Victoria Falls Stock Exchange with effect from 1 August 2020.

Sources include IBFD’s Tax Research Platform; www.allafrica.com; http://tax-news.com