Africa Tax In Brief

AFRICA: Second policy brief for taxation of highly digitalised businesses in Africa published by the African Tax Administration Forum

Following the publication of the 2020 ATAF policy brief, the African Tax Administration Forum ("ATAF") on 4 April 2024 published a second policy brief for the taxation of highly digitalised businesses by African countries. Under the published policy brief, the ATAF outlines the following options for taxing digital firms in Africa:

• waiting for the Amount A Multilateral Convention (MLC) to come into force;
• enacting digital service tax ("DST") legislation that is not an income tax based on the ATAF's suggested approach to drafting DST legislation;
• enacting DST legislation that is included in the Income Tax Act;
• adopting alternative nexus rules; and
• adopting article 12B of the United Nations Model Tax Convention.

ATAF emphasises that the choice that African countries make on the taxation of digital firms will vary depending on the country's particular tax policy objectives. In addition, DSTs and the other measures described above are much broader in scope than the Amount A MLC, and they will apply to a substantial number of digital firms operating in the country, whereas it is currently estimated that the MLC would apply to only about 100 multinational enterprises.

ANGOLA: Various amendments to the VAT Code introduced

On 18 April 2024, the Angolan General Tax Administration ("AGT") announced several changes to the VAT Code, which became effective on the same day. Significant amendments include:

• expanding the list of supplies subject to the reduced VAT rate of 5% to include widely-consumed foodstuffs such as cassava and yam; corn, wheat and sorghum grain; soybeans, sugar and salt; corn, cottonseed and wheat flour; meat sausages; and bread, cooking oil, soap, and mineral and table water;
• excluding taxpayers with a turnover or import transactions of up to AOA25-million (previously AOA10-million) from the scope of VAT;
• providing that taxable persons subject to VAT under the general VAT regime that only perform transactions exempt from VAT are required to pay stamp duty on receipts at the rate of 1% (previously 7%);
• introducing a deferred payment of VAT for imports or transfer of industrial materials and equipment by manufacturers starting up in business for a period of up to 12 months;
• extending the period for the right to claim VAT inputs from two to 12 months;
• exempting from VAT interest on arrears for the late payment of bank loans and fees charged for building maintenance expenses on condominium property; and
• allowing taxpayers under the simplified VAT regime that apply for a special 7% VAT rate for turnover arising from all non-exempt transactions and services provided by non-resident entities to deduct 10% of VAT input (previously 7%).

CABO VERDE: State Budget Law for 2024 (Law No. 35/X/2023) introduces various tax amendments

The State Budget Law for 2024 was published in the Official Gazette on 31 December 2023 and entered into force on 1 January 2024.

Significant amendments include:

• reducing the corporate income tax rate from 22% to 21%;
• introducing a new tax group regime allowing for the transfer of losses incurred by a group company to another group company;
• introducing a deduction for the capitalisation of companies, allowing companies to deduct an amount equal to 10% on eligible equity increases, subject to an annual deduction cap of CVE20-million, with any excess allowed to be carried for deduction in up to five subsequent years;
• removing the seven-year loss carry-forward limit, with losses allowed to be carried forward indefinitely, subject to a 50% of taxable profit cap per year;
• reducing the 50% tax credit for qualifying industrial investment to a 20% tax credit;
• introducing new provisions for the extension of contractual tax benefits beyond five years if certain conditions are met; and
• revising certain transfer pricing provisions to clarify the requirement for transactions between related parties to be at arm's length; the requirement to apply the transfer pricing method/(s) ensuring the highest degree of comparability; and that adjustments will be made if transactions are not at arm's length.

CAMEROON: Multilateral Competent Authority Agreement on Automatic Exchange of Country-By-Country Reports (CbC MCAA) signed

Cameroon joined the Multilateral Competent Authority Agreement on Automatic Exchange of Country-by-Country Reports (2016) (CbC MCAA) on 25 January 2024. As of 30 April 2024, the CbC MCAA has been signed

DEMOCRATIC REPUBLIC OF THE CONGO: Finance Law for 2024 (Law No. 23/056) published

The Ministry of Budget of the Democratic Republic of the Congo has published a copy of the Finance Law for 2024 (Law No. 23/056), which was originally approved in December 2023. The mainly administrative measures, which became effective on 1 January 2024, include:

• Reducing the number of advance tax payments from four payments to three payments due by 1 August, 1 October, and 1 December, with the first two payments equal to 30% of the tax declared in the previous year and the third payment equal to 20%;
• Introducing the following new penalties for failing to file tax returns:
  • CDF5-million for large companies;
  • 5-million for medium-sized enterprises and non-profit associations; and
  • CDF250 000 small businesses;
• Introducing new penalties for failing to certify annual financial statements by a registered chartered account; and for chartered accounts that certify financial statements that are subsequently proven to be incorrect and do not correspond to a true and fair view of a company's results:
• Introducing a penalty of CDF1-million for refusing a tax investigation, which will be doubled for repeat offenses, with the tax agent (officer) allowed to close a taxpayer's facilities until after the taxpayer submits to an investigation; and

GHANA: Lists of jurisdictions for Automatic Exchange of Financial Account Information published

The Ghana Revenue Authority recently published the lists of participating and reportable jurisdictions for the purpose of the automatic exchange of financial account information under the CRS MCAA.

The list of participating jurisdictions consists of 110 jurisdictions and the list of reportable jurisdictions consists of 72 jurisdictions.

The 2024 reporting period schedule for submitting 2023 reports is as follows:

• the validation of prepared XML files is from 1 to 31 May 2024; and
• the submission of validated XML files is from 1 to 30 June 2024.

KENYA: Statute Law (Miscellaneous Amendments) Act, 2024 gazetted

The Statute Law (Miscellaneous Amendments) Act, 2024, gazetted on 26 April 2024, seeks to amend several Acts of Parliament. Significant amendments, which are effective from effective from 24 April 2024, include:

• Expanding the list of VAT-exempted supplies to include gas meters to enhance access to clean energy by low-income households;
• Expanding the list of taxable supplies to include imported denatured ethanol (previously exempted) in order to create an economic safety net and competitive edge for local denatured ethanol manufacturers; and
• Adjusting the deadline for remitting the national industrial training levy of KES50 per employee, collected by the Kenya Revenue Authority on behalf of the National Industrial Training Authority, from the fifth day to the ninth day of the subsequent month to harmonize the remittance date with other statutory deductions such as Pay-As-You-Earn ("PAYE") and VAT.

KENYA: Tax Procedures (Electronic Tax Invoice) Regulations 2024 issued

On 28 March 2024, the government of Kenya has issued the Tax Procedures (Electronic Tax Invoices) Regulations 2024, pertaining to the electronic Tax Invoice Management System (e-TIMS), which ensures that electronic tax invoices are electronically generated and are transmitted to the Kenya Revenue Authority (KRA) on a real-time or near real-time basis.

The Regulations are effective 21 March 2024 and revoke the Tax Procedures (Electronic Tax Invoice) Regulations 2023.

Key highlights of the Regulations include:

• The Regulations apply to any person carrying on business unless the person is exempted;
• All users of the system are required to:
  • Ensure that each sale is recorded in the system;
  • Ensure that an invoice is generated in respect of each sale through the system;
  • Ensure that each invoice generated through the system for a sale contain all the required information specified in the Regulations;
  • Transmit the invoice generated with respect to the sale to the buyer, and the invoice details to the KRA;
  • Maintain the stock in and out records in the system by recording each local purchase and import and notifying the Commissioner in writing within 30 days before closure of business indicating records of current stock;
  • notify the KRA in writing of the current stock quantity or levels in case there is transfer of stock upon closure of business;
  • Account for all relevant taxes under the applicable tax laws upon closure of the business;
  • Ensure continuity of operations of the system at all times;
• Persons who cannot use the system for any reason are required to:
  • Notify the Commissioner in writing within 24 hours of their inability to use the system; and
  • Record sales using any other means as may be specified by the Commissioner;
• A person who is intending to discontinue to use of the system due to change of business model, closure of business, or any other reason, is required to notify the Commissioner in writing of the intended discontinuation within 30 days prior to discontinuation;
• A person who discontinues use of the system due to the unplanned closure of the business is required to notify the Commissioner within seven days after the closure of the business and the Commissioner may, within 30 days after receipt of the notification, retire the system;
• The system should be capable of:
  • Transmitting KRA's system electronic tax invoiced in the manner specified;
  • Printing or providing stored data;
  • Maintaining the integrity of data;
  • Securing authentication for authorised users;
  • Recording and storing a log of all activities; and
  • Assigning a unique identifier to each invoice;
• The following transactions are excluded from the use of the system:
  • Emoluments;
  • Imports;
  • Investment allowances including internal accounting adjustments;
  • Airline passenger ticketing;
  • Interest;
  • Fees charged by financial institutions;
  • Expenses subject to withholding tax that is a final tax;
  • Services provided by a non-resident person without a permanent establishment in Kenya; and
  • Any other exclusion as may be provided under section 23A of the Tax Procedures Act;
• The Commissioner has authority to exempt a person from the requirements of the use of an electronic tax invoicing system and to revoke the granted exemption; and
• A person who fails to comply with any provisions of the Regulations or tampers with, manipulates or interferes with the proper functioning of the system including uninstallation and change of the device without notifying the Commissioner, commits an offence and is liable to a penalty equal to double the tax due.

LIBERIA: New VAT regime planned

Liberian President Joseph Boakai has reportedly submitted a draft bill to amend the Revenue Code for the introduction of a new VAT regime that would replace the country's current goods and services tax ("GST") regime. GST is a consumption tax currently levied at a general rate of 10% with no right to deduct input tax. The VAT regime, which allows for the deduction of input tax, is intended to enhance tax compliance and boost revenue generation. Notably, Liberia is the only ECOWAS member state that has not yet adopted a VAT regime as required by the regional integration program.

LIBERIA & UGANDA: Removed from Luxembourg's Common Reporting Standard list

The Luxembourg government, by a Grand-Ducal Decree dated 18 April 2024, which was published in Official Gazette No. A 156 of 19 April 2024, gazetted an updated list of jurisdictions with which the Luxembourg Tax Authorities will exchange reports under the Common Reporting Standard ("CRS"). The Decree removes, amongst others, Liberia and Uganda from the list.

MALAWI: COMESA-SADC-EAC Free Trade Agreement ratified

On 23 April 2024, Malawi deposited its instrument of ratification for the Tripartite Free Trade Agreement ("TFTA").

The agreement brings together the three regional economic communities of the Common Market for Eastern and Southern Africa ("COMESA"), the East African Community ("EAC") and the Southern African Development Community (SADC) into a single free trade area, making it one of the largest free trade areas in the world. Further developments will be reported as they occur.

To date, 12 countries (Botswana, Burundi, Egypt, Eswatini, Kenya, Malawi, Namibia, Rwanda, South Africa, Uganda, Zambia and Zimbabwe) have ratified the tripartite agreement. The TFTA will enter into force once it has been ratified by 14 states.

MAURITIUS: Protocol to tax treaty with India signed

On 7 March 2024, India and Mauritius signed an amending protocol to update the India - Mauritius Income Tax Treaty (1982), as amended by the 2016 protocol. The Indian tax authorities have recently released the text of the amending protocol. The amending protocol, which is not yet ratified or in force, aligns the treaty with the international Base Erosion and Profit Shifting ("BEPS") standards, significant amendments including:

• Introducing a revised preamble to the treaty, to the effect that India and Mauritius intend to eliminate double taxation, without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in the treaty for the indirect benefit of residents of third jurisdictions). The words "for the encouragement of mutual trade and investment" in the current preamble to the treaty have been omitted;
• Introducing new article 27B, Entitlement to Benefits, in line with the PPT rule under the Action 6 (Prevention of tax treaty abuse) minimum standard of the BEPS Action Plan. It provides that regardless of any other provision in the treaty, no benefit will be granted under the treaty if it is reasonable to conclude that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted, directly or indirectly, in that benefit. Further, the benefit will be available if it is established that the benefit would be in accordance with the object and purpose of the treaty.

The protocol provides that India and Mauritius will notify each other about the completion of the procedures for the bringing into force of this protocol and that the protocol will enter into force on the later date of these notifications.

RWANDA: Draft law on taxation of minerals approved

On 3 April 2024, the Cabinet approved the draft law establishing taxes on minerals. Once enacted by the parliament and promulgated by the President, the new law will repeal Law No.55/2013 on Minerals Tax, which has been in force since 2013.

UGANDA: Tax Amendment Bills 2024 tabled before Parliament

On 28 March 2024, the Minister of Finance, Planning and Economic Development tabled before the parliament the Tax Amendment Bills 2024. The Bills will take effect on 1 July 2024, upon approval and assent by the parliament and the President respectively. Significant proposed amendments include:

Direct taxes

• Exempting income derived from:
  • Private equity or venture capital funds regulated under the Capital Markets Authority Act;
  • Disposal of government securities on the secondary market;
  • Manufacturing electric vehicles, electric batteries or electric vehicle charging equipment or fabricating the frame and body of an electric vehicle by an investor operating in or outside an industrial park or free zone; and
  • Operating a specialized hospital facility by an investor in or outside an industrial park or free zone;
• Exempting interest paid by the government to a non-resident person with regard to debentures;
• Imposing a separate and final capital gains tax of 5% on the disposal of non-business assets, including land in cities or municipalities (except the principal place of residence); shares of a private company; and rental property that is subject to rental tax;
• Introducing and clarifying the meaning and taxation of a permanent establishment to include a place of management, branch, office, factory, workshop, warehouse in relation to the provision of storage facilities among others;
• Expanding the scope of income sourced from Uganda to include:
  • Annuity paid by a non-resident person as expenditure of a business carried on by a non-resident person through a permanent establishment in Uganda; and
  • Income derived from the payment of an insurance premium, if the premium relates to the insurance or reinsurance of a risk in Uganda;
• Imposing a 2% final withholding tax on interest paid by a resident person to an unrelated foreign financial institution in respect of debentures; and a 10% WHT on commission paid to payment service providers such as banking agents or any other agents offering financial services;

Indirect taxes

• Imposing VAT on goods or services supplied by a taxable employer to an employee at no consideration;
• Increasing the threshold for refund in the case of overpaid tax from UGX5-million to UGX10-million;
• Expanding the list of VAT exempted institutions to include:
  • African Reinsurance Corporation;
  • International Regulatory Board of the East African Power Pool; and
  • Islamic Cooperation for Development of the Private Sector;
• Expanding the list of VAT exempted supplies to include:
  • Supply of an electric vehicle or its body and frame manufactured or fabricated locally;
  • Electric vehicle charging equipment or charging services;
  • Pesticides other than pesticides packaged for personal or domestic use;
  • Hoes, fertilizers, seeds, seedlings; and
  • Cooking stoves which use ethanol, assembled in Uganda up to 30 June 2028;
• Designating the recipient of the proceeds of an auction as the supplier of goods and person liable to pay VAT in the case of supply of goods through auctioning;
• Requiring persons engaged in commercial farming to register for VAT.
• Exempting from stamp duty:
  • Nominal share capital or any increase of share capital acquired by an investor in a private equity or venture capital fund regulated under the Capital Markets Authority; and
  • Transfer of shares or other securities, to or by an investor in a private equity or venture capital fund regulated under the Capital Markets Authority

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.