Worldwide: Africa Tax In Brief

AFRICAN UNION: Intention to protect tax revenues in light of Pillar Two reiterated by African jurisdictions

The African Union's Specialized Technical Committee on Finance, Monetary Affairs, Economic Planning and IntegraAtion recently reiterated its stance that the qualified domestic minimum top-up taxes provided for under Pillar Two might support African countries in protecting their tax revenues and that African countries should impose a top-up tax on the low-taxed income of their constituent entities. The African Tax Administration Forum ("ATAF") previously indicated that the Pillar Two system mainly benefits resident states that are developed countries to the detriment of developing countries.

Recommendations were also adopted to use the ATAF Value Added Tax ("VAT") Toolkit for improved revenue collection on cross-border supplies of digital goods and services.

BURKINA FASO: Residence tax payment locations decentralised

In a memo published on 25 May 2023, the Regional Tax Director of the Central Tax Region of Burkina Faso has informed taxpayers that, from 1 June 2023, they can declare and pay residence tax in the nine Tax Directorates Offices (Direction de Centre des Impots, DCI 1 to 9) and in the five Regional Tax Offices (Centre Départementaux des Impôts, CDI) of the Central Region (CDI Komsilga, CDI Koubri, CDI Pabré, CDI Saaba and CDI Tanghin-Dassouri). Previously, residence tax could only be declared and paid at the headquarters of the Central Region tax office.

DEMOCRATIC REPUBLIC OF THE CONGO: Certification of financial statements mandated from 1 January 2024

On 16 May 2023, the Minister of Finance issued Ministerial Order N0.014/CAB/MIN/FINANCES/2023 of 16 May 2023 with practical conditions for the certification of financial statements. The certification will be applicable from 1 January 2024 and should be done prior to the submission of income tax (Impot sur les Benefices et Profits, IBP) returns. In summary:

• the order only applies to companies subject to the standard tax regime (ie, qualifying taxpayers);
• only natural persons who are independent chartered accountants and chartered accountancy firms registered with the National Order of Chartered Accountants (Ordre National des Experts Comptables, ONEC) are entitled to certify the financial statements;
• all qualifying taxpayers are obliged to annually appoint an independent chartered accountant or a duly registered chartered accountancy firm to certify their financial statements before 30 June;
• for entities bound by the Uniform Acts of Organization for the Harmonization of Business Law in Africa (Organisation pour l'harmonisation en Afrique du droit des affaires, OHADA) and Congolese domestic laws to appoint an auditor, along with those who elect to appoint an auditor, the certification may be made by those auditors;
• an annual report on the financial statement certification, which aims to give an opinion regarding the regularity and accuracy of the taxpayer's financial affairs, must be prepared and submitted annually before 30 June; and
• proof of the financial statement certification must be provided in order to submit the IBP return.

KENYA: Requirement for declaring related party transactions in income tax return introduced

In a public notice issued on 5 June 2023, the Kenya Revenue Authority ("KRA") has announced the amendment of the income tax company return on the iTax platform to provide for the declaration of transactions between related parties where the:

• ascertainment of gains or profits from business in relation to stock is deemed to be derived from Kenya; and
• gains and profits of business are derived under a preferential tax regime.

When filing returns, taxpayers with related party transactions are required to:

• respond to the question under the basic information sheet of the income tax company return re whether they have related parties outside Kenya or controlled transactions; and
• capture the relevant details of the related party transactions under sheet B2.

KENYA: Electronic tax invoice requirements enforced from 1 June 2023

The KRA recently announced that, with effect from 1 June 2023, all VAT-registered taxpayers are required to only accept electronic tax invoices from registered taxpayers in compliance with the VAT (Electronic Tax Invoice) Regulations 2020 for purposes of claiming input tax and the processing of refunds, except non-resident suppliers of digital services.

MALAWI: Tax amendments assented to by the president

The President of Malawi has assented to the Taxation (Amendment) Act 2023, VAT (Amendment) Act 2023, and Customs and Excise (Amendment) Act 2023, which introduce changes to the relevant tax acts with effect from 5 April 2023. Please refer to the of March 2023 which provides an overview of the amendments introduced in the 2023-24 Budget statement.

MAURITIUS: Angel Investor Allowance Regulations published

Mauritius has published the Income Tax (Angel Investor Allowance) Regulations 2023, which regulate the angel investor allowance that was introduced as part of the 2022-2023 Budget (Finance (Miscellaneous Provisions) Act 2022). The Regulations are deemed to have come into operation in respect of the income year commencing on 1 July 2022 and in respect of every subsequent income year.

From 1 July 2022, an allowance by way of a deduction from their net income equal to 50% of the amount invested in a tax year is available to individuals where an angel investor has invested a minimum of MUR100 000 in the seed capital of a qualifying start-up SME by way of acquisition of shares in a tax year. The allowance is subject to a deduction cap of MUR500 000 per year and the conditions that ownership, together with relatives, in the SME does not exceed 25% and that the shares are held for at least 36 months.

MAURITIUS: 2023-24 Budget presented to the National Assembly

The Minister of Finance, Economic Planning and Development presented the 2023-24 Budget to the National Assembly on 2 June 2023. Significant proposed amendments include:

Corporate income tax

• with effect from the 2022/23 year of assessment, taxing banks on their chargeable income of up to MUR1.5-billion at a rate of 5% and at a flat rate of 15% on amounts above MUR1.5-billion;
• taxing companies manufacturing medical devices, and profits from the sale of aviation fuel to an airline at a rate of 3%;
• levying the solidarity levy on telephony service operators (including loss-making ones) at the rate of 5% of their accounting profit and 1% (previously 1.5%) of their turnover;
• exempting interest on bonds, debentures or sukuks issued by an overseas entity to finance renewable energy projects (green bonds) approved by the Mauritius Revenue Authority ("MRA");
• allowing an investment tax credit to manufacturing companies at a rate of 15% over three years on the cost of new plant and machinery, excluding motor cars, incurred until 30 June 2026;
• allowing unrelieved investment tax credits in a year to be carried forward over 10 years;
• granting an investment tax credit to companies manufacturing both alcoholic and non-alcoholic beverages at the rate of 15% on the acquisition of new plants and machinery used to produce non-alcoholic drinks;
• granting manufacturing companies, with an annual turnover not exceeding MUR500-million, incurring expenditure on market research and product development, a double deduction of the expenditure;
• granting tax relief to local companies, participating in financing, sponsorship or marketing and distribution of an approved film project for theatrical or media streaming release at 200% of the amount spent under film the rebate scheme, provided that at least 90% of the approved film is produced in Mauritius;
• allowing a 200% deduction on the cost of setting up a childcare centre. New campuses or local training institutions partnering with their African counterparts will be allowed a double deduction of their costs;
• allowing a 300% deduction for companies with employees that have disabilities;
• increasing the partial exemption on interest income from 80% to 95% for a collective investment scheme or a closed end fund established in Mauritius;
• waiving any outstanding COVID-19 levy (including penalties and interest) as at 20 January 2023;

Personal income tax

• abolishing the solidarity levy payable by high income earners;
• introducing the following progressive tax regime for personal income taxation:

Indirect taxation

• expanding the list of VAT exempt supplies to include 15 essential products, namely noodles, toothbrushes, baby wipes, baby diapers, baby powder, baby cream, breast pumps, infant feeding bottles, exercise books, pencils, crayons, erasers, walking sticks and incontinence mattress pads;
• exempting persons engaged in the construction of buildings intended for primary and secondary education from VAT;
• exempting contractors engaged in the construction of social housing units under a social housing project from VAT, customs duty, and excise duty. The exemptions apply to the procurement of goods (excluding vehicles), works, consultancy services and other related services;
• with effect from 5 June 2023, zero-rating certain instruments and appliances used in medical, surgical, dental, or veterinary sciences which were previously VAT exempt;
• removing VAT from the supply of all musical instruments;
• allowing persons who have voluntarily registered for VAT to claim input VAT;
• introducing a special levy at the rate of 5.5% for all banks;

Tax administration

• launching an electronic invoicing (e-invoicing) and a developer's portal to test the e-invoicing system supplied by vendors to ensure they meet required standards;
• allowing VAT refund claims where the construction value of a residential building, house, or apartment does not exceed MUR3-million;
• requiring annual reporting of transactions via a virtual asset service provider and an issuer of initial token offerings to the MRA if a:
  • transaction exceeds MUR250 000 or an aggregate of MUR2-million in a year for an individual; and
  • transaction exceeds MUR500 000 or an aggregate of MUR4-million in a year for a corporate body;
• repealing the tax deduction at source on fees paid to a management company which is licensed by the Mauritius Financial Services Commission. Tax deduction at source is now extended to apply to payment of fees by insurance companies to panel beater and also spray painters for repairs of motor vehicles of policyholders at a 3% withholding tax rate and to interior decorators at a 5% withholding tax rate; and
• reintroducing the tax arrears settlement scheme ("TASS") which should be made by 31 December 2023. In addition, waivers of interests and penalties for tax arrears outstanding under the Income Tax Act will apply when tax is settled in full on or before 31 March 2024. TASS is also set to apply to assessments that are pending before the assessment review committee, Supreme Court or the Judicial Committee of the Privy Council.

MOZAMBIQUE: Deadline for use of printed invoice books and equivalent documents containing former VAT rate extended

Following the recent reduction of the VAT rate from 17% to 16%, the General Directorate of Taxes has, through Circular No. n/AT/DGI-DNT/132/2023 of 23 May 2023, extended the deadline for taxpayers to use printed invoice books or equivalent documents reflecting a 17% VAT rate up to 30 June 2023. Previously, taxpayers in possession of such books or documents were only allowed to continue using them while applying a 16% VAT rate up to 30 April 2023.

Taxpayers using printed invoice books or equivalent documents are required to:

• request authorised printers to supply new invoice books or equivalent documents with the new VAT 16% rate, with effect from 1 July 2023; and
• notify the tax department about the last series of invoices using the previous 17% VAT rate.

NIGERIA: Notice on Implementation of Finance Act 2023 issued

On 9 June 2023, the Federal Inland Revenue Service ("FIRS") issued a circular specifying compliance measures under the VAT Act and Tertiary Education Trust Fund (Establishment) Act, including the following:

• VAT withheld or collected in June 2023 must be remitted on or before 14 July 2023, while VAT for subsequent months must be remitted not later than 14^th day of the month following the month the VAT was withheld or collected;
• companies involved in the letting or trading or rendering of services relating to radio or television masts, transmission lines, cell towers, vehicles, mobile homes, caravans and trailers must charge VAT at the prevailing rate effective from 1 July 2023; and
• the new Tertiary Education Tax rate of 3% takes effect in respect of the accounting period ending on or after 1 July 2023.

NIGERIA: Treaty with the Netherlands to be amended

Officials from the Netherlands and Nigeria reportedly met on 6 June 2023 to discuss bilateral relations, including the revision of the 1991 income and capital gains tax treaty between the two countries. Any revisions to the treaty must be finalised, signed, and ratified before entering into force.

NIGERIA: Finance Bill 2023 signed into law

The Nigerian President signed the Finance Bill 2023 into law on 28 May 2023. Significant amendments to the Act, which took effect from 1 May 2023, include:

• imposing a 10% tax on gains from the disposal of digital assets and 0.5% on goods imported from outside Africa;
• allowing the deduction of losses incurred by a person disposing of an asset on which capital gain tax is chargeable and which may be carried forward for a period of five years;
• applying roll-over relief for shares which is subject to reinvestment of the proceeds of sale within the same year of assessment and in the acquisition of eligible shares in the same or other Nigerian companies;
• requiring a certified detailed gross revenue statement of Nigerian operations and evidence of an income tax filing and tax clearance certificate by companies engaged in shipping or air transport;
• scrapping the investment allowance on expenditure incurred on plant and equipment;
• scrapping qualifying capital expenditure on the provision of facilities in rural communities;
• removing the exemption for convertible currencies derived from tourists by hotels;
• introducing a new revenue levy on Electronic Money Transfer with a distribution formula amongst the federal government at 15%, state governments at 50% and local government at 35%;
• introducing transfer pricing rules on VAT transactions between connected persons or fictitious or artificial transactions;
• increasing the annual tertiary education tax rate from 2.5% to 3% of assessable profits; and
• charging VAT on goods purchased via electronic or digital platforms from a non-resident supplier who is appointed as an agent of the FIRS.

NIGERIA: Tax relief to be granted to investors in the automotive industry

Following the adoption of the National Automotive Industry Development Plan (NAIDP) 2023 to 2033, the government published additional fiscal incentives to investors in the automotive industry on 26 May 2023, including:

• additional tax relief for five years for assemblers or manufacturers of automotive components and products; and
• additional tax relief for 10 years for assemblers or manufacturers of electric vehicles and components used in electric vehicles.

NIGERIA: Tax Appeal Tribunal confirms appointment of non-resident suppliers as agents of VAT collection

The Lagos Tax Appeal Tribunal ("TAT") in the case of Bolt Operations v FIRS held that the FIRS validly exercised its powers under the VAT Act to appoint Bolt, a non-resident supplier, as agent of collection of VAT from both the activities of the food vendors and drivers that use the company's platform to provide services to customers.

SÃO TOMÉ AND PRÍNCIPE: VAT enforcement timeframe for specified taxpayers extended

Following the recent implementation of the country's new VAT system, the government of São Tomé and Príncipe intends to set a deadline by which approximately 180 taxpayers must initiate the process of collecting VAT.

According to the Director of Taxes, of the 380 taxpayers identified to levy VAT, only 200 were able to commence charging VAT by the implementation date of 1 June 2023 and has advised that taxpayers that failed to commence VAT collection by 1 June 2023 have approximately one month in which to regularise any conditions causing the delay.

On 19 May 2023, the Tax Directorate Communication Service released Administrative Guidelines to assist taxpayers in implementing the new VAT system, which came into effect on 1 June 2023. According to the Guidelines:

• the right to recover VAT is only available to VATable persons in the capacity of direct importers and those who have borne the tax on consumption at the time of customs clearance;
• for this purpose, a taxable person must submit to the Tax Directorate an inventory list on 31 May 2023 with import documents showing the date covered in the said period and the amount of the respective tax; and
• the importer must reduce the product selling price with the consumption tax previously paid at the customs point and add 15% VAT to the selling price.

SENEGAL: List of organisations eligible for tax deductible donations updated

The Minister of Finance has issued Order No. 019908/MFB/DGID of 5 June 2023 which repeals the previous Order No. 5183/MFB/DGID of 24 March 2022 and updates the list of approved organisations to which donations deductible for income tax purposes can be made. For donations to be deductible, taxpayers should attach to their annual tax return a certificate of payment delivered by the approved beneficiary organisations.

SEYCHELLES: Indonesia publishes English synthesized text of treaty with Seychelles

On 19 May 2023, the Indonesian tax authorities published the English synthesised text of the Indonesia - Seychelles Income Tax Treaty (1999), displaying the modifications made to the treaty by the Multilateral Instrument ("MLI").

Indonesia and Seychelles deposited their instrument of ratification of the MLI on respectively 28 April 2020 and 14 December 2021. The MLI, therefore, entered into force for Indonesia on 1 August 2020 and for Seychelles on 1 April 2022. Unless stated otherwise in the synthesized text, the provisions of the MLI will generally have an effect with respect to the Indonesia - Seychelles Income Tax Treaty (1999):

In Indonesia:

• with respect to taxes withheld at source on amounts paid or credited to non-residents, when the event giving rise to such taxes occurs on or after 1 January 2023; and
• with respect to all other taxes, for taxes levied with respect to taxable periods beginning on or after 1 January 2024.

In Seychelles:

• with respect to taxes withheld at source on amounts paid or credited to non-residents, when the event giving rise to such taxes occurs on or after 1 January 2023; and
• with respect to all other taxes, for taxes levied with respect to taxable periods beginning on or after 10 June 2023.

TANZANIA: 2023-24 Budget speech presented to parliament

The Minister of Finance presented the 2023-24 Budget speech to parliament on 15 June 2023. Significant proposed amendments include:

• exempting capital gains tax on the internal restructuring of mining companies;
• increasing the VAT minimum threshold from TZS100-million (approx. USD41 000) to TZS200-million (approx. USD83 000);
• exempting from VAT the sale and lease of aircrafts, and the supply of precious metals and gemstones;
• introducing VAT deferments on locally manufactured capital goods;
• scrapping the mobile money transaction levy on sending and receiving money via digital platforms; and
• reducing the skills and development levy from 4% to 3.5%.

UGANDA: High Court rules that interest recovered on sale of mortgaged property not subject to withholding tax

A High Court judgement delivered on 22 May 2023 in the case of Luwaluwa Investment Ltd (LIL) v Uganda Revenue Authority (URA) (Civil Appeal No.43 and Tax Appeal Tribunal Application No.39 of 2021) confirmed that interest recovered on the sale of a mortgaged property is not subject to withholding tax.

The court held that:

• foreclosure by a bank takes the form and character of the loan obligation the bank was trying to recover the principal and interest;
• there is no withholding tax payable by a borrower when repaying the principal sum borrowed from the financial institution, as this does not qualify as income received but a mere refund; and
• the sale of a mortgaged property is a refund of loaned sums including principal and interest given to the borrower which does not attract income tax and withholding tax.

ZAMBIA: Zambia Revenue Authority embarks on data-matching exercise of PAYE declarations

As part of an initiative to enhance revenue collection, the Zambia Revenue Authority ("ZRA") announced that it has embarked on a data-matching exercise of Pay As You Earn (PAYE) returns and declarations making use of various third-party data sources. Employers identified as being non-compliant are being contacted through emails, phone calls and SMS alerts to regularise their positions.

ZIMBABWE: 1% tax on foreign payments introduced to bolster local currency

The Zimbabwean Minister of Finance and Economic Development announced the introduction of a 1% tax on all foreign payments effective from 1 June 2023 as part of measures to strengthen the Zimbabwean dollar and counteract rising inflation.

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