AFRICAN UNION: African Continental Free Trade Area Agreement developments
On 1 January 2021, Africa commenced trading under the preferences and rules that were negotiated and agreed upon under the African Continental Free Trade Area Agreement ("AfCFTA"). The commencement of trade had earlier been postponed due to the COVID-19 pandemic with the priority being given to fighting the pandemic by the Secretariat of the AfCFTA.
The AfCFTA, which entered into force on 30 May 2019, has been signed by 54 countries while 34 countries have deposited their instruments of ratification by 1 January 2021.
On 15 January 2021 and 5 February 2021 Malawi and Zambia respectively deposited their instruments of ratification as the 35th and 36th countries to do so.
During a virtual event on 15 January 2021, the Ministry of Trade and Industry of Rwanda launched the start of trading under the AfCFTA. The Ministry announced that goods from African countries that have ratified the agreement establishing the AfCFTA and its protocols will get preferential tariffs and service providers will be allowed to offer their services without any restrictions.
ANGOLA: 2021 Budget approved
The changes proposed by the 2021 State Budget, approved by Law 42/20 of 31 December, entered into force on 1 January 2021. Significant amendments include:
- reducing the industrial withholding tax rate on services rendered by non-resident companies to oil companies resident or having a permanent establishment in Angola from 15% to 6.5%;
- implementing a simplified value-added tax ("VAT") regime for persons with a turnover or imports of AOA350-million or less, in terms of which qualifying taxpayers are subject to VAT at the rate of 7% on their monthly turnover, with a deduction allowed for 7% of the total amount of VAT on inputs;
- introducing a 2.5% rate of VAT to be withheld on receivables obtained via automatic payment terminals from the supply of goods or services carried out by taxable persons;
- introducing a 5% VAT rate on the importation and supply of goods included in the amended Annex I of the VAT Code; and
- extending the statute of limitation applicable to the 2015 year of assessment until 31 December 2021.
BOTSWANA: VAT rate increased from 12% to 14%
The Minister of Finance and Economic Development in his 2021 Budget Speech to the National Assembly on 1 February 2021 announced a number of tax amendments which will become effective on 1 April 2021, including:
- increasing the VAT rate from 12% to 14%;
- increasing the withholding tax rate on dividends from 7.5% to 10%;
- increasing the tax-free threshold for individual income tax rates from BWP36 000 to BWP48 000 per annum;
- granting amnesty to taxpayers with outstanding taxes in terms of which interest and penalties are to be waived for taxpayers that settle the principal amounts owed; and
- introducing a levy on the importation of second-hand vehicles into Botswana.
BURKINA FASO: Multilateral Instrument ("MLI") enters into force
On 1 February 2021, the Multilateral Convention (2016) (MLI) entered into force in respect of Burkina Faso. Burkina Faso signed the convention on 7 June 2017 and deposited its final MLI position on 30 October 2020, including the three tax treaties that it wishes to be covered by the MLI.
BURKINA FASO: 2021 Budget adopted
Burkina Faso recently adopted its 2021 Budget 2021. The main provisions, which apply from 1 January 2021, include:
- the restructuring of the synthetic taxation regime into a lump-sum regime for companies with turnover of up to F.CFA5-million and a declaration regime for companies with a turnover from F.CFA5-million to F.CFA15-million;
- introducing a tax on financial activities (Taxe sur les activités financières, TAF) on banking and financial transactions at a rate of 17%. A reduced rate of 15% applies to taxpayers under the standard taxation regime and banking refinancing transactions. Activities subject to TAF will be exempt from VAT;
- extension of the scope of the livestock sector contribution (Contribution du secteur de l'élévage, CSE) to include fishery and aquaculture products;
- amending the declaration and payment deadline for taxes and levies from the 20th to the 15th of the month;
- making payments by electronic means mandatory for taxpayers under the medium-sized enterprises tax office;
- requiring a certificate of tax clearance as a prerequisite for the transfer of land by real estate companies, as well as the granting, renewing and transferring mining titles;
- extending the reduced rate of real estate transfer fees to 2021.
The Finance Law No 035-2020/AN was adopted by parliament on 19 October 2020 and published in the Official Gazette on 3 December 2020.
CABO VERDE: Tax treaty with Spain enters into force
The Cabo Verde/Spain income tax treaty (2017) entered into force on 7 January 2021 and generally applies from 1 January 2022 for taxes accrued periodically in respect of income taxes and from 7 January 2021 for all other taxes.
CABO VERDE: Electronic invoices and tax documents implemented
Ordinance No. 74/2020 (Phased implementation of electronic invoices and tax documents) of 28 December 2020 became effective on 29 December 2020 and provides that the implementation of electronic invoices and electronic tax documents will be gradually established according to the following phases:
- a pilot phase;
- a voluntary participation phase during which all taxable persons may, from 4 January 2021, accede to the system for issuing invoices and tax-relevant documents electronically; and
- a mandatory participation phase during which the issuance of invoices and tax-relevant documents electronically shall be mandatory.
CAMEROON: Finance Law 2021 enacted
Cameroon has introduced various amendments to the General Tax Code through Law No. 2020/018 of 17 December 2020 (the Finance Law 2021). Significant amendments include:
COVID-19 pandemic tax measures
- extending the COVID-19 measures implemented in 2020 and
introducing some further measures for taxpayers undergoing a
restructuring to alleviate the economic effect of the COVID-19
- extending loss carry-forwards granted to taxpayers carrying on activities in sectors most affected by the pandemic by one year. A list of qualifying sectors is to be issued by the Minister of Finance;
- allowing enterprises in sectors most affected by the COVID-19
pandemic and undergoing restructuring in the 2021 financial year:
- a deduction of capital losses from the transfer of receivables for the determination of taxable income for the 2020 financial year;
- a reduction in the registration duty on the transfer of shares from 2% to a to be determined fixed amount during the 2021 financial year; and
- a F.CFA50 000 fixed registration duty on assumption of liabilities in partial asset contribution transactions;
- allowing the tourist sector to benefit from an extension of tourist tax for 2021 and an exemption from corporate income tax;
- requiring a written and registered loan agreement as prerequisite for a deduction of interest paid to a related party;
- requiring losses due to goods damages to be noted by a Tax Controller (previously a Tax Inspector) as prerequisite for a deduction;
- introducing a deductibility limit of 0.5% of the overall production of brewing companies for deduction of losses due to damages and breakages incurred;
- introducing a reduced 28% corporate income tax to taxpayers realising a turnover of up to F.CFA3-billion a year;
- extending the loss carry-forward period for credit institutions and State portfolio companies undergoing restructuring to six years;
- applying a reduced customs duty rate of 5% to imported equipment for pharmaceutical industries;
- exempting from customs duty drugs, raw materials for pharmaceutical industries and materials for agriculture, livestock and fishery;
- exempting from registration duty public debt repurchase agreements, public debt securitisation agreements and financial support agreements granted to local authorities;
- considering any agreement intended to allow an entity to carry on an activity in replacement of another one to be a "transfer of business ownership" and taxing it as such for purposes of registration duty;
- requiring all tax payments to be made by bank transfer or electronic means, especially for taxpayers under the large companies tax office. Payment in cash is only allowed to banks or authorised financial institutions;
- extending the deadline for notification of significant changes affecting a business (eg, changes in shareholding and capital) to three months when such changes have been effected abroad;
- providing the possibility for good taxpayers with tax payment progression of 15% from the previous year to be exempt from tax audits;
- extending the tax recovery deadline for debt due to tax audits from 15 days to 30 days; and
- setting the deadline for electronic tax filing for individuals deriving active income at 15 March of the following fiscal year and 30 June for those deriving employment income and passive income.
- requiring taxpayers wishing to benefit from the payroll tax exemption granted to employers hiring young professionals to be members of an approved management centre;
- applying a reduced corporate income tax rate of 25% to:
- companies listed on the Central African Stock Exchange. The minimum tax rate is also reduced to 1.5% of annual turnover; and
- companies known to be involved in public issues, which list all or part of their equity interest or obligations on the Central African Stock Exchange from the date of listing;
- introducing incentives for start-ups carrying on activities in
the digital sector and registered in an approved management centre
dedicated to start-ups, including:
- a five-year exemption from all taxes and levies, with the exception of social security contributions during the incubation phase;
- a 10% reduced rate on a capital gain realised after the incubation phase on the transfer of a start-up; and
- incentives for a period of five years during exploitation after the incubation phase, including exemption from business licence duty, registration duty, payroll tax (excluding social security contributions), a reduced corporate income tax rate of 15%, a 50% reduced basis for minimum income tax and a reduced tax rate on dividends of 5%.
CAMEROON: Multilateral Convention ("MLI") ratified
On 29 December 2020, Cameroon ratified the OECD Multilateral Convention (MLI) (2017), by way of Presidential Decree No. 2020/798 of 29 December 2020. The country 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.
DEMOCRATIC REPUBLIC OF CONGO: Rules regarding the rate and terms of application of the special tax on capital gains issued
The Finance Minister has issued rules for the computation, submission and settlement of the special tax on capital gains from the transfer of mining company shares through Ministerial Decree no. CAB/MIN/FINANCES/2020/091 on 3 December 2020. The General Director of the Tax Authority (Directeur Général des Impôts, DGI) also issued a Note (no. 01/0182/DGI/DG/CT/GM/2020) on 8 December 2020 providing a return template for submission of the special tax on the capital gains on the transfer of shares.
In summary, the rules provide that:
- capital gains on the transfer of mining shares are subject to tax at a rate of 30%;
- the tax on capital gains applies only to assets located in the DRC. If a company established in the DRC has assets which are located in more than one jurisdiction, the tax is due only on the portion of gains realized in the DRC;
- capital gains are calculated on the difference between the transfer price and the book value of the shares transferred;
- the tax is due by the transferor located in the DRC or by the non-resident which transfers the shares; and
- the tax is to be withheld by the buyer located in the DRC. If the buyer is a non-resident company, the mining company whose shares have been transferred and which holds the mining rights in the DRC has to withhold the tax.
DEMOCRATIC REPUBLIC OF THE CONGO: Finance Law 2021 effective
The Finance Law 2021 (Law 20/020 of 28 December 2020) introduces a number of amendments including:
- extending the tax deduction for bad debts in favour of banks to microfinance establishments;
- allowing donations and contributions to the COVID-19 Pandemic Fund, as tax deduction, provided that such expenses are supported by relevant documentation;
- repealing the exemption from VAT on imports in favour of mining companies. However, the VAT exemption on goods dedicated to research, exploration, prospection, construction and development of mining projects remains available to mining companies;
- amending the procedures applicable to tax audits, including extending the period for submitting requested documents from 10 days to 20 days; and
- extending the definition and scope of tax penalties.
GAMBIA: 2021 Budget announces various tax amendments
The Minister of Finance and Economic Affairs in his 2021 Budget on 4 December 2020 announced various tax amendments which took effect on 1 January 2021. Significant amendments include:
- requiring persons categorised as large taxpayers to file audited financial statements together with their annual returns;
- exempting investors in the informal sector from payroll taxes;
- reducing the rate of fringe benefits tax from 35% to 27%;
- increasing the annual capital gains tax threshold from GMD18 000 to GMD24 000;
- increasing the VAT registration threshold for taxpayers allowed to register on a voluntary basis from GMD500 000 to GMD1-million; and
- repealing the environmental tax payable by employees.
GHANA: New excise tax stamps introduced
The Ghana Revenue Authority ("GRA") introduced new excise tax stamps to be affixed on certain domestic and imported products such as cigarettes, alcoholic and non-alcoholic beverages and textiles with effect from 1 January 2021. The new excise tax stamps have enhanced security features that will further eliminate counterfeiting and boost revenue. Both old and new stamps will be in circulation until the old tax stamps run out.
GHANA: Class ruling issued on tax treatment of employee uniforms
The GRA issued a class ruling on the tax treatment of clothing allowances granted to employees of the GRA and members of the Ghana Association of Bankers ("GAB").
In terms of the ruling, which is valid until December 2023 and only applicable to employees of GAB members and the GRA itself, 20% of the clothing allowance is allowable as a deduction, limited to 5% of the employees' basic salary.
GHANA: Independent Tax Appeals Board established
The Revenue Administration (Amendment) Act 2020 (Act 1029), which amends the Revenue Administration Act 2016 (Act 915) and entered into force on 6 October 2020, established a Tax Appeals Board to form part of the current tax dispute resolution process. The TAB is independent from the GRA and will be composed of tax lawyers, retired GRA officers, representatives of the Chartered Institute of Taxation and Institute of Chartered Accountants and individuals from the private sector.
Previously taxpayers that were dissatisfied with objection decisions by the GRA had to appeal to Ghana's Courts. It is now mandatory for taxpayers to appeal objection decisions to the Tax Appeals Board before proceeding to other courts.
GHANA: Three-tiered transfer pricing reporting structure introduced
Ghana introduced new Transfer Pricing Regulations 2020 (L1 2412) which repeal the 2012 Regulations and came into effect in November 2020. The 2020 Regulations maintain many of the provisions of the previous Regulations, but also provide requirements for more extensive information to be included in the annual transfer pricing return and transfer pricing documentation.
Although transfer pricing documentation was required in the previous regulations, the 2020 Regulations now require that this documentation includes both a master file and a local file, which must be filed with the GRA within four months after the end of the accounting year.
An ultimate parent entity of a multinational enterprise group that is tax resident in Ghana and meets a certain revenue threshold is also required to file a country-by-country ("CbC") report.
Transfer pricing documentation is not required if the related party arrangement does not exceed the Ghana Cedi equivalent of USD200 000. The CbC report is due 12 months after the last day of the relevant fiscal year of the multinational group.
The 2020 Regulations now clearly distinguish between the transfer pricing return and the income tax return, and mark it as a standalone return to be filed annually.
KENYA: Digital Service Tax Regulations published
Income Tax (Digital Service Tax (DST)) Regulations 2020 (Legal Notice No. 207 of 2020) were published in the Kenya Gazette Supplement No. 214 of 2 December 2020 and took effect on 1 January 2021.
The Regulations provide details of how the DST will be administered, including requiring a person liable to pay DST to submit a return in the prescribed format and remit the tax due by the 20th day of the month following the end of the month in which the digital service is provided.
DST applies to the income of a resident or non-resident person derived from, or accrued in, Kenya from the provision of services through a digital marketplace (as defined). Where it is paid by a resident or a non-resident person with a permanent establishment in Kenya, it will be offset against the corporate income tax payable by that person for that year of income. If it is paid by a non-resident person without a permanent establishment in Kenya, it will be a final tax. In such a case, the non-resident may opt to register under an outlined simplified tax registration framework in order to make payment or to appoint a tax representative to do so.
KENYA: Government operationalises the beneficial ownership E-Register
The Business Registration Service, which is mandated to oversee operations of the Companies Registry and the overall implementation of the Companies Act, 2015 has operationalized the beneficial ownership e-register.
The Companies Act and Companies (Beneficial Ownership Information) Regulations 2020 (the Regulations) require all companies registered under the Companies Act to maintain a register of their beneficial owners and lodge the same with the Registrar.
All officers and authorised persons of existing companies are required to submit a copy of a company's beneficial ownership register within 30 days of its preparation and to notify the Registrar of Companies within 14 days of any change in the beneficial ownership information.
After initially granting a grace period until 31 January 2021 for the preparation of the beneficial ownership registers, the government has since extended the period for the submission of beneficial ownership registers by companies for a period of six months with effect from 1 February 2021.
KENYA: VAT rate reduced from 16% to 14%
On 22 December 2020 Parliament approved the amendment of the VAT rate to 16% from 14% with effect from 1 January 2021, as contained in the VAT (Amendment of the Rate of Tax) Order No. 2020 being Legal Notice No. 206 of 2020.
KENYA: Business Laws (Amendment) Act aims to facilitate business operations
Various tax and other amendments contained in the Business Laws (Amendment) (No. 2) Bill, 2020 published in Kenya Gazette Supplement No. 228 (National Assembly Bills No. 50) of 2020 aims to facilitate business operations in Kenya, including:
- exempting payment of the fixed stamp duty of KES100 on contracts to reduce the cost of doing business; and
- providing for the National Hospital Insurance Fund and National Social Security Fund contributions to be collected on the ninth day of the month;
The Bill was taken through the first reading in parliament on 22 December 2020.
KENYA: Reversal of the corporate income tax rate reduction approved
Following the reduction of the corporate income tax rate from 30% to 25% to cushion businesses against the effects of the COVID-19 pandemic last year, the reversal of such reduction was promulgated as the Tax Laws (Amendment) (No. 2) Act No. 22 of 2020, which was published on 24 December 2020 and became effective from 1 January 2021.
From the same date, the individual income tax rates have been changed from five to three tax bands as follows:
on the first 24,000
on the next 100,000
on all income above 388,000
The Mauritius Revenue Authority recently published Statement of Practice (SP) 22/21 on qualifying income subject to the 80% partial exemption.
The Statement of Practice clarifies the categories of income subject to partial exemption and specify the conditions for eligibility to partial exemption on specified categories of income other than dividends. The company must:
- carry out its core income generating activities in Mauritius;
- employ, directly or indirectly, an adequate number of suitably qualified persons to conduct its core income generating activities; and
- incur a minimum expenditure proportionate to its level of activities.
MOZAMBIQUE: VAT exemption period for certain supplies extended
In terms of an amendment to paragraph 13 of article 9 of the VAT Code approved by Law no. 16/2020 of 23 December 2020, which came into force on 1 January 2021, the VAT exemption period for the following supplies of goods and services has been extended until 31 December 2023:
- raw materials, intermediate products, parts, equipment and components made by the national sugar industry;
- cooking oils and soaps;
- goods resulting from the industrial activity of the production of cooking oil and of soaps carried on by the relevant factories;
- goods to be used as raw material in the oil and soap industry; and
- goods and services rendered within the scope of the agricultural activity of sugar cane production and intended for the industry.
NAMIBIA: Certain tax incentives repealed
Through amendments to the Income Tax Act (Act No.2 of 2020) approved in Government Gazette number 7249 (Government notice 144) published on 8 June 2020, the government repealed various tax incentives previously granted to manufacturers, export processing zones ("EPZ") entities, and for goods manufactured in the EPZ, including announcing that:
- the special tax incentives granted to registered manufacturers will cease to apply at the end of the first year of assessment commencing after 31 December 2020;
- the 80% export allowance in respect of the export of goods manufactured in Namibia, excluding fish and meat products, will cease to apply on 31 December 2025; and
- the tax exemptions for EPZ entities, goods manufactured in EPZs
and the movement of goods in and out of EPZs will cease to apply as
- for entities granted EPZ status on or before 31 December 2020: the incentive will cease to apply on 31 December 2025; and
- no tax exemptions will be granted to entities granted EPZ status after 31 December 2020 during the five-year grace period commencing from 1 January 2021 and ending on 31 December 2025.
NAMIBIA: Convention and Protocol on Mutual Administrative Assistance in Tax Matters enter into force
On 1 April 2021, the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, as amended by the 2010 protocol, will enter into force in respect of Namibia and generally apply from 1 March 2022. This follows on the country depositing its instrument of ratification with the OECD on 9 December 2020.
NAMIBIA: VAT refund process to be accelerated
According to a communication published on 26 November 2020 on the Ministry of Finance website, the government intends to pay out undisputed VAT refunds within 90 days of receipt of a credit VAT return, effective from 1 February 2021.
Qualifying taxpayers must comply with the following requirements:
- the necessary financial records and documentary proofs must be kept in an orderly manner and must be ready for submission when required;
- when submitting a VAT credit return, the necessary supporting documentation, including VAT summaries, must be attached to shorten the VAT refund verification process;
- VAT credit returns and all other returns for all tax types must be submitted through the ITAS portal;
- all tax accounts for all tax types must be up to date; and
- taxpayers must co-operate with the tax auditors during the audit process.
NIGERIA: LIRS extends the deadline for filing 2020 PAYE tax returns
The Lagos State Internal Revenue Service has extended the statutory deadline for filing Employer's Pay-As-You-Earn (PAYE) tax returns to 14 February 2021 in response to taxpayers' appeals.
NIGERIA: Finance Bill 2020 assented to
The President of Nigeria assented to the Finance Bill 2020 on 31 December 2020. The Act became effective on 1 January 2021, with significant amendments including:
- a redefinition of gross income used as the basis for calculating the consolidated relief allowance, resulting in employees no longer being able to enjoy the additional 20% relief previously claimable on the portion of their income relating to the National Housing Fund, pension contributions and other tax exempt items;
- exempting from personal income tax any persons earning the national minimum wage or less from any employment;
- reinstating a deduction for the premium paid by an individual to an insurance company in respect of life insurance;
- limiting tax relief for pension contributions to schemes, provident or retirement benefits fund recognised under the Pension Reform Act, 2014; and
- introducing Significant Economic Presence rules for purposes of the taxation of non-resident individuals, executors or trustees carrying on a trade or businesses comprising technical, professional management or consultancy services.
NIGERIA: Tax Appeal Tribunal rules on withholding tax on sales in the ordinary course of business
The Lagos Tax Appeal Tribunal (TAT) on 30 November 2020 ruled in Tetra Pak West Africa Limited vs Federal Inland Revenue Service ("FIRS") that sales in the ordinary course of a company's business are exempt from withholding tax in line with the provisions of the Withholding Tax Regulations pursuant to the Companies Income Tax Act, C21, LFN, 2004.
Tetra Pak in 2016 seek clarification from FIRS as to whether its principal business, the sale of packaging equipment, spare parts and materials to customers in the manufacturing sector qualified as sales in the ordinary course of business and, therefore, are exempt from withholding tax. The FIRS responded in 2019 that the sale of packaging equipment, spare parts and materials is a contract with rights and liabilities enforceable by law and, therefore, did not qualify as sales in the ordinary course of business. The FIRS further noted that Tetra Pak's sales were subject to withholding tax at the rate of 5% based on the provisions of its Information Circular No. 9801 of 1 October 1998.
Tetra Pak appealed to the TAT, which held that "sales in the ordinary course of business" is a relative term which cannot be applied as a rule of thumb to all taxpayers without regard to their daily business realities. Based on the Black's Law Dictionary definition, "ordinary course of business" means "the normal routine in managing trade or business". In the absence of any local case law, the TAT reviewed judicial precedents in India and formulated the following questions to determine whether or not a sale is in the ordinary course of business of a company:
- Is the transaction comprising the sale of part of the main or ancillary objects of the taxpayer's Memorandum and Articles of Association?
- What is the nature and practice of the taxpayer's business industry?
- Does the taxpayer have a history in relation to the transaction?
- How often does the taxpayer engage in sale? Is it a solitary transaction?
The TAT held that Tetra Pak's business objects as stated in its Memorandum and Articles of Association include the sale of equipment and repairs. Therefore, Tetra Pak's ordinary course of business is the purchase and sale of packaging materials, spare parts and equipment and is thereby exempted from withholding tax.
REPUBLIC OF CONGO: Finance Law 2021 promulgated
The Parliament of the Republic of Congo has adopted a series of amendments to the General Tax Code, VAT and Customs Law through Law No. 66-2020 of 31 December 2020, which has been promulgated by the President of the Republic of Congo, but is yet to be published in the Official Gazette. The proposed amendments include:
Corporate income taxation
- a reduction in the corporate income tax rate from 30% to 28% for mining, quarrying and real estate companies;
- a reduction in the corporate income tax rate for non-resident taxpayers carrying out activities in the Republic of Congo without a permanent establishment from 35% to 33%;
- decreasing the special tax on companies/minimum tax (TSS) rate from 2% to 1% with a minimum of F.CFA1-million instead of F.CFA2-million for companies granted a total exemption from corporate income tax upon an extension of the establishment agreement signed with the State of the Republic of Congo;
- applying a 20% final withholding tax rate for foreign companies, which cannot prove that they have a professional installation in the Republic of Congo;
Individual income tax
- increasing the lump-sum tax subjugation threshold to F.CFA100-million (previously F.CFA30-million to F.CFA100-million) and excluding taxpayers carrying out regulated activities from this taxation regime;
- increasing the VAT registration threshold from F.CFA60-million to F.CFA100-million; and
- levying VAT on services performed in the Republic of Congo or when the customer is resident in the Republic of Congo;
- requiring the mandatory filing and payment of taxes by electronic means for taxpayers subject to the actual profit taxation regime (régime du réel);
- introducing a transfer pricing documentation template released by the Tax Administration; and
- introducing an obligation for taxpayers subject to internal or external audits to submit such audit reports to the Revenue Authority on request within eight days.
RWANDA: New Investment Code enacted
Rwanda has enacted a new Investment Code (Law no. 006/2021 of 5 February 2021) which repeals the existing Investment Code (Law no. 06/2015 of 28 March 2015). Significant provisions include:
- introducing new priority sections, including mining activities relating to mineral exploration, construction or operations of specialised innovation or industrial parks, transport, logistics and electric mobility, horticulture and cultivation of other high-value plants included in the list approved by the Rwanda Development Board, creative arts in the subsector of the film industry, and skills development in areas where Rwanda has limited skills and capacity as determined by the Rwanda Development Board;
- introducing various new tax incentives, including a preferential corporate income tax rate of 3% for 100% holding companies, investment special purpose vehicles, collective investment schemes, and on foreign sourced royalties of intellectual property companies;
- tax incentives for entities established by philanthropic investors, including 0% VAT on goods and services procured locally by the entity and an exemption from employment income tax for expatriates employed by the entity, provided that the number of expatriates does not exceed 30% of the employees of the entity. The government will also refund the social security contributions paid by the expatriates upon their permanent departure from Rwanda;
- 5% withholding tax on dividends and interest paid on securities listed on the Rwanda Stock Exchange;
- 10% withholding tax on interest paid on foreign loans, dividends, royalties and service fees, including management and technical service fees by specialised innovation or industrial park developers;
- an exemption from capital gains tax upon the sale of shares for angel investors investing a maximum USD500 000 in a start-up, provided that the shares were initially purchased as a primary equity issuance by the start-up;
- incentives to qualifying investors in the film industry, including % VAT on goods and services procured locally and 0% withholding tax on payments made for specialised services procured by the investor
- providing for special incentives to be granted to strategic investment projects (i.e. investment projects of national importance which have a strategic impact on the development of the country and meet other requirements set out under the Investment Code).
RWANDA: New COVID-19 pandemic measures to support businesses announced
On 27 January 2021, the Rwanda Revenue Authority announced new measures to support businesses amid COVID-19 pandemic, including
- extending the deadline for the declaration and payment of rental income and trading licences from 31 January to 28 February 2021; and
- suspending strict tax debt recovery measures and customs comprehensive audits requiring physical interactions with taxpayers until the end of February 2021.
RWANDA: New Transfer Pricing Rules introduced
The Rwandan government published new Transfer Pricing Rules in the Official Gazette on 14 December 2020. The Ministerial Order 003/20/10/TC of 11/12/2020 establishing general rules on transfer pricing was approved by the Cabinet meeting of 25 September 2020. The new Rules replace the previous rules that have been in force since 2007 and reflect key aspects of the 2017 OECD Transfer Pricing Guidelines.
The Rules require persons involved in controlled transactions to develop transfer pricing policies, and to prepare and keep the documentation that verifies that the conditions of their controlled transactions for the relevant tax period are consistent with the arm's length principle. Relevant transfer pricing documentation must be available before the deadline for filing the income tax return, but the documents related to the global organizational structure of the group of companies to which a Rwandan taxpayer belongs must be submitted to the tax administration with the first income tax declaration.
The ultimate parent entity of a multinational enterprise ("MNE") group that is tax resident in Rwanda is also required to file a country-by-country ("CbC") report not later than 12 months after the last day of the reporting fiscal year of the MNE group. No revenue threshold has been specified for MNEs required to file a CbC report.
Taxpayers with an annual turnover below RWF600-million, and whose controlled transactions have the value below RWF10-million individually or the aggregate value below RWF100-million are not required to prepare TP documentation.
RWANDA: Expenses not supported by electronic invoices to be disallowed as deduction
The Rwanda Revenue Authority on 24 December 2020 announced that all expenses not supported by electronic billing machine invoices will be disallowed as deduction for income tax purposes for the 2021 tax period.
The Tax Procedure Code, enacted in 2019, requires all taxpayers to issue invoices generated by an electronic invoicing system certified by the tax administration.
SIERRA LEONE: Finance Bill 2021 introduces various tax changes
Parliament has approved a number of tax amendments, which took effect on 1 January 2021, through the Finance Bill 2021 (the Bill), following the President's assent. Significant amendments include:
- introducing a new digital services tax of 1.5% on the turnover of all digital and electronic transactions;
- reducing the corporate income tax rate for manufacturing companies outside the western area (capital city) from 25% to 15%;
- allowing group members to offset losses from other group members;
- reducing the capital gains tax rate from 30% to 25% in line with the reduction of the corporate income tax rate in 2020;
- allowing, in addition to expenses relating to donations to good causes and social services for tax purposes, an additional 25% corporate social responsibility credit for businesses that invest in free and quality school education, children's welfare, natural disasters and disease outbreaks, and maternal child health;
- exempting tourism establishments registered with the National Tourism Board are exempt from income tax for the period from 1 January 2021 to 31 December 2023; and
- exempting SMEs registered between 1 January 2021 and 31 December 2023 from income tax for the first year of registration.
UGANDA: Guidance on the application of the electronic invoicing system issued
The Uganda Revenue Authority ("URA") published a notice on its website on 29 January 2021, announcing the launch of a facility for validating e-invoices/receipts issued by suppliers for purposes of the electronic fiscal receipting and invoicing system ("EFRIS"). Purchasers are advised to check the validity of the e-invoices/receipts through the URA web-portal or through a mobile application called the "kakasa EFRIS" that can be accessed through the Google Play Store or the Apple App Store.
The URA has also provided guidelines to taxpayers registered for EFRIS on how to access their customized reports for the purposes of VAT return filing:
In accordance with the VAT (Amendment) Act 2020, any input tax credit or refund claim shall be granted only if it is supported by an authentic e-invoice/receipt starting with the tax return of January 2021 which is due by 15 February 2021.
UGANDA: Tax agents for 2021 approved by Revenue Authority
The URA has issued a public notice informing all taxpayers and the general public that approval of tax agents for the period ending 31 December 2021, as legally provided for under section 9 and 10 of the Tax Procedures Code Act, has been effected. The URA will only interface with a registered and appointed tax agent where a taxpayer is not representing itself.
A taxpayer can appoint its preferred tax agent from the list of registered tax agents available on the URA web-portal.
UGANDA: Amendments to tax laws approved
The President of Uganda assented to the Income Tax (Amendment) Act 2020, the Tax Procedures Code (Amendment) Act 2020, the Excise Duty (Amendment) Act 2020, the Stamp Duty (Amendment) Act 2020 and the Value Added Tax (Amendment) Act 2020 on 24 November 2020.
The Value Added Tax (Amendment) Act 2020 took effect on 1 July 2020; the Excise Duty (Amendment) Act 2020 took effect on 9 November 2020; and the Stamp Duty (Amendment) Act 2020 took effect on 1 July 2020.
UGANDA: Court rules on VAT on services between a branch and its head office
On 30 November 2020, the Tax Appeals Tribunal in Samsung Electronics East Africa Limited V. Uganda Revenue Authority ruled that there was no supply of services between a branch registered in Uganda and the head office incorporated in Kenya and, therefore, there was no VAT payable on such services.
ZAMBIA: 2020 Tax Amendment Bills approved
Parliament has approved amendments to various tax laws on 9 December 2020. Significant amendments include:
- requiring the use of an electronic payment machine as a payment method and introducing a penalty for failure to comply;
- introducing property transfer tax, in the case of an indirect transfer of shares, to a transfer of shares that represents at least 10% of the value of shares in a company incorporated in Zambia;
ZIMBABWE: 2021 Budget approved by parliament
Parliament has approved the 2021 Budget and fiscal measures announced by the Minister of Finance and Economic Development on 26 November 2020. These measures have been promulgated as contained in Finance (No. 2) Act 2020 (No. 10 of 2020) gazetted on 31 December 2020. Significant measures include:
- introducing a new three-tier VAT on the export of medicinal cannabis at rates of 10%, 15% and 20% for the respective tiers;
- exempting real estate investment trusts from income tax subject to certain conditions;
- broadening the scope and coverage of the presumptive tax regime to encompass specified professions, such as medical specialists, engineers, lawyers, architects and realtors, as well as micro and small enterprises and informal operators; and
- introducing new pay-as-you-earn tax rates.
Sources include IBFD's Tax Research Platform; www.allafrica.com; http://tax-news.com
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