angola regulatory and tax framework - amazon web services

AngolaRegulatoryand Tax framework

Angola Oil & Gas

June 2019 www.pwc.com/ao

PwC

Agenda

Overview of Angola’s business environment

2PwC

Oil & Gas Companies - Specific Framework

Regulatory and Tax Framework 3

15

1.Regulatoryand Tax framework

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Business vehicles

Incorporated company Independent entity and allowed to carry out commercial activities

Branch Dependent entity and allowed to carry out commercial activities

Representative office Dependent entity and not allowed to carry out commercial activities

Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework

Regulatory & Tax Framework

Regulatory& Tax

Framework

Investment law regimes

Prior declaration regime General regime: applies to investments not covered by the special regime

Special regime Applicable only to certain businesses in priority sectors

How can the investment be made?

Importation of funds from abroad

Funds in local or foreign currency deposited in non-resident bank accounts domiciled in Angola susceptible of being transferred

abroad pursuant to the Foreign Exchange Law

Application in the Angolan territory of profits in the context of a reinvestment

Importation of machinery, equipment, accessories and other tangible assets

Technology and know-how

Indirect investment (e.g. shareholders’ loans, supplementary capital contributions, trademarks)

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Corporate Income Tax

Investment Income Tax

Employment Income Tax

Consumption Tax & VAT

Stamp Tax

Real Estate Transfer Tax -SISA

Real Estate Income Tax

Social Security

Special Contributions

Tax Regime

Regulatory& Tax

Framework



Taxes on Income

Taxes on Consumption/Value

Property Taxes

Others

Primary taxes

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Entities Income

Taxpayers with head-office or place of effective

management in Angola.Worldwide profits.

Taxpayers without head-office or place of effective

management in Angola, with a permanent

establishment herein.

Profits attributable to the PE.

Sales in Angola of goods or merchandise

of the same or a similar kind to that sold by the PE.

Any other business activity that is of the same

or similar kind to that conducted by the PE.

Taxpayers with head-office or place of effective

management outside Angola, without a permanent

establishment therein.

Withholding tax determined by special regime

for taxation of services.

CIT is levied, currently at a 30% rate,

on the profits deriving from business

activities carried out in Angola

by resident entities or non-resident

entities with a tax permanent

establishment (PE), as defined

by Angolan domestic legislation.

Regulatory & Tax FrameworkCorporate Income Tax


30%

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Regulatory & Tax FrameworkCorporate Income Tax


Under the tax regime of Corporate

Income Tax, the following earnings

are subject to tax payments.

Subject income Rates

Sales of the first semester (first six months) – provisional payment 2%

Services rendered by entities with head-office, place of effective management

or permanent establishment (excluding raw materials, associated components

and materials) are subject to withholding tax

6,5%

Services rendered by entities without head-office, place of effective management

or permanent establishment are subject to withholding tax6,5%

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Section AInvestment income includes the following:

• Interest on credit facilities

• Interest on loans

• Income derived from deferred payments

Section BInvestment income includes the following:

• Dividends

• Capital gains

• Bond interest

• Treasury bond interest

• Interest on loans, granted by shareholders

• Royalties

• Etc.

8

Regulatory & Tax FrameworkInvestment Income Tax


The Investment Income Tax Code

covers interest, dividends, royalties,

and other income of a similar nature,

dividing such income into two taxable

sections.

15% Tax rate 10% Tax rate

Tax rates of 15% or 5% when the type

of income meets certain conditions

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Regulatory & Tax FrameworkEmployment Income Tax


Group Type of Income Rates

A Employment Income0% – 17%

(depending on the gross income assessed)

B Self-Employment Income10.5%

(effective rate)

C

Business Income

(industrial and commercial activities)30%

(standard rate)

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Regulatory & Tax FrameworkValue Added Tax


• Enters into force in 1 July 2019, with a transitional period until 31 December 2020

• The VAT regime in Angola will be a modern one, with a single VAT rate of 14%

• The Consumption Tax is revoked and the Stamp Tax Law has been amended

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Other tax rates

Stamp Tax0.1% - 1%

(1% on receivables)

Real Estate Transfer Tax - SISA 2%

Real Estate Income Tax 15% (leased real estate)

Up to 0.5% (non leased real estate)

Social Security 3% (employee)

8% (employer)

Special Contribution on foreign technical assistance services 10%

11

Regulatory & Tax FrameworkOther Taxes


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Regulatory& Tax

Framework



Goods

• Operations for the payment of imported or exported goods

• Registration with the Exporters and Importers Registry (“REI – Registo de Exportadores

e Importadores”) is required

• Other formalities and authorizations depend on the amount, form of payment and nature

of the goods

Capital

• Transactions made under contractual arrangements between residents and non-

residents, including credit and loan transactions, foreign investment operations

and capital transactions of personal nature

• Subject to prior approval by the BNA, regardless of the amount

Invisible

items

of trade

• Services and other transfers (e.g. transport, insurance, travelling, commissions

and brokerage, trademarks, salaries and other personal services costs, income

payments) are subject to prior approval by the BNA when the amount is higher

than AOA 300M for services providers to the oil and gas industry

• Technical assistance and management services agreements are subject

to prior approval by the Ministry of Economy if the amount is higher than AOA 300M

for services providers to the oil and gas industry

• Dividends exceeding the annual amount equivalent to AOA 500M are subject

to prior authorisation by the BNA

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Regulatory& Tax

Framework



Provision

of services

to O&G

companies

• Non-competitive regime: activities exclusively reserved to Angolan companies (held in,

at least 51%, by Angolan citizens)

• Semi-competitive regime: activities which foreign companies may engage in provided

that they do so in association with Angolan companies

• Competitive regime: all oil-related activities that are not listed under the non-competitive

or semi-competitive regimes.

Tender

Process

• Angolan and foreign companies must be duly registered with MIREMPET as service

providers to the O&G industry.

• The contracting of services and acquisition of goods for oil operations should be made

by means of a tender procedure, as follows:

• If services or goods are in an amount lower than USD 1.000.000,00, the O&G company

should only send a mere communication to ANPG

• A tender must be launched for agreements in excess of USD 1.000.000,00, but the

selection of the successful bidder is at the discretion of the operator.

• If the amount of the contract exceeds USD 5.000.000,00, ANPG will not only monitor the

procedure but also validate the awarding decision.

Recruitment

and training

• The recruitment of foreign employees by services providers to the O&G sector

is treated as exceptional and companies need to demonstrate to MIREMPET that there

are no Angolan candidates with the required qualifications and experience.

• Service providers are required to sign the so-called “Contrato-programa” with

MIREMPET

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A new Legal Regime on Foreign Citizens was recently published and will enter into force on 22 of July, with the

following main changes:

• Elimination of the ordinary visa, which scope is now included in the tourist visa. The tourist visa will allow multiple

entries and a stay up to 30 days, renewable twice for an equal period of time

• Investors' visa replaces privileged visa, but it still valid for a period of 2 years, renewable for equal periods of time.

However, it now allows the obtainment of a temporary residency authorization after 3 years

This new legal regime is still to be further regulated.

Regulatory& Tax

Framework



Labor

In general, non-resident foreign employees may not represent more than 30% of the total workforce, which means that a minimum of

70% of the employees must be Angolan nationals

Non-resident foreign employees are required to sign a local employment agreement with the Angolan company, which is subject to a

special regime.

Labour and foreign exchange legislation allow the transfer abroad of the salaries of non-resident foreign employees.

Immigration

The only visa allowing its holder to undertake remunerated activities in Angola is the work visa, which is valid for 1 year, being

renewable for equal periods until the end of the contract

The granting of a work visa is subject to the provision of a deposit made by the employer in order to ensure the costs of a potential

repatriation of the employee

2.Oil & Gas Companies - Specific Framework

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Oil & GasSpecific Framework

Specific rules and regulations

Petroleum operations may only be exercised under a prospecting licence issued by the MIREMPET, or pursuant to an oil concession awarded by the Government

For the performance of the authorized petroleum operations, it is required an association between Angolan or foreign companies and the National Agency

for Petroleum, Gas and Biofuels (ANPG), which may take the form of (ii) a commercial company, (ii) consortium, (iii) Production Sharing Agreements

or (iv) Risk Services Agreements

• Private Investment Law is not applicable to O&G companies

• Foreign O&G Companies should finance fully in foreign currency their share of the investment necessary for the execution of petroleum operations. Consistently,

Angolan financial institutions are not allowed to grant credit, either in national or foreign currency, to foreign investor companies

There is a specific foreign exchange regime for Oil & Gas companies, according to which:

• Companies should open accounts with banks domiciled in Angola (i) in foreign currency to settle any tax obligations and to pay goods and services

to non-residents and (ii) in national currency for liquidating goods and services to resident entities.

• They are authorized to transfer abroad dividends and profits to their foreign shareholders

• No authorization is required for the execution of foreign exchange transactions, with the exception of capital operations consisting of an investment abroad

• Every quarter, O&G companies should provide to the BNA a list of the contracts for goods and services executed with non-resident entities

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Law 13/04 of 24 December establishes the tax regime

applicable to the entities which carry out activities of

exploration, development, production, storage, sale, exports,

treatment and transportation of crude oil and natural gas.

The tax charges applying to the entities are the following:

• Petroleum Production Tax

• Petroleum Income Tax

• Petroleum Transaction Tax

• Surface Fee

• Levy for the training of Angolan personnel

The entitiesare not exemptfrom other taxesor fees, unlessthey have beenexpressly indicated.

“

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Tax Taxable income Rates

Petroleum Income Tax

Taxable income generated by activities of exploration, development,

production, storage, sales, exports, treatment and transportation of petroleum,

wholesale trading and other activities.

50%

(PSA)

65.75%

(RSA and other forms of

association)

Petroleum Transaction Tax

Petroleum and other substances produced under Production Sharing Agreements

are not subject to these taxes.

70%

Petroleum Production Tax 20% (10%)

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Other Taxes Taxable income

Surface charge Due at an annual amount of USD 300 per Km2

Training Levy

The training levy is imposed differently for oil companies (and depending on the phases of the petroleum

activities carried out) and for the suppliers of goods and services to oil companies.

• USD 100,000 – to oil companies that only have research license

• USD 300,000 – to oil companies that are carrying out research activities

• USD 0.15 per oil barrel – to oil companies that are in a production stage

• USD 0.15 per oil barrel – to oil companies that carry out oil refining activities

• 0.5% of the annual turnover – to companies that carry out storage, transportation,

• distribution and commercialization activities of crude oil

• 0.5% of the values of contracts – to companies that render services to oil companies on a

• regular basis

Importation of assets to be used directly and exclusively in the oil activities are exempt of all import-related duties, with the exception of a statistical fee of 0.1% and

stamp duty at 1%.There are lists of exempt equipment. – Law 11/04, 12 November.

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Oil & GasSpecific Framework - VAT Specifics

• Items where input VAT is not deductible:

• Supply of water and energy;

• Services relating to electronic communications

and telecommunications;

• Hotel and accommodation services;

• Lease of equipment, except if it qualifies as royalty;

• Consultancy, legal, tax, financial, accounting, IT services;

• Security services; and,

• Lease of vehicles

• A captivation regime exists for O&G Operators.

VAT is mentioned in the invoice, but it is not paid

to the supplier – rather directly to the State.

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21

Bidding

Process Impact

Aims to streamline the

process of assigning

the status of Associate

of the National

Concessionaire and

simplify the process

of contracting services

and acquisition of

goods in the oil sector.

Presidential Decree

nr. 86/18, 2 April

Marginal Field

Legislation

Establishes the

incentives and

procedure for

adjusting contractual

and fiscal terms

applicable to Qualified

Marginal Areas.

Presidential Decree

Law nr. 6/18, 18 May

Natural Gas

Legislation

To create a legal

and fiscal regime base

that fits and promotes the

exploitation of natural gas,

at the same time ensuring

the necessary flexibility

and adaptability to allow

the economic viability

of future projects.

Presidential Decree Law

nr. 7/18, 18 May

Expansion of

Development Zones

Creates an

exceptional regime for

conducting additional

exploration activities

to be performed on

Development Areas in

order to maximize

production levels.

Presidential Decree

Law nr. 5/18, 18 May

Abandonment

of Wells

Defines abandonment

and decommissioning

rules for all upstream,

onshore & offshore

facilities

Presidential Decree

nr. 91/18, 10 April


PwC

Contacts

Overview of Angola’s business environment

22

Cristina TeixeiraTax Director | Tax

+244 227 286 109

[email protected]

Luís AndradeTax Director | Merger & Acquisitions

+351 225 433 175

[email protected]

Building relationships, creating value

This presentation has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained

in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information

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liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any

decision based on it.

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