moving into africa tax in africa a masterclass. 1 africa – massive opportunities a population of...

Moving Into Africa

Tax in AfricaA Masterclass

2

Africa – Massive Opportunities

A population of more than 1 billion people (projected 1,5 billion by 2030)

55 Countries

3000 languages

Positive age demographic

Urbanisation

Strong Economic Growth

Big investment in infrastructure

Western Europe and Africa are the 2 major sources of FDI in Africa

Strategic Growth through partnerships

Knowledge and Understanding

3

Which African regions are most important for your business growth?

Southern

Western

Eastern

Central

Northern

19

8

10

5

1

4

In which sub-Saharan African region do you find it the easiest to manage your tax affairs?

Southern

Western

Eastern

Central

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0

4

1

5

Rate your experience of the extent of the following challenges in dealing with your tax affairs in Africa from 1 to 5

Capacity, capability and accessibility of the Revenue Authority

Availability of local Tax skilled resources for your business

Corruption within the Revenue Authority

Complexity of tax legislation and tax environment

Uncertainty or lack of tax rules covering key business areas

3.73

3.05

2.7

2.94

3.18

6

Which of the following is the most critical Tax consideration for your African business?

Local Corporate Income Tax Rates and incentives

Withholding Taxes

Customs Duty, other Indirect Taxes and Tariffs

Transfer Pricing

Managing compliance complexity

2

14

3

10

6

7

To what extent do developments in Tax such as BEPS impact the way you do business in Africa?

Not relevant to us

Relevant but our current business model is sustainable

We need to revisit our business model in light of these developments

7

18

9

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A Focus on Tax In Africa Why Are We Here?

Unsophisticated Revenue Authorities? Good or bad?

Does a pilot manage your Tax affairs in country?

Should you even take a meeting with revenue?

Do you have skilled Tax resources in country? Do we?

You can solve this country by country right?

BEPS!

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A Southern African Perspective

Sophisticated laws – transparent, world class, connected, ATO, ATAF key

Concerns over key staff at Revenue Authorities – good or bad?

Slowing economy, growing social responsibilities

Growing aggressiveness – different dispute resolution needs

Is future of Tax in good hands?

But opportunities provided eg SEZs, R&D, youth employment incentives, green?

10

KPMG at your disposal

Venter Labuschagne : Africa Tax Solution Centre

Victor Onyenkpa : West Africa (Nigeria)

Richard Ndungu : East Africa (Kenya)

Louison Kiyombo : Central Africa / Francophone (DRC)

Emmanuel Asiedu : Ghana

Wasoudeo Balloo : Mauritius

Michael Phiri : Zambia

Quintino Cotao : Mozambique

Nigel Dixon-Warren : Botswana

Carolyn Chambers : Africa Mobility Services

SOUTH AFRICA TAX

Natasha Vaidanis, Michael Fortmann, Michael Rudnicki & Johan van der Walt

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Tax on the African Continent

Africa for Africans – Increased investment from Investors on the Continent

General reduction in corporate income taxes

UN Target: Tax collection at least 20% of GDP

Sophistication and Complexity of Tax Systems

Introduction of anti-avoidance rules (GAAR & SAAR)

BEPS and the Africa Tax Administration Forum

US FATCA (Foreign Account Tax Compliance Agreements)

High Trade Taxes (customs duties etc)

Fewer exemptions – Broadening the Tax Base

Comprehensive changes to Natural Resource Taxation Laws

Development of Regional Communities

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Economic Regions - Tripartite Free Trade Area (TFTA)

Angola

Botswana

Burundi

Comoros

Djibouti

Democratic

Republic of Congo

Egypt

Eritrea

Ethiopia

Kenya

Lesotho

Libya

Madagascar

Malawi

Mauritius

Mozambique

Namibia

Rwanda

Seychelles

Swaziland

South Africa

Sudan

Tanzania

Uganda

Zambia

Zimbabwe

13

A Comprehensive Analysis Framework

Indirect Tax Analysis

Contribution Value Scenario Comparison

Customs and Duties Analysis

Incentives and rebates

Political StabilityInventory Analysis

Tax rules, regulations and exposure

Inbound and Outbound Tax Implications

ABC Classification

Network Analysis

Port and Route Availability and Accessibility Industrial Development

Zone AreasDistribution Methods

Availability of skills and talent

Collaboration Opportunities

Quality of Infrastructure

Storage and MaterialHandling Requirements

Logistics Cost Considerations

Import Prohibitions

Health Risks

Tax Inventory Logistics Country Analysis

Key Considerations for Africa

Review & Selection

Sensitivity & Risk Analysis

Option Generation

Moving Into Africa


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Countries Covered Ghana, Nigeria, Sierra Leone

Easy access to revenue authorities at all levels

Stakeholder consultation

18

Taxation of dividends – Nigeria

EXCESS DIVIDEND TAX

Section 19 of the CIT Act provides that dividend paid where a company records no total profits or total profits less than dividend paid, shall be charged to tax as if the dividend is the total profits of the company.

A recent ruling upholds tax based on dividends, whether or not such profits have already suffered tax.

DIVIDENDS PAID FROM GAS OPERATIONS

Exemption from WHT of dividends paid out of profits that have suffered PPT.

The Act defines petroleum operations to include natural gas and gas income are taxable under CITA and not PPTA.

The Tribunal recently ruled that the WHT exemption does not apply to dividends from gas income

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Topical items / new developments

Value Added Tax at 15% on non-core banking and insurance services.

15% corporate income tax on free zone enterprises after first 10-year tax holiday.

The National Fiscal Stabilization levy of 5% of profit before tax, on select industries has been extended to 2017.

2.5% National Health Insurance Levy.

NRCs now required to file taxes on actual profits basis

Progress on the Integrated Tax Administration System

Amendment to withholding tax regulations

Lower prices affecting the mining industry

Ongoing restructuring of the energy (electricity) sector

Ghana Nigeria Sierra Leone

21

Investment Opportunities / Investment Incentives

Companies that partner with government to construct low-cost residential premises for sale or lease can enjoy tax holiday in their first five years of operation

3-year tax holiday, renewable for additional two years.

Import duty exemption on machinery, equipment or spares imported into Nigeria for power projects utilizing gas.

3-year import duty exemption for the construction of an “approved development” on materials, equipment etc.

5-year corporate tax relief for the period of initial Investment.

Manufacturing companies investing $2m and employing at least 20 locals will benefit from CIT relief for period not less than 5 years including duty free importation of equipment.

Real Estate Ghana

Power Nigeria

Tourism Sierra Leone

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Top five things to remember

100% foreign ownership of companies

Reasonable corporate tax rates (30%) and tax holidays for selected sectors

No restriction on profit repatriation

Introduction of transfer pricing / aggressive tax revenue drive

Tax authorities are open to engagement; dispute resolution process in the event of disagreement

Moving Into Africa


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How to engage the authorities

KRA is the 'Big Brother' authority in the region; most aggressive and influential to the other EA authorities

Automation of the tax systems in the region: e-filing, e-payments, e-registration platforms

One Stop Shops e.g. Huduma Centers, Rwanda investment center - allows for easier business registration

Tax authorities can issue advance tax rulings on contentious issues

Tax Revenue Appeals Tribunals have been established for the resolution of tax related issues

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Challenges in tax law

Tax payer's perception of KRA overstepping the mandate- Flight 540 had expected this to cover only Aug and Sep 2012 Court held that KRA did not overstep its mandate in charging tax on accrued VAT Act, 2013 has now exempted the same

KRA overstepping mandate in CGT collection mechanism- compelling brokers to collect tax

Applicability of the law - Pharmaceutical Manufacturing (K) Co Ltd Vs KRA(2014) - The packaging materials were not exempt yet the taxpayer declared them as exempt prior to VAT Act, 2013

The Revenue Authority expecting the case to be settled on a number rather than technical arguments

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Some of the biggest areas of investments in East Africa include:

Oil & Gas - exciting prospects with for exploration and production companies

Mining industry

Infrastructure developments-Road, bridges and Railways

Real Estate-Residential and Commercial Buildings

Financial Services- Nairobi as a hub

IT development

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Top five things to remember

East Africa is an emerging economy

East Africa has good tax incentives

Infrastructure-Lapset project, Mobile and Banking Infrastructure

Average GDP of 6%

Strategic Location-Access to ports and abundant natural resource

Moving Into Africa


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Doing Business in the Francophone Region

What do these countries have in common

Same Language

Belong to the OHADA organization

Where mostly colonized by French speaking western countries except Equatorial Guinea

35

DRC Democratic Republic of Congo

Sized to 2,345,000 Km², DRC is 4 times bigger than France with +70 million population; 60% under 30 years.

Language: French

Wealth: DRC detain 42 types of minerals including Diamond, copper , cobalt , Tantalite, Tin– 10% reserve of world forest – Big potential of hydroelectric power, agriculture, infrastructures, etc.

Join the OHADA since 2012 and companies can be created with no minimum capital amount.

Exchange control: Stable currency since 6 years. No restriction on funds transfer in or out; except payment of 0,2% transfer fee. Businesses are free to use both the local currency (CDF) and foreign currencies.

Permanent establishment for foreign companies: when operating during more than 183 days during a year.

Two double treaties signed with Belgium and RSA but not yet in force.

TAX REGIME: DECLARATION Corporate tax: 35% / 30%minimum 1% of Turnover ;

VAT: 16% / 0%; Salaries’ tax: from 15% to a maximum of 30% on the net.

Expat tax : 25% / 10%; WHT on dividends : 20% / 10%;

Tax inspection: every year

SOCIAL CONTRIBUTIONS 12,5% pension (3,5% by employee and 9% by employer); Training contribution : 1 to 3% by

employer.

Contribution to national employment agency 0,2%.

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DRC Democratic Republic of Congo

INVESTMENT INCENTIVES Investment code, gives tax holidays and free custom;

The mining code allows mining operators and subcontractors reduced tax and customs rates as well as they are allowed to keep books in Foreign currencies;

Abolition of nationalization and expropriations;

Reduction of corporate tax rate: from 40% to 35% and 30%

Reduction of interest rate: from 10% to 4% per month.

Standardization of monthly declarations date to 15th of the month.

Introduction of transfer pricing by 2015 financial law

POTENTIAL INVESTMENT AREAS Road, port, rail, and civil engineering infrastructure

Agriculture, fishing, livestock, forestry, storage of plant, animal, and fish products

Production or transformation manufacturing industry:

– Building materials industry; Metals industry; Wood industry; Packaging industry; Agro-processing industry;

Tourism, facilities, tourism industry, and other hospitality activities

Cultural industries (books, music, cinema, documentation centers, audio-visual production centers, etc.)

– Energy (water and electricity); Services in the following sub-sectors:

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Ivory Coast

Size : 322,462 Km² Capital city: Abidjan

Population: +25 million

Language: French

Currency: CFA

Resources: Agriculture (Cocoa, cashew nut, coffee, etc) – Mining sector growing – Fishing – Infrastructures and public work – Banking and Manufacturing, etc.

Investor friendliness of tax legislation

IC has put on place an investment code and free trade zones. Codes in specific sectors were recently modified to increase tax holidays (petroleum code, mining code, etc.)

Ease of engaging with revenue authorities

IC is improving transparency when dealing with taxpayers.

Topical items for new developments and specific tax incentives

Infrastructures projects, Mining and Housing sectors.

Inter country co-operation by Tax Authorities

IC is in touch with OECD Experts and willing to implement Transfer pricing rules.

38

Cameroon

Size : 475,442 Km² Capital city: Yaounde


Language: French and English

Resources : Petrol, Bauxite, Iron ore, Timber, Hydropower, etc.


Cameroon has put on place a new investment code in April 2013. There are also financial and administrative incentives for investors.


Cameroon has implemented an information office for tax payers. The tax administration organize every year an information seminar on the Finance Law.


Corporate tax reduced from 35 to 30%.

Cameroon has signed 3 tax treaties with: FRANCE - CANADA - TUNISIA


Cameroon has implemented transfer pricing rules similar to the OECD TP.

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Guinea-Conakry

Size : 245,860 Km² Capital city: Conakry

Population: +11,5 million

Language: French

Currency: CFA

Resources: bauxite, iron ore, diamonds, gold, uranium, hydropower, fishing, Agriculture, etc.


Guinea is a free investment flexible policies market. No restrictions for foreign investors. One-shop investment and the investment code have been put on place.


Guinea has created the API (Promoting Investment Agency) to allow investors to talk to only one administration.


Sectors classified as priority: agricultural production, industrial crops with a stage of processing and packaging of products, fishing, production of fertilizers, health and education, tourism, hotel, investment bank or lending institutions, etc.


Guinea is member of AU and several regional organizations. No treaty with a specific country.

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Equatorial Guinea

Size : 28,050 Km² Capital city: Malabo


Language: Spanish, French and English

Resources : Petrol and agriculture.


Equatorial Guinea has on place an investment code which emphasize all the tax advantages.


Tax authorities communicate with Taxpayers through exchange of correspondences and the Administration’s announcements.


Agriculture and manufacturing.


Equatorial Guinea has ratified the UDEAC Tax convention.

The tax code includes Transfer pricing provisions and the BEAC Exchange control rules apply.

Thank you

moving into africa tax in africa a masterclass. 1 africa – massive opportunities a population of...

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