moving into africa tax in africa a masterclass. 1 africa – massive opportunities a population of...
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Moving Into Africa
Tax in AfricaA Masterclass
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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
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Which African regions are most important for your business growth?
Southern
Western
Eastern
Central
Northern
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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
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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
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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
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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?
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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
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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
Tax in AfricaA Masterclass
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Countries Covered Ghana, Nigeria, Sierra Leone
Easy access to revenue authorities at all levels
Stakeholder consultation
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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
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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
Tax in AfricaA Masterclass
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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
Tax in AfricaA Masterclass
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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
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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.
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Cameroon
Size : 475,442 Km² Capital city: Yaounde
Population: +20 million
Language: French and English
Resources : Petrol, Bauxite, Iron ore, Timber, Hydropower, etc.
Investor friendliness of tax legislation
Cameroon has put on place a new investment code in April 2013. There are also financial and administrative incentives for investors.
Ease of engaging with revenue authorities
Cameroon has implemented an information office for tax payers. The tax administration organize every year an information seminar on the Finance Law.
Topical items for new developments and specific tax incentives
Corporate tax reduced from 35 to 30%.
Cameroon has signed 3 tax treaties with: FRANCE - CANADA - TUNISIA
Inter country co-operation by Tax Authorities
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.
Investor friendliness of tax legislation
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.
Ease of engaging with revenue authorities
Guinea has created the API (Promoting Investment Agency) to allow investors to talk to only one administration.
Topical items for new developments and specific tax incentives
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.
Inter country co-operation by Tax Authorities
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
Population: +20 million
Language: Spanish, French and English
Resources : Petrol and agriculture.
Investor friendliness of tax legislation
Equatorial Guinea has on place an investment code which emphasize all the tax advantages.
Ease of engaging with revenue authorities
Tax authorities communicate with Taxpayers through exchange of correspondences and the Administration’s announcements.
Topical items for new developments and specific tax incentives
Agriculture and manufacturing.
Inter country co-operation by Tax Authorities
Equatorial Guinea has ratified the UDEAC Tax convention.
The tax code includes Transfer pricing provisions and the BEAC Exchange control rules apply.
Thank you