ECOWAS: Regional transfer pricing meeting held in Abuja
The Economic Community of West African States (“ECOWAS”), the Nigeria Federal Inland Revenue Service and the World Bank Group co-hosted the first Transfer Pricing Regional Meeting for ECOWAS member states in Abuja, Nigeria from 11 to 13 October 2016. The meeting was convened under the aegis of the Improved Business and Investment Climate in West Africa Project.
The more than 60 delegates included tax policy and administration officials from the 15 member states of ECOWAS, as well as representatives from the ECOWAS Commission, the European Union (“EU”), the West African Economic and Monetary Union, the World Bank Group, the Organisation for Economic Co-operation and Development (“OECD”), the African Tax Administration Forum (“ATAF”) and the West African Tax Administration Forum.
The meeting was convened to provide a platform to evaluate the implementation of transfer pricing rules by ECOWAS member states and identify areas for development. Key resolutions and identified areas of development include:
· the importance of developing internationally shared transfer pricing principles for the ECOWAS
· developing strategies to address implementation challenges arising from the scarcity of data, information and limited capacity
· assisting member states in resolving investment challenges along key trade corridors to improve global competitiveness
· encouraging collaboration and inter-country support among member states for protection of their tax bases through efficient transfer pricing regimes
· determining the thrust of transfer pricing regimes in ECOWAS member states in light of regional and international initiatives
· implementing programmes for the facilitation of regional integration
The World Bank Group, in partnership with the OECD and ATAF, implemented a transfer pricing programme, in terms of which:
· comprehensive reviews are to be conducted and recommendations provided on the transfer pricing rules of ECOWAS member states
· in-depth long-term support is to be provided on transfer pricing policies and the implementation of legislation for Liberia, Nigeria and Senegal (this will be available to other ECOWAS member states from 2017)
· domestic resource mobilisation will be supported by helping ECOWAS member states protect their corporate tax base from profit shifting
· tools are to be developed to build capacity on transfer pricing and related issues in ECOWAS member states
· ways are to be identified in which ECOWAS member states can mutually support each other in the development and implementation of transfer pricing rules
Ethiopia: Treaty between Ethiopia and Saudi Arabia enters into force
The Ethiopia/Saudi Arabia Income Tax Treaty (2013) entered into force on 1 October 2016 and generally applies from 1 January 2017 for Saudi Arabia and from 8 July 2017 for Ethiopia.
Namibia: 2016/17 Mid-year Budget presented to Parliament
The 2016/17 Mid-year Budget Review Policy Statement was presented to Namibian Parliament on 27 October 2016. Proposed tax amendments include:
· the elimination of certain income tax and value added-tax (“VAT”) exemptions
· the introduction of a presumptive tax on small businesses
· redesigning the proposals for a solidarity wealth tax into a high income-based wealth tax, coupled with further expansion and strengthening of capital gains tax
· the renegotiation of double tax agreements
· increased cooperation with regional and international tax bodies to build technical capacity and enforce transfer pricing regulations
Namibia: Scrapping of tax certificate of good standing certificate requirement
The Ministry of Finance, in a press release dated 4 October 2016, withdrew the directive issued on 15 August 2016 requiring businesses to submit a Tax Certificate of Good Standing to quality for any payment for services or goods delivered to the State.
However, a Tax Certificate of Good Standing remains a requirement for businesses to qualify in any bidding or tendering procedure.
Liberia: Goods and services tax rate increased
The Liberia Revenue Authority issued a Government Notice on 27 October 2016, announcing that, with effect from 1 November 2016, the standard goods and services tax (“GST”) rate for all goods and services transactions that are currently subject to GST at the rate of 7% has been increased to 10% pursuant to the enactment of the Liberia Tax Amendment Act 2016.
Malawi: Tax Amendment Laws enacted
The Commissioner General of the Malawi Revenue Authority announced on 7 October 2016 that the respective bills to amend the Taxation Act 2006, Value Added Tax Act 2005 and the Customs and Excise Act 1969 were signed into law and gazetted on 19 August 2016 by Parliament.
Significant amendments include:
· the introduction of a separate corporate income tax (“CIT”) regime for the mining sector in terms of which:
o gains and losses on mining projects are ring-fenced
o mining royalties are deductible expenses for tax purposes
o a reduced withholding tax rate of 10% (as compared to the standard rate of 15%) is applicable to payments made by mining projects to non-residents in respect of interest, and royalty and management fees
o the minimum resource rent tax has been increased from 10% to 15%
o the determination of income, deductible expenses and capital allowances are subject to special rules
o mining royalties are to be charged at the following rates: precious and semi-precious stones: 10%; commercial in an unmanufactured state: 7.5% and others: 5%
o mine-specific expenditure is entitled to an annual allowance which is calculated on a straight-line basis
o losses attributable to mining start-up expenditure may be carried forward for a period of 10 years
o for transfer pricing purposes, taxpayers are permitted to enter into advanced pricing agreements (“APAs”) with the Commissioner General with respect to income derived from mining projects, provided that the duration of the APAs does not exceed a period of five years. Such APA are binding on the Commissioner and the taxpayer with certain exceptions
o an additional corporate income tax rate of 5% is applicable to non-resident individuals and unincorporated companies that carry on mining projects
o management fees attributable to a non-resident company without a permanent establishment are subject to a final withholding tax of 15%
o dividends, interest, royalties and fees for independent professional services earned by a non-resident (without a permanent establishment) from a source within Malawi are liable to a final withholding tax of 10%
· The Value Added Tax Act has been amended with:
o the definitions of “business” and “taxable person” to include mining projects
o a registration threshold of annual turnover of MWK10-million having been established for mining projects
o a change in control or effective control of a mining project being deemed to be a taxable supply
· For administrative purposes, the Commissioner is empowered to allocate payments received among the different tax obligations of the taxpayer (eg a payment received in respect of CIT may be used to offset any outstanding VAT obligations) and each mining project is required to submit separate CIT returns
SADC: SADC-EU Trade Treaty comes into effect
The South African Department of Trade and Industry (“DTI”) has announced that the Southern African Development Community (“SADC”)-European Union Economic Partnership Agreement (“EPA”) has provisionally entered into force on 10 October 2016.
The DTI stated that all Southern African Customs Union member countries – Botswana, Lesotho, Namibia, South Africa and Swaziland – have deposited their instruments of ratification of the EPA and the EU has notified provisional application of the agreement. The EPA will provisionally enter into force between the EU and Mozambique (the remaining SADC member country) once the latter has finalised its ratification process.
However, the new agriculture market access within the EPA requires a further exchange of letters between the EU and South Africa to confirm the protection of each other's geographical indication names. It is expected that the agricultural market access will enter into force on 1 November 2016.
Under the EPA, Namibia, Mozambique, Botswana, Swaziland, and Lesotho will be granted immediate duty- and quota-free access for their exports to the EU market. South Africa will benefit from improved market access when compared to the trade chapter in the previous South Africa-EU Trade, Development and Cooperation Agreement, with tariffs being fully or partially removed on 98.7% of EU imports from South Africa.
With the exception of Mozambique, SADC members will liberalise 86% of their imports from the EU over a 10-year period. Mozambique will liberalise 74% of its imports from the EU. In addition, the EU has agreed not to subsidise its agricultural exports to the countries.
Seychelles: Treaty with Guernsey enters into force
The Guernsey/Seychelles Income Tax Treaty, 2014 entered into force on 12 October 2016 and generally applies from 1 January 2017.
South Sudan: 2016/17 Draft Budget presented
The Ministry of Finance and Economic Planning presented the 2016/17 Draft Budget to the National Legislative Assembly on 18 October 2016. The proposed measures include:
· imposing withholding tax at a rate of 8% on all government contracts
· deducting withholding tax at a rate of 10% from technical fees paid to contractors in line with the East African Community Tax Treaty
· establishing a National Revenue Authority in line with the National Revenue Authority Act which will be charged with the collection of tax revenues and the integration of customs and taxation administration
· placing a moratorium on the issuance of tax exemptions
ZAMBIA: Electronic payment system rolled launched
The Zambia Revenue Authority (“ZRA”) issued a public notice announcing the roll-out of the e-payment system for large and medium-sized taxpayers on 7 October 2016. Effective 1 November 2016, the ZRA will discontinue the use of the real-time gross settlement system and large and medium-sized taxpayers are expected to migrate to the e-payment system by the cut-off date.
Sources include IBFD, PwC and www.tax-news.com.