BOTSWANA: 33rd African country to join Yaoundé Declaration Initiative for Tax Transparency

Botswana’s Minister of Finance and Economic Development, Hon. Peggy Serame, on 4 March 2022 endorsed the Yaoundé Declaration Initiative for Tax Transparency.

Originally signed by four countries in November 2017, the Yaoundé Declaration encouraged the African Union to begin a high level discussion on tax co-operation, the fight against illicit financial flows (IFFs) and their link to domestic resource mobilisation.

Botswana became the 33rd African country to join the initiative.

BOTSWANA: 2022-2023 Budget and tax measures announced

The Minister of Finance and Economic Development presented the 2022-2023 budget on 7 February 2022.

The budget generally does not propose any changes to the current tax rates or provisions.

However, a number of measures have been announced to improve tax collection, including increased tax audits and inspections, and the use of information technology to improve collection efficiency.

GUINEA: Finance Law 2022 adopted

The National Assembly of the Republic of Guinea on 31 December 2021 adopted the Finance Law 2022, with the relevant measures being outlined in Ordinance No O/2021/0011/PRG/CNRD/SGG of 31 December 2021.

Various incentives have been introduced for the transport sector, including, with effect from 1 January 2022:

  • exemption from the value added tax (VAT) on imports of new spare parts and accessories intended for public transport vehicles and vehicles for transport of goods
  • exemption from VAT on imports of new spare parts and accessories for motorcycles and tricycles
  • increase of excise duty on imports of cigarettes from 35% to 40% for fiscal year 2022
  • reduction of tax on telephone consumption (Taxe sur la consommation téléphonique) for calls from GNF2 to GNF1 per second

Kenya: VAT Regulations held invalid by court

The High Court in the case of Commissioner of Domestic Taxes (KRA) v. W.E.C Lines (K) Limited (Taxpayer) [2022] KEHC 57 (KLR) recently held that VAT Regulations (2017) were invalid as a result of the fact that the appropriate process for legislative review of the regulations was not completed timely.

In the case at hand, the taxpayer applied to the Kenya Revenue Authority (KRA) for VAT refunds for the period February 2015 to January 2018, relating to services rendered by the taxpayer to its parent entity in the Netherlands. The tax authority rejected the request for the VAT refund after reviewing the agency agreement between the taxpayer and the Dutch entity. In rejecting the refund application, the KRA relied on Regulation No. 13 of the VAT Regulations, 2017 and concluded that the taxpayer’s supplies did not qualify as exported services and were taxable at 16%.

The taxpayer appealed to the Tax Appeals Tribunal, which agreed with the taxpayer and allowed the appeal. The KRA subsequently appealed to the High Court, which affirmed the tribunal’s decision.

In holding that the taxpayer was entitled to a refund of VAT, the High Court observed that the VAT Regulations, 2017 ceased to have any effect on the eighth day after the regulations were not tabled before the National Assembly (that is, the regulations were not presented for review within the required seven day period). Thus, the regulations were null and void.

The High Court concluded that the taxpayer was entitled to the VAT refund because the services offered were exported services and were zero-rated for VAT purposes.

LESOTHO: Multilateral Convention (MLI) signed

On 9 February 2022, Lesotho signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI), bringing the total number of signatories to 97.

This Convention will implement a series of tax treaty measures to update international tax rules and lessen the opportunity for tax avoidance by multinational enterprises.

The Government of Lesotho released its provisional list of expected Reservations and Notifications pursuant to articles 28(7) and 29(4) of the Convention, which will be confirmed upon deposit of the instrument of ratification pursuant to articles 28(6) and 29(3) of the MLI Convention.

MALAWI: 2022/2023 Budget Statement delivered

Malawi's Minister of Finance presented the 2022/2023 Budget Statement to Parliament on 18 February 2022. Significant proposed amendments, which will be effective from 1 April 2022, once the relevant bills have been passed in Parliament, include:

Income tax

  • amending the withholding tax rate on fees from 10% to 20%, to align with the current withholding tax on services
  • reducing the withholding tax rate on small tobacco farmers and insurance and banking agents from 3% for farmers and 20% for agents to a 1% final tax
  • amending the withholding tax rate on gaming and gambling winnings from 20% to a final withholding tax of 5% and replacing the minimum threshold of MWK 100 000 from which the withholding tax was applied by a rebate of MWK 100 000 in the betting industry and MWK 500 000 in the gambling industry for each winning, with the withholding tax applied on the amount exceeding those rebates
  • revising the monthly PAYE income tax schedule as follows:
    • up to MWK 100 000 - 0%
    • over MWK 100 000 up to MWK 330 000 - 25%
    • over MWK 330 000 up to MWK 3-million - 30%
    • over MWK 3-million up to MWK 6-million - 35%
    • over MWK 6-million - 40%
  • amending the deemed interest rate for 0% or no interest foreign loans from the prevailing LIBOR rate plus 5%, to 6% on the USD equivalent of the loan (as a result of the fact that LIBOR was phased on out from January 2022)
  • extending the requirement for a Tax Clearance Certificate to include:
    • export and import licenses
    • renewal of customs clearing and forwarding agency licenses
    • gaming licenses
    • suppliers to government agencies
    • suppliers to private businesses
    • duty-free clearance except for Government departments and agencies
    • any other transaction as may be defined and gazetted from time to time
  • introducing a simplified return requirement for taxpayers, subject to the presumptive tax on turnover for small businesses with annual turnover up to MWK12.5-million, which was introduced in the 2021/22 fiscal year, with the return to be filed by 30 April of each year

VAT

  • abolishing the withholding VAT system
  • exempting cooking oil and tap water from VAT
  • amending the Tax Administration Act to align with the amendment to the VAT Act that reduced the validity period for claiming input VAT from 12 months to 6 months

MAURITANIA: Finance Law 2022 enacted

Mauritania's Finance Law for 2022 (Law no. 2022-01) was enacted on 13 January 2022. Its main measures include:

  • introducing a simplified tax regime for commercial fishing that is available for exporters of frozen products, finished products, and fresh or live products, with a flat tax levied on the basis of the gross value of exports, which is payable by the 15th of the following month at a rate of 1% for exporters who have their own processing plants for their own production and a rate of 1.2% for exporters who do not
  • introducing a simplified tax regime for the maritime refuelling sector for ships, with the application of a 2% tax rate on turnover
  • exempting public passenger or freight transport companies from VAT
  • reducing the VAT rate on the telecommunications sector from 18% to 16% (the standard rate)
  • introducing a property tax on unbuilt property (undeveloped land) that will be imposed as a regulatory tariff based on the area of the property as of 1 January of the tax year (tariff amount not specified under the law), with an exemption for land for commercial and industrial use, land belonging to the state and local authorities, and land belonging to foreign states

NAMIBIA: Manufacturing sector tax incentives repealed

The Namibian Government has repealed various tax incentives granted to registered manufacturers with effect from 31 December 2025 through amendments to the Income Tax Act (Act No.5 of 2021) in Government Gazette No. 7705 (Government Notice 283) published on 16 December 2021, including:

  • the deduction of remuneration and training costs for employees involved in the manufacturing process
  • the deduction of export costs in respect of manufactured goods
  • the deduction of land-based transport costs of the materials and components and imported manufacturing equipment used in the manufacturing process

The building allowance is reduced from 8% to 4% on the manufacturing cost of buildings, claimable in the succeeding year after being brought into use.

NAMIBIA: 2022/2023 Budget presented to the National Assembly

On 24 February 2022, the Minister of Finance presented the 2022/2023 National Budget before the National Assembly. Significant proposed measures include:

  • reducing the current tax rate of 32% for non-mining companies over a medium-term period
  • requiring taxpayers to provide proof of actual tax withheld on the payment of services rendered
  • increasing the maximum allowable tax deduction of contributions for pension funds, provident funds, retirement funds, educational policies and long-term insurance policies from NAD 40 000 to NAD 150 000
  • zero-rating sanitary pads for VAT purposes
  • introducing a modified electronic filing tax relief programme to write off a percentage of interest and penalties for another 12-month period. The programme aims to promote online filing of tax returns and the general usage of the Integrated Tax Administration System (ITAS). The previous tax relief programme expired on 31 January 2022

NIGERIA: One-month window for payment of foreign currency tax liabilities in Naira announced

In response to challenges experienced by taxpayers in sourcing foreign currencies to offset their foreign currency denominated tax liabilities, the Federal Inland Revenue Service (FIRS) recently announced in a Public Notice a one-month window from 1 March 2022 to 31 March 2022 for taxpayers to offset outstanding foreign currency tax liabilities falling due from 1 January 2022 with Naira equivalent.

In order to benefit from the concession, it is required for the outstanding taxes to be paid before the 31 March 2022 deadline, and copies of the relevant transaction documents and evidence of payment of the taxes must be submitted to the office of the Executive Chairman and the local tax office of the taxpayer.

The applicable exchange rate will be the Central Bank of Nigeria’s Investors and Exporters foreign exchange rate prevailing on the date of transaction and/or the due date for payment of the tax liability.

RWANDA: All taxpayers reminded to use electronic billing machines

The Rwanda Revenue Authority (RRA), through a Public Notice of 11 March 2022, reminded all taxpayers to use electronic billing machines/systems (EBMs), irrespective of whether they are registered for VAT or not.

Penalties for non-compliance include administrative fines of up to 10 times the VAT amount, business closure for 30 days, a bar from bidding for public tenders, withdrawal of business registration and publication in the media. In addition, taxpayers may be subject to criminal prosecution and imprisonment for a period of between two and five years.

RWANDA: VAT on digital services considered

The Ministry of Finance and Economic Planning is currently considering the collection of VAT on digital services supplied by non-resident providers, including streaming services such as Netflix. The collection of VAT is to be based on the destination principle where VAT is levied at the place where the taxable supply is consumed.

SEYCHELLES: Statutory instruments for the implementation of the 2022 Budget published

The Seychelles Revenue Commission has published various statutory instruments for the implementation of the 2022 Budget Measures, which were originally published in the Official Gazette on 31 December 2021. Significant measures, which generally apply from 1 January 2022, include:

  • introducing the following new business tax rates:
    • in the case of an entity, government body, or a trustee:
      • 15% on taxable income of up to SCR 1-million
      • 25% on taxable income above SCR 1-million
    • in the case of persons other than an entity or government body:
      • 0% on taxable income of up to SCR 102 666
      • 15% on taxable income between SCR 102 666 and SCR 1-million
      • 25% on taxable income above SCR 1-million
    • repealing the 0% tax rate for casino businesses
    • removing from the schedule on special tax rates for specified entities:
      • international corporate service providers
      • companies listed on the Seychelles Securities Exchange
      • private educational institutions
      • private medical service providers
    • providing a temporary exemption from business tax for:
      • farming partnerships and farming entities with retroactive effect from 1 January 2021 until 31 December 2023 on any income derived from any farming activity involving the production of agricultural products
      • individual fishers and farmers with retroactive effect from 1 January 2014 to 31 December 2023 on any income derived from any fishing activity or fishing related activity in the case of a fisher, or any farming activity involving the production of agricultural products in the case of a farmer
    • amending special deductions as follows:
      • increasing the 150% deduction for training costs incurred by a business for its employees to 200%
      • reducing the 200% deduction for salaries of employees that graduated from professional centres to 125%
      • reducing the 150% deduction for salaries of students from professional centres who are on part-time employment to 125%
    • setting the rates of depreciation allowable on capital investments, other than buildings, for farming and fisheries and for tourism operators (hotels, restaurants, transport, tour operators, travel agents, etc.) as follows:
      • 30% in year 1
      • 25% in year 2
      • 20% in year 3
      • 15% in year 4
      • 10% in year 5

UGANDA: Effective date of rental income tax amendment for non-standard tax years clarified

The Uganda Revenue Authority has issued a clarification regarding the effective date of the changes to the taxation of rental income introduced as part of the 2021-22 Budget Measures. The changes include that deductible expenses and losses allowed to persons earning rental income are fixed at 75% of the rental income for both individuals and companies, resulting in an effective tax rate of 7.5% on rental income, considering the applicable tax rate of 30%.

For taxpayers whose current year of income commenced before 1 July 2021, the amendment will apply from the beginning of the following year of income and for taxpayers whose year of income commenced on 1 July 2021, the amendment will take effect from 1 July 2021.

Sources include IBFD’s Tax Research Platform; www.allafrica.com; http://tax-news.com; www.oribtax.com