African taxation at a glance – Lexology
AFRICA: ATAF issues statement on revised two-pillar solution to tax digital economy
The African Tax Administration Forum (“ATAF“) issued a statement commenting on the application of the two-pillar solution of the OECD / G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to address the tax challenges arising from the digitization of the economy in Africa ATAF:
- considers that the proposals of the master plan are far too complex and lead to a reallocation of insufficient profits to market courts;
- proposes that the reallocation of profits be calculated as a share of multinational enterprises (“EMN“) total profits instead of its residual profits, based on the likely inequitable distribution of profits, in particular for digital businesses that have no taxable connection in the jurisdiction of the market;
- recommends that the Inclusive Framework consider the implementation of an elective binding dispute settlement mechanism that is made available to African countries with limited capacities and a low or no level of disputes related to amicable procedures;
- with the African Union, continues to advocate for a higher minimum tax rate of at least 20% instead of the proposed 15%, which is deemed more effective in protecting African tax bases and stemming the flow illicit financing by reducing profit transfers by multinational companies.
- welcomes the inclusive framework’s agreement to include the tax liability rule as a minimum standard in the second pillar, but calls on the inclusive framework to broaden the scope of the tax liability rule to cover payments of interest, royalties, capital gains and all service payments instead of only interest, royalties and a defined set of payments as agreed by the Inclusive Framework; and
- recognizes the need to continue work to finalize the new pillar 1 and 2 rules in order to ensure a more equitable tax distribution and stem illicit financial flows from Africa.
BOTSWANA: the tax treaty with Luxembourg enters into force
The tax treaty between Botswana and Luxembourg (2018) entered into force on July 6, 2021 and generally applies from August 5, 2021 for Botswana and from January 1, 2022 for Luxembourg.
MAURITIUS: Budget 2021/2022 presented to the National Assembly
The Minister of Finance, Economic Planning and Development during the presentation of the 2021/2022 budget to the National Assembly on June 11, 2021, announcing several tax changes to mitigate the economic impact of the COVID-19 pandemic. Significant changes proposed include:
- authorize contributions to the COVID-19 Vaccination Program Fund as deductions;
- allowing a double tax deduction on expenses incurred for research and development targeting African markets and the acquisition of specialized software and systems;
- extend the deferral provision of the non-reduced investment tax credit for manufacturing companies by 10 years;
- allow a 110% tax deduction to large manufacturers on products purchased from local small and medium enterprises;
- the introduction of a preferential tax rate of 3% for private universities established in Mauritius;
- the granting of a full tax credit on the costs of acquiring patents by biotechnology and pharmaceutical companies subject to a tax rate of 3%;
- granting a five to ten year tax holiday to family offices, fund and asset managers;
- granting an eight-year tax holiday to new businesses in prescribed sectors or activities that are registered with the Economic Development Council;
- extend the partial exemption tax regime to securities brokers and companies engaged in activities related to the rental of locomotives and trains, including the rental of rails; and
- granting a 5% tax credit to manufacturing companies for new installations and machinery over three years until June 30, 2023.
Value added tax (“VAT”)
- changes to the VAT reimbursement regime, including the extension of the VAT threshold for apartments and residential buildings to MUR 3 million, the reduction of the reimbursement ceiling to MUR 300,000 and the reduction of the household income threshold to 1 million MUR;
- expand the list of zero-rated supplies to include animals for training, rearing and re-export, supply of meatballs consisting of meat, fish, squid, crab, chicken, vegetables or milk ; and research and development plant, machinery, equipment and building construction for the provision of health care, nursing and residential care services.
- require all self-employed workers to be required to submit an income tax return; and
- confirming that the 30-day period for issuing income tax and VAT rulings runs from the date of sending the additional information to the Mauritius Revenue Authority and not from the date of the request.
SEYCHELLES: Ratification of the Multilateral Convention (MLI) approved
On June 23, 2021, the Seychelles Cabinet approved the ratification of the Multilateral Convention for the Implementation of Tax Treaty Related Measures to Prevent BEPS (“MLI»), Following the submission of its provisional position on the MI, its reservations and notifications and the 28 tax treaties that it wishes to see covered by the MI.
SEYCHELLES: implementation of a tax amnesty program
The Ministry of Finance and the Seychelles Revenue Commission have introduced a tax amnesty program in response to the economic crisis caused by COVID-19. The tax amnesty program runs from July 1, 2021 to December 31, 2021 and applies to unpaid debts, under-declared taxable income; and unfurnished tax returns. There is a 100% penalty waiver and a 25% to 75% interest waiver, depending on the date of payment of unpaid taxes.
TANZANIA: 2021 finance bill adopted by parliament
The 2021 finance bill, which includes various tax amendments aimed at increasing domestic revenue by broadening the tax base, was adopted by parliament on June 12, 2021. The significant amendments, which will enter into force upon approval of the bill by the president, include:
- empower the Minister of Finance and Planning to grant exemptions for projects financed by donors or through non-concessional loans without prior cabinet approval in order to speed up project implementation;
- the introduction of a tax regime for small-scale miners;
- the granting of depreciation allowance on a straight-line basis at the rate of 5% per annum on assets owned and employed by a person on an international pipeline;
- the introduction of a withholding tax at the rate of 2% on payments to residents who engage in the supply of agricultural, livestock and fishing products other than the sale of these products by through cooperative agricultural marketing societies and cooperative unions;
- reduce the tax rate of the lowest bracket of personal income tax for resident natural persons to 8% instead of 9%
- extending the list of VAT-exempt deliveries to include:
- imported raw materials for the manufacture of durable mosquito nets;
- importing or supplying goods or services to a government entity to be used only for the implementation of government funded projects, concessional and non-concessional loans, grants and donor funds;
- the importation or supply of goods or services for the relief of a calamity or natural disaster;
- the import or supply of goods or services to one or more entities having an agreement with the government for the purpose of operating or executing a strategic project, provided that the agreement provides for exemption from VAT; and
- import of smartphones, tablets, modems; aluminum and stainless steel milk cans; crude oil, minerals and mineral concentrates designated by the Mining Commission; contactless smart cards and consumables imported by the National Identification Authority; cold rooms imported by a person practicing horticulture; and artificial turf for soccer fields located in municipalities imported by the Tanzania Football Federation;
- removal of the VAT exemption for solar lamps
- the introduction of an obligation for employees to apply for a tax identification number in order to facilitate the correct accounting of tax on labor income;
- the imposition of an obligation to present documents officially translated by taxpayers with documents that are not in an official language; and
- require each taxpayer who maintains data in electronic format to maintain a main data server in Tanzania for efficient accessibility of information.