Africa

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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?
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In which sub-Saharan African region do you find
it the easiest to manage your tax affairs?
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Rate your experience of the extent of the
following challenges in dealing with your tax
affairs in Africa from 1 to 5
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Which of the following is the most critical Tax
consideration for your African business?
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To what extent do developments in Tax such as
BEPS impact the way you do business in Africa?
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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, RD, 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
Key Considerations for Africa
Tax
Inventory
Logistics
Country Analysis
Indirect Tax Analysis
Inventory Analysis
Political Stability
Network Analysis
Customs and Duties Analysis
ABC Classification
Port and Route Availability and Accessibility
Health Risks
Industrial Development Zone Areas
Storage and Material Handling Requirements
Incentives and rebates
Distribution Methods
Tax rules, regulations and exposure
Availability of skills and talent
Import Prohibitions
Logistics Cost Considerations
Inbound and Outbound Tax Implications
Collaboration Opportunities
Quality of Infrastructure
Contribution Value Scenario Comparison
Review Selection
Option Generation
Sensitivity Risk Analysis
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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
Ghana
Nigeria
Sierra Leone

• 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

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Investment Opportunities / Investment Incentives
Real Estate Ghana
Power Nigeria
Tourism Sierra Leone

• 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.

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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

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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

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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 / 30minimum 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
  Administrations 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.

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