africa tax guide 2015

NAMIBIA

GHANA

SIERRA LEONENIGERIA

TANZANIA

BURUNDIRWANDA

TUNISIA

LIBYA

ZIMBABWE

ZAMBIA

BOTSWANA

KENYAUGANDA

EGYPT

GAMBIA

ANGOLA

MOZAMBIQUEMAURITIUS

MOROCCO

CAPE VERDE

SOUTH AFRICA

LESOTHO

SWAZILAND

SOUTH SUDAN

SOMALILAND

www.pkf.com

DIAMONDS

ALUMINIUMCRUDE OIL

CRUDE OIL

CRUDE OIL

PETR

OLE

UM

COTTON

GOLD

DIAMONDS

DIAMONDS

CRUDE OILCRUDE OIL

DIAMONDS

TEACOFF

EE LIVES

TOCK

FISH

CRUDEOIL

ALUM

INIU

M

IRON ORE

PLATINUM

CLOTHING & TEXTILES

COCOA BEANS

CRUDE OIL

GRAINSCOFFEE

COPPER

PLATINUM

GOLD

AfricaTax Guide

2015

INDEPENDENT FIRMS IN AFRICASOUTH AFRICADurban12 on Palm BoulevardGateway, 4319Tel: +27 31 573 5000Contact: Paul GeringEmail: [email protected] TownPKF Rademeyer Wesson53 Willie van Schoor DriveTyger Valley, 7536Tel: +27 21 914 8880Contact: Derick WessonEmail: [email protected] - East Rand89 Michelle AvenueRandhartAlberton, 1449Tel: +27 11 907 7260Contact: Henico SchalekampEmail: [email protected] - West Rand620 Kudu StreetConstantia Kloof Office Estate - Block BAllensnek, 1735Tel: +27 11 675 0907Contact: Josua Jansen PietersenEmail: [email protected] Thesen HarbourKnysna, 6570Tel: +27 44 382 7176Contact: Henico SchalekampEmail: [email protected] Port ElizabethPKF House27 Newton StreetNewton Park, 6045Tel: +27 41 398 5600Contact: Deon van ZylEmail: [email protected] StatewayBedelia, 9459Tel: +27 57 353 2601/2Contact: Roland HeirissEmail: [email protected] da Missão n. 47 - 6º DTel: +244 222 334 332Contact: Henrique Camões SerraEmail: [email protected] PKF HibernianUnit 30, The OfficePlot 64517, Fairgrounds, GaboroneTel: +267 71349866Contact: Tim RoddyEmail: [email protected]

BURUNDIKigali9901 Nyarutarama RoadKigaliTel: +254 57 2505787Contact: Gurmit SantokhEmail: [email protected] VERDESalRua 1º de Junho1º Esq, Cx. Postal n.º 83Santa Maria, SalTel: +351 213 182 720Contact: Jose de Sousa SantosEmail: [email protected], Badr & Co95 Hafez Ramadan StreetBy El Ahly ClubNasr CityTel: +202 2354 7340 / 2354 6574 / 2354 7112Contact: Hany RashedEmail: [email protected] (THE)BanjulNoble House33 Bijilo Layout AnnexTel: +220 4414419Contact: Donald C KayeEmail: [email protected] ViewFarrar AvenueTel: +233 0302 221266Contact: Frederick Bruce-TagoeEmail: [email protected] Taxation Services LimitedKalamu House, Grevillea GroveBrookside, WestlandsTel: +254 20 4270000 / +254 732 144000Contact: Michael MburuguEmail: [email protected] UditorsLNDG Centre, Level 5MaseruTel: +266 28324750Contact: Sunday [email protected]

LIBYATripoliMohamed O. Alhadi Office for Auditingand Accountancy386 Zangat Alhansheri, Almezan StreetTripoliTel: +218 91 32 36 465Contact: Tarek Mohamed BrighEmail: [email protected] MAURITIUSPort LouisPKF Lamusse Sek Sum5 Duke of Edinburgh Avenue, Port LouisTel: +230 208 0877/8Contact: Christine Sek SumEmail: [email protected] Morocco131 Bd Abdelmoumen Avenue20100, CasablancaTel: +212 5 22 47 64 70/77Contact: Abdellatif ZarkalEmail: [email protected] MOZAMBIQUEMaputoAv. 25 de Setembron.° 1008, 12° FloorTel: +258 21 33 34 93/4Contact: Jose de Sousa SantosEmail: [email protected] Centre, 1st Floor, Unit 8Peter Múller Street, WindhoekTel: +26461 22 0662Contact: Uwe WolffEmail: [email protected] PKF Professional ServicesPKF House205A Ikorodu RoadObanikoro, LagosTel: 234 1 8042074Contact: T Adegboyega Akandeemail: [email protected] Rwanda LtdGasabo District, Kinyinya SecteurGaculiro Celule, Street 381, Plot 1610KigaliTel: +250 104 414 / +250 788 300 428Contact: Gurmit SantokhEmail: [email protected] LEONEFreetownPKF Mason Hill2nd Floor, Aureol House22 Wallace Johnson Street, FreetownTel: +232 76 294 555Contact: Madonna ThompsonEmail: [email protected]

SOMALILANDHargeisaPKF SomaliaBadda-Cas Village, Koodbuur DistrictSomaliland, Hargeisa, SomaliaTel: +254 57 2505787Contact: Atul ShahEmail: [email protected] SUDANJubaPKF Associatesc/o Hamza Hotel CompoundP.O. Box Private Bag, JubaTel: +256 414 341 523Contact: Atul ShahEmail: [email protected] SwazilandFirst Floor, Swaki House, Mhlakuvane StreetManzini, M200Tel: +268 2505 4016Contact: Charmain YoungEmail: [email protected] es Salaam9th Floor, Amani Place,Ohio StreetDar-es-SalaamTel: + 022 212080677Contact: Mustansir GulamhusseinEmail: [email protected] Lassad Marwani & CoCentre Ines9 Rue Azzouz Rebai, TunisEl Manar II, 2092Tel: +216 71 88 98 35Contact: Lasaad MarouaniEmail: [email protected] UgandaPlot No 1B, Kira RoadTel: +256 41 4341523 / 5Contact: Murtuza DalaEmail: [email protected] ZambiaSable House, 30G Sable RoadKabulonga, LusakaTel: +260 211 267124Contact: Mohammed LunatEmail: [email protected] Floor, Takura House67 Kwame Nkrumah AvenueTel: +263 4 291 8463 / +263 4 701 510Contact: Sydney BvurereEmail: [email protected]

1

This booklet is published by PKF Publishers (Pty) Ltd for and on behalf of

• Copyrightsubsistsinthiswork.Nopartofthisworkmaybereproducedinanyformorbyanymeanswithoutthepublisher’swrittenpermission.

• PKFInternationalisanetworkoflegallyindependentmemberfirmsadministeredbyPKFInternationalLimited(PKFI).NeitherPKFInorthememberfirmsofthenetworkgenerallyacceptanyresponsibilityorliabilityfortheactionsorinactionsonthepartofanyindividualmemberfirmorfirms.

chartered accountants& business advisers

Angola ................................................................................................... 3Botswana ............................................................................................ 11Burundi ............................................................................................... 15Cape Verde ......................................................................................... 17Egypt ................................................................................................... 21 Gambia ................................................................................................ 29Ghana .................................................................................................. 34Kenya .................................................................................................. 47Lesotho ............................................................................................... 54Libya .................................................................................................... 69 Mauritius ............................................................................................. 74Morocco .............................................................................................. 81Mozambique ....................................................................................... 91 Namibia ............................................................................................... 97 Nigeria ............................................................................................... 104 Rwanda ............................................................................................. 116Sierra Leone ...................................................................................... 122Somaliland ........................................................................................ 133South Africa ...................................................................................... 135 South Sudan ..................................................................................... 149Swaziland .......................................................................................... 151Tanzania ............................................................................................ 163 Tunisia ............................................................................................... 177 Uganda .............................................................................................. 186 Zambia .............................................................................................. 194Zimbabwe ........................................................................................ 206

CONTENTS

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AFRICA

Africa is the world’s second largest and second most populous continent with apopulation of 1.1billion people. The total land area ofAfrica covers30.2millionsquarekilometreswhichisapproximately20.4%ofthetotallandareaoftheworld.

AfricaissurroundedbytheIndianOcean,AtlanticOcean,MediterraneanSea,SuezCanal,theRedSeaandSinaiPeninsula.Africahasatotalof54countries,includingMadagascarandvariousislandgroups.

TheAfricaneconomyisdiverseandduetothepresenceofnaturalresourcesandtheworld’syoungestpopulation,ithasthepotentialtogrowatafastpace.SouthAfricaandEgyptarethetworichestcountriesinAfrica.

Inrelationtotherestoftheworld,Africaislargelyresponsiblefortheminingofraremetals and precious stones, the supply of oil, agricultural products, livestock andcoffee.

ImpoRtAnt dIsClAImeR

Allinformationcontainedhereinisbelievedtobecorrectatthetimeofpublication,30April2015.Thecontentsshouldnotbeusedasabasisforactionwithoutfurtherprofessionaladvice.

Whileutmostcarehasbeentakeninthecompilationofthispublication,noresponsibilitywillbeacceptedforanyinaccuracies,errorsoromissions.

Thispublicationshouldnotberegardedasofferingacompleteexplanationofthetaxationmattersthatarecontainedwithinthispublication.

Thispublicationhasbeensoldordistributedontheexpresstermsandunderstandingthatthepublishersandtheauthorsarenotresponsiblefortheresultsofanyactionswhichareundertakenonthebasisoftheinformationwhichiscontainedwithinthispublication,norforanyerrorin,oromissionfrom,thispublication.

Thepublishersandtheauthorsexpresslydisclaimallandanyliabilityandresponsibilitytoanyperson,entityorcorporationwhoactsorfailstoactasaconsequenceofanyrelianceuponthewholeoranypartofthecontentsofthispublication.

Accordinglynoperson,entityorcorporationshouldactorrelyuponanymatterorinformationascontainedorimpliedwithinthispublicationwithoutfirstobtainingadvicefromanappropriatelyqualifiedprofessionalpersonorfirmofadvisors,andensuringthatsuchadvicespecificallyrelatestotheirparticularcircumstances.

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MEMBER FIRM

NameofFirm:PKFAngolaCity:LuandaContact:Name:HenriqueCamõesSerraTelephone:222334332Email:[email protected]

KEY TAX POINTS• Companies carrying out industrial and commercial activities in Angola are

subject tocorporate taxonallAngolansource income.Taxpayersaredividedintotwogroups,eachgrouphavingdifferenttaxpaymentdeadlines.

• Angolanresidentcompaniesaretaxedontheirworldwideincome.• Non-residentcompaniesare liabletocorporatetax if theycarryonatradein

Angolatroughapermanentestablishment.• DoubletaxationreliefisnotavailableinAngola.• Angolahasnotconcludeddoubletaxagreementswithanyjurisdiction.• The Large Taxpayers Statute regulates the criteria for large taxpayers

classification, their rights and obligations. This regime allows for tax grouptaxation (tax consolidation) and introduces Transfer Pricing Regulations,including the obligation to prepare the transfer pricing documentation fortaxpayerswithaturnoverexceedingAOA7,000,000,000.00,

• Consumptiontaxisleviedontheproductionandontheimportofgoodsaswellontheprovisionofservices,atratescomprisedbetween2%and30%.

• Specialtaxregimesexistforoilandminingcompanies.• Personal income tax is payable by all Angolan residents and non-residents

earningincomeinAngolaatratesbasedonaslidingscalefrom0%to17%.

A. tAXes pAYABle

NATIONAL TAXES AND LEVIESCOMPANY TAXAngolanresidentcompaniesareliabletocorporatetaxonallitssourcesofincomeandcapitalgains.Anon-residentcompanycarryingonatradeinAngolathroughapermanentestablishmentlocatedinAngolaisliabletocorporatetaxonallincomeandgainsattributedtothatestablishment.

Residentcompaniesaresubjecttotaxationontheirworldwideincome.

IncomefromAngolancompaniesistaxedunderIndustrialTax(“ImpostoIndustrial“).TaxpayersliableforIndustrialTaxaredividedintotwogroups:AandB. Taxpayers included inGroupA aswell asGroupB taxpayers that opt for keepingorganizedaccounts,aresubjecttoIndustrialTaxontheincomeeffectivelyobtainedanddeterminedinaccordancewiththeaccountingrecords.GroupBtaxpayersthatdonotkeeporganizedaccountsaresubjecttotaxonthebasisoftheirturnover.

AnGolACURRENCY: Kwanza (AOA)POPULATION: 22.22 million GDP GROwTh: 5.9% GDP: US$ 141.8 billion

Angola

4

In general, commercial companies, as well as permanent establishments of non-residentcompanies,aremandatorilyincludedinGroupA.GroupBisapplicabletothecompanieswithasharecapitaloflessthanAOA2,000,000.00andwithaturnovernotexceedingAOA500,000,000.00.

CORPORATE INCOME TAX RATE AND TAX RETURNS Corporatetaxableincome,determinedonthebasisofaccountingprofits,istaxableatarateof30%. ForGroupAtaxpayersanannualcorporateincometaxreturn(“Modelo1”)mustbesubmittedby31 Mayof the followingyear, togetherwithadocumentationset thatformspartofthetechnicalreport.

ForGroupBtaxpayersthatvoluntarilyprepareaccountingrecords,anannualcorporateincometaxreturn(“Modelo1”)mustbesubmittedby30 Aprilofthefollowingyear,togetherwithadocumentationsetthatformspartofthetechnicalreport.ForGroupBtaxpayersthatdonotprepareaccountingrecords,anannualcorporateincometaxreturn(“Modelo2”)mustbesubmittedby30 Aprilofthefollowingyear,signedbyanaccountantandwiththedescriptionofthesalesandservicesprovided.

wIThhOLDING TAX ON SERVICES Mosttypesofservicesaresubjecttowithholdingtaxatrateof6.5%.Thetypesofservicesprovidedbyresidentcompaniesthatarenotsubjecttowithholdingtaxarethefollowing:• EducationalServices• MedicalServices• HospitalityServices• TransportationServices,includingpassengers• RentalofEquipmentsubjecttoCapitalApplicationTax• TelecommunicationsServices• FinancialBrokerandInsuranceServices• Rechargeswith nomark-up, conducted between related companies, defined

undertheStatuteoftheLargeTaxpayers

Thiswithholding tax should bewithheld by the payer of the service, andmay bedeductedonthecorporateincometaxreturn(“Modelo1”)asanadvancepayment,uptotheamountofthetaxassessed.Theexcessoftheamountoftaxwithheldovertheamountoftaxassessed,itmaybecarriedforwardandset-offagainstthecorporatetaxliabilityofthefollowing5years.

Likewise the payment of services to non-resident companies is subject to awithholdingtaxrateof6,5%,exceptforthefollowingservices:• EducationalServices• MedicalServices• TransportationServices,includingpassengers• RentalofEquipmentsubjecttoCapitalApplicationTaxTheprovisionofservicesuptoatotalofAOA20,000isexemptfromwithholdingtax.

Angola

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Angola

PERMANENT ESTABLIShMENTInaccordancewiththeAngolanGeneralTaxCode(CGT),afixedplaceofbusinessfromwhichthecompanyexercisesthewholeorapartofitsactivity,namelyanoffice,abranch,afactoryisdeemedasapermanentestablishment.

Thecontinuedprovisionofservicesforperiods longer than90dayswithinany12monthsperiodmayalsobedeemedasapermanentestablishment.

BRANCh PROFITS TAXForeigncompanieswithapermanentestablishmentinAngolaaresubjecttoIndustrialTaxinrespectof:(a) ProfitsimputabletoapermanentestablishmentlocatedinAngola,and(b) ProfitsofbusinessactivitiescarriedoutbytheheadofficeinAngola,withthe

samenatureoftheactivitiescarriedoutbyapermanentestablishmentoftheheadofficeinthatterritory

AnAngolanbranchofanon-residentcompanyistaxedonitsprofitsandcapitalgainsinthesamewayasaresidentAngolancompany.

TherepatriationofAngolanbranchprofitstoforeigncompaniesissubjecttoIndustrialTaxatrateof10%.

CAPITAL GAINS TAXCapitalgainsobtainedbyresidentcompaniesareincludedintheirtaxableincomeandtaxedundertheIndustrialTaxatthestandardflatrateof30%.CapitalgainsonsharesorotherinstrumentsnotsubjecttoIndustrialTaxaretaxedunderCapitalApplicationTaxatarateof10%.

CONSUMPTION TAXThere isnovalue-added tax (VAT)orsales tax inAngola.However,aconsumptiontaxexists,whichisleviedontheproductionandimportofgoodsaswellasontheprovisionofserviceslistedintheConsumptionTaxCode.Thetaxratesvarybetween2%(basicproducts)to30%(luxuryproducts)fortheproducts.

Asfarasservicesareconcerned,astandardtaxrateof5%applies(e.g.waterandenergy consumption, communication services, car rental, consultancy services,namelylegal,tax,financial,accounting,IT,engineering,architecture,economics,realestate,auditservices,andlegalservices)exceptforthehospitalitybusinessserviceswhicharetaxedata10%rate.

Thetaxpaymentshouldbemadeby:• Themanufacturerofthegoods,ifthegoodsareproducedinAngola• Thecustomsofficeattheimportationofgoods• Thecompanyprovidingtheservices

Theconsumptiontaxistobebornebytheacquirerofthegoodsorservices.Serviceschargedbynon-residenttaxpayerswillbetaxedbyreversechargebytheacquireroftheservice.

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STAMP DUTYStampDutyisleviedinawiderangeofoperationsandcontracts.Boththeoperationsonwhich the tax is leviedand theapplicable rateare listed in the tableannex totheStampDutyCode.Taxratesvaryfrom0.1%to1%.Certainitemsaretaxedatadeterminedfixedamount.

Someexamplesare:

Loans: 0.1%to0.5%ontheprincipalamountoftheloandependingontheloancontractedperiod.

Notaryacts:AOA2,000.

Amountscollectedbyacompanyfromitscustomers: 1%.

Intheparticularcaseofloansgrantedbyforeigncompaniesaswellasinthecaseinterestchargedbyaforeignbank,thetaxmustbeself-assessed(byreversecharge)andpaidbytheborrower.

CAPITAL APPLICATION TAXCapitalApplicationTaxappliestoinvestmentincome,suchasinterest,dividendsandroyaltiesandcapitalgains.Thetaxratesvaryfrom5%(e.gdividendsandloaninterestwithmaturity over3 years,dividends from listedcompanies)10% (e.g.dividends,royalties,capitalgains,bankdeposits interest)or15%(e.g.gamblingand lotteriesprizes,loanagreementsinterest).Inthecaseofloancontracts,thetaxauthoritiesmaydeemthattheprincipalisremuneratedata6%interestrate.

Dividends paid between Angolan resident companies are exempt from taxif a participation of 25% has been held for a 1 year period prior to the dividenddistribution,otherwiseataxof10%mustbewithheld.

URBAN REAL ESTATE INCOME TAX (IPU)Thistaxisleviedonrentedaswellasnon-rentedurbanrealestate.

Inthecaseofrentedrealestate,thetenantisrequiredtowithhold15%taxontherentspaidtothelandlord.

Innon-rentedurbanrealestatetheowneroftherealestateissubjecttotaxatrateof0,5%oftheassettaxvalueandexemptifthetaxvalueisbelowAOA5,000,000.

REAL ESTATE TRANSFER TAX (SISA)Thistaxisleviedonallactsthatinvolvethesaleofrealestateatarateof2%andpayablebytheacquirer.

SPECIAL TAX REGIMES:PETROLEUM INDUSTRY TAX REGIMEIncomefromoilindustryissubjecttoaspecifictaxregime.Thistaxregimeisappliedtoallcompaniesthatperformactivitiesofsearch,development,production,storage,treatmentandsalesofoilanditscomponents.

Angola

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OilCorporateIncomeTaxRates:• Productionorsharingagreement–50%• Othertypesofjoint-ventures–65,75%• Angolancompaniesmembersofthenationalconcessionaire–30%

MINING INDUSTRY TAXATIONMiningcompaniesaresubjecttoaspecifictaxregime.Thegeneralrateappliedinthistaxregimeis25%.

B. deteRmInAtIon oF tAXABle InCome

GENERAL REGIMETaxable income is calculatedbyadjusting theaccountingprofits fromnon-taxableincomeandnon-deductibleexpenses.Asageneralprinciple,costsareonlydeductiblewhennecessarilyincurredtorthepurposeofproducingincome.

DEPRECIATION OF FIXED ASSETSFixed assets can be depreciated for tax purposes.The depreciation rates are setbyspecificlegislation.Thenormalmethodofcalculationisthestraight-linemethod.

STOCK / INVENTORYInventorymustnormallybevaluedattheeffectivecostofacquisitionorproduction(historiccost).

DIVIDENDS DividendswhensubjecttoCapitalApplicationTaxareexcludedfromthetaxbasisforCITproposes.ThesameappliesforotherincomesubjecttoCapitalApplicationTax.

INTEREST DEDUCTIONInterest charges related to shareholder loans are not tax deductible for corporateincometaxpurposes.Interestonloanscontractedwithotherpartiesareeligibleastaxdeductible.

LOSSESOperating losses incurredbyresidentcompaniesorbyabranchofanon-residentcompany,maybecarriedforwardandsetoffagainsttaxableprofitsforthefollowingthreeyears.

FOREIGN SOURCED INCOMEAngolan companies are taxed on their worldwide income, including any foreignbranchincome.

INCENTIVESForeignprivateinvestmentinAngolarequiresaminimumcapitalof1millionUSD.

Dependingontheinvestmentprojectareaofimplementation,itmaybepossibletocontractwiththeAngolaGovernmentcertaintaxbenefitsnamely:(a) CustomsDuty(exceptStampDuty,emolumentsandstatisticalfees)–exemption

orratereductionforuptosixyears.

Angola

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(b) CorporateTax–Temporaryexemptionorratereduction(upto50%),foruptotenyears.

(c) Withholdingtaxondividends–Temporaryexemptionorratereductionforupto9years.

(d) RealEstatetransfertax–exemptionorratereduction.

AdditionallyMicro,smallandmedium-sizedcompaniesmaybenefitfromareducedcorporateincometaxrate,aconsumptiontaxexemptiononrawmaterialsandfromaStampDutyexemption.

C. FoReIGn tAX RelIeF

ThereisnotaxreliefonforeigntaxespaidbyAngolancompanies.

d. CoRpoRAte GRoUps

AgroupspecialregimehasbeenrecentlyintroducedbyAngolantaxlaw.CompanieswhichareclassifiedasLargeTaxpayersmayopttobetaxedbythesumofthetaxableprofitsandlossesofthegroup.

e. RelAted pARtY tRAnsACtIons

There is a general provision that allows the tax authorities to adjust the taxableincomeofanytaxpayerasaresultofnon-arm’slengthtransferpricingpractices.

The recentlypublishedStatuteofLargeTaxpayers introducednew transferpricingrules.A company listed as a LargeTaxpayer with an annual turnover aboveAOA7 billion (approximately 70 million USD) is required to prepare transfer pricingdocumentation.

F. WItHHoldInG tAX

Underdomesticlaw,dividendspaidtonon-residentcompaniesaresubjecttoa10%withholdingtax.DividendspaidbetweenAngolanresidentcompaniesmaybeexemptfromwithholdingtaxifaparticipationofatleast25%isheldforaperiodlongerthan1yearprior to thedividenddistribution.Dividendspaidtoresidentornon-residentcompanieswithstockstradedonarecognizedstockexchangemarketaresubjecttoareducedwithholdingtaxrateof5%,inrespectofthe2015to2019years.

All royalties paid to resident or non-resident companies are subject to a 10%withholdingtax.

Interestpaid to resident ornon-resident companiesare subject towithholding taxusuallyatarateof15%.However,certaininterest,suchasinterestonshareholdersloans,corporatebonds,bankdeposits,treasurybills,treasurybondsandsecuritiesissuedby theAngolanCentralBank (BNA), are subject toa10% rate. InterestontreasurybondsandsecuritiesissuedbytheBNAissubjecttoareducedrateof5%ifthematurityisofnolessthanthreeyears.

Angola

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Angola

Servicefeesareusuallysubjecttoa6,5%withholdingtaxregardlessofwhetheritispaidtoaresidentornon-residentcompany.Someexemptionsmayapplydependingonthetypeofservice. G. eXCHAnGe ContRol

ThereareexchangecontrolsinAngola.

H. peRsonAl InCome tAX

IndividualsreceivingemploymentincomeforworkperformedinAngolaaresubjecttopersonalincometax.Theindividuals’taxpayersaredividedinthreegroups:GroupA – Employment Income; Group B – independent professionals (appeared in thelistannextothePersonal IncomeTaxCode);GroupC–IndustrialandCommercialActivities.

EMPLOYMENT INCOME (GROUP A)Employment income is taxed by withholding tax (final tax) levied on the monthlyremunerationpaid,atthefollowingprogressiverates:

Taxable Income Exceeding AOA

Taxable Income Not Exceeding AOA

Tax On Lower Amount AOA

Rate On Excess %

0 34,450 0 0

34,451 35,000 Amount34.451

exceeding

35,001 40,000 550 740,001 45,000 900 845,001 50,000 1,300 950,001 70,000 1,750 1070,001 90,000 3,750 1190,001 110,000 5,950 12110,001 140,000 8,350 13140,001 170,000 12,250 14170,001 200,000 16,450 15200,001 230,000 20,950 16230,000 - 25,750 17

INDEPENDENT PROFESSIONALS (GROUP B)Feespaidtoindependentprofessionalsaresubjecttowithholdingtaxataflatrateof15%on70%oftheirtotalincome(beingtheeffectivetaxrateof10.5%).

INDUSTRIALS AND COMMERCIALS ACTIVITIES (GROUP C) Income derived from industrial and commercial activities is subject to a rate of30%determinedaccordingtotheMinimumProfitstableorarateof6.5%inother

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situations.

MINIMUM wAGEInAngola,theminimumwageisdeterminedaccordingtotheeconomicsectorwheretheemployeeworks:

Commerceandextractiveindustry:22,504.50AOATransports,servicesandprocessingindustry:18,754.00AOAAgriculture:15,003.00AOA

SOCIAL SECURITY CONTRIBUTIONS Remunerationspaidbyemployeraresubject tosocialsecuritycontributionsat thefollowingrates:• 8%fortheemployer,and• 3%fortheemployee(tobewithheldbytheemployer).

I. tReAtY And non-tReAtY WItHHoldInG tAX RAtes

Angolahasnotconcludedataxtreatywithanyjurisdiction.

Angola

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MEMBERFIRM

NameofFirm: PKFHibernianCity:GaboroneContact:Name: TimRoddyTelephone: 0026771349866Email: [email protected]

A. tAXes pAYABle

FEDERAL TAXES AND LEVIESCOMPANY TAXApprovedmanufacturingtaxableincome15%Capitalgains22%Foreigndividends15%Miningtaxableincome(excludingdiamonds)22%-55%Othertaxableincome22%AccreditedInnovationHubbusinesstaxableincome15%IFSCcompany–approvedservicesincome15%IFSC–othertaxableincome22%Corporatetaxrate-non-residentcompanyStandardrate30%Incometaxreturnsaredue4monthsafteracompany’sfinancialyearend.CompanieswithafinaltaxliabilitygreaterthanBWP50000mustpayquarterlyselfassessmenttaxpayments.YourtotalquarterlySATpaymentsbutexceed80%ofyourfinaltaxliability.

CAPITAL GAINS TAXAppliestocompaniesandindividualsCGTrateforcompaniesisthesameastheirincometaxratesIndividualspaytaxonchargeablegainsasfollows:18000–BWP018001-72000–BWP0+5%ofexcessover1800072001-108000-BWP270012.5.7%ofexcessoverP72000108000-144000-BWP7200+18.75%ofexcessoverP108000Over144000andaboveBWP13950+25%ofexcessover144000

Capitalgainonmoveablepropertiesiscalculatedontheproceedslesstheindexedcostandanycostsrelatingtothedisposal.IfacompanyorindividualsellssharestheypayCGTon75%ofthegain.

SALES TAX / VALUE ADDED TAXVATisimposedcomprehensivelyonanend-userbasisattherateof12%onstandardratedsupplies.CertainspecifiedsuppliesareeitherzeroratedorexemptfromVAT.Registrationismandatorywhere12monthsturnoverisexpectedtobeP500000ormore.VATispayablebytheimporterofservicesnotutilisedinthemakingoftaxablesupplies

Botswana

BotsWAnACURRENCY: Botswana Pula (BwP)POPULATION: 2.11 millionGDP GROwTh: 4.1%GDP: US$ 17.7 billion

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Input tax includes:−Transferdutypayableunder theTransferDutyAct−Any taxdeemedtohavebeenpaidinrespectofsuppliesofsecondhandgoods.Inputtaxclaimsshouldbemadewithinthefollowingtimelimits:−Forthosewhofilemonthlyreturns,withinaperiodoffourmonths−Forthosewhofilereturnseverytwomonths,withintwotaxperiods−Fortaxpaidinrespectofimports,withintwotaxperiods.LateVAT returnspenalty - thegreaterofP50perdayor10%permonthorpartthereofofthetaxdue.LatepaymentofVAT-compoundinterestat1.5%permonthorpartthereofonbothoutstandingtax,penaltiesandinterestcharged.VATrefunds-Interestat1%permonthorpartofamonthispayableiftherefundisnotmadewithintwocalendarmonthsoftheduedateofthereturn(1monthforIFSCcompanies,approvedmanufacturersandexporters).

ZERO-RATED SUPPLIES ExportsofgoodsandservicesInternationaltransportservicesSuppliesofgoingconcernsSorghum,maizemeal,millet,wheat,sugarandflourforhumanconsumptionFertilizersforfarmingpurposes,somepesticidesandfarmingtractorsSuppliestotheHeadofStateFirst5,000ltrs ofwaterpermonth supplied toa residential dwellingby theWaterUtilitiesCorporation(withexceptions)

EXEMPT SUPPLIES PrescriptiondrugsandcondomsResidentialaccommodationEducationatapprovedinstitutionsPublicmedicalservicesNon-feebasedfinancialservicesPassengertransport(excludingthetransportationoftourists)Farmimplements

FILING DEADLINE TheVATTaxreturnsmustbefiledonorbeforethe25thofthemonthfollowingtheendofthetaxperiod.


CAPITAL ALLOwANCESCapitalAllowancesStraightLine(Theratesofstraight lineannualallowancesonplantormachineryrangebetween10%and25%asfixedbytheCommissionerGeneral)Heavyplantormachineryusedinconstruction25%Motorvehiclesandaircraft (forpassengermotorvehicles, limitedtoexpenditureofP175000)25%Plantormachineryuseddirectlyinmanufacturingorproduction25%Otherplantormachineryincludingfarmingequipment15%Computerhardware25%

Botswana

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Botswana

Computersoftware-offtheshelf100%Furnitureandfittingsincludingsoftfurnishings10%

StatutoryStraightLineAllowances:

Industrialbuildings-initialallowance,annualallowances25%2.5%

Commercialbuildings-annualallowances2.5%

Farmbuildings,improvements,watersuppliesandotherfarmcapitalworks100%

LOSSESCompanytaxlossesfallawayafterfiveyears.Farmlossesneverfallaway.

FOREIGN SOURCED INCOMEBotswanacitizensaretaxedontheirworldwideincome.NoncitizensareonlytaxedonincomegeneratedinBotswana.

F. eXCHAnGe ContRol

Therearenoexchangecontrolrestrictions.

G. peRsonAl InCome tAX

EMPLOYMENT INCOME Includes salaries, wages, terminal payments, directors and other fees, bonuses,commissions,allowancesandthevalueofbenefits.Employmentincomefrom,ordeemedtobefromasourcewithinBotswanaistaxableinBotswana.Allemploymentincome,includingbenefitsinkind,issubjecttomonthlywithholdingtax(PAYE).

EXEMPTION AND TAX FREE BENEFITS FOR INDIVIDUALS Thevalueofcontractualtravelbenefitsforemployeesandtheirfamilies.Medicalfundcontributionsandmedicalattentionpaidforbytheemployer.Contractual terminal gratuities payable to expatriate employees are exempt to theextent of one-third. Bank and building society interest of P7,800 per annum, forresidentindividuals.Severancepayandcertaingratuitiespayabletocitizenemployeesareexempttotheextentofonethird.Investmentofsuchpaymentsdirectlyintoanapprovedpensionorretirementannuityfundresultsin100%exemption.Retrenchmentpackage:onethirdorP36,000whicheverisgreaterisexempt.

BENEFITS VALUATION housing • 10%ofmunicipalvaluationor• 8%ofcurrentcapitalvaluation,(P250×floorarea).

14

Use of employer’s furniture10%oftheexcessoverP15000ofthecosttotheemployer

Loans Thedifference between the interest at concessionary rate and prime lending rateannouncedbyBankofBotswanaon1Julyofthetaxyear.

Other benefits SuchasschoolfeesandutilitiesCosttotheemployerormarketvalue,whicheveristhegreater.

BUSINESS AND EMPLOYMENT INCOME RATES Earnings Rate0-36000 036001-72000 0+5%over3600072001-108000 1800+12.5%over72000108001-144000 6300+18.75%over108000144001andover 13050+25%over144000

Botswana

15

Fullname: RepublicofBurundiCapital: BujumburaMainlanguages: Kirundi,FrenchPopulation: 9.4million(2013estimate)Monetaryunit: BurundianFranc(BIF)Internetdomain: .buInt.diallingcode: +257

A. FIsCAl YeAR end

Residents Non-residentsCalendaryearend Calendaryearend

B. tAXes pAYABle

COMPANY TAX Residents Non-residentsIncometax 30% 35%Taxoncapitalgaintax 30%(taxedasordinaryprofit)30%Valueaddedtax(VAT) 18%,10%,0%andExempt 18%,10%,0%andExempt

INDIVIDUAL TAXATIONResidents Non-residentsProgressivetaxrateupto30% Progressivetaxrateupto30% Capitalincometaxedata Capitalincometaxedataproportionalrateof15% proportionalrateof15%Basisoftaxationisworldwide Basisoftaxationisatsource STATUTORY DEDUCTIONS• Socialsecuritycontributionsof6%ofgrosssalaries• Accidentrisksfundof3%ofgrosssalaries

wIThhOLDING TAX

The relevant rates are as follows: Resident Non-Resident

Dividends 15% 15%

Interest 15% 15%

Royalties 15% 15%

Rent N/A N/A

Managementservicefee 30% 30%

Contractorsfees 30% 30%

Importationofgoods 18-10%

BURUndICURRENCY: Burundi Franc (BIF)POPULATION: 10.99 million GDP GROwTh: 4.8% GDP: US$ 3.3 billion

Burundi

16

STAMP AND TRANSFER DUTYThereisnostampduty.

DOUBLE TAX TREATIESBurundihasnotyetsignedatreatyagainstdoubletaxation.

INVESTMENT INFORMATIONBurundihasputinplaceAPI(AgencedePromotionpourl’Investissement)thenationalbodyresponsiblefordevelopmentandinvestmentpromotioninBurundi inordertoassistandsupportinvestorsinobtainingrequireddocumentsandformalitiesrequiredbylaw.

TRANSFER PRICING AND ThIN CAPITALISATION RULESTransactionsbetweenrelatedpartiesmustbeatarm’slength.Guidelinesfortransferpricingarestillunderdevelopment.

Interestexpensespaidtorelatedentitiesarenon-deductiblefortaxpurposesifthedebt-to-equityratioexceeds30%.Thisexcludesreservesandretainedearnings.

EXChANGE CONTROLSSomerestrictionsareimposedontheimportandexportofcapital.Bothresidentsandnon-residentscanholdbankaccountsinanycurrencybutrestrictionsareimposedonexportofforeigncurrenciesbytheBurundiReserveBank(BRB).

Burundi

17

MEMBERFIRM

NameofFirm: PKF,LimitadaCity:SantaMaria–SalIslandContact:Name:JoséSousaSantosTelephone:+351Email:[email protected]

KEY TAX POINTS• ResidentcorporationsaresubjecttoCapeVerdecorporateincometax(IUR)on

theirworldwideincome.• ThestandardrateofVATis15%.• Paymentsbetweenresidentcompaniesaregenerallysubjecttowithholdingtax.• Incometaxispayablebyindividualsonemploymentincome.Residentindividuals

aresubjecttoincometaxontheirworldwideincomewhilstnon-residentsareliabletoincometaxonlyonincomesourcedinCapeVerde.

A. tAXes pAYABle

COMPANY TAX: GENERAL REGIMEResidentcorporationsaresubjecttoCapeVerdecorporateincometax(CIT)ontheirworldwide income.Residentcompaniesare thosewhichhave theirheadoffice,orplaceofeffectivemanagement,inCapeVerde.Companies,nothavingtheirheadofficeorplaceofeffectivemanagementinCapeVerdeterritory,aresubjecttoIURonlyonincomeobtainedinCapeVerde.The IUR is charged on the profits of companies or other similar entities, andindividuals treated as companies, and individual enterprises, engaged in acommercial, industrial,agricultural,fishingorservicebenefits,profitattributable toapermanentestablishmentlocatedinCapeVerdeanterritoryincomparisontonon-resident individuals, the incomereceivedbyentities thatdonothaveapermanentestablishmentinCapeVerdeanterritory,orthat,havingit,notattributabletohimandcapitalincome.Taxableprofitistaxedat25%.Thetaxyearusuallycoincideswiththecalendaryear(1Januaryto31December).Taxispayableasfollows:

Taxable Persons Tax PaymentResidententitieswhosemainactivityiscommercial,industrialoragriculturalandnon-residentswithapermanentestablishmentinCapeVerde

PaymentsonaccountinJanuary.Thebalanceisduebythedatewhenthetaxreturnisfiled–generally31May.

Non-profitableentities.Taxispayablebytheendofthefifthmonthfollowingtheendofthetaxyear–generally31May.

Non-residententitieswithoutapermanentestablishment.

Taxispayablebytheendofthefifthmonthfollowingtheendofthetaxyear–generally31May.

Cape Verde

CAPE VERDECURRENCY: Cape Verdean Escudo (CVE)POPULATION: 0.5 million GDP GROwTh: 3.02% GDP: US$ 2.1 billion

18

VALUE ADDED TAX (VAT)CapeVerdehasadoptedVATwhichisasalestaxleviedonthesupplyofgoodsandservices aswell as on the import of goods intoCapeVerde.The standard rate is15,5%,withtheexceptionforwaterandelectricity–15%VATtaxrate.VAT exemptions are laid down in particular to medical services, services relatedto education and social support and vocational training, banking and financialtransactions, insuranceand reinsuranceoperations, aswell asexemptions for theimportationofcertaingoods.

OThER TAXESMUNICIPAL TAX ON REAL ESTATE (IUP)TheIUPisamunicipaltax leviedonthevalueofproperties intheterritoryofeachmunicipality, dividing, in accordance with the classification of buildings in rusticand urban, the value of free transmissions or expensive real estate, the value ofcorporatetransactionssubjecttopublicdeed,suchassocialpactschanges,transferofsharesandotherlikenature,valueinuseorenjoymentofmotorvehiclessubjecttoregistrationand,finally,capitalgainsarisingfromthevaluationoflandforbuilding,broadcastsofbuildingsorotherrealestate.TheIUPispayablebytheownerofthebuildingat31Decemberoftheyearinthesamerespect.Thestandardrateis1,5%.

STAMP DUTYTheStampDuty (IS) focusesondifferent taxevents,and inparticularonfinancialtransactions,corporatetransactions,capitaltransfersanddocumentedlegalacts.Applieddifferenttaxrates,dependingontheapplicableamount,withtheupto15%.

B. deteRmInAtIon oF tAXABle InCome (IRC)

General regime: Net income,ortaxable income, isarrivedatbyadjustingtheaccountingprofitstornon-taxed incomeandnon-deductible expenses.As ageneral principle, costs areonlydeductiblewhennecessarilyincurredtorthepurposeofproducingincome.

DEPRECIATIONFixedand intangibleassetscanbedepreciated for taxpurposes.Thedepreciationrates are set by specific legislationand include4% for buildings.Nodepreciationisallowedon land.Thenormalmethodofcalculation is thestraight-linebasisbutdeclining-balance method may be used except for items such as buildings, carsandofficefurniture.Intangibleassetswithalimitedperiodofexclusiveusemaybedepreciatedforthatperiod,otherwisefor20years.

STOCKS / INVENTORYInventorymustnormallybevaluedattheeffectivecostofacquisitionorproduction(historiccost).Othermethodswhichmaybeadoptedinclude:• Thestandardcostmethod,whichmustbecalculated inaccordancewith the

appropriatetechnicalandaccountingprinciples;• Thesalepricemethod,basedonthemarketvaluelessanormalprofitmargin.

Cape Verde

19

LOSSESOperatinglossesincurredbyresidentcompanies,maybecarriedforwardtobesetoffagainsttaxableprofitsforthreeyears.

FOREIGN SOURCED INCOMEResidentcompaniesaretaxedontheirworldwideincome.

C. WItHHoldInG tAX

Paymentsbetweenresidentcompaniesaregenerallysubjecttowithholdingtax.Theratesvarybetween10%and20%.

d. peRsonAl tAX

Personnel Income Tax will be due by natural persons residing in Cape Verdeanterritoryand,also,bythosethatdonotresideinCapeVerde,butobtainincomeinCapeVerde.Non-residenttaxpayersinCapeVerdeanterritoryaresubjecttoIURsolelybyincomeearnedinCapeVerde.

Theincomeofanindividualistaxedbydifferentcategories.RegulationofthePersonnelIncomeTaxprovidesforthefollowingcategories:propertyincome,commercialandindustrialincome,includingcapitalgainsandtheprovisionofservices,andincomeagricultural,livestockandfishing,capitalincomeandotherincome,suchasfromthegame,lotteryandbetting,andfinally,incomefromwork,dependentandindependent,includingpensionsandannuitiesortemporary.

Taxable income results from the aggregation of the various categories of income,although exempt, earned each year, after the deductions and rebates defined inRegulationIUR.

Realizedcapitalgainsandnet realised losseson the transferof sharesandothersecurities are subject to awithholding tax. In determining the tax base, the gainsmustbesubjecttoaggregationandareconsideredinrelationto50%oftheirvalue.

Therearespecificdeductionsforeachcategoryofincome,usingascriteriathecostsorchargesnecessarytoattainthem.Thus, spending on health and education, pensions, housing rents permanent, thehousingdebt interest, constructionand improvementof real estate, thepremiumsof illness or personal accident insurance, aswell as some life insurance, and theamountsinvestedannuallyingovernmentbondsandcontributionstosocialsecurityorsinglesocialtaxforthetaxablepersonortheirdependentsmaybedeductedfromthetaxableincome.Donationsofpublicinterestcanalsobedeductedfromthetotalincome,netofdeductions.

Theworkers,aresubjecttothepaymentataxof8%-contributiontoSocialSecurity.Theself-employedare,inturn,subjecttothepaymentoffeesby11%inrestrictedscheme,andintheorderof19.5%inextendedscheme.Thepaymentofcontributionsshalltakeplacebythe15thofthemonthfollowingthattowhichtheyrelate.

Cape Verde

20

Taxreturnssubmittedinpaperformaredueuntil31Marchofthesubsequenttaxyear

The following progressive tax rates apply in tax year 2015 to the aggregate netresultsofemploymentincome,businessincome,investmentincome(exceptinterestonbondsanddeposits),incomefromland,capitalgainsandincomefrompensions:

Taxes

Level Levels Amounts normal Average

1 Until 408.843$ 11,67% 11,67%

2 From408.843$until 860.163$ 15,56% 13,71%

3 From860.163$until 1.720.327$ 21,39% 17,55%

4 From1.720.327$until 2.580.490$ 27,22% 20,77%

5 From2.580.490$ 35,00%

e. tReAtY And non-tReAtY WItHHoldInG tAX RAtes

CapeVerdesignedagreementstoavoiddoubletaxationwithPortugalandMacau.CapeVerdeiscurrentlynegotiatingadoubletaxagreementwithSpain.

Cape Verde

21

NameofFirm:City:Contact:Name:Telephone:Email:

KEY TAX POINTS• Egyptianresidentcompaniesaretaxableontheirworldwideincome,exceptfor

profitsderivedfrompermanentestablishmentsabroad.Non-residentsareonlytaxedonEgyptiansourcedincome.

• Dividendspaidtoresidentsandnon-residentsarenotsubjecttowithholdingtax.Companiesand individualsarenot taxedondividendsreceivedfromresidentcompaniesbutaretaxedondividendsandotherpaymentsfromnon-residents.

• Acreditsystemisavailabletorelievedoubletaxationonforeignsourceincome.Thecredit issubject toamaximumof theEgyptian taxpaidon theoverseasincomeconcerned.

• Thereareprovisionswhichlimitthetaxdeductibilityofinterestbasedontherateofinterestchargedandthedebttoequityratioofthecompanyconcerned.

• Transferpricingrulesarebasedonarm’slengthprinciples.Anadvancepricingarrangementisavailable.

• Domestictaxlawprovidesfora20%withholdingtaxapplicabletothepaymentofinterestandroyaltiestonon-residents.Treatieswithvariouscountriesreducetherateofwithholdingtaxapplying.

• Generalsalestaxispayableonthesupplyofgoodsandservicesandimports.Thestandardrateoftaxis10%althoughratesvaryfrom0%to30%.

• Resident individuals are subject to income tax on their worldwide incomewhereasnon-residentsontaxedonEgyptiansourcedincome.

A. tAXes pAYABle

CORPORATE INCOME AND GAINS TAXEgyptiancorporationsaresubjecttocorporateprofitstaxontheirprofitsderivedfromEgypt, aswell as on profits derived from abroad, unless the foreign activities areperformed throughapermanentestablishment locatedabroad.ForeigncompaniesresidentinEgyptaresubjecttotaxonlyontheirprofitsderivedfromEgypt.

Oilprospectingandproductioncompaniesaresubjecttotaxontheirprofitsatarateof40.55%.TheSuezCanalCompany,EgyptianGeneralPetroleumCompany(EGPC)andCentralBankofEgyptaresubjecttotaxontheirprofitsatarateof40%.

ADMINISTRATIONCompaniesmustfiletheirannualtaxreturns,togetherwithallsupportingschedulesandtheoriginalfinancialstatements,before1Mayeachyearorfourmonthsfromthefinancialyearend.The tax returnshouldbesignedby the taxpayer.Taxpayerscanfilearequesttoextendtheduedateoffilingthetaxreturnprovidedtheypayan

eGYptCURRENCY: Egyptian Pound (EGP)POPULATION: 85.97 million GDP GROwTh: 3.5% GDP: US$ 324.2 billion

Egypt

22

estimatedamountoftax.Therequestmustbefiledatleast15daysbeforetheduedateandtheestimatedtaxduemustalsobepaidbeforetheduedate.Theextendedperiodcanbeupto60days.

Anamendedtaxreturncanbefiledwithin30daysfromtheduedate.Anytaxduemustbepaidwhenthetaxreturnisfiled.Alatepenaltyisappliedattherateof2%plusthecreditanddiscountrateissuedbytheCentralBankofEgyptasofJanuaryeachyear.

Thelawhassetupappealscommitteesattwolevels-theInternalCommitteeandtheAppealCommittee.TheAppealCommittee’sdecisionisfinalandbindingonthetaxpayerandthetaxdepartmentunlessacaseisappealedtothecourtwithin30daysofreceivingthedecision,whichisusuallyintheformofanassessment.

DIVIDENDSDividends distributed by an Egyptian company are not subject to withholding taxbecause they are paid out of corporate profits that are taxed under the normalrules.DividendsreceivedbyresidentsfromforeignsourcesarenottaxedinEgypt.Dividends are exempt from tax. Interest on bonds listed on the Egyptian stockexchangeisexemptfromtaxifcertainconditionsaresatisfied.Certainexemptionsmaybeprovidedinsomecases.

CORPORATE TAX RATES

Nature of Tax RateCorporateincometax 25%Capitalgainstax 20%Branchtax 20%Withholdingtax:Dividends 0%Interest 20%1

Royaltiesfrompatents,know-how,etc. 20%1

Certainservicesprovidedfromnon-residententities 20%1

Branchremittancetax 0%Netoperatinglosses(years)Carryback 3yearsLossesincurredinlong-termprojectscanbecarriedbackwithinthesameprojectwithnolimits.Carryforward 5years

NOTES:Finaltaximposedongrosspayments.Theratemaybereducedunderataxtreaty.

Egypt

23

OThER TAXESThetablebelowsummarisesothersignificanttaxes.

Nature of Tax RateGeneralsalestax 0%to30%CustomsDuties:General,advalorem VariousOnvalueofmachineryneededforinvestmentsbycompanies 5%Stampdutiesonbills,promissorynotesand lettersofguaranteeaswell as most types of documents, contracts, checks and receipts(sharesandbondslistedontheEgyptianStockExchangeareexempt)

Various

Theamountspaidbecomecreditsavailablefor incometaxpurposesat theendoftheperiod.

SOCIAL INSURANCEOnmonthlybasesalary,uptoEGP987.5paidby:

Employer 26%Employee 14%

On amount in excess of EGP 987.5 of the base salary, with amaximum excessamountofEGP1,520amonth,paidby:

Employer 24%Employee 11%


Corporate income tax is based on taxable profits computed in accordance withgenerallyacceptedaccountingandcommercialprinciples,modifiedfortaxpurposesbycertainstatutoryprovisionsprimarilyconcerningdepreciation,provisions,inventoryvaluation,inter-companytransactionsandexpenses.Start-upandformationexpensesmaybecapitalisedandamortisedinthefirstyear.

Thedeductibilityofabranch’sshareofheadofficeoverheadexpensesislimitedtoapproximately3% to5% (according topractice)of turnover.Headofficeexpensesotherthanoverheadandgeneraladministrationexpensesaresubjecttonegotiationwiththetaxauthorities.Theyarefullydeductibleiftheyaredirectlyincurredbythebranchandarenecessaryfortheperformanceofthebranch’sactivityinEgypt.

Suchexpensesmustbesupportedbyoriginaldocumentsandapprovedbytheheadofficeauditors.

DEBIT INTERESTDebitinterestofloans/overdraftusedinthecompany’sactivityisadeductibleitemafteroffsettingtheinterestincome.Interestexpensepaidtoindividualswhoarenotsubjecttotaxorexemptedfromtaxisnotdeductible.InterestexpenseislimitedtotheinterestratewhichwillnotexceedtwicethediscountratedeterminedbythecentralbankofEgypt.

Egypt

24

DEBT-TO-EQUITY RULESThetaxlawhasdeterminedthemaximumdebttoequityratiotobe4:1.Intheeventthedebtexceedssuchratio,theexcessinterestisnotconsideredbytheTaxAuthoritytobeadeductibleexpense.

INVENTORIESInventoriesarenormallyvaluedfortaxpurposesatthelowercostormarketvalue.Costisdefinedaspurchasepriceplusdirectandindirectproductioncosts.Inventoryreservesarenotpermissibledeductionsfortaxpurposes.Foraccountingpurposes,companiesmayelecttouseanyacceptablemethodofinventoryvaluationsuchasfirst-in,first-out (FIFO)oraveragecost.Themethodshouldbeappliedconsistentlyandthereasonsforsuchchangeshouldbestatedifthemethodischanged.

PROVISIONSProvisionsarenotconsideredasdeductiblecostsexceptforthefollowing:

• 80%ofloanprovisionsmadebybanks(requiredbytheCentralBankofEgypt);

• InsurancecompaniesprovisiondeterminedbyLawNo10of1981.

BAD DEBTSBaddebtsareadeductiblecost if thecompanyprovidesareportfromanexternalauditorcertifyingthefollowing:

• Thecompanyismaintainingregularaccountingrecords;• Thedebtisrelatedtothecompany’sactivity;• Thedebtappearsinthecompany’srecords;and,• Thecompanyhastakenthenecessaryactionstocollectthedebt.

DEPRECIATION AND AMORTISATION ALLOwANCESDepreciationisdeductiblefortaxpurposesandmaybecalculatedusingeitherthestraight-lineordeclining-balancemethod.Depreciationratesareasfollows:

Type of Asset Rate Method of Deprecia-tion

Buildings 5% Straight-lineIntangibleassets 10% Straight-lineComputers 50% Declining-balanceHeavymachineryandequipment 25% Declining-balanceSmallmachineryandequipment 25% Declining-balanceVehicles 25% Declining-balanceFurniture 25% Declining-balanceOthertangibleassets 25% Declining-balance

Accelerateddepreciationisallowableonlyonceatarateof30%onnewmachinesandequipmentintheyeartheyareplacedintoservice.Normaldepreciationiscalculatedafterconsideringtheaccelerated30%depreciationonthenetvalueofnewassets,providedthatproperbooksofaccountaremaintained.Taxlossesmaybecarriedforwardforfiveyears.Lossesincurredinlong-termprojects

Egypt

25

canbealsocarriedbackwithinthesameproject.

REAL ESTATE TAXEgyptintroducedanewtaxlawNo196of2008witheffectfrom23June2008tobeappliedwitheffectfrom1January2009.TaxRate:10%oftheannualrentalvalueafterexcludingthefollowingrepresentinganassumedmaintenanceexpenses:• 30%oftherentalvalueforpropertiesusedforlivingaccommodation;• 32%oftherentalforpropertiesusedforotherpurposes.


ForeigntaxpaidbyaresidententityoutsideEgyptcanbedeductedprovidedthereissupportingdocumentation.LossesgeneratedoutsideEgyptcannotbeoffsetagainstthetaxableamountinEgypt.TreatiesconcludedbetweenEgyptandothercountriesregulatethecreditfortaxespaidabroadonincomesubjecttocorporateincometaxinEgypt.

d. CoRpoRAte GRoUps

Associatedorrelatedcompaniesinagrouparetaxedseparatelyforcorporateincometaxpurposes.Egyptianlawdoesnotcontainaconceptofgroupassessmentunderwhichgrouplossesmaybeoffsetagainstprofitswithinagroupofcompanies.


The Egyptian tax law contains provisions for transfer pricing.The transfer pricingprovisionsarebasedonthearm’s lengthprinciple.Undertheseprovisions, thetaxauthoritiesmayadjusttheincomeofanenterpriseif itstaxableincomeinEgyptisreduced as a result of contractual provisions that differ from those thatwould beagreedtobyunrelatedparties.

However, it is now possible to enter into arrangements with the tax departmentto agree a transfer pricing policy in advance (Advance PricingArrangement).Thisprovidesassurancesthattransferpriceswillnotbechallengedafterthetaxreturnissubmitted,withtheconsequentexposuretopenaltiesandinterestonlatepaidtaxes.

F. WItHHoldInG tAX

No withholding tax is levied on dividends distributed by resident companies,regardlessoftheresidencestatusoftherecipient.Interestderivedbynon-residentlegalpersons issubject toafinalwithholding taxat therateof20%on thegrossamount,unlessa lower treaty rateapplies.Royaltiesderivedbynon-resident legalpersonsaresubjecttoafinalwithholdingtaxattherateof20%onthegrossamount,unlessalowertreatyrateapplies.

Egypt

26

G. eXCHAnGe ContRol

Egypt has a free market exchange system. Exchange rates are determined bysupply and demandwithout interference from the central bank or theMinistry oftheEconomy.

H. peRsonAl tAX

IncometaxisimposedontheworldwideincomeofEgyptianresidents.Non-residentsaresubjecttotaxonincomeearnedorrealisedinEgypt.

AnindividualisdeemedtobearesidentofEgyptif:• TheindividualispresentinEgyptformorethan183daysinafiscalyear;• Theindividual’sprincipalplaceofresidenceisEgypt.Article2oftheExecutive

Regulations states that an individual is considered to have a permanentresidenceinEgyptif:

(a) ThetaxpayerstaysinEgyptforthemajorityoftheyear,eitherinhisownproperty,inarentedpropertyorinanyotherplace;

(b) Thetaxpayerhasalocalcommercialpresence,professionaloffice,industrialsiteoranyotherplacewherehecarriesonhisactivitiesinEgypt;

(c) TheindividualisanemployeewhoperformshisdutiesabroadandreceivesasalaryfromanEgyptianpublicorprivatesource.

Incometaxisassessedeachyearontheaggregateofthenetamountsfromeachcategory of income realised during the preceding year.There are four recognisedcategoriesofincome,namely:(1) Employmentincome;(2) Business income (which includes income from commercial and industrial

activities);(3) Non-commercialincome;(4) Incomefromrealestateassets.

Graduated rates applywith effect from1 July 2005 to the aggregate of the fourcategoriesofincome,asfollows:

Income (EGP) RateUpto5,000 0%5,001to30,000 10%30,001to45,000 15%45,001to25,000,000 20%Over25,000,000 25%

IndividualsarenotsubjecttoataxoncapitalgainsexceptinthecaseofthedisposalofrealestateorbuildingsiteswithintheboundariesofEgyptiancities.Suchgainsarenotsubjecttoincometaxbutaretaxedattherateof2.5%onthevalueoftheproperty.

Egypt

27

I. TREATY wIThhOLDING TAX RATES

Dividendspaid to non-residents arenot subject towithholding taxunderEgyptiandomesticlaw.Consequently,thefollowingtablesetsforthmaximumwithholdingratesprovidedinEgypt’staxtreatiesforinterestandroyaltiesonly.

Egypt has signed double tax treaties with Armenia, Bangladesh, Greece, Ireland,Kazakhstan, Mongolia, Norway, Oman, Senegal, Seychelles, the Slovak Republic,Spain,Sri Lanka,Tanzania,Thailand,UgandaandVietnambut these treatieshavenotyetbeenratified.

TaxtreatynegotiationsareunderwaywithCongo,MacedoniaandNorthKorea.

Interest (%)

Royalties (%)

Non-treatycountries 20 20Treatycountries:Albania 10 10Algeria 5 10Austria 15 0Bahrain –1 –1

Belarus 10 15Belgium 15 15/20Bulgaria 12.5 12.5Canada 15 15China 10 8Cyprus 15 10CzechRepublic 0 10Denmark 15 20Finland1 -FromFinland 0 20-FromEgypt 20 20France 20 15/203

Germany 15 15/203

Hungary 15 15India 20 –1

Indonesia 15 15Iraq:-FromIraq 10 15-FromEgypt 20 15Italy 20 15Japan 20 15Jordan 15 20Korea(South) 10/15 15Kuwait 10 10Lebanon 10 5

Egypt

28

Libya 20 20Malaysia 15 15Malta 10 12Morocco 20 10Netherlands 12 12Norway:-FromNorway 0 0-FromEgypt 20 15Pakistan 15 15Palestine 15 15Poland 12 12Romania4 15 15Russia 15 15Singapore 15 15SouthAfrica 12 15Sudan 20 10/35

Sweden 15 14Switzerland 15 12.5Syria 15 20Tunisia 10 15Turkey 10 10Ukraine 12 12UnitedArabEmirates 10 10UnitedKingdom 15 15UnitedStates 15 15Yemen 10 10Yugoslavia6 15 15

NOTES:1 Accordingtodomesticlawineachcountry.2 Afinaldraftofanew tax treatywithFinlandwas initialledon17September

1997,butthenewtreatyhasnotyetbeenratified.3 Thehigherrateappliestotrademarks.4 ThetreatywithRomaniaisbeingrenegotiated.5 Films,otherwise10%.6 The treaty with Yugoslavia applies to the republics that formerly comprised

Yugoslavia.

Egypt

29

MemberFirm:

City: Name C o n t a c tInformation:Banjul DonaldCKaye 4414419 [email protected]

A. tAX pAYABle

COMPANY TAXCorporationtaxispayablebasedonthehigherof31%ofchargeableprofitor1.5%oftotalrevenueforthetaxyear.Thisimpliesthatevenifacompanyhasanadjustedtaxlossfigureforanyparticularyear,itwillstillbeliabletotax.Notethatifforanyreasonacompanyisnotaudited,taxonitstotalrevenuewillbe2.5%andnot1.5%.

Incometaxispayableinquarterlyinstalmentsi.e.thethreemonthsperiodendingonthelastdayofthethird,sixth,ninthandtwelfthmonthsofthetaxyear.Thisinstalmentisbasedon1.5%oftotalrevenueforacompanywithauditedaccountsor2.5%foracompanywithoutauditedaccountsandisduebythe15thofthefollowingmonth,failingwhich a penalty equal to 5%of the unpaid tax permonth can be applied.Advancepaymentsduringthetaxyeararecreditedagainstincometaxassessed.

CorporateIncomeTaxReturnformismandatoryforalltaxableentitiesandisexpectedtobesubmittedby31Marchoftheyearfollowingthattowhichitrelates.Theformisusedtodetermineannualtaxliability.

CAPITAL GAINS TAX (CGT)CGTispayableonthedisposalofacapitalasset.

Inthecaseofapartnership,companyortrustee,taxispaidonthegreaterof:(i) 25%ofthecapitalgainarisingondisposalor(ii) 10%oftheconsiderationreceivedforthedisposal.

Inthecaseofanindividual,bodyofpersonsortrusteeofadeceasedestate:(i) 15%ofthecapitalgainarisingonpercentageofthedisposalor(ii) 5%oftheconsiderationreceivedondisposal.

Capitalgainstaxisexemptonthedisposalofagriculturalland,privateresidenceandifthegaindoesnotexceedGMD7,500.

BRANCh PROFITS TAXAbranch’sprofit is taxedat thehigherof the two31%onprofitor1.5%of totalrevenue as the branch is considered as a permanent establishment meaning aresidentcompany.

Gambia

tHe GAmBIACURRENCY: Gambian Dalasi (GMD)POPULATION: 1.93 million GDP GROwTh: 7% GDP: US$ 1 billion

30

VALUE ADDED TAXValueAddedTax(VAT)ispayableon:(a) ataxablesupplymadeinTheGambia(b) ataxableimportofgoods(c) ataxablesupplyofimportedservices.

REGISTRATION REQUIREMENTS• ApersonisrequiredtoregisterforVATattheendofany12monthorshorter

periodif,duringtheperiod,thetotalvalueofsuppliesofgoodsorservicesmadebythepersonequalsorexceedsonemilliondalasis(GMD).

• ApersonisrequiredtoregisterforVATatthebeginningofany12-monthperiodif there are reasonable grounds to expect that the total value of supplies ofgoodsor services tobemadeby thepersonduring thatperiodwill equal orexceedonemilliondalasis(GMD).

• ApersonwhoisnotrequiredtoregisterforVATispermittedtoregisterwithinsixmonthsoftheendofa12–monthorshorterperiodinwhichthetotalvalueofsuppliesmadebythepersonexceededfivehundredthousanddalasis(GMD).

VATispayableonataxablesupplyofgoodsmadeintheGambia.Inthecaseofcertaintaxablesuppliesofgoodstherateis0%andinanyothercase,therateis15%.

AregisteredpersonshallprovideaVATreturnforeachtaxperiodwithin15daysaftertheendoftheperiod,whetherornottaxispayableforthetaxperiod.

AIR TRANSPORT TAXAirTransportTaxisapplicabletoallAirlinesandTravelAgenciesandcameintoeffecton the 1stJanuary2014.AllairticketsalesforflightsoriginatingfromTheGambiaattracta15%AirTransportTax.

The tax is due on or before the 15th of the followingmonth.A standard form forsubmissionisprescribedbyGRA.

FRINGE BENEFITS TAXFringebenefitsarespecificanddirectpaymentsofexpenditureforandonbehalfofanemployee,inadditiontohis/hersalary.Thetaxleviedisatarateof35%onthegrossed-uptaxablevalueofeachbenefitprovidedandispayablebytheorganisationthatprovides thebenefit to theemployee. The totalamountof fringebenefitplustaxthereonisanallowabledeductionforthepurposesofcorporatetaxcalculation

LOCAL TAXESNational Educational Levy: If the total incomeofa taxableentityexceedsGMD5millionperannumthelevyappliedisGMD50,000andifbelowGMD5million,arateofGMD30,000isapplied.

Expatriate Tax: AnannualpaymentofGMD40,000ispayableforeachemployeewithcitizenshipfromanycountryoutsidetheWestAfricanregionbutforemployeesfromWestAfrica,therateisGMD10,000.

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Gambia

Business Registration:AnannualpaymentofGMD1,000shouldbemadebyallbusinessesatthestartoftheyear.

Stamp Duty: The duty is levied on juristic acts resulting in a flow of wealthbetweenthepartiesinvolved.Thus,stamptaxisapplicableinteraliatoactswherebytransactions on Real Estate or financial obligations are documented. Rates varyaccordingtothetypeoftransactioninvolved.

Customs & Excise Duties:This isappliedonthe importationorexportationofcertaingoods.

OThER TAXESResidential Rent Tax: Taxisimposedforeachtaxyearonapersonwhohasataxablerentalamountatarateof10%perannum.


Thecalculationof taxable income isarrivedatbyadjustingtheaccountingprofits/lossesfornon-taxedincomeanddisallowedexpenses.

CAPITAL ALLOwANCESThefollowingannualratesareappliedagainstthewrittendownvalueofassets:

ANNUAL ALLOwANCE:Building 5%MotorVehicle 40%Plantandmachinery 20%Plantandmachineryused 30%inmanufacturing,miningOfficefurnitureandequipment 20%

INITIAL ALLOwANCEInitial allowance is applied at 20%of the cost of the asset or 10% for buildings,structuresorworksofpermanentnature.

Initialandannualallowancecannotbegrantedonthesameassetinthesameyear.Therefore,annualallowanceisnotgrantedintheyearafixedassetisfirstputtouseonlyinitialallowanceisgranted.

INTANGIBLE ASSETSAnamortizationdeductionisallowed.Thedeductioniscomputedbyusingthecostoftheassetdividedbytheusefullifeoftheintangibleassetinwholeyears.

DEPRECIATIONNo deduction is allowed in the tax computation but rather capital allowances areallowed.

STOCK/ INVENTORYAdeduction is allowed for the cost of stock in trade disposed of in a tax year in

32

derivingthechargeableincome. CAPITAL GAINS AND LOSSESIftheconsiderationreceivedexceedsthewrittendownvalueoftheasset,theexcessisbusiness incomewhichhas tobe included in theperson’s income for thatyearand,ifless,thedifferenceisallowedasadeductionwhencomputingthechargeableincomefortheyear.

DIVIDENDWithholdingtaxondividendisatarateof15%. INTEREST DEDUCTIONAdeduction isallowedforany interest incurred ina taxyear if thecompanyusedtheproceedsorbenefitofthedebtonwhichtheinterestispayable.Theinterestnotdeductedcanbecarriedforwardforaperiodofsixyears.

LOSSESIfacompanyhasabusinesslossfortheyear,thatamountiscarriedforwardtothefollowingyearandallowedasadeductionincomputingthechargeableincomeforthatyear.Lossescanonlybecarriedforwardforsixyearsafterthetaxyearinwhichthelossisincurred.

FOREIGN SOURCED INCOMEAforeignsourcedincomereceivedbyaresidentcompanyisexemptfromincometax.Ifforeignincometaxhasbeenpaid,ataxcreditisallowed.

INCENTIVESExpenditure on certain pre-commencement expenditure qualifies for accelerateddeductions.Adeductionisallowedinthetaxyearwhichtheexpenditureisincurredandinthefollowingthreeyearsatarateof25%eachyear. OThERBAD DEBTSAdeductionisallowedforadebtwrittenoffifcertainconditionsaresatisfied.

LOSS RESERVE OF BANKSAbankisallowedadeductionfortheadditiontoitsprovisionfordoubtfuldebtsinataxyearprovidedtheadditionhasbeendeterminedinaccordancewiththeprudentialrequirementsspecifiedbytheCentralBankofTheGambia.Theamountallowedasadeductionforataxyearshallnotexceedahalfofonepercentofthetotaloutstandingdebtclaimsofthebankasattheendofthetaxyear.

GrantingofinvestmentincentivesandtaxexemptionscanonlybeobtainedfromtheGambiaInvestmentandExportPromotionAgency(GIEPA).


TheGovernmentofTheGambiahasadoubletaxationtreatywithNorway,Sweden,Switzerland,Taiwan,theUnitedKingdom,RepublicofChinaandQatar.

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Ifaresidentpersonhasaforeigntaxlossforataxyear,theamountofthelosscanbecarriedforwardtothefollowingtaxyearandallowedasadeductionagainsttheperson’s foreignsourcedbusiness income. The losscanbecarried forward foraperiodofsixyears.

d. CoRpoRAte GRoUps

Tax on certain payments to non-resident personsdoesnot apply if the conditionsbelowaremet:(ii) If the holding giving rise to the dividend is connected with a permanent

establishmentinTheGambiaofanonresidentcompany(ii) Any interest if the debt claim giving rise to the interest is connectedwith a

permanentestablishmentinTheGambiaofanon-residentcompany(iii) Any royalty if the property or right giving rise to the royalty is effectively

connectedwithapermanent establishment inTheGambiaof anon-residentcompany

(iv) Any technical service fee is the services giving rise to the fee are renderedthroughapermanentestablishmentinTheGambiaofanon-residentcompany.

F. WItHHoldInG tAX

Apersonwhoretainstheservicesofacontractororsubcontractortocarryoutworkorsupplylabourormaterialsforthecarryingoutofworkshallwithholdtaxattherateof10%ofthegrossfees.

Acompanyorpartnershippayingdividendtoaresidentindividualshallwithholdtaxattherateof15%.

A15%withholdingtaxshallbewithheldoninterestpaidtoresidentcompaniesbutitdoesnotapplytointerestpaidtofinancialinstitutions.

G. eXCHAnGe ContRol

Therearenoexchangecontrolsinplace.

H. peRsonAl tAX

Tax is payable on the gross employment income of an employeemonthly. Tax iscomputedusingthefollowingrates;

Income range per annum Tax rate

0toGMD18,000 0%

GMD18,001toGMD28,000 5%

GMD28,001toGMD38,000 10%

GMD38,001toGMD48,000 15%

GMD48,001toGMD58,000 20%

AboveGMD58,000 30%

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Currency:GhanaianCedi DialCodeTo:233DialCodeOut:00(Gh¢)MemberFirm:City: Name: ContactInformation:AccraFrederickBruce-Tagoe [email protected]

A. tAXes pAYABle

Nationaltaxesandleviesapplyinalltenregionsofthecountry.In2001,anew tax law,The InternalRevenueAct2000 (Act592),waspassed toadministerDirectTaxes.TheInternalRevenueRegulations,2001(L.I.1675)wasalsointroduced.Therehavebeenanumberofamendmentstothelawandregulations.

Theonlynotablenationalleviesinthecountryare:a. The National health Insurance Levyof2.5%imposedoncertaingoodsandservices.TheNationalHealthInsuranceLevyisadministeredonthelinesofValueAddedTax.

b. NATIONAL FISCAL STABILISATION LEVY (NFSL)TheNFSLwasintroducedin2009butwasabolishedinJanuary2012.IthasbeenreintroducedbyACT862,effective30THSeptember2013.Therateoflevyis5%ontheprofitsbeforetax,payableonquarterlybasisandcoversthefollowingentities:i. Banks(excludingRuralandCommunitybanks)ii. Non-BankFinancialInstitutionsiii. InsuranceCompaniesiv. TelecommunicationcompaniesliabletocollectandpayCommunicationService

TaxunderAct754of2008v. Breweriesvi. InspectionandValuationCompaniesvii. Shippinglines,MaritimeandAirportTerminalsviii. ThelevyiscollectedupfrontbytheGhanaRevenueAuthority.

ItisnotanallowabledeductionforthepurposeofascertainingthechargeableincomeofanentityundertheInternalRevenueAct,2000,ACT592asamended

c. A Special Import Levyof1.2%wasextendedin2015toendin2017Taxesconsistofincometaxes,salesandservicetaxesadministeredbytheDomesticTaxRevenueDivision(DTRD)oftheGhanaRevenueAuthority(GRA)andcustomsandexcisedutiesadministeredbytheCustomsDivision(CD)oftheGRA.

COMPANY TAXUnless specifically exempted in the law, resident companies resident are requiredtopaytaxonincomerelatingtobusinessandinvestmentderivedfrom,accruedin,broughtintoorreceivedinGhanaafterthenecessaryadjustmentaremade.Therateoftaxisgenerally25%.

GHAnACURRENCY: Ghanaian Cedi (GhS)POPULATION: 26.90 million GDP GROwTh: 4.7%GDP: US$ 32.6 billion

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Non-resident companies are liable to tax on income relating to business andinvestmentsderivedfromoraccruinginGhanaduringanybasisperiodendingwithintheyearofassessment.Therearedifferentratesapplicabletocertaincompanies(see‘Incentives’below).From2012,miningcompaniesaretopaycorporatetaxatarateof35%.Thecorporateentityistaxedseparatelyfromitsshareholders.Allcompanieshavetofilereturnsfourmonthsaftertheiraccountingyear.Itisalsorequiredthattheymakequarterlytaxpaymentsonthecurrentyear’sincomebasedontheprovisionalassessmentmadebytheDTRDorthecompanyitself(wheretheDTRDhasgrantedthatpermission).

CAPITAL GAINS TAXBusinessesarerequiredtopaytaxongainsmadeonrealizationofchargeableassets.Chargeable assets include land (which is not for agriculture in Ghana), buildings,shares,goodwillandbusinessassets,amongothers.Chargeableassetsdonotincludetradingstock,securitiesofacompanylistedontheGhanaStockExchangeduring thefirst15yearsof theestablishmentof theStockExchangeorClasses1,2,3and4assets(e.g.vehicles,plantandmachinery,airandseatransport,computers,etc).

EXEMPTIONSThefollowingexemptionsapply:(1) Gainsderivedfrommergers,amalgamationsorre-organizationofthecompany

wherethereiscontinuityofunderlyingownershipintheassetofatleast25%(2) CapitalgainsofuptoGh¢50.00(3) Wherethepersonusesuptheamountreceivedtoacquireareplacementasset

withinoneyear(4) Transferofownershipofanassettoaformerspouseindivorcesettlementor

genuineseparation(5) Transferofassettospouseorcertainrelatives.

The capital gain is calculated as the excess of consideration received from therealizationoverthecostbaseoftheassetatthetimeofrealization.Thetaxisimposedattherateof15%.Attention is nowdevoted to appreciation in owner capital arising fromchanges inownershipstructurethroughtakeoverandacquisition.

BRANCh PROFIT TAXA branch of any foreign company doing business in Ghana is taxed at 10% onrepatriatedfunds.

SALES TAX/ VALUE ADDED TAX (VAT)Theseareindirecttaxespaidbyconsumersonsomegoodsandservicestothestatethrough registered individuals or businesses.The rate is 15% for businesses andindividualswhoseturnover fora12monthperiod isGH¢120,000oraboveonthevalue of goods and services.This excludes theNational Health Insurance Levy of2.5%.AnewlawAct870hasreplacedtheValueAddedTaxAct,546bringingintoeffectthefollowing:

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VAT RATEAll persons registered for the ValueAdded Tax (VAT) and are currently operatingthe standard rate scheme are required to charge and account for VAT and theNationalHealthInsuranceLevy(NHIL)simultaneouslyattheratesof15%and2.5%respectivelyof thetaxablevalueof theirsupplies.This ineffectamounts toa totalchargeof17.5%ofthetaxablevalueofthesupply.

CREDIT FOR DEDUCTIBLE INPUT TAXBytheprovisionsoftheVATAct2013,(Act870),allowableperiodfordeductinginputtaxhasbeenreducedfromthree(3)yearstosix(6)months.AccordinglyallregisteredpersonswhoareinpossessionofvalidVAT/NHILinvoicesforinputtaxclaimswhicharemorethansix(6)months(i.e.before31stJuly2013)aretoclaimthemontheDecember2013returns.ThismustbesubmittednotlaterthanthelastworkingdayofJanuary2014(i.e.31stJanuary2014).

SCOPE AND COVERAGE OF ThE VALUE ADDED TAXThe Value Added Tax 2013, (Act 870) extends the coverage of the tax to somebusinessactivitieswhichwerehithertooutsidethetaxnet.Theseincludethefollowingbusinessactivities;i) Thesaleofimmovablepropertybyanestatedeveloperataflatrateof5%. (“Estatedeveloper”meansacommercialestablishmentengagedinthebusiness

oftheconstructionandsaleofimmovableproperty)ii) Thesupplyoffinancialservicesthatarerenderedfora fee,commissionora

similarcharge.

“Financial services” means provision of insurance; issue, transfer, receipt of, ordealingwithmoneywhetherindomesticorforeigncurrencyoranynoteororderofpaymentofmoney;provisionofcredit;oroperationofabankaccountoranaccountofasimilarinstitution.

Lifeinsuranceandreinsuranceservicesarehoweverexemptfromthetaxwhetherornotsuchservicesarerenderedforafee,commissionorasimilarchargeiii) Asupplyofdomestictransportationofpassengersbyair;andthesupply ofhaulageaswellastherentalorhiringofpassengerandothervehicles.iv) Thebusinessactivitiesofauctioneersandpromotersofpublicentertainmentv) Thebusinessofgymnasiumandspavi) The manufacture or supply of pharmaceuticals listed under Chapter 30 of

the Harmonized Systems Commodities Classification Code, 1999 other thansuppliesattheretailstage.

ThREShOLDThecurrentthresholdforregistrationofVATisGH¢120,000fora12monthperiodorGH¢30,000foraperiodof3months.However the followingentitiesarenotboundby the thresholdandare required toapplyforregistrationuponoperation:• promotersofpublicentertainment• anauctioneer• anational,regional,localorotherauthorityorbody

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TAXPAYERS REGISTERED UNDER ThE VAT FLAT RATE SChEMEAllpersonsregisteredforVAT/NHILandareauthorizedtooperateundertheVATFlatRateScheme(VFRS)arerequiredtocontinuetochargeandaccountforthetaxattherateof3%ofthetaxablevalueoftheirsuppliesuntilotherwiseadvisedbytheCommissioner-Generalinwriting.SuchregisteredpersonsaretoissuetheVFRSVAT/NHILinvoices.

Exemptsuppliesincludepostalservices,transportation,machinery,electricity,waterandtransferofgoingconcern.Thefollowingchangesweremadein2015• aSpecialPetroleumTax(VAT)of17.5%• areversalofexcisetaxonpetroleumfromAdValoremtoSpecificBusinesses and individuals whose turnover for a 12 month period falls belowGH¢120,000aretopayapresumptivetaxof6%oftheirturnover.(NoinputoroutputVATiscomputed.)ThereareexemptionsspecifiedintheVATlaw.Exemptsuppliesinclude agricultural products and inputs, printed matter, approved medical andpharmaceuticalsupplies,transport,financialservices,land,buildingandconstruction.

Importsaretaxable.Exportsarezerorated.UnderExciseDuty, the rate forEnvironmentalTaxhasbeen reduced from20%to15%.Alsoexcisedutyratesaretobereducedonaslidingscaletocompaniesusinglocalrawmaterialsassubstitutesintheproductionofexcisablegoods.

FRINGE BENEFIT TAXWith the exception of dental, medical, and health insurance expenses, all fringebenefitsderivedfromemploymentaretaxable.Benefitsrelatingtoaccommodationandcarshave theirowntreatmentspecified in theTaxLaw.Forallotherbenefits,theopenmarketvalueorareasonablevalueisaddedtotaxableincomeandsubjectto tax.Certain services provided to its employees (e.g. food offered in a canteen,office outings, transportation of employees, accident insurances and payments toretirement funds), theemployerhas theoption topay the incometaxonbehalfoftheemployee.

LOCAL TAXESTaxesarecollectedbytheDistrict,MunicipalandMetropolitanAssemblies(authorities)frompersonsdoingbusinesswithintheirlocalities.Theyalsoareresponsibleforthecollectionofpropertytaxes.

OThER TAXESGIFT TAXSubjecttocertainexemptions,gifttaxispayablebyeverypersononthetotalvalueoftaxablegiftsreceivedbythepersonbywayofgiftswithinayearofassessment.Theraterangesfrom5%to15%.

STAMP DUTYStampdutyispaidatvariousratesbyapersonwhoundertakescertaintransactionsincludingthefollowing:

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(a)Conveyanceortransferonthesaleofanyproperty(b)Appointmentofanewtrustee(c)Naturalresourceleaseorlicense(e.g.miningandtimber)(d)Agreementormemorandumofagreement(e)Awardofcostinamatterofdispute(f)Billofexchange(e.g.issueofcheques)(g)Billoflading(h)Insurancepolicy.

MINERAL ROYALTIESHolders of mining leases are required to pay royalties at specified rates to theGovernmentonamonthlybasis.

COMMUNICATION SERVICE TAXTaxoncommunicationserviceprovidersisbasedonturnover.Thecoverageofthistaxhasbeenextendedtoincludethefollowing:Public/corporatedataoperatorsProvidersofradio(FM)broadcastingservicesProvidersoffree-to-airtelevisionservices.

TAX STAMPThisataximposedonoperatorsintheinformalsector.Theamountpaidisbasedonturnoverandnatureofproductbutnotonprofit.

VEhICLE INCOME TAXThisisataximposedoncommercialvehicleswhichispaidquarterly.

AIRPORT TAXThisisimposedonbothdomesticandinternationaltravels.Itvariesdependingonthepassengerclassandtheplaceofdestination.

Thecurrentratesare:Domestictravel$5RegionaltravelwithinWestAfrica$60Internationaltravela)EconomyclasstraveloutsideWestAfrica$100b)BusinessclasstraveloutsideWestAfrica$150c)FirstclasstraveloutsideWestAfrica$200

wINDFALL TAXWindfallProfitTaxBillat10%wastobere-introducedafteracommitteehadreviewedall Stability Agreements, incentives and theWindfall Profit Tax that could not bepassedbyParliamentin2012.TheWindfallProfitTaxintendstoapplyataxattherateof10%onwindfallgainsofminingentitiesinGhana.Indications as at 25th January 2014 are that theGovernment intends to abandonthebillduetoconcernsfromtheminingcompaniesto layoffworkers if thebill ispassedaslaw.

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TAX AMNESTYEffective1January2012ataxamnestywasgrantedtocompaniesandindividualswhohadevadedtaxes.Thisconcessionexpiredon30September2012.


Chargeable income of a person is defined in the Internal RevenueAct 2000 (Act592)as:“the total of a person’s assessable income, fromeach business, employment,andinvestment,lessthetotalamountofdeductionsallowedtothatpersonfortheyearundersections13to22(relatingtogeneralandspecificdeductions),s39(relatingto reliefs), s 57 (relating to life insurance), and s 60 (relating to contributions toretirementfunds).

CAPITAL ALLOwANCESCapital allowances are granted in respect of fixed assets (depreciable assets),both tangible and intangible, acquired by persons in businesses for each year ofassessment.Toqualifyfortheseallowances,however,thefollowingconditionsmustbemet:(a)theassetsshouldbecapitalinnature(b)theassetshouldbeownedbythebusiness(c)theassetshouldbeinthebusinessuptotheendoftheyear(d)theassetshouldbeusedincarryingonbusinessduringtheperiod(e)theCommissionerGeneralofGRAshouldbeinformedofanynewassetacquiredonemonthafteritsusageinthebusiness.

Depreciableassetsarecategorizedintosixclasses.Classes(Pools)1–4assetsareputindifferentpoolsanddepreciatedatvariousratesrangingfrom20%to40%onreducing-balancemethod.Class5(buildings)attractarateof10%oncostandClass6(intellectualorindustrialproperty)isdepreciatedoveritsestimatedusefullife.

CLASS ASSETS RATE

1 Computersanddatahandlingequipment 40%

2 Automobiles,plantandmachineryusedinmanufacturing 30%

3 Assetsinrespectoflongtermcropplantingcosts 30%

4 (1)AssetsrelatingtomineralsandpetroleumIndustry 30%

5Rail,waterandairtransport,plantandmachinery,fixtures,furnitureandequipment,andanyotherassetnotincludedinanyotherclass.

20%

6 Buildings,structuresandworksofpermanentnatureotherthanthoseinClass3 10%(straightline)

7IntangibleassetsotherthanthoseinClass3Estimateduselife10%(straightline).From2012,miningandoilcompanieshaveauniformregimeforcapitalallowanceof

20%forfiveyears.

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DISPOSALWhenanassetbelongingtoClasses1to4isdisposed,therealizedvalueistakenoutoftheclassitcamefrombeforetherateofcapitalallowanceisappliedontheresidue.Wherethesaleofanassetleadstothewipingoffofthewritten-downvalueofthepoolbutthereisstillanexcessofthedisposalproceeds,theexcessisincludedintheincomeoftheyearandtaxed.Whereallassetsinapoolaredisposedofbuttherearenotenoughproceedstotakecareofthewrittendownvalue,capitalallowanceisgrantedontheoutstandingwrittendownvaluetoreducethepooltozeroattheendoftheyear.

IncaseofClasses5and6assets,adifferentmethodisadopted.Thismethodensuresthatbusinessesrecovercostinthecaseofalossondisposalandarealsonotoverlytaxedinthecaseofgains.

CAPITAL ALLOwANCE ON LEASED ASSETSThelesseeofanasset,whetherunderfinanceoroperatinglease,isnotentitledtoanycapitalallowanceontheasset.Therentalpaymentsmadetothelessoraretreatedasallowableexpensefortaxpurposes.

Inthecaseofthelessor,capitalallowanceisclaimedunderanoperatinglease.Thefullamountofrentreceivedisincludedinthelessor’sincomefortheyear.Wherethearrangementisafinancelease,thelessordoesnotqualifyforcapitalallowance.TheamountofrentpaymentincludedintaxableincomefortheyearisreducedbycapitalamountsdeterminedbytheCommissioner.

DEPRECIATIONDepreciation of any fixed asset is not an allowable deduction in arriving at theassessableincome.Thisiscompensatedforbythegrantingofcapitalallowance.

STOCK/INVENTORYForthepurposeoftax,stockandworkinprogressisvaluedatthelowerofcostormarket value.However, anymethodof stock valuationacceptedbyanaccountingprinciplethatisconsistentlyappliedisacceptable.

CAPITAL GAINS AND LOSSESGainsorLossesondisposalofassets,asreportedinthefinancialstatements,arenottaxableorallowablerespectively.Gainsaredeductedfromprofitsandlossesaddedtoprofits.ThisisinlinewiththeIRSlawthatdoesnotrecognizedepreciationpoliciessetoutbybusinesses.ThepoolsystemadoptedbytheIRSforcapitalallowancepurposesmakes it almost impossible to ascertainwhether a lossorgainwasmadeon thedisposalofaparticularasset.

However, there are adequate provisions for recovery of full cost of fixed assetsdisposed of (refer to disposal of fixed assets under ‘Capital allowance’).Classes1to 4 assets do not attract capital gains tax on disposal. .Assets disposed of aresubjecttoVAT.

DIVIDENDSAtaxispaidbyaresidentornon-residentpersonorpartnershipwhoorwhichispaid

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adividendbyaresidentcompany,otherthanexemptdividends,at8%.Acapitalizationof profit is treated as dividend paid to each of the company’s shareholders inproportiontotheirrespectiveinterestinthecompanyandistaxedat8%.

Whereacompany (controlledbynotmore thanfivepersons) recordsprofitoverareasonableperiodbutdoesnotdeclaredividends,theCommissionerhastheauthoritytotreatpartofthecompanyincomeasdistributedanddemandtaxondividends.

EXEMPTIONDividends paid by a resident company to another resident company where therecipient company controls directly or indirectly 25% of the voting power of thecompany paying the dividend are exempt. This exemption does not apply if thedividendpaidisintendedasaprofitordividendstrippingarrangement.

INTEREST DEDUCTIONSInterest incurred in respect of a borrowing employed by a business entity in theproduction of income is a deduction allowed for the purpose of ascertaining theassessableincomeoftheperson.

LOSSESTax lossesarearrivedat after adjusting losses reported in financial statements inline with tax principles.Manufacturing industries which export their products andfarmingandminingconcernsareallowedtodeductthelossesoverafive-yearperiodsubsequenttotheyearinwhichthelosswasincurred.

FOREIGN CURRENCY EXChANGE LOSSESAnyforeigncurrencyexchangeloss,otherthanalossofcapitalnature,inrespectofanydebtclaim,debtobligation,orforeigncurrencyholding,incurredforthepurposeofproducingan income isanallowabledeductionbut subject to the fulfillmentofcertainconditions.

FOREIGN SOURCED INCOMEForeign sourced incomebrought into or received inGhanaby resident persons isincluded in that person’s income for the year and taxed. However, the person isallowedthedeductionofforeigntaxcreditsorentitledtosomereliefswherethereisadoubletaxationagreement.

INCENTIVESThereare anumber of incentivesprovided for in the IRS lawandother lawsandenactmentsgeared towards thedevelopmentof certainsectorsof industryandofcertainpartsofthecountry.Theseincentivesincludereducedrateoftaxes,exemptionfromthepaymentofdutiesandothertaxesforspecifiedperiods,higherrateofcapitalallowance,amongothers.Thesecannotbeexhaustiblydealtwithbutbelowareafewofsuchconcessionsgranted.

1. CARRY OVER LOSSESThis applies to businesses engaged in farming, manufacturing or mining (referto‘Losses’above).Thisconcessionisalsotobegrantedtoventurecapitalinvestmenton losses incurred on the disposal of shares, agro-processing, tourism and ICT

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industriesfromthe2006year.

2. LOCATIONAL INCENTIVES FOR MANUFACTURING BUSINESS

LocationwithinAccraandTema 25%LocationinregionalcapitalsofGhana 18.75%Locationinfreezoneenclave 0%LocationelsewhereinGhana 12.5%

3. LOCATIONAL INCENTIVES FOR AGRO-PROCESSING BUSINESSTaxratesformanufacturingconcernsvarydependinguponthelocationofthebusinessandareasfollows:

LocationwithinAccraandTema 0%LocationinregionalcapitalsofGhana:-exceptthethreenorthernregions 10%-thethreenorthernregions 0%OutsideRegionalCapitals 0%

4. SECTORIAL INCENTIVES (REDUCED TAX RATES)Taxratesvarydependinguponthearea(sectororindustry)fromwhichtheincomeisderivedfromasshownbelow:

Hotelindustry 20%Exportofnon-traditionalproduction 8%Loansgrantedtoafarmingenterprise 20%Loansgrantedtoaleasingcompany 20%CompanieslistedontheGhanaStockExchange 25%CompanieslistedontheGhanaStockExchangeafter1January2004 22%(forfirstthreeyears)

5. INDUSTRIAL CONCESSIONS (EXEMPTION PERIOD)Theincomeofapersonfromthefollowingindustryorsectoroftheeconomyisexemptfromtaxfortheyearsstatedagainstthem:

Farmingtreecrops 10yearsLivestock 5yearsFarmingcattle 10yearsProcessingbusiness 3yearsRuralbanking10yearsConstructionforsaleorlettingofresidentialpremises 5years(onconditionthatthecompanypartnerstheMinistryforWorksandHousing)CocoafarmingindefinitelyProcessingofcocoaby-products 5yearsProcessingofwastematerials 7years

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Agro-processing 5yearsVenturecapitalinvestments 5years(effective2006).


Foreign tax credits are available to relieve double taxation on overseas income.Credits are calculated separately for each source of business, employment andinvestment incomeandmaynotexceed theaverage rateofGhanaian income taxof thatperson for the yearofassessmentapplied to thatperson’s taxable foreignincomefortheyear.

d. CoRpoRAte GRoUps

Corporategroups, irrespectiveof theiraffiliations,prepareaccountsseparatelyandaretaxedseparately.Capitalallowancesarenottransferable.


Althoughnothinginthelawdisallowsrelatedpartytransactions,theCommissionerhas authority to disregard or reverse any transaction that is geared towards taxavoidance.

F. WItHHoldInG tAX

Taxiswithheldatvariousratesforthefollowingtransactions:

Income (Residents) RatePaymentofemployees graduatedDirectors’fees 20%Paymentofinterest(excludingindividuals) 8%Feestopart-timelecturers,teachers,examiners,etc 10%Paymentofdividendtoshareholders 8%Commissiontoinsuranceandsalesagents 10%Commissiontolotteryagentsandreceivers 5%Paymentforgoodsandservicessupplied 5%Rent(Residential) 8%Rent(commercial) 15%

Income (Non-Residents) RateManagementandtechnicalservicefees 20%Royalties,naturalresourcepaymentsandrents 10%Endorsementfees 15%Dividends 8%Repatriatedbranchaftertaxprofits 8%Interest 8%Short-terminsurancepremium 5%

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G. eXCHAnGe ContRol

GhanahasanExchangeControlActthatregulates,amongotherthings,thefollowing:• Useofforeignexchangeamongresidents• Tradingingold(coinsand/orbullion)• Exportsandimportonbanknotes• Exportsandexportproceeds• Capitalandmoneymarketinstruments.

The DTRD Regulations set a formula for calculating the amount of profits that aforeigncompanymayrepatriatetoitshomecountryateverypointintime.

TherearerestrictionstotheamountallowedtoberepatriateddeterminedbytheBankofGhanaunderAct723.The restrictions relate to Sections 15,16,18,19 and 20 ofAct 723which amongothersrequire thateachpayment in foreigncurrency toor fromGhanabetweenaresidentandanonresident,orbetweennonresidents,shallbemadethroughabank.WheretheBankofGhanahasreasontobelievethatanoffenceincontraventionofAct723is likelytobecommittedorhasbeencommitted,theBankofGhanamayrequireabanktoobtainitspermissionpriortotheexecutionofanypaymentinforeigncurrency.

SubjecttotheForeignExchangeAct,2006(Act723)andtheRegulationsandNoticesissuedundertheForeignExchangeAct,anentityshall,throughanauthorizeddealerbank be guaranteed unconditional transfer in freely convertible currency of thefollowing:• dividendsornetprofitsattributabletotheinvestmentmadeintheentity• paymentsinrespectofloanservicingwhereaforeignloanhasbeenobtained• fees and charges in respect of a technology transfer agreement registered

undertheGhanaInvestmentPromotionCentreAct,2013(Act865)• theremittanceofproceeds,netofalltaxesandotherobligations,inrespectof

saleorliquidationoftheentityoranyinterestattributabletotheinvestmentintheentity.

H. peRsonAl tAX

Individualsarerequiredtopaytaxongainsorprofitfromemployment,businessorinvestment.Fora residentperson,heor she is topay taxon incomeaccruing in,derived from, brought into, or received in Ghana.A non-resident person pays taxon incomeaccruing in,andderivedfromGhanaregardlessofwhether the incomeis received inGhana. An individual isconsideredresident ifheorshehasstayedinGhanaforanaggregateperiodof183daysormoreinany12monthperiod.Allincomeisaggregatedandtaxedafterthevariousadjustmentsrelatingtothetypeofincomeearnedaremade.Theaggregatedincomeexcludescapitalgains,giftsandrentincome.Thetaxratesaregraduatedwithratesrangingfrom0%to25%.AnnualincomeuptoGhanaCedis1,584istaxedat0%.AnyincomeinexcessofGhanaCedis31,680istaxedat25%.Detailsoftheannualratesare

Ghana

45

Chargeable Rate Tax Cumulative Cumulative

Income Income Tax

GH¢1,584 0% 0.00 1,584 0.00

Next792 5% 39.60 2,376 39.60

Next1,104 10% 110.40 3,480 150

Next28,200 17.5% 4,935 31,680 5,085

Exceeding31,680 25%

TheMonthlyratesare

Chargeable Rate Tax Cumulative Cumulative

Income Income Tax

GH¢132 0% 0.00 132 0.00

Next66 5% 3.30 198 3.30

Next92 10% 9.2 290 12.50

Next2,350 17.5% 411.25 2,640 423.75

Exceeding2,640 25%


In theabsenceofany treatywith theGovernmentofGhana, theprovisionsof theincometaxlawappliesforthetreatmentofalltaxmatters.Thus,taxratesapplicableonvariousincomesapply.WherethereisatreatywiththeGovernmentofGhana,thetermsofthetreatyprevailoverallprovisionsoftheincometaxlaw.However,wheretheratesoftaxessetoutinatreatyarehigherthanthoseofthelawsofGhana,thelowerratesareused.Currently,notabledoubletaxationtreatiesGhanahasarewiththeUnitedKingdom,France,Italy,SouthAfrica,BelgiumandGermany.

TaxRatesinpercentagesareasfollows:

Income GermanySouthAfrica

Belgium Italy NetherlandsUnited

KingdomFrance

Technical/Managementfees

8 10 10 10 8 10 10

Interest 10 10 10 10 8 12.5 10

Royalties 8 10 10 10 8 12.5 10

Dividends:Recipientmustholdatleast10%shares

5 5 5 5 5 7.5 7.5

All other cases

15 15 15 15 10 15 15

Ghana

46

PENALTIESFILING OF RETURN OF INCOMEAnycompanyoraself-employedpersonwhofailstoprovideareturnofincometotheDTRDwithinthetimerequiredisliabletopayapenaltyasfollows:Company Two(2)CurrencyPointsforeachdayofdefault.Self-employed One(1)CurrencyPointforeachdayofdefault.

Thepenaltiesforfailuretopaytaxonduedateareasfollows.

(a)uptothreemonths–10%oftheunpaidtax(b)exceedingthreemonths–20%oftheunpaidtax.

Afurtherpenalty5%ofthetaxandpenaltyshallbeimposedifthetotalamountremainsunpaid.

The penalties for failure to withhold tax and/or failure to paywithheld tax are asfollows:

(a)Uptothreemonths–20%oftheunpaidamount(b)Exceedingthreemonths–30%oftheunpaidamount.

Afurtherpenaltyof5%ofthetaxpluspenaltyshallbeimposedifthetotalamountremainsunpaid.

PAYMENT OF TAXIncometaxesarepaidupfrontonaquarterlybasisbasedonselfassessmentandassessmentsfromtheCommissionerGeneraloftheGhanaRevenueAuthority.

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47

Currency:Shilling(KES) DialCode:+254 DialCodeOut:00

MemberFirmCity Name ContactInformationNairobi M i c h a e lMburugu +254204270000 [email protected]

A. tAXes pAYABle

COMPANY TAXCompanytaxisbasedoncomputedtaxprofitsasfollows:

Turnovertax:3%ofturnover (witheffectfrom1January2007forturnoverofuptoKES5,000,000)

Residentcompanies: 30%Non-residentcompanies: 37.5%

CAPITAL GAINS TAXCapitalGainsTax(CGT)wasre-introducedeffective1stJanuary2015.Therateoftaxis5%ofthenetgainonthetransferofproperty.Itisafinaltaxandcannotbeoffsetagainstotherincometaxes.

BRANCh PROFITS TAXBranchofaforeignentitypaystaxattherateof37.5%.

SALES TAXES/VALUE ADDED TAX (VAT)TheVATratesare16%and0%.Exportsarezerorated.Somegoodsandservicessuchasunprocessedagriculturalproductsandfinancialservicesareexempt.

FRINGE AND EMPLOYMENT BENEFITS TAXGenerally,non-cashbenefitsare taxableon thehigherof thecost incurredby theemployerorthefairmarketvalue.Thetaxablevalueisaddedtotheemolumentsfortaxpurposes.ExemptifaggregatetotaldoesnotexceedKES36,000perannum.

MOTOR VEhICLESThebenefit is thehigherof2%permonthof the initial costof the vehicleor theprescribedrates.Forleasedvehiclesthebenefitisthecostofleasing.

hOUSINGFor non-executive directors the benefit is the higher of 15% of total income(emoluments- forawhole timeservicedirector), fairmarket rentalvalueandrentpaid.Foragriculturalemployeesitis10%ofemoluments.Forotheremployeesitisthehigherofrentpaidand15%ofemoluments.

LOANS TO EMPLOYEESLoanstoemployeesaretaxedatacorporatetaxrateonthedifferencebetweenthe

Kenya

KenYACURRENCY: Kenyan Shilling (KES)POPULATION: 46.72 million GDP GROwTh: 6.2%GDP: US$ 70 billion

48

interestrateprescribedbytheCommissionerandtheactualinterestratepaidbytheemployee.

OThER BENEFITSThetaxablebenefitoffurnitureis1%ofcostpermonth,telephoneis30%ofthecostpermonth,andemployeeshareownershipplans(ESOPs)isthedifferencebetweenthemarketpriceofsharesandtheofferpriceatthedatetheoptionisgranted.

LOCAL TAXESEmploymentincomeistaxedonawithholdingtax(WHT)basisknownasPayAsYouEarn(PAYE)atagraduatingscaleof10%-30%.

OThER TAXESLAND RATESLandratesarebasedonthepercentageofthesitevalue.

NATIONAL SOCIAL SECURITY FUND (NSSF)Contributionsaresetattherateofacombinedminimumof12%ofthepensionableearningsmadeupofequalcontributionsof6%bytheemployeeandemployer.Thecontributions for theyear2014havebeenset toanupper limitofKES2,160peremployee earning above KES 18,000 per month. However, an employee earningbelowtheLowerearningslimitofKES6,000willcontributeuptoamaximumofKES720.EffectivedateforthenewNSSFActisyettobesetduetoimpendingcourtcase.TheoldNSSFcontributionssetat10%ofmonthlyincomeuptoamaximumofKES400 permonth, half paid by the employer and the balance by the employee arecurrentlybeingapplied.

NATIONAL hOSPITAL INSURANCE FUND (NhIF)Payments are set at graduated scale rates starting at KES 30 per month to amaximumofKES320permonth.

However,newratesaresettotakeeffectasfrom1stApril2015wherecontributionswillbesubjecttoaminimumofKShs150andamaximumofKShs1,700.

SINGLE BUSINESS PERMITDependingonthetypeofbusiness,thispermitcostsaminimumofKES5,000toamaximumofKES10,000.


CAPITAL ALLOwANCESTheratesforcapitalallowancesareasfollows:

wear and tear: Rate Tractors/heavyvehicles 37.5%Computershardware,copiers,scanners 30%Othermotorvehicles,aircrafts 25%Ships,plant,machinery,furnitureandequipment 12.5%Telecommunicationequipment 20%

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49

Kenya

wear and tear: Rate Computersoftware 20%Loosetoolsandimplements(straight-line) 33.3%

Industrial building allowances:

Factories(2.5%upto2009) 10%from1January2010

Prescribedhotels-(upto2006was4%) 10%from1January2010

Prescribedlow-costresidentialhousingdevelopments 5%Hostelsorapprovededucationalbuilding-(from2007was10%)

50%from1January2010

CommercialBuildings 10%upto31December2012

CommercialBuildingswithservices 25%from1January2010

ResidentialBuildingswithservices 25%upto31December2012

Farm works 100%from1January2010

Investmentdeductionseligibleforbuildingandmachineryformanufacture(from2008) 100%

Investmentdeductionseligibleforconstructionofabuildingorpurchaseandinstallationofmachineryof200moroveroutsideNairobi,Mombasa&Kisumu

150%

ManufacturingunderBond–combinedinvestmentdeduction 100%Shippinginvestmentdeduction 40%ofcostofshipPurchaseoffilmingequipmentbylicensedfilmproducers 100%Mining allowance (on capital expenditure or mining)Year1 40%Years2–7 10%

DEPRECIATIONThisisanaccountingexpensewhichisnotallowablefortaxpurposesbutwearandtearallowancesasshownabove,areprovidedforinlaw.

STOCK/INVENTORYThe cost of sales is deducted as allowable expenditure before arriving at theaccountingprofits.Generalprovisionsonslowmovingstockandstockwriteoffsmaybeallowableinarrivingatthetaxableprofitbasedoncertainestablishedcriterion.

CAPITAL GAINS AND LOSSESCGThasbeenreintroducedandisnowtaxableatarateof5%whichisafinaltax,effective1stJanuary2015.

50

DIVIDENDSDividendsaretaxedonaWHTbasiswhich isfinal tax.Expensesarethereforenotallowableonthedividends’incomeoranyotherincomeofthetaxableperson.Dividends are tax-exempt for resident companies controlling more than 12.5%shareholding. Dividends received by financial institutions shall be deemed to beincomechargeabletotax.

However, compensating tax (corporation tax) may arise if non-taxed income isdistributed,e.g.capitalgainorprofitsoncapitalallowances.ThisisarrivedatthroughanannualDividendsTaxAccountwhichcapturesthemovementofdividendsreceivedandpaidandtakesintoconsiderationtaxespaidbytheentity.

INTEREST DEDUCTIONSInterestincurredwhollyandexclusivelyintheproductionofincomeistaxallowable.However,whereacompanyiscontrolledbyanon-residentpersontogetherwithfourorfewerresidentpersons,theinterestdeductibilityisrestrictedonlytotheextentthatthetotalindebtednessofthecompanydoesnotexceedthreetimesthepaid-upsharecapitalandrevenuereservesoranamountofdeemedinterest(thinlycapitalised).TheCommissionerof IncomeTaxisempoweredtoprescribetheformandmannerinwhichdeemedinterestistobecomputed.Realisedforeignexchangelossesaredeferredaslongasthecompanyisthinlycapitalised.

LOSSESTaxlossescanbecarriedforwardtobeoffsetagainstfuturetaxableincome.Howeverthisissubjecttoafiveyearlimiteffective1January2010.The tax loss is only allowable on taxable income derived from the same specificsource.Thesesourcesare:(a) incomefromrentingoroccupationofimmovableproperty(b) incomefromemployment(c) incomefromagriculture,horticulture,forestry,etc(d) incomefromwithdrawalsfromaregisteredpension/providentfundbyemployer(e) businessactivitiesLossesare,however,nottransferablefromoneentitytoanother.

FOREIGN SOURCED INCOMEIncomethatisnotincomeaccruedorderivedfromKenyaisnotassessableinKenyaexcept:(a) employment income for an employeewhoat the timeof employmentwas a

residentpersoninrespectofanyemploymentbyhimoutsideorinsideKenya.(b) businessactivitiescarriedoutacrossborders;and(c) foreignbankbranches’incomeoninvestmentsortradingabroadusinglocally

generatedincome.

INCENTIVESCapital deductions are allowable and provided for on assets based on the assetclassification.

Atenyeartaxholiday isavailabletocertaindesignatedenterprisesthatundertakeactivitiesconsistingofthemanufactureofgoodsforexportsonly(undertheExport

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51

ProcessingZones).At theendof the taxholiday, a reduced rateof taxof25% isavailable.

A lower rateofcorporation taxat27%,25%and20%, for thefirst3-5years forcompaniesnewlylistedonasecuritiesexchange,withatleast20%,30%and40%respectively,oftheissuedsharecapitallisted.

Taxexemptionsapplyfororganisationsundertakingcharitable,medical,alleviationofpoverty,andreligiousactivities.


ForeigntaxreliefislimitedonlytocountrieswhichhaveaDoubleTaxationAgreementwithKenya.

KenyahasDoubleTaxAgreementswiththefollowingcountries:

UK, Mauritius

India, France

Germany, EastAfricanCommunity

Zambia, SouthAfrica

Norway, DenmarkandCanada.

Sweden,

d. CoRpoRAte GRoUps

Generallyfortaxpurposes,acorporationtaxrateof30%appliestoallincorporatedcompanies irrespective of groups in Kenya. The rate is 37.5% for non-residentcompanies.


RelatedpartytransactionsareallowableexpensesifincurredwhollyandexclusivelyintheproductionofincomeandtaxedasincomeifearnedoraccruedinKenyaasbusinessactivities.

Companies which have related party transactions are required to prepare anddocumentTransferpricingDocumentation,aspertheKenyanTransferPricingRuleseffective1July2006.

Kenya

52

F. WItHHoldInG tAX

Therelevantratesareasfollows:

Resident Non-Resident Artists and entertainers – 20%Managementfees 5% 20%Professional fees 5% 20%Trainingfees(inclusiveofincidentalcosts) 5% 20%Winningsfrombettingandgaming(w.e.f.1Jan2014) 20% 20%

Royalties 5% 20%Dividends (nil for resident shareholderswith>12.5%) 5% 10%

Equipment(movable)Leasing N/A 5%Interest(bank) 15% 15%Interest(Housingbond-HBI) 10% 15%InterestTwo-yeargovernmentbearerbonds 15% 15%Otherbearerbondsinterest 25% 25%Rents-buildings(immovable) N/A 30%Rents-others(exceptaircraft) N/A 15%Pensions/providentschemes(withdrawal) 10-30% 5%Insurancecommissions 10% 20%Consultancyandagency(from1July2003) 5% 20%Contractual(from1July2003) 3% 20%Telecommunicationservices/Messagetransmission – 5%

NaturalResourceIncome(w.e.f.01/01/2015) 5% 20%

G. eXCHAnGe ContRol

TherearenoforeignexchangecontrolsapplicableinKenyaatpresent,andforeigncurrencyisfreelytransferableinKenya.TheProceedsofCrimeandAnti-MoneyLaunderingActprovidesthatanytransactionwhich involves the movement of US$10,000 or more must be supported bydocumentaryproofofthereasonofsuchatransfer.

H. peRsonAl tAX

Thetaxratesareasfollows:

Yearly income (KES) Rate 0to121,968 10%121,969to236,880 15%236,881to351,792 20%351,793to446,704 25%Over446,704 30%

Kenya

53


Thewithholdingtaxratesareasfollows:

United Kingdom

Germany & Canada

Denmark, Norway,Sweden & Zambia

India

(%) (%) (%) (%)Managementandprofessionalfees 12.5 15 20 17.5

Royalties 15 15 20 20Dividends 10 10 10(i) 10Interest 15 15 15 15Pensionandretirementannuities 5 5 5 5

Entertainmentandsportingevents 20 20 20 20

Promotingentertainmentorsportingevents 20 20 20 20

Rent-immovableproperty 30 30 30 30Rent-Otherthanimmovableproperty 15 15 15 15

0%ifdividendsubjecttotaxinZambia

Kenya

54

MEMBERFIRM

CityName C o n t a c tinformation

Maseru AdacheSunday [email protected]

KEY TAX POINTS• Acompanyisliabletotaxseparatelyfromitsmembers,anddividendsareonly

taxableiftheyarefromunqualifiedincome.AmanufacturingCompanyistaxedataspecialrateof10%onprofitswhilstanon-manufacturingCompanyistaxedatastandardrateof25%onprofits.

• Capitalgainsandlosses:Ataxablegainorlossondisposalofanassetisthedifference between its adjusted cost base and proceeds. No tax implicationarisesfromthedisposalofassets,suchasaprivateresidenceormotorvehicle,providedtheyarenotusedintheproductionofincomesubjecttotax.

• Abranchofanon-residentcompanyinLesothoissubjecttotaxatthestandardrate of tax of 25% on repatriated income in addition to income tax on thechargeableincomeofthebranch.

• VAT is a broad based tax levied on the supply or consumption of goods orservicesincludingsuppliestoGovernment.Itisalsoleviedonimportedgoodsandservices.OnlyregisteredpersonscanoperateVATandregistrationmaybeonacompulsory,mandatoryorvoluntarybasis.TheVATregistrationthresholdisM850,000.TherearefourratesofVAT;0%,5%,14%and15%.

• FringeBenefitsTax(FBT)isimposedonemployerswhoprovidetheiremployeeswith fringe benefits. The IncomeTaxAct specifically identifies certain fringebenefits,allotherbenefitsfallunderthedefinitionofemploymentincomehencetaxabletoemployees.

• LesothoisamemberoftheSouthernAfricanCustomsUnion(SACU)whichlinksallmembersbyasingletariffandnoCustomsDutyappliesbetweenthemi.e.theSACUistreatedasasingleCustomsterritory.

• Taxablebusinessincomeisdeterminedaftertheoff-setofallowabledeductionssuchascapitalallowancesandbusinessexpensesandavailabletaxlosses.

• Personal tax isbasedon residency.An individual isa resident if theyhaveaplaceofabodeinLesotho,arepresentinLesothoformorethan182daysinanyconsecutiveperiodoftwelvemonths(whichincludesallorpartoftheyearofassessment),areanofficialoftheLesothoGovernmentpostedoverseasduringtheyearofassessmentorhavearesidentlifestyle.

• ForacountrywithwhichLesothohasconcludedadoubletaxationagreement,dividend, interest, royaltyandnatural resourcepaymentsaresubject to25%withholding tax (a royalty on technology is subject to 15% withholding tax.Statutorywithholding(non-treaty)taxratesrangefrom5%to30%

A. tAXes pAYABle

TheNationalgovernmentadministerstaxesthroughtheLesothoRevenueAuthority

lesotHoCURRENCY: Lesotho Loti (LSL)POPULATION: 2.07 million GDP GROwTh: 4.7%GDP: US$ 2.7 billion

Lesotho

55

Lesotho

(LRA) and levies may be charged by both the National government and districtcouncils.

COMPANY TAXAcompany is defined as a body corporate or unincorporated,whether created orrecognized under the law in force in Lesotho or elsewhere, but does not includepartnership or trust.A company is liable to tax separately from itsmembers, anddividendsareonlytaxableiftheyarefromunqualifiedincome.

AmanufacturingCompanyistaxedataspecialrateof10%onprofitswhilstanon-manufacturingCompanyistaxedatastandardrateof25%onprofits.

CAPITAL GAINS TAXAtaxablegainorlossondisposalofanassetisthedifferencebetweenitsadjustedcostbaseandproceeds(seebelowunder‘capitalgainsandlosses’).

PERSONAL ASSETS Notaximplicationarisesfromthedisposalofassets,suchasaprivateresidenceormotorvehicle,providedtheyarenotusedintheproductionofincomesubjecttotax.

SPECIAL SITUATIONS Anumberofspecialsituationsare identified in theAct inrespectofwhichspecialrulesapply.

1. Loss on Disposal to an Associate Whereanassetisdisposedofatalosstoanassociate,thelossisnotrecognized

fortaxpurposes.Insuchasituation,theassetisdeemedtohavebeensoldbythedisposerandacquiredbythebuyerforitsadjustedcostbaseatthedateofdisposal.

2. Asset Depreciation under the Pooling Method Gainsandlossesdonotnormallyarisewhereassetsaredepreciatedusingthe

poolingmethod. However, there is a required treatment for three particularsituations.

• Where,afterdisposal,thereisacreditbalanceonthepool,thenthatcreditbalanceistreatedasagainandformspartofBusinessIncome.

• Where,afteralltheassetsinapoolhavebeendisposedof,adebitbalanceremains,thenthatdebitbalanceistreatedasalossandisanallowabledeductionagainstBusinessIncome.

• Wherethebalanceinapool is lessthanM500andtherehavebeennoadditions to the pool during the year, then that balance is an allowabledeductionagainstBusinessIncome.

3. Transfer between Spouses and Former Spouses Whereanassetistransferredbetweenspousesorbetweenformerspouses aspartofadivorcesettlement,ataxabledisposalhasnotarisen.Insuch casesthe(former)spouseisdeemedtohaveacquiredtheassetatits adjustedcostbasetotheother(former)spouseasatthedateoftransfer. Correspondingly,the(former)spousetransferringtheassetisdeemedtohave

56

disposedofitforitsadjustedcostbaseatthedateoftransfer.

4. Involuntary Conversion and Re-investment Specialtreatmentisavailableforsituationswhenanassetisinvoluntarily

disposedofandasimilarassetisacquired.Suchsituationscover,for example,compensationunderaninsurancepolicyforthedestructionof anassetorapaymentforthecompulsoryacquisitionofanasset.

Iftheproceedsarelessthantheadjustedcostbase,thenthelossisallowable.Thenewassetisdeemedtohavebeenacquiredatitsactualcost.Pleasenote:

• If the full amount of the proceeds is re-invested in a new asset, no

chargeablegainarisesandthenewassetisdeemedtohavebeenacquiredfortheadjustedcostbaseoftheassetdisposedof.

• Ifthefullamountoftheproceedsisnotre-investedinasimilarassetthentheun-investedproceedstotheextentthattheyformpartofanygainaretaxable.Thenewlyacquiredassetisdeemedtohavebeenacquiredattheadjustedcostbaseoftheassetdisposedof.

5. Transfer of Assets on Death Whereanassetistransferredtoapersonalrepresentativeorbeneficiaryonthe

deathofataxpayeradisposalfortaxpurposedisnotdementtohavearisen.Insuchasituation,thepersonalrepresentativeorbeneficiaryisdeemedtohaveacquiredtheassetforitsmarketvalueatthedateofdeathoritsadjustedcostatthedateofdeathifthatishigher.

6. Contribution of Asset to Partnership Whereataxpayertransfersanassettoapartnershipapartofthecontributionof

capitaltothepartnershipandthetaxpayer`sinterestinthepartnershipexceeds50%afterthecontributionoftheassetthennogainorlossisdeemedtohavearisenonthedisposaloftheasset.Thetaxpayerisdeemedtohavedisposedoftheassetforitsadjustedcostbaseatthedateoftransferandthepartnershipisdeemedtohaveacquireditforthatamount.

BRANCh PROFITS TAXAbranchofanon-residentcompanyinLesothoissubjecttotaxatthestandardrateof tax of 25%on repatriated income in addition to income tax on the chargeableincomeofthebranch.

Repatriatedincomeisthechargeableincomeofthebranchminus: Lesothoincometaxpaidonthatchargeableincome; Anyprofitsreinvestedinthebranch;and, Andeveryrepatriationofmoneysbythebranchistreatedfortaxpurposesas havingbeenmadefirstoutofthebranchincome,notwithstandingthatitmay betreatedotherwiseintherecordsofthebranch.

VALUE ADDED TAX (VAT)Prior to July 2003, a Sales Tax was in operation and this contributed to theGovernmentBudgetuntil30June2003.From1 July2003theSalesTaxceasedand

Lesotho

57

wasreplacedbyValueAddedTax(VAT) inaccordancewiththeVATAct(passedbyParliamentin2001).

VATisabroadbasedtaxleviedonthesupplyorconsumptionofgoodsorservicesincludingsuppliestoGovernment. It isalso leviedon importedgoodsandservicesandreferredtoasa‘destinationbasedtax’becauseitisleviedattheplacewheretheconsumptionofserviceoccurs.

SuppliessubjecttoVATmustbemadebyaregisteredvendorandtheymustnotbeanexemptsupplyi.e.asmallbusinessesnotregisteredforVATcannotlevyVATonsuppliestothefinalconsumer.

OnlyVATregisteredpersonscanoperateVATi.e.chargeVATontheirsalesinvoices.RegistrationforVATpurposescaneitherbeonacompulsory,mandatoryorvoluntarybasis.TheVATregistrationthresholdisM850,000.

(1) CompulsoryVATregistrationisrequiredwithin14dayswhereapersonconductsbusinessinLesothoanditisclearthatwithina12monthperiodtheirturnoveroftaxablesupplieswillexceedM850,000.Insayingthishowever,thefollowingpersonsarerequiredtoregisterforVATpurposes,regardlessofthethreshold:

a) National,regionalorpublicauthoritieswhocarryonenterprises; b) Auctioneers;and, c) PersonscarryingonanenterpriseoutsideLesothowhosegoodsor

servicesareconsumedinLesotho.

(2) MandatoryRegistration:TheCommissionerofVATcandirectapersontoregisterforVATwhentheirturnoverexceedstheregistrationthresholdi.e.itismandatoryforthemtoregisterbecausetheannualturnoveristhedeterminingfactor.

(3) VoluntaryRegistration:VATregistrationcanbeappliedforwheretheturnoverislessthantheregistrationthreshold.TheCommissionerofVATcanapprovesucharegistrationathisdiscretion.EntrepreneursoftenopttovoluntarilyregisterforVATpurposesinordertorecoverinputVATpaidonpurchases.

Suppliers of exempt services such as banking services, educational services,etc. cannot register forVAT even if the annual turnover exceeds the threshold. Ifthesupplierprovidesboththeexemptandtaxableservices, theCommissionerwillconsiderthetaxablesupplies.

TheVATtaxperiodisonemonth.VATispayableorclaimableonorwithintwentydaysaftertheendofthemonth.

TherearefourVATratesinLesotho:a) 0%forexportsofgoodsandservicesandonmaizemeal,maize(grain),bread,

milk, beans, peas, agricultural inputs (fertilizers, seeds and livestock feed,unmaltedsorghum),henseggsandparaffinintendedforuseasfuelforcooking,illuminatingorheating;

b) 5%:utilitiese.g.telephoneandelectricityservices;

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58

c) 14%:othersuppliesofgoodsandservicese.g.groceries;and,d) 15%:alcoholandtobaccoproducts.

VATmaybeaccountedforoneitheranaccrual(orinvoice)basisoracash(payment)basis.

RestrictionstoclaiminputVATapplyto:a) Expensesforprivateuse;b) ExpensesincurredpriortotwomonthsbeforeregisteringforVAT;c) Vendoroncashbasisbutwhohasnotpaidtheexpense;d) Entertainmentofcustomersandclientsinrestaurants,theatresandnightclubs;e) Staffrefreshmentssuchascoffee,teaandothersnacks;f) Cateringservicesacquiredforstaffcanteensanddiningroom;g) Subscriptionfeesforsportingorrecreationalclubs;h) Christmaslunchesandparties,includinghireofvenues;i) Beverages,mealsandotherhospitalityandentertainmentsuppliedtocustomers

andclientsatproductlaunchesandotherpromotionaleventsandetc.

Bywayofexceptiontotheabove,theinputtaxincurredinrelationtovendorswhoare in the business of supplying entertainment and meals and refreshments fororganizersofseminarsandsimilareventsmayhoweverbeclaimed.

Penalties for non-compliance and fraud: Therearetwotypesofadditionaltaxorfinesforfailingtoareturnortopaybyduedateaswellasactsoffraud.TherearefineswhichareimposedbyCommissionerofVatandthoseimposedbycourts.Somepenaltiesfornon-complianceandfraudareshownbelow:

Infringement Penalty / Additional tax1.Latesubmissionofareturn Additionaltaxof3%permonthorpartthereofof

theVATpayable2.LatepaymentofVAT Additionaltaxof3%permonthorpartthereofof

theoutstandingVATamount3.Failuretofileareturnorpay Anoffencewhichisliableonconvictiontoafine4.Incorrectorfalsereturnorotherdeclaration

Criminaloffencewhichisliableonconvictiontoafineorupto2yearsinprison

5.Fraudulentevasion Criminaloffencewhichisliableonconvictiontoaheavyfineoruptosixyearsinprison

FRINGE BENEFITS TAXFringe Benefits Tax (FBT) is imposed on employers who provide their employeeswith fringe benefits. The Income Tax Act specifically identifies fringe benefits as;car,housing,utilities,domesticassistance,mealorrefreshment,medical,loan,debtwaiver andexcessive superannuationcontributions.All otherbenefitswill then fallunderthedefinitionofemploymentincomehencetaxabletoemployees.

Certainbenefitsprovidedbyanemployerarehoweverexempt,suchas:

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59

a) Mealsorrefreshmentsprovidedinacanteen,cafeteria,ordiningroomoperatedbyoronbehalfoftheemployersolelyforthebenefitoftheemployeesandwhichisavailabletoallnon-casualemployeesonequalterms.

b) Medicalfringebenefitavailabletoallnon-casualemployeesonequalterms.c) Afringebenefitrelatingtoexemptemploymentincome.d) A fringebenefit, the valueofwhich is so small as tomakeaccounting for it

unreasonableoradministrativelyimpractical.e) Provisionofasecurityguardf) Housing fringebenefit to theextend it is inexcessof20%ofanemployee’s

remunerationfortheyearofassessmentinwhichthebenefitisprovided.g) Fringebenefitsprovidedtoadomesticassistant.

Forthepurposeofmealsandrefreshmentsandmedicalfringebenefits,anon-casualemployee isdefinedasanemployeewhodoesnotmeetanyof the following twoconditions:a) An employee who is employed under a single contract, arrangement or

understandingwhichisforafixedperiodoflessthanonemonth.However,ifthecontractissubsequentlyrenewed,suchthatonehasbeenemployedformorethanonemonthfromthecommencementoftheoriginalcontract,thatpersonisanon-casualemployee;or,

b) Anemployeewhoworksforlessthan15hoursperweekoverthecourseofamonth.

Thetotalofalltaxablevaluesprovidedtoanemployeeintheyearofassessmentisdividedby65%togrossituptoataxableamount.FBTis35%ofthetaxableamountandisanallowabledeductiontotheemployer. EmployersarerequiredtomakereturnsandpaymentsofFBTwithin14daysaftereveryquarter.

LOCAL TAXESLocaltaxesInLesothoaresometimesreferredtoasdomestictaxes.TheseincludeVATalreadymentionedabove,Pay-As-You-Earn(PAYE)andCorporatetax(CIT).PAYEischargedonemploymentincomeandCITischargedoncompanyprofits

OThER TAXES – CUSTOMS DUTYTheSouthernAfricanCustomsUnion(SACU)consistsofBotswana,Lesotho,Namibia,SouthAfrica,andSwaziland.TheSACUSecretariatislocatedinWindhoek,Namibia.SACU was established in 1910, making it the world’s oldest Customs Union.Negotiationstoreformthe1969Agreementstartedin1994,andanewagreementwassignedin2002.ThenewarrangementwasratifiedbySACUHeadsofState.

TheEconomicstructureoftheUnionlinkstheMemberstatesbyasingletariffandnoCustomsDutiesbetweenthem.TheMemberStatesformasingleCustomsterritoryinwhichtariffsandotherbarriersareeliminatedonsubstantiallyallthetradebetweentheMemberStatesforproductsoriginatinginthesecountries;andthereisacommonexternaltariffthatappliestonon-membersofSACU.Thisissharedaccordingtotherevenuesharingratio.

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INTEREST RECEIVABLE Interest payable to a resident of Lesotho by a resident of Lesotho, other than anindividual,issubjecttoawithholdingtaxof10%.


CAPITAL ALLOwANCESTaxdepreciationcanbeclaimedonthecapitalcostofpremises(normallylimitedtoindustrialpremises)andequipmentincludingthosefornon-subsistencefarming.Thetwomethodsofclaimingtaxdepreciation (capitalallowances)are theSingleAssetMethodorthePoolingMethod.

DecliningBalanceDepreciationRates:

Group Assets Rate1 Automobiles;Taxis;LightGeneralPurposeTrucks;Tractorsfor

useOver-the-road;SpecialToolsandDevices 25%

2 Officefurniture;Fixtures,andEquipmentComputersandPeripheralEquipmentandDataHandlingEquipment;Buses;HeavyGeneralPurposeTrucks;TrailersandTrailerMountedContainers;ConstructionEquipment

20%

3 AnydepreciableassetnotincludedinanotherGroup 10%4 RailroadCarsandLocomotivesandRailroadequipment;

Vessels,Barges,TugsandSimilarWaterTransportationEquipment;IndustrialBuildings;EnginesandTurbines;PublicUtilityPlant

5%

SINGLE ASSET DEPRECIATIONTheSingleAssetMethodissimilartotheReducingBalanceMethodofaccountingandapplieswhereataxpayerhasnotelectedforpoolingtoapply.

Nomatterwhetherapoolingelectionhasbeenmade,singleassetdepreciationwillapplytodepreciableassetsthatareonlypartlyusedintheproductionofincomethatissubjecttotax,andtoassetsingroup4.

POOLING OF ASSETSWherepoolingofassetsapplies,thedepreciationallowanceiscalculatedseparatelyforeachpoolbyapplyingtherateofdepreciationforthepoolagainstthebalanceofthepoolattheendofyearofassessment.Whereconsiderationisreceivedonthedisposalofassetsduringayearofassessmentandtheamountexceedstheclosingbalanceofthepool,theexcessconsiderationistreated as a gain from the disposal of fixed assets and included in gross taxableincomei.e.itistreatedasbusinessincome.

Ifnoassetshavebeenadded to thepoolduring theyearofassessment,and theclosingbalanceofthepoolislessthanM500,thetaxpayerispermittedtowriteoffthepoolbalanceasadeduction.

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Single Asset Method Pooling MethodDepreciationallowanceisgrantedfortheperiodduringtheyearthattheassetisinusei.e.dateswhenthefixedassetswerepurchasedanddisposedofmustbekept.

Theassetsaredepreciatedonthebasisthattheywereacquiredexactlyhalfwaythroughtheyear.

ThismethodisalwaysapplicabletoGroup4assetsandtoallotherassetswhenpoolinghasnotbeenelectedfor.

Itonlyapplieswhenitiselectedfor.Onceelectedfor,theelectionisirrevocable.ItcannotbeappliedtoGroup4assets.

Whentheassetisdisposed,againorlossmayoccurwhichwillformpartofthebusinessincomeoradeductionagainstthebusinessincomerespectively.

Gainsandlossesdonotariseondisposalastheproceedsaredeductiblefromthepool.Howeverwherealltheassetsaredisposedandabalanceremains,thebalanceisanallowablededuction.Ifthebalanceofthepoolisacredit,thenitformspartofthebusinessincomeintheyearinwhichitarises.

Itrequiresthemaintenanceofdetailedassetregisters.

Itdoesnotrequirethemaintenanceofdetailedassetregisters.

Itcanbeappliedtoassetsbothfully and partially used in the productionofincome,subjecttoanapportionmentoftheamountattributabletotheproductionofincome.

Itcannotbeappliedtoassetspartiallyusedintheproductionofincome.

FARMING ASSETSTax depreciation can be claimed on assets of non-exempt farming activities.Themethoddependsonwhentheassetwasacquiredandwhetheranelectionhasbeenmadebythetaxpayer,althoughfarmbuildingsmaybetreatedseparately.

STOCK / INVENTORYAcash-basistaxpayermaycalculatethecostbaseoftradingstockontheprime-costorabsorption-costmethod,andanaccrual-basis taxpayermustcalculate thecostbaseoftradingstockontheabsorption-costmethod.

Thevalueoftradingstockonhandattheendoftheyearofassessmentisthelowerofitscostbaseormarketvalueatthatdate.Whereparticularitemsoftradingstockarenotreadilyidentifiable,ataxpayermayaccountforthetradingstockonthefirst-in-first-outmethodortheaverage-costmethod.

CAPITAL GAINS AND LOSSESDepreciable Business AssetsTheadjustedcostbaseofdepreciablebusinessassetsisthetaxwrittendownvalueonthedateofdisposal.Wheretheproceedsarelessthanthetaxwrittendownvalue,thelossisanallowabledeductionagainstBusinessIncome.

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Non-Depreciable Business Assets Non-depreciablebusinessassets,whichmay includeofficebuildings, fall into twocategories.

a) Non-depreciableBusinessAssetsHeldat1stApril1993:

Theadjustedcostbaseoftheassetisdeductedfromtheproceeds.Inthecaseofsuchassets,theadjustedcostbaseisthehigheroforiginalcostormarketvalueasat1stApril1993.

Wheretheproceedsexceedtheadjustedcostbase,thenthegainformspartofBusinessIncome.Wheretheproceedsarelessthantheadjustedcostbase,thelossisanallowablededuction.However,thelossisonlyallowabletotheextentthatthereisanactualloss.Thus,iftheproceedsexceedtheoriginalcostbutnotthevalueasat1stApril1993,thelossisnotallowablededuction.Thisisanogain,nolosssituation.

b) Non-depreciableAssetsAcquiredAfter1stApril1993:

Theadjustedcostbaseoftheassetisdeductedfromtheproceeds.Theonlyadjustmentstocostbasearecapitalimprovements.Wheretheproceedsexceedadjustedcostbase, thenthatgain formspartofbusiness income.Wheretheproceedsare lessthantheadjustedcostbase, thenthat loss isanallowabledeductionagainstBusinessIncome.

Farming assets – depreciable and non-depreciableThetaxlegislationnowdistinguishesbetweencommercialfarming(notexemptfromincometax)andsubsistence farming (exempt from incometax).The tax treatmentofsuchdisposalswouldbesimilartootherassetdisposalsexceptforthefollowingtransitionalprovisions:

• Thecostbaseofanyfarmingassetdisposedwhichwaspurchasedbefore31stMarch1996isequaltoitsmarketvalueon31stMarch1996.Thisappliestotradingstockandotherassets.Thisistoensurethattheindividualisonlytaxedinrespectofthegainorlossaccruingaftertheremovaloftheexemptioni.e.from31March1996.

Itisimportanttonotethatwhilethemarketvalueasat31stMarch1996istakenasthecostbasefordisposalsofcommercialfarmingassets,theadjustedcostbaseasat31stMarch1996,arrivedatbyassumingthatthesingleassetmethodofdepreciationhasbeenappliedsinceacquisitionoftheasset,istakenfordepreciationpurposes. Now,forthepurposedofdisposal,thecostbasewouldagaindependonwhethertheassetisdepreciableornot:• Fordepreciationassets,gainsarecalculatedastheproceedslessthetaxwritten

downvaluetakingaccountofnotionalallowancesforpre1stApril1996assets.• Fornon-depreciableassets,thehigherofthemarketvalueasat1stApril1996

andoriginalcostisusedasthecostbasefordisposalpurposes.

Thetaxtreatmentoftheseassetsissimilartobusinessassetsexceptthatthe1st April

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1993dateissubstitutedforthe1stApril1996.

Investment assets – immovable propertySuchinvestmentassetsfallintotwocategories:

a) Landandbuildingsgivingrisetorentalincome;and,b) Sharesincompanieswhoseprimaryassetsconsistofinvestmentsinimmovable

properties.

Determining whether land or buildings are investment assets or business assetsdependonwhetherrentalincomeisbeingderivedfromtheasset.

Theseassetsaregroupedintotwocategories;thoseheldat1stApril1993andthoseacquiredafter1stApril1993.Forassetsheldat1stApril1993there isadifferentcalculationmethodtoestablishthecostbase.Iftheassethasbeenheldformorethantwelvemonths,thentheadjustedcostoftheassetcanbeincreasedfortheeffectsofinflationbetween1stApril1993andthedateofdisposal. Wheretheproceedsexceedtheadjustedcostbase,thereisanallowablelosswhichcanbeoff-setagainstanygainsarisingfromthedisposalofany investmentasset(movableorimmovable).Anyunutilisedlosscanbecarriedforwardforset-offagainstfuture gains. However, the amount of the loss that is allowed is restricted to theextentthatthelossisanactualloss.Itisthereforenecessarytomakeacomparisonbetweentheproceedsandtheoriginalcost.If,onthisbasis,thereisaprofit,thenthelossisnotallowable.Ifthereisaloss,onlytheactualwillbeallowable. Investment assets – not immoveable propertyForpurposedofcalculatingthetaximplicationsonthedisposaloftheseassets,theyaredividedintotwocategories:

a) InvestmentAssetsheldat1April1993

Theadjustedcostbase(higheroforiginalcostormarketvalueasat1st April 1993)oftheassetisdeductedfromtheproceeds.Wheretheproceedsexceedthe adjusted cost base, the gain forms part of Property Income.Where theproceedsarelessthantheadjustedcostbase,thenthereisanallowableloss.

Such loss can be off-set against any gains arising from the disposal of anyinvestmentasset (movableor immovable). Anyunutilized losscanbecarriedforwardforset-offagainstfuturegains.However,theamountofthelossthatisallowedisrestrictedtotheextentthatthelossisanactualloss.Itisthereforenecessarytomakeacomparisonbetweentheproceedsandtheoriginalcost.Ifonthisbasisthereisaprofit,thenthelossisnotallowable.

b) InvestmentAssetsacquiredafter1April1993

The treatmentof suchdisposals is straight-forward.Where theproceedsareless than theoriginalcost then the loss isanallowable loss. Such losscanbeoff-setagainstanygainsarisingfromthedisposalofanyinvestmentasset(movableorimmovable).Anyunutilizedlosscanbecarriedforwardforset-off

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againstfuturegains.

DIVIDENDSAresidentcompanywhichpaysadividendisliabletopayadvancecorporationtaxattherateof25/75ofthedividendpaymentexcepttotheextentthatthedistributionismadeoutofqualifiedincome(manufacturingIncomesubjecttothe10%specialrateanddividendsreceivedfromanotherresidentcompany).ACTisanadvancepaymentofthecompany’sincometaxliabilityonitsdistributedprofitsandisnotanadditionaltax.AcompanymaycreditACTagainstitsincometaxliability,includinginstalmentsofincometax.

Aresidentcompanymust,withinsevendaysofpayingdividends,fileareturnofACTstating:a) Theamountofdividendspaid;b) ACTpayable;and,c) TheamountofACTwhichhasbeensatisfiedbywayofset-off inaccordance

withSection87(4). Where therehasbeennoset-offofACT itmustbepaidwithinsevendaysof thedividendpayment.Thispaymentcanbecarriedforwardindefinitelyforset-offagainstfuturetaxliability.

A dividend paid by a resident company is not included in the gross incomeof a resident individual.This in effectmeans that themaximum rate of tax on amanufacturingdividendis10%andonanon-manufacturingdividendis25%.Italsopermitspassageofdividendsbetweenresidentcompanieswithoutanyfurtherliabilitytotaxation.

Redemption of sharesOnredemptionofshares,acompanymaypurchaseacertainproportionofsharesfrom each shareholder or from certain number of shareholders. If the formerapproachisadoptedthentheredemptionisonpro-ratabasisotherwisenotonpro-ratabasis.Wheretheredemptionisonpro-ratabasis,thegainsorlossesaretreatednormally.However,wheretheredemptionisnotonpro-ratabasis,thegainistreatedasdistributiontotheshareholdersandthereforethecompanyhastoaccountforACTlikeonordinarydividends.

Disguised dividendsTheremaybeanumberoftransactionsbetweenacompanyandamemberofthecompanyoranassociateofamember,whichare, insubstance,adistributionandassuchwillbetreatedasadividendforthepurposeofACT.Wherethetransactioniswithanassociateofamember,thedividendistreatedashavingbeenpaidtothememberandnottheassociate.Dividend strippingDividendstrippingoccurswhereacompany,justbeforeitistopaydividendsoutofitsqualifiedincome(whichdoesnotattractACT),isboughtbyanothercompany.Theacquiringcompanyreceivesthedividendsandthensubsequentlysellstheacquiredcompanyataloss.

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TheCommissionerhasthediscretiontotreatadividendpaidaspartofadividendstrippingtransactionandnotpaidoutofqualifiedincome.Undersuchadirectionthetax-payerwillbeliabletoACTinrespectofthedividends. LOSSESIndividualsWherebusinessincomeofanindividualtaxpayerisexceededbydeductionsrelatingtothatincome,theloss(beingtheamountoftheexcess):• Maynotbedeductedagainstotherincomeofthetaxpayerbutshallbecarried

forward;and,• Maybedeductedindeterminingthechargeablebusinessincomeinsubsequent

yearsofassessment.

Wherepropertyincomeofanindividualtaxpayerisexceededbydeductionsrelatingtothatincome,theloss(beingtheamountoftheexcess):• Maynotbedeductedagainstotherincomeofthetaxpayerbutshallbecarried

forward;and,• May be deducted in determining chargeable property income in subsequent

yearsofassessment.

CompaniesWhere the taxpayer is a company, the excess of the deductions allowed over thetaxpayer’sgrossincomeshallbecarriedforwardandmaybedeductedindeterminingchargeableincomeinsubsequentyearsofassessment.

Wheremanufacturingincomeofaresidentcompanyisexceededbythedeductionsrelatingtothatincome,theloss(beingtheamountoftheexcess):• Maynotbedeductedagainstotherincomeofthecompanybutshallbecarried

forward;and,• May be deducted in determining the chargeable manufacturing income in

subsequentyearsofassessment.

Losses on disposal of business assetsAlossarisingfromthedisposalofabusinessasset,whetherornottheassetwasoncapitalorrevenueaccount,isallowedasadeduction.

Unutilised capital losses on disposal of investment assetsLosses on disposal of investment assets are only allowed to the extent of gainsderivedbythetaxpayerfromthedisposalofinvestmentassetsbythetaxpayer.Anyunutilizedlossesinayearofassessmentcanbecarriedforwardindefinitelyforfutureset-offagainstchargeablegainsarisingondisposalofinvestmentassets.

FOREIGN SOURCED INCOMEForeign-sourcedincomefromemploymentincomeinaforeigncountryderivedbyaresident individual isexemptfromincometaxif theincomeischargeabletotax intheforeigncountry.

ThetablebelowillustrateshowcertainindividualsaretaxedonforeignandLesothosourced-income.

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Individual Employment income

Business income

Property income

Other income

Residentcitizensandpermanentresidents

Worldwideexceptifsourcedandtaxedabroad

Worldwide Worldwide Worldwide

Diplomatresidents

Foreignsourcetaxableifexempt

Lesotho sourceonly

Lesothosourceonly

Lesotho sourceonly

Lesotho diplomats

Foreignserviceallowanceisexempt Worldwide Worldwide Worldwide

Expatriates WorldwideWorldwide(exceptforeigndisposal)

Worldwide(exceptforeigndisposal)

Worldwide

Non-resident Lesothosourceonly Lesotho sourceonly

Lesothosourceonly

Lesotho sourceonly

INCENTIVESThereareseveralincentivesrelatingtotaxationinLesotho,namely:• Themanufacturingtaxrateisreducedto10%;• Thedeductionofpensioncontributionsfromthegrossincomewhichisbefore

taxanditsexemptionwhenreceivingthepayment;• Theexemptionofdividendstoaresidentindividualfromaresidentcompany;• Ataxexemptionforsubsistencefarmingbyaresidentindividual;• Aninterestdeductiontotheindividualasspecifiedinthelegislation(sections27

and158)


AresidenttaxpayerisentitledtoaforeigntaxcreditagainsttheirliabilitytoLesothoincome tax in respectofany foreign income taxbornedirectlyor indirectlyby theresidentonforeign-sourceincomesubjecttoLesothotax.

TheforeigntaxcreditiscalculatedbyapplyingtheaveragerateofLesothoincometaxtotheforeign-sourceincomereducedbyanydeductionproperlyallocatedtothatincome.Thecalculationismadeseparatelyforbusinessincomeandforotherincome.

Foreignincometaxborneby:• Apartnershipistreatedasbornebypartners• A trustee (where the incomeonwhich the trusteewas assesses is included

inthegrossincomeabeneficiaryunderthisOrderistreatedasbornebythebeneficiary.

• A beneficiary (where the income on which the beneficiary was assessed isincludedintheincomeofatrusteeunderthisOrder)istreatedasbornebythetrustee.

Wherearesidentcompanyisentitledtobothacreditforadvancecorporationtaxandaforeigntaxcredit,theforeigntaxcreditshallbeappliedfirst.

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Forthepurposeoftheabove,theaveragerateofLesothoincometaxisthepercentagethattheLesothoincometax,beforetheforeigntaxcredit, isofchargeableincomeofthetaxpayerandinthecaseofataxpayerwithbothbusinessandotherincome,theaveragerateoftaxistobecalculatedseparatelyforbothcategoriesofincome.Foreignincometaxincludesforeignwithholdingtaxbutdoesnotincludeaforeigntaxdesignedtoraisetheforeigntaxlevelontheincomesothatthetaxationofthecountryofresidenceofthetaxpayerisreduced.

d. CoRpoRAte GRoUps

ThereisnogroupbasisoftaxationinLesotho.Acompanyisliabletotaxseparatelyfromitsmembers,anddividendsareonlytaxableiftheyarefromunqualifiedincome.

A manufacturing company is taxed at a special rate of 10% on profits. A non-manufacturingcompanyistaxedatstandardrateof25%onprofits.


Loss on disposal to an associateWhereanassetisdisposedofatalosstoanassociate,thenthelossisnotrecognizedfortaxpurposes.Insuchasituation,theassetisdeemedtohavebeensoldbythedisposerandacquiredbythebuyerforitsadjustedcostbaseatthedateofdisposal.

Transfer between spouses and former spousesWhereanassetistransferredbetweenspousesorbetweenformerspousesaspartofadivorcesettlement,ataxabledisposalhasnotarisen.Insuchcasesthe(former)spouseisdeemedtohaveacquiredtheassetatitsadjustedcostbasetotheother(former) spouse as at the date of transfer. Correspondingly, the (former) spousetransferringtheassetisdeemedtohavedisposedofitforitsadjustedcostbaseatthedateoftransfer.

F. peRsonAl InCome tAX

Personaltaxisbasedonresidency.Anindividualisaresidentifthey:• HaveaplaceofabodeinLesotho;• Arepresent inLesotho formore than182days inanyconsecutiveperiodof

twelvemonthswhichincludesallorpartoftheyearofassessment;• AreanofficialoftheLesothoGovernmentpostedoverseasduringtheyearof

assessment;• Havearesidentlifestyle.

Interest ThefirstM500ofinterestderivedfromasinglesavingsaccountwitharegisteredfinancialinstitutionresidentinLesothobyaresidentindividualisexemptfromincometax.

As the Lesotho branch of a non-resident financial institution is deemed to be aresidentcompanyunderSection6(2),anaccountheldwithsuchabranchqualifies

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fortheexemption.Anaccountheldwithaforeignbranchofanon-residentfinancialinstitutiondoesnothoweverqualifyforexemption,andtheinterestpaidonsuchanaccountisfullytaxablewithacreditforanyforeigntax(suchaswithholdingtax)paidontheinterest.

G. tReAtY And non-tReAtY WItHHoldInG tAX RAtes

Treaty Rates:ThewithholdingtaxratesapplicabletocountrieswithwhichLesothohasconcludedadoubletaxationagreementareasfollows:

• Dividend,interest,royaltyandnaturalresourcepaymentsissubjectto25%;and

• Aroyaltyontechnologyissubjectto15%.

Non-Treaty Rates:Thestatutorywithholdingtaxratesareasfollows:

• Interest:10%;• Liquidator:10%;• Superannuationfund:25%;• Residentcontractor:5%;• Non-residentcontractor:10%;• Non-residentIndividual:25%;• ResidentIndividual:Marginalratesarecurrently20%uptoM51,670andthen

30%above.

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FullName: StateOfLibyaPopulation: 5.4Million(2012)Capital: TripoliMajorLanguage: ArabicMajorReligion: IslamMonetaryUnit: 1Dinar=1000DirhamInternetDomain: .LyInternationalDiallingCode: +218MinistryOfFinanceWebsite: Www.Mof.Gov.Ly

A. tAXes pAYABle

InLibya,ThereshallbesubjectedtotaxanyincomeresultinginLibyafromanyassetsexistenttherein,whethermaterialorimmaterialorfromanyactivityorworktherein.The latest incometax lawhasbeen issuedon28thofJanuary,2010 listedundernumber(7)oftheyear2010.Thenewlawshascomeintoforceasfrom28/04/2010,replacingtheoldIncomeTaxLawno(11)of2004.

FEDERAL TAXES AND LEVIES:Libyaisnotafederationcountry;therefore,therearenofederaltaxes.

COMPANY TAXIncomesresultinginLibyaandabroadforthenationalcompaniesandbranchesofforeigncompaniesinLibya,whateverthetypeoftheiractivityorpurposemightbe,aresubjectedtocorporatetax.Thecompaniesshallmeanthegeneralcompaniesandthe private joint-stock companies.The branches of foreign companies shallmeantheaspectsofactivityandcapitals,asperformedbytheforeigncompaniesinLibya,whatevertheirorganizationorlegalstatusmaybe.CompaniesareliabletocorporateincometaxontheirprofitsstemmingfromanybusinesstheycarryoninLibya.Theyaresubjectedtocompanytaxatrateofcorporatetaxof20%oftaxableincomeandJehadtaxat4%oftaxableincome.

Insomecaseswherea foreigncompany isnot registered inLibya,deemedprofittaxbasedonestimatedprofit (mostly20%-60%of total income)mayapplyandtaxedatthegeneralcorporateincometaxrate.Likely,deemedprofittaxmayapplytocompanies thatdonot record theirbooksandaccounts inaccordancewith thelocalregulations.

Salaries and wages TaxThesalariesandwagestaxiscalculatedonthebasesalaryplusanyallowancesandtaxedasfollow:-1- Allowance:1,800L.Dforsingleperson,2,400L.Dformarriedperson,plus,300

L.Dforeverychild(perannum).2- Tax rate is calculatedafter thepersonal allowancedeductionsandemployee

contributionofINASdeductions.Theratesare5%forthefirst12,000L.Dperannum,and10%fortheexessamount.

3- Othertaxesleviedonpersonalincomesareinclude,Jehadtaxat3%oftaxablesalaryincome,andSolidarityFundat1%oftaxablesalaryincome.

Libya

lIBYACURRENCY: Libyan Dinar (LVD)POPULATION: 6.57 million GDP GROwTh: 15%GDP: US$ 63 billion

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Social security contributions (INAS):The contributions are payable by all employeesworking in Libyawhether local orforeign,basedongrossincomewithatotalof15%(3.75%employeecontribution,11.25%employercontribution).

CAPITAL GAINS TAXCapital gains are treated as ordinary business income and taxed at the generalcorporate income tax rate of 20%. Proceeds of sale of any business asset andliquidationproceedsreceivedduringthetaxperiodareincludedinbusinessprofit.

BRANCh PROFITS TAXBranch’sincomeofforeigncompaniesregisteredinLibyaarecalculatedandtaxedonthesamebasisofcorporateincometax.

SALES TAX / VALUE ADDED TAXLibyadoesnotimposeanyVAT.

FRINGE BENEFITS TAXIn general, cash benefits paid to employees are added to their salary and taxedaccordingly. There are, however, some exceptions (such as, travel allowances,telephoneallowance,fuelallowanceandtheuseofacompanycar.

LOCAL TAXESSpecialtax(Jehadtax)isimposedonwages,companies,dutiesoncertainbusinessactivities,andsomecustomsduties.ThistaxispayableunderLawno:44/1970andisleviedonpersonalincomesat3%andcorporateprofitsat4%.

OThER TAXESCertainlegaltransactionsaresubjecttoregistrationduties.Theseinclude:- Stampdutyoncertaintransactionsatvaryingratesaswellfixedduties.Formore

informationaboutLibyanstampdutylawno:(12)of(2004)anditsamendmentno(8)of(2010).http://tax.gov.ly/laws.aspx?lawid=12

For example; Contract negotiated in Libya must be registered with the TaxDepartmentwithin60daysofsigningthecontract.Contractsaresubjectedtoa1%StampTaxonthevalueofthecontractplus0.05%onthe1%StampTax.

- Customs, excise and other taxes charged by the Customs and ExciseDepartment.


CAPITAL ALLOwANCESGenerally,expensesincurredwhollyandexclusivelyforthepurposeofthebusinessare deductible. However, specific rules apply in respect of certain categories. Forexample, the general expenses or fees for services or interests or commissionschargedbytheforeigncompanytoitsbranchinLibyashallbeonlyconsideredintheamountdeemednecessaryforachievingthepurposesofthebranch,atmaximumof(5%)oftheadministrativeexpensesapprovedbytheTaxdepartment,provisionsandreservesarenotpermissibledeductionsfortaxpurposes.

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Libya

DEPRECIATION AND AMORTIZATIONDepreciationofassetsusedinbusinessactivitiesmustbecomputedatamaximumannualpercentage.Fortaxpurposes,thestraight-linemethodisnormallyadopted,anddepreciationratesshallnotexceedthefollowing:

Annual rate of depreciation (%)

Buildingswithmachineriesinstalledonit 3

OtherBuildings 2

PassengerVehicles 20

Trucks 10

Vessels 4

Ferriesandfishingboats 4

Aircrafts 8

Furnitureforoffices,houses,stores 10

Furnitureforhotelscafes,restaurantsandhospitals 20

Furnitureforcampsoutsidecities 20

Officemachineries 10

Electricgenerators 15

Computersandrelatedequipment 20

Computerprograms 10

Othermachineries 15Start-up fees (at establishing the company) is normallyamortizedwithinthenextfiveyears 20

STOCK/INVENTORYInventoriesaremostlyvaluedatcostandcalculatedonaFIFObasis.However,themethodchosenmustbeappliedconsistently.Inventoryreservesarenotpermissibledeductionsfortaxpurposes.

CAPITAL GAINS AND LOSSESAsmentionedabove,capitalgainsandlossesareusuallytaxableasordinaryincome.

DIVIDENDSDividends received from other companieswill be subjected to tax at the tax rateapplicabletobusinessincomeandisconsideredas“otherincomeinP&Lstatement”.

INTEREST DEDUCTIONSInterestpayableisgenerallytaxdeductibleonanaccrualsbasis.However, interest payable on taxes, fines and penalties are not deductible. Also,interestderivedfromloanfinancereceivedfromshareholdersisnotdeductible.

72

LOSSESLossesoffiscal yearmaybecarried forwardup tofiveyears.Lossesmaynotbecarried backwards. If the ownership of a company changes partway through thenextyearsof loss’year,thegeneral lossdeductionwillbeonlybeappliedontheirsharespercentage.

FOREIGN SOURCED INCOMETaxauthorities levy taxeson residentcompaniesonallprofitsarising fromforeignsources in thesamewayas incomefrom localsources.Except, incomeraisedforpersonassalaries.

INCENTIVESIn2010,LibyanauthoritypromotedLibyanandforeigncompaniestoinvestinLibya.TheLawno9/2010aimsatthepromotionofnationalandforeigncapitalinvestment,with thepurposeofsettingup investmentprojects,within thescopeof thestate’sgeneralpolicyand theobjectivesofeconomicandsocialdevelopment, inorder toparticularlyensureachievementofthefollowinggoals:• TechnicallyupgradeandqualifyLibyancadresandelevate their efficiency, in

ordertoacquireadvancedskillsinadditiontoopeningemploymentopportunities.• Endeavourtointroduceknow-howandtechnologyandthereofinsertedintothe

Libyaneconomy.• Contributiontowardssettingup,developingorrehabilitatingeconomic,service

andproductionunits, inamanner thatassistssuchunits tocompeteandbeintroducedintotheworldmarkets.

• Achievementofdevelopmentintherelevantarea• Increaseanddiversifyincomesources• Controlenergyconsumption• Utilizelocallyavailablerawmaterial

The investmentproject,subject to theprovisionsof thisLaw,shallenjoy themainfollowingprivileges:• Exemption of the machinery, equipment and apparatuses necessary for the

execution of the project, from all taxes, customs duties, import fees, servicechargesandotherfeesandtaxesofasimilarnature.

• Exemptionoftheinvestmentprojectfromincometaxforanyactivity,forthefirst5years.

• Exemptionofcommoditiesproducedforexport, fromproductiontax,customsdutiesandsuchchargesimposedonexports.

• Exemptionofstampdutypayableinaccordancewiththeeffectivelegislation.• Other exemptions are available for certain projects and some nationalities

companies.

However,theExecutiveRegulationofthisLawshalldecidetheconditionsandrulesnecessaryfortheexecutionofinvestedcompanies.


DoubleTaxationAgreementwithLibyahasbeenmadewithsomecountriessuchas:• ValidagreementssuchaswithEgypt,Tunisia,Sudan,Italy,Malta,India,Kuwait,

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SaudiArabia,Algeria,Pakistan.• FinishedbutunvalidagreementssuchaswithFrance,Russia,Belarus,England,

Syria,Ukraine• InprocessagreementssuchaswithJordan,Iran,Spain,Slovakia,Switzerland,

Portugal,Germany,Austria,Serbia,Bosnia d. CoRpoRAte GRoUps

ThereisnogroupbasistaxoptioninLibya.Eachcompanyhastofill-initstaxreturnsseparatelyincludingtheholdingcompany.


Relatedpartytransactionsnegotiatedatarm’slengtharetreatedthesameasnon-relatedpartytransactions.

F. eXCHAnGe ContRol

Foreigncompaniesareabletotransferdistributableannualnetinterestsandrevenuesachievedbytheforeigncapitalinvestedintheproject.However, abroad transfer is regulated by the Central Bank of Libya and such anauthorisationfromthebankisnecessary.


ResidentandNon-residentindividualsaresubjecttotaxonlyontheirLibyansalariesincomeatthesameratesmentionedabove.Other sourced income (other than registeredasacompany) is taxedaccording toits source.Tax on income from agriculture is levied at a flat rate 0%; income oncommercial activities is 15%;Tax on income from industry and crafts is levied at10%;taxonincomefromprofessionactivitiesisleviedat15%;andincomederivedfrompartnersshareentityisleviedat10%.

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MauritiusCurrency:Rupee(MUR) DialCode:230 DialCodeOut:00MemberFirmCity Name ContactInformationPort Louis MichaelLo [email protected]

KEY TAX POINTS• AcorporationresidentinMauritiusissubjecttotaxonitsworldwideincome.A

non-residentcorporationisliabletotaxonanyMauritiussourceincome,subjecttoanyapplicabletaxtreatyprovisions.Corporationsareliabletoincometaxontheirnetincome,currentlyataflatrateof15%.

• Value-AddedTax(VAT)ischargedbyVATregisteredentitiesatthestandardrateof15%ongoodsandservicessuppliedbytheminMauritius.Certainsuppliesareexemptedorzero-rated.

• Certain local taxes apply including excise duty, land and property taxes andcustomsduties.

• Personalincometaxischargeableataflatrateof15%forindividualsresidentinMauritius.

• Thereisnocapitalgainstax.

A. tAXes pAYABle

FEDERAL TAXES AND LEVIESThemainincometaxlegislationinMauritiusistheIncomeTaxAct1995asamendedbysubsequentFinanceActs.CorporateandPersonalTaxesareembodiedunderoneheadingof IncomeTax andarepayableby all resident companies and individualsonnon-exempt incomederivedfromMauritiusandfromothersources.TheprofitsofallResident‘Sociétés’ (Partnerships)are taxable in thehandsof thepartners inproportiontotheirprofitsharingratio.Anon-residentsociétéisliabletoincometaxasifthesociétéwasacompany.‘Resident’,inrelationtoanincomeyear,means:• acompanywhichis incorporatedinMauritiusorhasitsCentralManagement

andcontrolinMauritius• anindividualwho:

(a) hashis/herdomicileinMauritiusunlesshis/herpermanentplaceofabodeisoutsideMauritius

(b) hasbeenpresentinMauritiusinthatincometaxyearforaperiodof,oranaggregateperiodof,183daysormoreorhasbeenpresentinMauritiusinthatincomeyearandthetwoprecedingincomeyearsforanaggregateperiodof270daysormore

• asociétéwhichhas its registeredofficeaddress inMauritiusand includesasociétéwhichhasatleastonepartnerresidentinMauritius

• trust – where the trust is administered in Mauritius and a majority of thetrusteesareresidentofMauritiusorwherethesettlorofthetrustwasresidentinMauritiusatthetimetheinstrumentcreatingthetrustwasexecuted

• anyotherassociation–anassociationorbodyofpersonswhichismanagedor

mAURItIUsCURRENCY: Mauritian Rupee (MUR)POPULATION: 1.32 million GDP GROwTh: 3.9%GDP: US$ 13.6 billion

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Mauritius

administeredinMauritius.

CORPORATE TAXATIONTherateoftaxapplicableforallcompaniesis15%onthecompanies’profitwhichconsistofbusiness/tradingprofitsandpassiveincome.

ALTERNATIVE MINIMUM TAX (AMT)Whereinthecaseofacompanythenormaltaxpayableislessthan7.5%ofitsbookprofit,thetaxpayableforthatincomeyearisdeemedtobe7.5%ofitsbookprofitor10%ofanydividendsdeclaredinrespectofthatyear,whicheveristhelesser.Thisalternativeminimumtaxisapplicableincertainspecificcases.

GLOBAL BUSINESS COMPANIESCorporationsholdingCategory1GlobalBusinessLicence(GBC1)paytaxatarateof15%.

Pursuant to the ForeignTax Credit RegulationAct 1996, a GBC1which does notpay tax ina foreign jurisdictionon its foreign incomeearnedoutsideMauritius, ispresumedtohavepaidtaxelsewhereandcanclaimtaxcreditof80%ofitsincomeresultinginaneffectivetaxrateof3%only.

CorporationsHoldingCategory2GlobalBusinessLicence(GBC2)areexemptfromtax.

DUE DATES FOR PAYMENT OF TAXCompaniesmustfiletaxreturnsandpayanyincometaxnot laterthansixmonthsfromtheendofthemonthinwhichtheaccountingperiodends.

ADVANCE PAYMENT SYSTEM (APS)Companies,unittrustschemes,collectiveinvestmenttrusts,cellsofaprotectedcellcompany,sociétéholdingCategory1GlobalBusinessLicence,mustsubmitanAPSStatementinrespectofeachofthethreemonthsperiodcommencingthefirstdayoftheaccountingyearandpayanytaxinaccordancewiththeAPSStatementwithinthreemonthsfromtheendofthequarter.ThisisapplicabletocompanieshavinganannualturnoverexceedingRs4M.

CAPITAL GAINS TAXThereisnoCapitalGainsTaxinMauritius.

BRANCh PROFITS TAXThereisnoBranchProfitsTaxinMauritius.

wIThhOLDING TAXDividendsMauritiusdoesnotlevywithholdingtaxondividendsbyresidentcompanies.

InterestNowithholdingtaxoninterestpaidtonon-residentcompanies.

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VALUE ADDED TAX (VAT)VATischargedontaxablesupplies(bothgoodsandservices)madeinMauritiusatastandardrateof15%.

Certain items such as basic foodstuffs andmedical and educational services areexemptwhileexportsarezerorated.

The threshold forVAT registration is a turnover of taxable supplies exceeding Rs4mperyear.VATRegistrationiscompulsoryirrespectiveoftheannualturnoverofapersonengagedinacertainbusinessorprofession.

FRINGE BENEFITS TAXEmployeesreceivinganyadvantageinmoneyormoney’swortharetaxedthereon.Certaintypesofincomeareexempt:• rentandhousingallowanceforcertainpersons• passagebenefits,limitedto6%ofbasicsalary• thefirstRs1.5millionoflumpsumpaidonretirementordeath.

LOCAL TAXESAlltaxesareona‘national’basisbutmunicipalanddistrictcouncilsareempoweredtolevypropertytax,entertainmenttaxandcertainlicences.


Thetaxableincomeisdeterminedbyascertainingtheassessableincomeandthendeducting any expenditure or loss in the income year to the extent towhich it isexclusivelyincurredintheproductionofgrossincome(otherthan‘emoluments’).Foremoluments,theexpendituremustbewholly,exclusivelyandnecessarilyincurredinperformingthedutiesofanofficeoremployment.Theunauthoriseddeductionsare:• investment,expenditureorlossofacapital,privateordomesticnature,fine• expenditureor loss incurred in theproductionof exempt incomeorwhich is

recoverableunderacontractofinsuranceorindemnity• incometaxorforeigntax• anyexpenditureincurredinprovidingbusinessentertainmentorgifts.

CAPITAL ALLOwANCESAnnual allowances are available on capital expenditure incurred exclusively in theproductionofgrossincome.Therateofannualallowancevariesfrom5%to100%dependingonthetypeofassetandiscalculatedonthebasevalueoroncost.

DIVIDENDS PAID BY RESIDENT COMPANIESDividendspaidbyresidentcompaniesareexempted.

ROYALTIESRoyaltiespaidtoanon-residentareexemptedfromtaxforthefollowingcompanies/

trusts:(i) acompanyholdingaGBC1Licenceoutofitsforeignsourceincome(ii) a bank in so far as the royalty is paid out of gross income derived from its

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banking transactions with non-residents and corporation holding a GBC2Licence

(iii) byatrust.

INTEREST RECEIVEDThefollowingtypeofinterestareexemptfromtax.Interestpayableon:(i) abalancemaintainedinabankbyanindividualwhoisnotresidentinMauritius(ii) savingsandfixeddepositaccountheldbyanindividual,asociétéorasuccession(iii) callanddepositamountsheldwithanybankbyaGBC1.(iv) interestpaidtoanon-residentnotcarryingonanybusinessinMauritiusby:

(a) aGBC1outofitsforeignsourceincomeor(b) byabankinsofarastheinterestispaidoutofgrossincomederivedfrom

itsbankingtransactionswithnon-residentsandcorporationholdingGlobalBusinessLicence

LOSSESLossescanbecarriedforward(butnotbackwards)forsetoffagainstincomederivedinthefivesucceedingincomeyearsprovidedthatthereiscontinuity;i.e.that50%innominalvalueoftheallottedsharesandnotlessthan50%ofthepaidupcapitalwasheldbyoronbehalfofthesameperson.Ifacompanyengagedinmanufacturingactivities istakenoverbyanothercompanyortwoormorecompaniesengagedinmanufacturingactivitiesmergeintoonecompany,anyunrelievedlossoftheacquireemay be transferred to the acquirer in the income year in which the takeover ormergertakesplaceonsuchconditionsrelatingtosafeguardofemploymentof thecompanies.Lossesarisingfromannualallowanceoncapitalexpenditurecannotbecarriedforward.

FOREIGN SOURCED INCOMEIncomederivedfromoutsideMauritiusbyaresidentistaxableinthenormalmannersubjecttodoubletaxationrelief.

INCENTIVESPresently,mostincentiveshavebeenremoved.Theexceptionsare:(a) deductionoftwicetheemolumentspaidtoadisabledperson(b) transferoflossofamanufacturingcompanybyanothercompanyontakeover

ormerger(c) additionalinvestmentallowanceoncapitalincurredontheacquisitionofstate-

of-arttechnologicalequipmentbyamanufacturingcompany.(d) tax relief on the interest paid by an individual on a housing loan, subject to

conditions.

CORPORATE SOCIAL RESPONSIBILITY (CSR)Every profitable company and resident société are required to spend 2% of itschargeableincomeoftheprecedingyeartoimplement:

(a) anapprovedprogrammebythecompany(b) anapprovedprogrammeundertheNationalEmpowermentFoundationor(c) FinanceanNGO.

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For the purpose of CSR, a company does not include:(a) acompanyholdingaGBC1Licence(b) abankholdingabankinglicenceundertheBankingActinrespectofitsincome

derivedfromitsbankingtransactionswithnon-residentorcorporationholdingGlobalBusinessLicence

(c) AnIntegratedResortScheme(IRS)Company(d) Anon-residentsociété,atrustoratrusteeofaunittrustscheme.

GLOBAL BUSINESS COMPANIESGlobalbusinesscompanies(companies,trusts,sociétés)havespecialfiscalregimesandincentivessuchascustomsdutyremissionandconcessionaryincometaxratesforexpatriates.Generoustaxcreditsareavailabletothosecompanies.

OFFShORE TRUSTSResidenttrustsaretaxedat15%.Deemedtaxcreditof80%isavailabletothetrusts.Non-residenttrustsandtheirnon-residentbeneficiariesareexemptfromtaxes.

SOCIéTé (PARTNERShIP)EverypartnerofasociétéholdingaGBC1Licenceisliabletoincometaxinrespectofitsshareattherateof15%.


UnilateralreliefisprovidedforintheIncomeTaxAct.Intheeventofdoubletaxation,reliefisbywayofanordinarycredit.Thetaxpayermayelecttoclaimthecreditonaggregateforeign-sourceincomeoronasource-by-sourcebasis.

d. CoRpoRAte GRoUps

Thegeneralruleisthatnogroupreliefisallowedexceptinafewspecialcases.


The taxauthoritiesmayadjust the liability of a taxpayerwhere it considers that atransaction has not been entered into or carried out by persons dealing at arm’slength.Itmustbeoftheopinionthatavoidanceorreductionofliabilityoftaxwasthemainpurposeofsuchatransaction.

F. WItHHoldInG tAX

Theratesforwithholdingtaxesareasfollows:

Residents Non-residents

Companies Individuals Companies Individuals

Interest 0% 0% 15% 15%

Royalties 10% 10% 15% 15%

Rent 5% 5% 5% 5%

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Companies Individuals Companies Individuals

Contract 0.75% 0.75% 0.75% 0.75%

Services 3% 3% 10% 10%Paymentsmadebycentralgovernmentorlocalauthorityforprocurementofgoods/services

1-3% 1-3% 10% 10%

G. peRsonAl tAX

TAX YEARThefiscalyearisonacalendaryearbasis.IncomeTax ispayableby residentsonnon-exempt incomederived fromMauritiuslessallowabledeductions including interestonhousing loan,subject toconditions.Employersdeductincometaxfromeachsalarypaymentsofallindividualtaxpayers.Thepersonaltaxrateis15%.

H. tReAtY And non-tReAtY WItHHoldInG tAX RAtes

Theratesfortreatycountriesareasfollows.

Treaty countries Dividends Interest Royalties

(%) (%) (%)

Barbados 5 5 5

Bangladesh 10 _1 _1

Belgium 5/10 10 0

Botswana 5/10 12 12.5

China 5 10 10

Congo 0/5 5 0

Croatia 0 0 0

Cyprus 0 0 0

Egypt 5/10 10 12

France 5/15 _1 15

Germany 5/15 0 10

Guernsey 0 0 0

India 5/15 _1 15

Italy 5/15 _1 15

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Treaty countries Dividends Interest Royalties

(%) (%) (%)

Kuwait 0 0 10

Lesotho 10 10 10

Luxembourg 5/10 0 0

Madagascar 5/10 10 5

Malaysia 5/15 15 15

Monaco 0 0 0

Mozambique 8/10/15 8 5

Namibia 5/10 10 5

Nepal 5/10/15 10/15 15

Oman 0 0 0

Pakistan 10 10 12.5

Rwanda 10 10 10

Senegal 0 0 0

Seychelles 0 0 0

Singapore 0 0 0

SouthAfrica 5/15 0 0

SriLanka 10/15 10 10

StateofQatar 0 0 5

Swaziland 7.5 5 7.5

Sweden 0/15 0 0

Thailand 10 10/15 5/15

Tunisia 0 2.5 2.5

Uganda 10 10 10

UnitedArabEmirates 0 0 0

UnitedKingdom 10/15 _1 15

Zimbabwe 10/20 10 15

Zambia 5/15 10 5

1 Samerateasunderdomesticlaw.

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MEMBERFIRM

NameofFirm: PKFMAROCCity: CASABLANCAContact:Name: ABDELLATIFZARKALTelephone: +212522476470Email: [email protected]

KEY TAX POINTS• Moroccancorporationsaresubjecttoaunitarytaxsystemcalledthecorporate

tax‘impôtsurlessociétés’orISsystem.• Thenormalrateofcorporationtaxis30%witha37%rateapplyingtoleasing

companiesandcreditinstitutions.• The standard rate ofValueAddedTax is20%andapplies to all suppliers of

goodsandservices,exceptthosetaxedatotherratesorthosewhoareexempt.Areducedrateof10%appliestospecificitems.

• Dividendspaidtoanon-residentaresubjecttoa15%withholdingtaxunlessthe rate is reducedunderanapplicable tax treaty. Intereston loansobtainedfromanon-residentandroyaltiespaidtonon-residentsaresubjecttoa10%withholdingtax(subjecttotreaties).

A. tAXes pAYABle

GENERAL REGIMETheMoroccan taxation systemconsists of direct and indirect taxes. Indirect taxesprovideagreatersourceoftaxrevenuethanthedirecttaxes.Moroccancorporationsaresubjecttoaunitarytaxsystemcalledthecorporatetax‘impôtsurlessociétés’orISsystem.

Thesystemisstatutoryandcontainsapackageofincentivesdesignedtoencourageboth Moroccan and foreign investors. For example, in order to promote foreigninvestmenttheBudgetLawfor2014exemptedpermanentlyfromcorporatetaxtheFund“AFRICA50”createdbytheAfricanDevelopmentBank.

From2014, the taxationofagricultural incomes,whichwereuntil2013exemptedfromincometax,isestablished.

ThekeymeasuresintroducedbytheBudgetLawfor2015aresummarizedasfollows:

• Exemptionfrompersonalincometaxonthegrossmonthlysalaryincomecappedat10,000dirhamspaidbycompaniescreatedbetween1January2015and31December2019andwithinthelimitsof5employees;

• Increase of the VAT exemption period for investment goods from 24 to 36monthsfromthestartofactivity;

• Transfer prices: the Budget law 2015 establishes a procedure to taxablebusinesses in Morocco, having direct or indirect dependency links withcompaniesoutsideofMoroccotoconcludewiththefiscalAdministrationprior

Morocco

moRoCCoCURRENCY: Morocco Dirham (MAD)POPULATION: 33.66 million GDP GROwTh: 4.7%GDP: US$ 121.9 billion

82

agreementon themethodofdetermining transferpricesbetween themforaperiod not exceeding four years. Thismeasure will enable these companiestobenefit froma legalguaranteeagainst the riskofcalling intoquestion themethodofdeterminingprices.

CORPORATE INCOME TAXThedefinitionof‘corporation’coverslimitedliabilitycompanies,limitedpartnershipsbyshares,generalandlimitedpartnershipsinwhichatleastonepartnerisacorporateentity, civil companies, branches of foreign corporations, public sector companieshaving profit-oriented activity and joint ventures having business-oriented activity.Generalpartnershipsand limitedpartnerships inwhichall partnersare individualsmay elect to be taxed under the corporate tax regime.The same applies to jointventuresinwhichallpartiesareindividuals.

Thenormalrateis30%witha37%rateapplyingtoleasingcompaniesandcreditinstitutions.Foreigncontractorscarryingoutengineering,constructionorassemblyprojectsrelatingtoindustrialortechnicalinstallationsmayopttobetaxedatarateof8%calculatedonthetotalcontractpricenetofVATandsimilartaxes.

MINIMUM CORPORATE TAX CONTRIBUTIONCompaniesarealwayssubjectedtoaminimumcontribution(CotisationMinimale;CM)of0.5%oftheannualturnover.TheCMisbasedonturnover,incomefrominterest,subsidies,bonusesordonationsreceived.TheCMisnotpayablebycompaniesduringtheir first 36 months of operation. However, the legal entities liable to CorporateIncomeTaxwhichdonothaveaturnovermustpayaminimumcontribution.Asfrom2014,thisminimumcontributionisraisedatMAD3,000(MAD1,500previously).

Therearealsospecificratesofcorporateincometaxdetailedasfollows:• 8.75% applying to companies that operate in free zones export, during the

20 consecutive years following the fifth year of full exemption and servicecompanieswiththestatusof“CasablancaFinanceCity”inaccordancewiththelawsandregulations,beyondthefiveyearsofexemption;

• 10% for organisations with regional or international status “Casablanca CityFinance”,accordingtothelawsandregulations,fromthefirstyearofgrantingsuchstatusandoptionally foroffshorebanksduring the15first consecutiveyearsfollowingthedateofobtainingapproval;

• 10%applyingforcompanieswithafiscalnetincomeoflessthanorequaltoMAD300,000;

• 17.5% for companies operating in some northern and southern regions andalsoforcompaniesexportingproductsorservicesafterthetotalexemptionfromcorporatetaxforaperiodoffiveconsecutiveyearscalculatedfromtheyearinwhichthefirstexportoperationwasperformed.

Companiesaretaxedonthedifferencebetweentheirtradingincomeandexpenditure.Businessexpensesincurredintheoperationofthebusinessaregenerallydeductibleunlessspecificallyexcluded.Expensesnotpermittedinclude:fines,penalties,interestonshareholderloanswherethestockisnotfullypaidup,andinterestonshareholderloansinexcessoftheofficialannualinterestrate.

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Morocco

Moroccooperatesaterritorialtaxsystem.Companies(bothresidentandnon-resident)aregenerallysubjecttocorporatetaxonlyonincomegeneratedfromactivitiescarriedon inMorocco. Foreign corporations are subject to taxation on income arising inMoroccoiftheyhave,oraredeemedtohave,apermanentestablishmentinMorocco.AcompanyisresidentinMoroccoifitisincorporatedthereoritsplaceofeffectivemanagementisinMorocco.

The calendar year is normally the fiscal year although a companymay opt for adifferent fiscal year.Accounts for income tax purposesmust be filedwithin threemonthsaftertheendoftherelevantaccountingperiod.

Corporate tax is payable in four equal instalments, based on the prior year’sassessment.Theactualamountpayable isadjusted in the threemonths followingtheendoftheaccountingperiod.Foreigncompaniesthathaveelectedforthe8%defaulttaxationmustsubmitadeclarationoftheirturnoverbefore1Aprilfollowingeachcalendaryear.

TAXATION OF AGRICULTURAL INCOME (COMMON MEASURE TO BOTh PERSONAL INCOME TAX AND CORPORATE INCOME TAX)

First,thedefinitionofAgriculturalIncomeassetbythearticle46oftheGeneralTaxCode is profoundly amended.According to the Budget Law for 2014,AgriculturalIncomes encompass “profits made by farmer/cattle breeder and derived from allactivitiesinherentinanimal/plantoperatingcycleandwhoserevenuesareintendedtohumanoranimalfeed,aswellasthetreating/processingactivitiesoftheserevenues,apartfromtheirtransformationbyindustrialmeans.”

Asfrom1stJanuary2014,incorporatedfarmsmakingaturnoversuperiororequaltoMAD5millionduringthree(3)consecutivefiscalyearsaresubjecttoCorporateIncomeTax.

On theotherhand, incorporated farmswitha turnoverbelowsuch thresholdkeeptheircurrentstatus,underwhichtheyaretotallyandpermanentlyexemptedfromCIT(article6-1-A-29oftheGeneralTaxCode).

Thetaxationofincorporatedfarmsorfarmerswillfollowthistimetable:

Period Threshold

From1stJanuary2014to31stDecember2015 TurnoversuperiororequaltoMAD35million.

From1stJanuary2016to31stDecember2017 SuperiororequaltoMAD20million.

From1stJanuary2018to31stDecember2019 TurnoversuperiororequaltoMAD10million.

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Thus,startingfrom1January2020,allfarmsmakingaturnoversuperiororequalto MAD 5million operated either through a corporation or not will be subject toCorporateIncomeTaxorPersonalIncomeTax.

However,farmersliabletotaxareexemptedfrominstalmentpaymentsforthefirsttaxablefiscalyear(article170oftheGTC).

Incorporated farms and farmers benefit temporary from reduced tax rates for thefiveyears:• Taxrateof17.5%for incorporatedfarmssubjecttocorporatetaxforthefive

consecutiveyears,startingwiththefirsttaxableyear;• Taxrateof20%fortannerssubjecttoPersonalincometax.

SOCIAL CONTRIBUTIONAtaxcalledsocialcontribution(contributionsociale)comesintoforcefromJanuary2013toDecember2015.Thistaxisappliedtothenetincome(afterincometax)oftheentities.

Net income MAD Tax Rate

15,000,000–Lessthan25,000,000 0.5%

25,000,000–Lessthan50,000,000 1.0%

50,000,000–Lessthan100,000,000 1.5%

Over100,000,000 2.0%

BRANCh REMITTANCE TAXA15%branchremittancetaxisimposedonprofitsremittedtotheheadoffice.TheMoroccan-sourcedincomeofMoroccanbranchesofforeigncompaniesissubjecttoincometaxattheordinarycorporaterateoftax.

The taxable income is calculated as if the branchwas a separate entity from theforeigncompany.

VALUE ADDED TAXThe Value Added Tax (VAT) is a non-cumulative tax levied at each stage of theproductionanddistributioncycle.Thus,suppliersofgoodsandservicesmustaddVATtotheirnetprices.WherethepurchaserisalsoliableforVAT,inputVATmaybeoffsetagainstoutputVAT.ThestandardVATrateis20%andappliestoallsuppliersofgoodsandservices,exceptthosetaxedatotherratesorthosewhoareexempt.Areducedrateof10%appliestospecificitemssuchasbankingandcreditservices,leasing,gas,waterandelectricity.

TwotypesofexemptionsfromVATareprovided.Thefirstisanexemptionwithcredit,equivalenttothezerotaxconcept,whichappliestoexports,agriculturalmaterialsandequipment,andfishingequipment.Thesecondisanexemptionwithoutcredit-iethesellerreceivesnocreditforinputVATpaid.Thisexemptionappliestobasicfoodstuffs,newspapersandinternationaltransportservices.Withintheframeworkofthefuturetaxreform,theGovernment intendstoradically

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overhaulthevalue-addedtax(VAT)system,notablybyprogressivelyaligningtheVATrates,andeventually limitingthenumberofratestotwo,namelya10%and20%rateofVAT.

Asfrom1January2014,theratesofthefollowingproductsareamended:Rawsugar,rawlogs,somecategoriesoffarmequipmentandcateringservicesdirectlyprovidedbythecompanytothestaffarenowsubjecttotherateof10%.

The20% rate applies to equipment and fishingnets, dried raisins anddried figs,candlesandparaffin.

The10%rateappliestofoodforcattlefeed(previouslysubjecttothe7%rate).Finally,therateof20%appliestocommercialvehicles,alimentaryfatsandmargarines(14%previously).

BeforetheBudgetLawfor2014,therightofdeductionaroseattheendofthemonthfollowingtheestablishmentoftheCustomsreceiptsorfullorpartialpaymentofbillsonbehalfofthebeneficiary.Asfrom1January2014,therightofdeductionofVATbeginsattheendofthemonthoftheestablishmentofCustomsreceiptsorattheendofthemonthofthefullorpartialpaymentofbillsonbehalfofthebeneficiary.Asaresult,the“one-monthlag”ruleisabolished.

BUSINESS TAXAbusinesstaxor“taxeprofessionnelle”isleviedonindividualsandenterprisesthathabituallycarryoutbusinessinMorocco.Thebusinesstaxisappliedontheannualrentalvalueofbusinesspremises(rentedorowned)cappedatMAD50millionnetofVAT.Thetaxratesrangefrom10%to30%withexemptionforthefivefirstyearsofactivity.

URBAN PROPERTYOwnersof realestatearesubject tourbanproperty taxon the rental valueof theproperty.Thesameappliestoownersofmachinesandappliancesthatareintegralpartsoftheestablishmentproducinggoodsorservices.

PROPERTY TAXPropertytaxisassessedontherentalvalueoftheproperty.Thegeneralpropertytaxrateis10%oftheassessedrentalvalue,asdeterminedbythelocaltaxauthorities.

If the property is used as a primary residence, only 25% of the assessed rentalpropertyvalueissubjecttotax.Propertiesoccupiedasamainorsecondresidencearetaxedatprogressiveratesasfollows:

Tax Base MAD Tax RateUpto5,000 Nil5,000–20,000 10%20,000–40,000 20%Over40,000 30%

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CUSTOMS DUTIESAllgoodsandservicesmaybeimported.Goodsdeemedtohaveanegativeimpactonnationalproduction,however,mayrequireanimportlicence.ProductsfromtheEUarefullyexemptedfromMarch2012.Cars,householditemsandalsosemi-finishedproducts for local industry are reviewed.The rates fall for products brought fromtheoutsideworld.Somematerialsandproducts,however,areexempted,especiallythose imported under the investment charter, imported under customs economicsystemsand thoseusing renewable energies.Value added tax is also payable ongoodsimportedintoMorocco.

CAPITAL GAINS TAXIndividualsearningcapitalgainsfromsellingpropertyaresubjecttotaxonpropertyprofits.Profitson thesaleofpropertyare taxableat20%ofanyprofitbutwithaminimumtaxof3%ofthesaleprice.Thetaxablegainiscomputedbydeductingthefollowingfromthesellingprice:• Acquisitionpriceandincidentalcosts;• Transfercosts;• Investmentexpenses;• Interestpayments.

Capitalgainsfromthesaleofapropertywhichhasbeentheprimaryresidenceofthetaxpayerarenotsubjecttotaxundersomequalifications:• Thepropertyhasbeentheseller’sprimaryresidenceforatleastsixyears;• Thepropertyhasbeentheseller’sprimaryresidenceforatleastfouryearson

thedayofthesale,andthepropertyareadoesnotexceed100sq.m.andtheprofitdoesnotexceedMAD250,000;

• TheprofitmadeononeormoretransfersbyindividualswithinacalendaryearwhosetotalvaluedoesnotexceedMAD140,000.


CAPITAL GAINSMorocco instituted a tax on the proceeds from a company’s stocks, shares andcomparable income (TPT),distributedbycompaniesbased inMoroccoandpayingtaxesoncorporations.Thetaxof10%iscollectedatthesourceandappliesto:• Capitalinterest;• Profitpercentages;• Special allowances or the payment of fees and other compensation allotted

to members of the board of directors (except for the fraction of thesecompensationsconsideredassalaryandsubjecttopersonalincometax(IR);

• Sumsleviedonprofitstorepaycapitalproducedtostockholdersortobuyoverstocks;

• Beneficiary/founder’sshares;• Surpluses fromwindingupaugmentedby reservesbuiltupoverat least ten

yearsago;• Profits made in Morocco by establishments whose home office is located

abroad,astheseprofitsaremadeavailabletosuchcompaniesabroad.

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LOSSESTaxlossesmaybecarriedforwardforaperiodoffouryearsfromtheendofthelossmakingaccountingperiod.However,theportionofalossthatrelatestodepreciationmaybecarriedforwardindefinitely.Lossesmaynotbecarriedback.

DIVIDENDSDividendsreceivedbycorporateshareholdersfromtaxableMoroccan-residententitiesmustbeincludedinbusinessprofitsoftherecipientcompanybutthedividendsare100%deductibleinthecomputationoftaxableincome.Theparticipationexemptionin Morocco is also applicable to dividend derived from foreign subsidiaries. Theoriginal participation exemption regime granted 100% allowance to a MoroccanrecipientcompanyofMoroccan-sourcedividends.

CONSOLIDATED RETURNSConsolidatedreturnsarenotpermitted.Eachcompanymustfileitsownreturn.

INTEREST DEDUCTIONSInterest paid on loans and other debts is deductible to the extent it relates toborrowingsmadeforincomeproducingpurposes.

Thincapitalisationrulesapplytoreducethedeductionavailablewherethetaxpayerisa foreignentityoperating inMorocco,a foreigncontrolledMoroccanentityoraMoroccan residentwith foreignbusiness investments. Ineachof thesecases, thetaxdeductionforinterestmaybereducedifthetaxpayer’sdebtexceedsthelevelspermittedunderthethincapitalisationprovisions.

REPATRIATION OF PROFITS AND TRANSFER PRICINGInadditiontopayinginterestanddividends,thepaymentofmanagementfees,servicefeesandroyaltiesaremethodsofrepatriatingprofitstothenon-residentassociates,controllersandownersofMoroccanentities.

Inthesecircumstances,thepaymentsmadebytheMoroccanresidenttothenon-residentassociatemustreflectthemarketvalueofthegoodsand/orservicestotheMoroccancompany.Thatis,allpaymentsmustbecalculatedwithreferencetoarm’slengthmarketrates.

Where the Tax Office takes the view that the Moroccan company has paid anexcessive amount for the goods and/or services, the Tax Office can disallow thedeductionclaimedbytheMoroccancompanyandsubstituteanalternativeprice.

OthertransactionsbetweenMoroccantaxableentities(orbranches)andtheirrelatedforeignentitiesorheadofficesarealsosubjecttothetransferpricingrules.Wherea Moroccan branch of a foreign company remits profits to its parent by way ofmanagement feesorservice fees, theprofitsarenotsubject towithholding taxorbranchprofitstax.


SinceaMoroccanresidentistaxedonworldwideincome,theMoroccantaxsystem

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provides relief from foreign taxes paid on suchworldwide income bymeans of aforeigntaxcredit.ThisforeigntaxcreditcannotexceedtheMoroccantaxotherwisepayableinrespectoftheforeign-sourceincome.

d. WItHHoldInG tAX

Dividendspaid toanon-residentaresubject toa15%withholding taxunless therate is reduced under an applicable tax treaty. Interest on loans obtained from anon-resident is subject to a 10%withholding tax. Royalties paid to non-residentsaresubjecttoa10%withholdingtaxunlesstherateisreducedunderanapplicabletaxtreaty.

e. peRsonAl tAXes

Individuals, regardless of nationality or activity, who have their habitual residenceinMoroccoaresubjecttoapersonalincometax(impotsurlerevenuorIR)ontheirworldwideincomeonaprogressivescalebetween10%and38%.

IndividualswhodonothavetheirhabitualresidenceinMoroccoaresubjecttotaxonlyonMoroccan-sourceincome.Habitualresidencestatus isestablishedbyreferencetooneofthefollowing:(1) Placeofpermanentabode;(2) Centreofeconomicinterest;(3) Durationofstay in thecountryexceeding183dayswithinanyperiodof365

days.

Theissueofdoubletaxationispartiallyaddressedbytaxtreatiesorunilateralreliefintheformoftaxcredit.

Allcompensationreceivedbyanindividualistaxable,includingsalariesandwages,allowances, pension annuities, and all other employment benefits, investmentincome, property incomeand incomederived from the carrying out of a businessor profession. Capital gains derived from the disposal of immovable property aregenerallysubjecttotaxaspartofthepersonalincomeoftheindividual,i.e.20%.

Filingandpayment:thetaxreturnmustbefiledby31Marchofeachyearintheplacewherethetaxpayerhashis/herhabitualresidenceormainbusiness.

Resident individuals are assessed to tax on taxable income from January 2010accordingtothefollowingscales:

Income MAD Tax Payable0-30,000 Nil30,001-50,000 10%50,001-60,000 20%60,001-80,000 30%80,001-180,000 34%Over180,000 38%

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ArangeofrebatesareavailabletoMoroccanresidentindividualtaxpayers.

Employersmust retain and pay any income tax due on the salaries paid to theiremployees thepreviousmonthwithin thefirst tendaysofeachmonth. Individualswhoreceiveincomesfromnon-wagesourcesmustfileataxdeclarationeveryyearonorbefore31March.

Net rental income is taxable under the general income tax (lmpot General sur leRevenuorIGR)atprogressiverates.Astandarddeductionof40%ofthegrossrentalincomecoverstheincome-generatingexpensesinlieuofitemiseddeductions.Asof2014,thetaxationonsuchrentalincomesisnoweffectiveasfromthefirstyear(theexemptionofrentalincomederivedfromtherentingofnewbuildingsapplicableduringthethree-yearperiodfollowingthecompletionoftheconstructionsisabolished).

Until2013,retirementpensionsinMoroccoweresubjecttoa55%taxallowanceontheirwholeannualgrossamount.TheBudgetLawfor2014cappedthisadvantagebyintroducingathresholdreducingthisadvantageto40%:• 55%fromMADzero(0.00)toMAD168,000;• 40%beyond.

Furthermore, the Budget law 2014 creates the new fiscal regime of “auto-entrepreneur”,applicabletoindividualswhoseannualturnoverdoesnotexceedMAD500,000 forcommercial, industrial,andartisanalactivitiesundertaken,andwhereyearlyturnoverdoesnotsurpassMAD200,000fortheprovisionofservices.Underthe“auto-entrepreneur·status,individualsaresubjecttoincometaxatarateof1%or2%ofturnover,dependingontheactivity.

Finally, the Budget Law for 2014 provides a new disposition aiming at deferringtaxationonthenetcapitalgainrealizedbyataxpayerwhocontributesthestocksheholdsinoneorseveralcompaniestoaresidentholdingcompanyliabletoCorporateIncomeTax.

Theoperationmustsatisfythefollowingconditions:• Thecontributionmustbecarriedoutbetween1January2014and31December

2015;• Thevalueofthecontributedsharesmustbeassessedbyalegallyaccredited

accountingexpert;• Thecompanytowhichthesharesarecontributedshallundertaketokeepthe

sharesduringaminimumof4yearsfromthedateofthecontribution;• The taxpayer who proceeds to the contribution shall undertake, in the

contributionagreement,topaythetaxonthegainsheshallderivefromthesale,refundingorcancellationofthestocksreceivedinexchangeforthecontribution.

Incaseofnon-respectoftheseformalities,thecapitalgainsaretaxedinaccordancewithordinarytaxrules.

SOCIAL CONTRIBUTIONThistaxcalledsocialcontribution(contributionsociale)isinforcefromJanuary2013toDecember2015.Thistaxisappliedtotheannualnetincome(salaries,dividends,

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etc)earnedbyanindividual.

Net Income MAD Tax Rate0-360,000 Nil360,001-600,000 2%600,001-840,000 4%Over840,001 6%

F. otHeR tAXes

DOMESTIC CONSUMPTION TAXAsfrom1January2014,theamountofthistaxisraisedtoMAD500byhectolitreforenergizingdrinks,andtoMAD700byhectolitreforwines.

TAX ON PLANE TICKETSTheBudgetLawfor2014setsoutanewtaxonplaneticketscomingintoforceasof1April2014.ThistaxwillbeleviedonticketspurchasedoninternationalflightsdepartingfromMoroccanairports(domesticflightsareexempted).Howeverthistaxwill not apply to certain category of tickets, such as those for flying and securitypersonalorforchildrenbelowtwo(2)yearsold.

TheamountoftaxissettoMAD100forEconomyClassandMAD400forBusinessandFirstClass.

SPECIAL ANNUAL TAX ON LUXURY VEhICLESTheBudgetLawfor2014raisestheratesofthistaxasfollows:

Value of the vehicle excluding VAT RateFromMAD400,000toMAD600,000 5%FromMAD600,001toMAD800,000 10%FromMAD800,001toMAD1,000,000 15%SuperiortoMAD1,000,000 20%

G. tReAtY And non-tReAtY WItHHoldInG tAX RAtes

TheMoroccangovernmentiseagertoencourageforeigninvestment.Thisisreflectedbytheterritorialityprinciplefortaxationapplicabletocorporationsmentionedabove.

In addition, Morocco has concluded about 47 treaties including a multilateralagreementwithMAU (MaghrebArabUnion:Algeria,Tunisia,LibyaandMauritania)forthepreventionofdoubletaxation,mainlywithdevelopedcountries.Morocco’slistoftreaty-partnersincludeBelgium,Canada,France,Germany,Italy,Luxembourg,theNetherlands,Norway,Romania,Spain,theUnitedKingdomandtheUnitedStates.ThetreatysignedwithSwedenwascancelledandhasnotbeenapplicablesince2007.

MostofthetaxtreatiesarebasedontheUN(UnitedNations)modelanddonotcontainspecificanti-abuseprovisions.Reducedwithholdingtaxratesvaryfromonetreatytoanother.OfspecialinterestisthetreatywithFrancewhichoffersadvantagesinvolvingself-employedforeignersandpaymentsfortechnicalassistanceandcontracts(e.g.importedsupplies).

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MozambiqueCurrency:Metical(MT,MZMorMTN)DialCodeTo:258DialCodeOut:00

MemberFirm:City:MaputoName:MiguelDamasContactInformation:+25821333493/[email protected]

A. tAXes pAYABle

COMPANY TAXResidentcorporationsaresubjecttocorporateincometax(IRPC)ontheirworldwideincome. Resident companies are those which have their head office, or place ofeffectivemanagement,inMozambique.

Non-residentcompanieswithapermanentestablishmentinMozambiqueareliableforIRPContheincomeattributabletothatpermanentestablishment.

Anon-residentcompanywithnopermanentestablishmentinMozambiqueistaxedonthefollowingtypesof incomesourced inMozambique:capitalgains,dividends,interests,royalties,servicesandrentals.

Taxableprofit is taxed,normally, at32%.Nondocumentedexpensesare taxedat35%.

Thetaxyearusuallycoincideswiththecalendaryear(1Januaryto31December).ExceptionsmustbepreviouslyapprovedbytheFinanceMinisterandonlyappliesifacompanyisowned,morethan50%,byanotherwithadifferenttaxyearitmayadoptthatdifferenttaxyear.

Taxispayableasfollows:

Taxable persons Tax paymentResident entities whose main activityiscommercial, industrialoragriculturaland non-residents with a permanentestablishmentinMozambique.

-Paymentsonaccount(PC)inMay,JulyandSeptember(5th,7thand9thMonthafteryear end)- Special payments on account (PEC) inJune,AugustandOctober(5th,8thand10th Monthafteryearend).-Thebalanceisduebythedatewhenthetaxreturnisfiled–generally31May.(5th monthafteryear-end)

Resident entities whose main activityis neither commercial, industrial noragricultural.

Tax is payable by 31 May following theendofthetaxyear.

Non-resident entities without apermanentestablishment.

Taxed by definitive withholdingmade byclientorbyindependenttaxreturn

Mozambique

mozAmBIqUeCURRENCY: Mozambican Metical (MZM)POPULATION: 27.25 millionGDP GROwTh: 8.2%GDP: US$ 18.6 billion

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Paymentsonaccount(PC)areestimatedonthebasisof80%ofprevioustaxyear’sIRPCliability,lessanytaxwithheldatsourceanddividedintothreeequalinstalments.

PC=(IRPCofpreviousyear-withheldtaxofpreviousyear)x80 _________________________________________3instalments

Specialpaymentsonaccount(PEC)areestimatedonthebasisof0.5%ofthesalesand/or services rendered during the previous financial year, with the minimumamountof30.000MTandmaximumof100.000MT,netofprovisionaltaxpaymentsmadeinthepreviousyearanddividedintothreeequalinstalments.

PEC=(turnoverofpreviousyearx.05%PCofpreviousyear)_____________________________________3instalments

Permanent establishments of non-resident companies are taxed at the ratesapplicabletoresidentcompanies.When there isnopermanentestablishment, tax is leviedat ratesvaryingbetween10%and20%accordingtothesourceofincome.

CAPITAL GAINS TAXWorldwide capital gains obtained by resident companies are included in taxableincome.Thegain(orloss)iscalculatedbythedifferencebetweenthesalesproceedsandtheacquisitioncostwhichmaybeupdatedusingofficialinflationcoefficients.

Iftheproceedsofthesalesarereinvestedinotherfixedassets,withinthreetaxyearsfollowingtheyearofsale,100%ofthegainobtained(netoftherelatedlosses)willbeexcludedfromtaxation.

Whenonlypartoftheconsiderationisreinvested,onlythecorrespondingpartofthegainqualifiesfortherelief.

BRANCh PROFITS TAXAll income attributable to the Mozambique branch (permanent establishment) issubjecttocorporationtax.Notaxisimposedontheeventualremittancesofprofitstotheheadoffice.

SALES TAX/VALUE ADDED TAX (VAT)Thestandardrate is17%. VAT ischargeableon thesaleofalmostallgoodsandservicesaswellasonimports.UsuallyVATisrecoverablebycorporateentities.

OThER TAXESMunicipal tax on real estate: Owners of real estate properties are subject to taxbetween0.2%and1%forurbanpropertiesdependingonthemunicipality.

RealEstateTransferTax (SISA):RealEstateTransferTaxapplies to transferof realestatepropertyandisnormallypayablebythepurchaseratarateof2%.A10%rateapplieswhenthepurchaserofthepropertyisaresidentofablack-listedoffshorejurisdiction.

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Mozambique

Social security contributions (INSS): Social security contributions are payable byemployers(4%)andemployees(3%)onmonthlyremuneration.

B. deteRmInAtIon oF tAXABle InCome (IRpC)

Normally net income, or taxable income, is arrivedat by adjusting the accountingprofits fornon-taxed incomeandnon-deductibleexpenses.Asageneralprinciple,costs are only deductiblewhen necessarily incurred for the purpose of producingincome.

DEPRECIATIONFixedassetscanbedepreciatedfortaxpurposes.Themaindepreciationratesare:

Assets Rate %Tangibleassets:Industrialbuildings 4Officeandresidentialbuildings 2Machineryandinstallations,airconditioning,andtelephoneequipment 10Lifts 8.33Tools 25Laboratoryequipment 12.5Telexandinteriorequipment 10Furnitureandfilingsystems 10Typewritersandaccountingmachines 14.28Computerhardware 16.66Warehouseandfilinginstallations:Ofconcrete 5Ofwood 6.66Ofsteel 8.33Trucks 20Automobiles 25Intangibleassets:Pre-operating expenses incurred prior to the commencement ofbusiness 33.33

Deferredexpensesarisinginconnectionwithincreasesinsharecapital,changes in form of business enterprises, issuance of debentures,marketing and other studies, and financial expenses incurred for theacquisitionorownproductionoffixedassetspriortocompletion

33.33

Patents 10Manufacturinglicences,concessionaireagreements,andsimilarrights 5*Trademarkorpremiumoftakingoverleasesofrealestate **

*Ifsomeconditionsaremet.**Maybeacceptedbytaxauthoritiesifproventhedecreaseofthevalue.

STOCKS/INVENTORYInventorymustnormallybevaluedattheeffectivecostofacquisitionorproduction

94

(historiccost).Othermethodswhichmaybeadoptedinclude:• the standard costmethod,whichmust be calculated in accordancewith the

appropriatetechnicalandaccountingprinciples;• thesalepricemethod,basedonthemarketvaluelessanormalprofitmargin;• thespecialcostingforbasicornormalinventory,subjecttopriorapprovalofthe

taxauthorities;and• thecostingbasedonmarketpricequote,thiscanbeusedbycompaniesselling

agriculturalproductsandotherbiologicalassets.

CAPITAL GAINS AND LOSSESGainsobtainedbynon-residententitiesfromthedisposalofsharesmaybeexemptfrom tax depending on the holding period of the shares. This exemption is notapplicableifthegainsareobtainedfromanon-resident.

Period of detention of shares Reduction % Effective RateLess than one year 0% 32%12to24months 15% 27,2%24to60months 35% 20,8%Morethan60months 45% 17,6%

DIVIDENDSThereisafullparticipationexemptionforpaymentofdividendsbetweenMozambiqueresidentcompanieswhentherecipientofthedividendsisacompanythathasheldaparticipationofnotlessthan20%ofthesharecapitalofthedistributingcompanyforaminimumperiodoftwoyears(iftheinvestmentisheldforlessthan2yearthelawallowsthattheshareholderswillstillbeexemptiftheinvestmentishelduntilitcompletes2years). Ifsuchconditionsarenotmet, thedividendamount issubjecttotaxation.

INTEREST DEDUCTIONSInterestisdeductibleonanaccrualsbasis.TheFiscalAdministrationisentitled,undercertaincircumstances,todisallowinterestpaymentstorelatedpartiesinexcessofarm’slengtharrangements.Thincapitalizationrulesareappliedwhenthedebt/equityratioexceeds2:1.

LOSSESOperatinglossesincurredbyresidentcompanies,orbyabranchofanon-residentcompany,maybecarriedforwardtosetoffagainsttaxableprofitsforfiveyears.Nocarrybackwardisallowed.

FOREIGN SOURCED INCOMETaxation of resident companies and permanent establishments takes into accounttheirworldwideincome.DoubletaxationtreatiesmayallowtobalancethetaxpaidoverseasandIRPC.

INCENTIVESThe Investment Law grants certain tax and customs benefits depending on theamount,locationandsectorofinvestmentactivity.

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Foreign-sourced income, gross of tax paid abroad, is included in taxable income.Aunilateralcredit for foreign incometaxsufferedcanbesetoffagainst the IRPC.Mozambique’s tax treatiesalsoapply theordinarycreditmethod.The taxcredit isrestrictedtothelowerof:• theincometaxpaidabroad(ordinarycreditmethod);and• theMozambiqueincometaxchargeableonthatforeignincome.

d. CoRpoRAte GRoUps

ThereisnogroupbasistaxoptioninMozambique.Eachcompanyhastofillinitstaxreturnsseparately.


Transferpricinglegislationenablesthetaxauthoritiestomakecorrectionstotaxableincomewhentheconditions(andprices)agreedbetweenrelatedpartiesaredifferentfrom those that would have been agreed and accepted by independent entities.Taxpayersmustkeep thenecessarydocumentation tosupport the transferpricingpolicywithinthegroup.

F. WItHHoldInG tAX

Payments between resident companies are liable to withholding tax if they areoriginatedfrom:a) Incomefromintellectualpropertyorindustrialaswellastheprovisionofknow-

how;b) Income derived from the use of or right to use , industrial, agricultural,

commercialorscientificequipmentc) Incomefrominvestmentnotcoveredintheprecedingparagraphsandproperty

income;d) Remunerationearnedasamemberofthestatutorybodiesoflegalpersonsand

otherentities;e) Income from the intermediary in the conclusion of any contract and income

otherservicesrenderedorusedinMozambique.

Non-resident entities without a permanent establishment are liable to a final anddefinitive20%WHTthatisappliedonallincomeearned.Anexceptionexistsfor(i)telecommunicationsandinternationaltransport,aswellastherespectiveinstallationand assembly of equipment made by those same entities, (ii) construction andrehabilitation of production, transport, and distribution of electricity infrastructuresintheruralzonesunderthepublicprojectsofruralelectrification;and(iii)maritimevesselsfreightforfishingandcoastingactivities,allofwhicharesubjecttoa10%WHTrate.

G. eXCHAnGe ContRol

All transfers to and from abroad are subject to registration with the Bank of

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96

Mozambique and may not be authorized in certain circumstances. Shareholdersloansoranyothertypeofforeignloanareliabletopre-approvalbytheCentralBank.Otherexamplesofoperationsthatrequirepre-approvalareinsuranceoperationsandguaranteesoperations.

H. peRsonAl tAX

Personal Income tax (IRPS) is payable by individuals on income obtained fromemployment, a business activity or independent profession, investment income,immovableproperty,capitalgains,pensionsandbettingorgamblingprofits.Residentindividualsaresubjecttoincometaxontheirworldwideincomewhilenon-residentsareliabletoincometaxonlyonincomesourcedinMozambique.

Taxable Income Tax Rate (%) Flat rate rebate0-42,000 10 -42,000–168,000 15 2,100168,000–504,000 20 10,500504,000–1,512,000 25 25,700over1,512,000 32 141,540

Double taxation treatiesMozambique has established DTT with the following countries: Portugal, Italy,Mauritius,UAE,SouthAfrica,Macau,Vietnam,Botswanaand India.Under theDTTtreatiesinplacetaxisleviedatthefollowingreducedrates:

Country Dividends Interest Royalties Capital gainsPortugal 10% 10% 10% 0%*Italy 15% 10% 10% 0%Mauritius 8/10/15%** 8% 5% 0%UAE 0% 0% 5% 0%*SouthAfrica 8/15%*** 8% 5% 0%Macau 10% 10% 10% 0%Vietnam 10% 10% 10% 0%*Botswana 0/12%**** 10% 10% 0%*India 7,5% 10% 10% 0%*

* Incasethesharessoldarefromacompanywhichitsvalueisconstitutedwithmorethan50%ofimmovableproperty,thecapitalgainsaretaxedinMozambique.

** 8% for dividend payments by a 25% or more owned subsidiary inMozambiquetoitsMauritiusparentcompany;10%fordividendpaymentsby a less than 25% owned subsidiary in Mozambique to its Mauritiusparentcompany;15%inallothercases.

*** 8% for dividend payments by a 25% or more owned subsidiary inMozambiquetoitsSouthAfricaparentcompany;15%inallothercases.

****0% for dividend payments by a 25% or more owned subsidiary inMozambiquetoitsBotswanaparentcompany;12%inallothercases.

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Namibia

Currency:NamibianDollar DialCode:+264 DialCodeOut:09 (N$)

MemberFirmCity Name ContactInformationWindhoek UweWolff +26461220662 [email protected] A. tAXes pAYABle

FEDERAL TAXES AND LEVIESINCOME TAXIncome tax is source-basedwith certain incomesdeemed to be fromaNamibiansource,eginterestderivedfromfinancialinstitutions.Taxisimposedonallreceiptsandaccruals fromaNamibiansource,other than receiptsoraccrualsofacapitalnature.Thetaxableincomeofexternalcompaniesiscomputedinthesamewayasforlocalcompanies.Thecurrentrateofcorporateincometaxis33%commencingonorafter1January2013.

The reduction of the corporate tax rate for non-manufacturing and non-miningcompaniesfrom33%to32%willbe implementedandbecomeeffectiveforyearsofassessmentcommencingonorafter1January2014aspreviouslyannounced.TheeffectivedateremainsuncertainastherelevantpromulgationintheGovernmentGazetteisstillpending.

Therateoftaxpayablebymanufacturingcompaniesremainsunchangedat18%forthefirst10yearsofassessmentasaregisteredmanufacturer.Thenormaltaxrateof32%foryearsofassessmentcommencingon1January2014willapplyafterthe10yearperiod.TheeffectivedateremainsuncertainastherelevantpromulgationintheGovernmentGazetteisstillpending.

The tax year is the same as the financial year of the company.Tax liabilities arecalculatedonaself-assessmentbasis.

Thecollectionoftaxesismadeasfollows:• Provisional Payments (1st and2nd) are due after the first sixmonths of the

financialyearandonthelastdayofthefinancialyear• A top-up payment is payable on due date for the return of Income– seven

monthsaftertheendofthefinancialyear.

Taxratesformining,miningservicesandoilorgascompanies.The tax ratebyhard rockminingcompaniesandcompanies renderingservices inconnectionwithminingis37.5%.Thetaxratebydiamondminingcompaniesis55%andThebasicrateoftaxpayablebyoilandgasextractioncompaniesare35%.Oil andGas extraction companies are also subject to additional profits tax that iscalculatedintermsofacomplexformulacontainedinthePetroleumTaxationAct.

nAmIBIACURRENCY: Namibian Dollar (NAD)POPULATION: 2.32 millionGDP GROwTh: 4.5%GDP: US$ 13.1 billion

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PROCEEDS ON SALE OF OIL AND GAS EXPLORATION AND PRODUCTION LICENCESTheproceedsonthesaleofpetroleumlicencesandrighttoexplorefor,developorproducepetroleumwillbecome taxableonce the IncomeTaxAct isamended.Theeffectivedateoftheamendmentisnotyetannounced.

RESTRAINT OF TRADE PAYMENTSRestraintofTradepaymentswhichwerepreviouslyregardedasreceiptsofacapitalnatureandnotsubjecttoincometaxwillbecometaxableoncetheIncomeTaxActisamended.Theeffectivedateoftheamendmentisnotyetannounced.

CAPITAL GAINS TAXThereisnocapitalgainstaxinNamibia.

BRANCh PROFITS TAXNormal company income tax rules apply to the Namibian branch tax profits ofoverseascompanies.

VALUE ADDED TAX (VAT)VATappliestothesupplyofgoodsandservicesbytaxablepersonsinNamibiaandontheimportofgoodsandservicesintothecountry.

TheVATregistrationthresholdwillbeincreasedfromN$200,000toN$500,000.Theeffectivedateoftheamendmentisnotyetannounced.CriteriawillbeintroducedforvoluntaryVATregistrationandVATimportaccounts.MandatorysecurityrequirementswillbeintroducedforthedeferralofimportVATongoods.Theeffectivedateoftheintroductionsofthesecurityrequirementsinnotyetannounced.

VAT ispayableat therateof15%of thevalueof thegoodssuppliedor imported.Certainsuppliesareeligiblefora0%rate.Theseinclude:• Exportofgoodsandservicesandrelatedsupplies• Internationaltransport• Saleofagoingconcern• Saleof landandbuildingsforresidentialpurposesanderectionof residential

buildings• Supplyofmunicipalservicestoresidentialaccounts• Supplyofmahangoandmaizemeal• Supplyofagriculturallandtobeusedforresettlementpurposes• Suppliesmadeinrespectofguarantees• Supplyoffuneralundertakingservices• SupplyofservicesphysicallyrenderedelsewherethaninNamibia• Petrol,dieselandparaffin• Certainfoodsupplies• Postagestamps,butexcludingpostagestampssuppliedasacollector’spiece;• Telecommunicationservicestoresidentialaccounts• Suppliesbycharitableorganisationandsimilarinstitutions• Supplyoflivestock(onthehoof)• Thesupplyofgoods,andtherepair thereof, tobeusedasaidsbyphysically

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Namibia

handicappedpersonswhoareblind,deaf,crippledorachronicinvalid.Servicesfor any adjustment or modification in respect of a vehicle used for thesepurposes.

Exempt Supplies• Financialservices• Medicalservicesandservicesprovidedbyhospitals• Groupfinance/managementcompaniesandinter-companyloans• Residentialleasesandfringe-benefitaccommodation• Publictransportservices• Educationalservices• Managementofgrouphousingandcommercialpremises• Employeeorganisations• Localauthorities• Fringebenefits• SuppliestoforeignheadsofState

LOCAL TAXESMunicipaltaxesarepayableonthevalueoffixedproperty.

OThER TAXESOthertaxesinclude:• stampduty(ondocumentsandmarketablesecurities)• transferdutiespayableonpropertytransactions• motorvehiclelicences• royaltyonminerals• CustomsandExciseduties• Royaltytax• non-resident’sshareholderstax.• withholdingtaxoninterest• withholdingtaxonservices.

wIThhOLDING TAX ON SERVICESTherateofwithholdingtaxonservicesapplicabletopaymentstonon-residentsforservices of technical, managerial or consultative nature including director’s feesandentertainmentfeeswillbereducedfrom25%to10%.Theeffectivedateoftheamendmenthasnotyetbeenannounced.FurtherreliefmaybeavailableintermsofadoubletaxationagreementbetweenNamibiaandthecountryinwhichtheserviceproviderisresident.

ENVIRONMENTAL TAXThe introductionof thefirstphaseof theenvironmental taxeswhichwill includeacarbondioxideemissiontaxonmotorvehicles,aswellastaxesonincandescentlightbulbsandmotorvehicletyresisexpectedin2015.

EXPORT LEVYAnexportlevyontheexportofunprocessedmineralsandothernaturalresourceswillbeintroducedtopromotedomesticvalue-addition.Thistaxislikelytobeintheformofthelevypreviouslyproposedonminerals,fish,game,crudeoilandgas.Therateis

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expectednottoexceed2%ofthevalueofthegoodsexported.

ROYALTY wIThhOLDING TAXThe royalty withholding tax rate applicable to royalties payable to non-residentswillreduceto9.6%(previously9.9%)oncethecompanytaxrateof32%becomeseffective.

EXCISE DUTIESExcisedutyratesoncertainalcoholandtobaccoproductsincreasedeffectivefrom25February2015.


CAPITAL ALLOwANCESAllowancesareavailableonplantandmachinery.Taxreliefisallowedonthecostofassetsusedinthetrade,claimedoverathree-yearperiod(excludingfinancechargesonHirePurchaseorLease).Allowancesonbuildingsusedinthetradeare20%intheyeartheyweretakenintouse,balanceat4%perannumforthenext20years.Allowancesonbuildingsusedformanufacturingpurposesare20%intheyeartheyweretakenintouse,balanceat8%perannumforthenexttenyears.This isonlyapplicablefor‘registeredmanufacturers’andmustbeappliedfor.

DEPRECIATIONNodepreciationisallowedinNamibiafortaxpurposes.

STOCK/INVENTORYStockistobevaluedatthelowerofcostormarketprice,usuallyFIFOmethod.LIFOmaybeappliedfor.

DIVIDENDSDividends are not taxable except if paid to foreign taxpayers. Double TaxationAgreementsareapplicable.

INTEREST DEDUCTIONSInterestdeductionsareallowedinNamibiaiftheyareincurredintheproductionofincome.

LOSSESLossesandprofitsgeneratedbyataxpayermaybesetoffagainsteachother.Anetlossmaybecarriedforwardtoutiliseinfuturetaxyears.

Assessedlossesincurredinayearofassessmentfromatradecarriedonbyanaturalpersonmaynotbesetoffagainstotherincomeofthatpersonwitheffectfromyearsofassessmentcommencing1March2012.

FOREIGN SOURCED INCOMEForeignincomeisnottaxableinNamibia,exceptthatdeemedtobefromaNamibiansource.

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INCENTIVESMANUFACTURING INCENTIVESAmanufacturermay qualify for registeredmanufacturer status if its activities arebeneficial to the economic development of Namibia by way of net employmentcreation,netvalueaddition,replacementofimportsoranincreaseinnetexports.Thebenefitsavailabletoregisteredmanufacturersincludeacceleratedcapitalallowancesin respect of industrial buildings and enhanced allowances for training costs andpensioncontributions.

EXPORT PROCESSING ZONES/STATUSAregisteredmanufacturerderivingincomefromtheexportofgoodsmanufacturedorproducedbyittoanothercountryisentitledtoanadditionaldeductionof25%ofspecifiedtypesofexpenses.

INDIVIDUALSIncentives for individuals include housing subsidies, study bursaries or loans andtravelling allowances. Special deductions for contributions to pension and otherretirementfundsandtertiaryeducationpoliciesareavailableuptoN$40,000intotal.


Ataxcreditisavailableforforeigntaxpaidinrespectofdividends,royaltiesandsimilarincomewhichisalsotaxableinNamibia,subjecttoamaximumoftheNamibiantaxpayableontheoverseasincomeconcerned.

d. CoRpoRAte GRoUps

CorporategroupsarenottaxedasgroupsinNamibia.Theindividuallegalentitiesinagrouparetaxed.


TherearenospecialrulesinNamibiaotherthanthosecontainedintaxtreaties.

F. WItHHoldInG tAX

Generally, awithholding tax (NRST) at 20%must be deducted from any dividenddistributedbyacompanytoashareholderwho isanon-residentandnotcarryingonbusinessinNamibia.Thisratemaybereducedto10%ifthebeneficialownerofthedividendsisacompanywhoholdsdirectlyorindirectlyatleast25%ofthesharecapitalofthecompanypayingthedividends.Therateoftaxcanbereducedto5%intermsoftheprovisionsofadoubletaxationagreementbetweenNamibiaandaforeigncountry.Royalty payments to non-residents are subject to awithholding tax based on thecompany tax rate applicable to the recipient company’s year-end (currently 34%commencingonorafter1January2009)on30%ofthegrossroyaltytaxpayable.

TheMinistryofFinanceinNamibia introducedawithholdingtaxon interest,whichwillbeleviedonanyinterestearnedoraccruedtoanyperson(otherthanaNamibian

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company)fromaNamibianbankinginstitutionand/oraunittrust.The10%taxwillbedeductedfrominterestearnedbyanypersononbankaccountsandapplicableunit trust investments. Namibiancompanieswill,however,be taxedat thenormalcorporatetaxratesapplicable.

The10%withholdingtaxoninterestisafinaltaxand,asfromthe28February2010taxyear,interestfromaNamibianbankinginstitutionand/oraunittrustwillnolongerbeincludedintaxableincomeonthetaxreturnsofaffectedpersons.

Althoughaccountholdersareliableforthepaymentofthewithholdingtax,Section34C of the IncomeTaxAct requires Namibian banking institutions and unit trustschemestowithholdandpaythetaxoninterestdirectlytoInlandRevenue,within20daysafterthemonthinwhichtheinterestaccruedorwasreceivedbytheaccountholder.

The Ministry of Finance introduced a withholding tax on services rendered bynon-residents and non-resident shareholder’s tax. The effective date for thecommencementofwithholdingtaxonservicesi.e.Section35Ais30December2011foranyresidentinNamibia(residentandjuristicpersons)towithholdtaxonpaymentsforservicesrenderedbynon-residents.

Thepaymentofmanagementfees,consultancyfees,entertainmentfeesordirectors’feesbyaNamibianresidenttoanon-residentissubjecttowithholdingtaxatarateof25%.Amountsthathavebeensubjecttothe25%taxratedonotfallintothegrossincomeoftherecipientoftheamount.

TheNamibianresidentmustpaythewithholdingtaxtotheRevenueauthoritieswithin20daysaftertheendofthemonthduringwhichthewithholdingtaxwasdeductedorwithheld.Latepaymentofthewithholdingtaxissubjecttoapenaltyof10%andinterestasarateof20%peryear.

G. eXCHAnGe ContRol

ExchangecontrolsapplyinNamibia.

H. peRsonAl tAX

Individualsaretaxedunderthesamestatuteascompanies,i.e.theIncomeTaxAct1981,asamended.Generally, the incomeofanon-residentwhich isderivedfromNamibia is taxed in the samemanner as that of a resident. Only income from asourcewithinNamibiawillbeincludedintaxableincome.Profitsofacapitalnaturearenottaxed.

All individuals are taxedon incomeat progressivemarginal rates over a series ofincomebracketsasfollows:(Taxratesreducedeffective1March2013)

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Taxable income (N$) Rate Up to 50,000 0% 50,001 to 100,000 18%onamountexceedingN$50,000100,001 to 300,000 N$9,000plus25%onamountexceedingN$100,000300,001 to 500,000 N$59,200plus28%onamountexceedingN$300,000500,001 to 799,999 N$115,200plus30%onamountexceedingN$500,000800,000 to 1,500,000 N$205,000plus32%onamountexceedingN$800,000 Over1,500,000 N$429,000plus37%onamountexceedingN$1,500,000

Thetaxyearrunsfrom1Marchto28February.

Tax is determined by self-assessment with a final tax due for qualifying salariedtaxpayers.

TheduedateforreturnsofIncomeis30Juneformosttaxpayersalthoughthisis30Septemberforotherssuchassoleproprietors.

Thecollectionoftaxesisasfollows:• provisionaltaxesaretobepaidininstalmentsafterthefirstsixmonthsofthetax

yearandonthelastdayofthetaxyear• atop-uppaymentisdueonthetaxreturnfilingdate.


Thetreatywithholdingratesaremadeasfollows:

Dividends Interest Royalties

Individuals/companies

Qualifyingcompanies

(%) (%) (%) (%)

Treatycountries:Botswana 10 10 10 10France 15 5 10 10Germany 15 10 0* 10India 10 10 10 10Malaysia 10 5 10 5Mauritius 10 5 10 5Romania 15 15 15 15Russia 10 5 10 5SouthAfrica 15 5 10 10Sweden 15 5 10 5/15UnitedKingdom 15 5 20 5

*Taxableonlyinthestateofresidenceoftherecipient.

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MEMBERFIRM

NameofFirm: PKFProfessionalServicesCity:Lagos,Abuja,Kano,Kaduna,Jos(Nigeria)Contact:Name:TajudeenAkandeTelephone:+234(01)7734940;08023039317Email:[email protected]

KEY TAX POINTS• AllcompaniesoperatinginNigeriaoutsidetheoilandgassectoroftheeconomy

arerequiredtopayincomeandeducationtax.Therateis30%oftotalprofitforincometaxand2%ofassessableprofitforeducationtax.

• VATisimposedonnon-exemptsuppliesofgoodsandserviceswithinNigeriaaswellasongoodsimported.Exportgoodsarenon-taxable.Thestandardrateis5%.

• Certain payments to domestic companies and individuals and non-residentcompanies/investorsaresubjecttowithholdingtaxat5%or10%.

• Aresidentpersonisassessabletotaxonhisglobalincome,i.e.incomeaccruingin,derivedfrom,broughtintoorreceivedinNigeria.Non-residentpersonspaytaxontheportionoftheirincomesourcedinNigeria.

A. tAXes pAYABle

FEDERAL TAXES AND LEVIESCOMPANY TAX

AllcompaniesoperatinginNigeriaoutsidetheoilandgassectoroftheeconomyarerequiredtopayincomeandeducationtax.Therateis30%oftotalprofitforincometaxand2%ofassessableprofitforeducationtax.Totalprofitisprofitafterdeductingprevious year losses carried forward and capital allowances. Assessable profit isobtainedpriortodeductingcapitalallowances.

Alowerincometaxrateof20%isapplicabletoaNigeriancompanythatengagedinmanufacturingoragriculturalproduction,miningofsolidmineralsorwhollyexporttrade,withinthefirstfiveyearsofoperation,andwheretheturnoverdoesnotexceedN1million

Residentcompaniespaytaxontheirworldwideincome.Non-residentcompaniesaretaxedontheproportionoftheirincomeearnedinNigeria.CompaniesaredeemedtoberesidentcompaniesiftheyareregisteredorincorporatedinNigeria.

Thefiscalyearrunsfrom1Januaryto31December.ACompanycanchooseanydatefor itsaccountingyear-endbutmustfilereturnsnot later thansixmonthsafter itsaccountingyear-end.Taxcanbepaidinamaximumofsixequalmonthlyinstalmentsifataxpayerfilesself-assessmentandappliesforpaymentininstalments.

Minimumtaxispayablewhereacompanyhasnotaxableprofitorthetaxpayableis

nIGeRIACURRENCY: Nigerian Naira (NGN)POPULATION: 179.70 millionGDP GROwTh: 7.3%GDP: US$ 657.2 billioin

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Nigeria

lessthantheminimumtaxcalculatedasfollows:Thehighestof:• 0.5%ofgrossprofit• 0.5%ofnetassets• 0.25%ofpaidupsharecapital• 0.25%ofturnoveruptoN500,000 Plus• 0.125%ofturnoverinexcessofN500,000.

ExemptionfromMinimumtax:A company would not be liable to minimum tax if it meets any of the followingconditions:• Itcarriesonagriculturetradeorbusiness• Ithasatleast25%importedequitycapital• Itisstillwithinitsfirstfourcalendaryearsinoperation

PETROLEUM PROFIT TAXCompanies in the oil and gas sector together with construction and consultingcompaniesprovidingservicestooilcompaniesareregulatedbyseparatetaxlaws.Taxratesaredifferentforresidentcompaniesintheupstreamsectoroftheoilandgasindustry.Theratesrangefrom50%forsomeofthenewproductionsharingcontractsto65.75%forothersinthefirstfiveyears,duringwhichallpre-operationexpensesareexpectedtobefullyamortised,and85%oftheirchargeableprofitsthereafter.Thetaxrateinthedownstreamsectoris30%.

Chargeableprofit isprofitofthecompanyafterdeductingallowances.Foroffshorecompanies that engage in petroleum operation, 20% of their turnover is deemedprofitandtaxedaccordingly.

Petroleumcompaniesare required tofile their returnsofestimated taxwithin twomonthsintoanewaccountingyearandcommencepaymentofthetaxin12monthlyinstalmentspendingdeterminationoftheresultoftheiroperationatthecloseoftheyear.

BothestimatedandfinaltaxesarecomputedinUSdollarsandpaymentmadeinUSdollarsinaccordancewithreturnsfiled.

CAPITAL GAINS TAXCapitalgainsandlossesaretreateddifferentlyfromregularbusinesstransactionsofindividuals,partnershipsandcompaniesinNigeria.Gainsarisingfromthedisposalofassetsaretaxedattherateof10%.TaxableassetsincludelandandbuildingsituatedinNigeria,aswellasplantandmachinery.CorporateSecuritiesareexemptedfromCapitalGainsTax.

Inflationisrarelytakenintoaccountindeterminingcapitalgains.Paymentofcapitalgainstaxcanbepostponediftheproceedsondisposalofanassetarereinvestedinacquiringsimilarassets.

Capitallossescannotbechargedagainstnormaltradingincomebutcanbecarried

106

forwardtooffsetfuturecapitalgainstaxfromthesamesource.

BRANCh PROFITS TAXThereisnobranchprofitstaxinNigeria.Non-Nigeriancompaniesoperatingbranches,whichareexemptedfromlocalincorporationbytheFederalGovernment,aretreatedasseparateentitiesandtaxedonincomeearnedfromtheiractivitiesinNigeria.

Activitiesofnon-Nigeriancompanies,whichwouldattract tax inNigeriaandotherspecial issues, are set out in legislation. Examplesare turnkeyprojects, allocationofincomeandexpenditurebetweentheforeigncompanyanditsbranchinNigeria,transferpricingetc.

VALUE ADDED TAX (VAT)VATisimposedonnon-exemptsuppliesofgoodsandserviceswithinNigeriaaswellasongoodsimported.Exportgoodsarenon-taxable.

Thestandardrateis5%.VATisgenerallyassessedbyataxablepersonwhosuppliestaxablegoodsandservicesandpaymentmadewhenfilingmonthlyreturns.

Transactionsonbasicfooditemsproducedwithinthecountry,booksandeducationalmaterials,plantandmachineryforuseinExportFreeZone,agriculturalequipment,and all medical and pharmaceuticals products and services, amongst others, areexemptfromVAT.

OThER TAXESCUSTOMS AND EXCISE DUTYCustomsdutiesare leviedongoodscoming into thecountryatvaryingrates from5%to75%ofimportvalueateachportofentry.Excisedutiespaidbycompaniesonlocallymanufacturedgoodshavebeenabolished.

STAMP DUTIESA number of transactions attract stamp duties. These include incorporation ofcompanies, increase in companies authorised share capital, mortgage bonds,debentureanddealinginsecurities,settlementofestatesandconveyanceofproperty.

LOCAL TAXESStatesinFederation(therearenow36states)haveavarietyof localtaxesintheirareasofjurisdiction.Localtaxesincludemotorvehicles’licence/registration;consentfees tor transfer of property in real estate; property tax; gaming/casino tax;waterratesetc.LocalCouncils imposeLandusechargeonpropertiesandseveralothertaxes.


Taxable profit of a company is determined by ascertaining its incomeon ordinaryactivitiesandsubtractingallallowabledeductionsbasedonfinancial resultsof theprecedingyear.

Tobedeductible,expensesmustbeofrevenuenatureandincurredwholly,exclusively,

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necessarily and reasonably for earning the income reported. Donations to certainbodiesarenotallowablefortaxpurposes.

CAPITAL ALLOwANCES / DEPRECIATIONCapitalallowancesaregrantedtocompaniesagainst taxable income in lieuof thewearandtearofbusinessassets.Ratesofcapitalallowancesarehighest(95%)forexpenditureonreplacementplantandmachineryforminingagriculturalproduction,industrialplantandmachinery,andmotorvehiclesusedforpublictransportation.

In addition, investment allowances of between 10% to 15% are available tomanufacturing companies in their first year of acquisition of plant andmachinery.Otherbusinessassetssuchasfactorybuildings,furnitureandfittingsenjoycapitalallowancesatlowerratesbutgenerallyat50%initialand25%annualinothercases.

STOCK / INVENTORIESClosingstockshavetobeappropriatelyvaluedatthelowerofcostornetrealisablevalue.Acceptedvaluationmethodsarefirst-in-first-out(FIFO)andweightedaveragebutlast-in-first-out(LIFO)valuationisnotacceptable.Valuationmethodonceadoptedmustbeconsistentlyfollowed.

CAPITAL GAINS AND LOSSESCapital gains and losses as discussed above are excluded from regular tradingoperationofacompanyandassessedseparatelyunderdifferenttaxlaw.

DIVIDENDSDividends received by a Nigerian company from other domestic companies areexcludedinthedeterminationoftaxableincometotheextentthatsuchdistributionhassufferedwithholdingtaxinthehandsofrecipient.Dividendspaidtonon-residentcompaniesandinvestorsattractwithholdingtaxof10%,whichisthefinaltax,whiledividendsdistributedbyUnitTrustsandpioneercompaniesduringthepioneerperiodaretax-exempt inthehandsofrecipientsandwithholdingtax isnotdeductibleforsuchdividend.

INTERESTInterestpaidonloansusedforbusinessoperationsareallowablefortaxpurposes.Fornewbusiness,suchinterestiscapitalisedpriortostartingcommercialproduction.Interestincomereceivedbylendinginstitutionsonloanstoexportorientedcompaniesand agricultural businesses are granted tax exemptions depending on tenure andmoratoriumoftheloans.

LOSSESNormal business losses can be carried forward indefinitely except for insurancecompanieswhocanonlycarryforwardlossesforamaximumoffouryears.

Tax IncentivesGovernment Incentives To IndustryNigeria’s IndustrialPolicydocument introducesanumberof incentivesdesignedtopromoteinvestment,employment,productmixandvariousotheraspectsofindustry.Theseincentivesfallwithinthefollowingbroadcategories:

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(a) Fiscalmeasuresontaxation;(b) Effectiveprotectionoflocalindustrieswithimporttariff;(c) ExportpromotionofNigerian-madeproducts;(d) Foreigncurrencyfacilityforinternationaltrade;(e) CIT(ExemptionofProfit)Order.

Enterpriseswhichfulfiltherequiredcriteriaarefreetoapplyforthefollowingspecificincentives:

1 Pioneer Status100% tax-free period for five years for pioneer industries that produce productsdeclaredas“pioneerproducts”undertheIndustrialDevelopment(IncomeTaxRelief)Act.

2 Local Raw Materials Utilisation30% tax concession for five years to industries that attain minimum local rawmaterialsutilisationasfollows:

Industrial Sector Minimum LevelAgro 80%Agro-allied 70%Engineering 65%Chemical 60%Petro chemical 70%

3 Labour Intensive Mode of ProductionThereisa15%taxconcessionforfiveyears.Therateisgraduatedinsuchawaythatanindustryemploying1,000personsormorewillenjoythe15%taxconcessionwhileanindustryemploying100willenjoyonly6%,whilethoseemploying200willenjoy7%andsoon.

4 Local Value AddedThereisa10%taxconcessionforfiveyears.Thisappliesessentiallytoengineeringindustrieswheresomefinishedimportedproductsserveasinputs.Theconcessionisaimedatencouraginglocalfabricationratherthanthemereassemblyofcompletelyknockeddownparts.

5 In-Plant TrainingThereisa2%taxconcessionforfiveyearsofthecostoffacilitiesprovidedfortraining.

6 Export-Oriented IndustriesThereisa10%taxconcessionforfiveyears.Thisconcessionwillapplytoindustriesthat export not less than 60% of their products. The emphasis here is on theencouragementofthepre-establishmentstageofanexport-orientedenterprise.

7 Infrastructure20%of the cost of providing basic infrastructure such as roads,water, electricitywheretheydonotexististaxdeductibleonceandforall.

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8 Investment In Economically Disadvantaged AreasThereisa100%taxholidayforsevenyearsandadditional5%depreciationallowanceoverandabovetheinitialcapitaldepreciation.

9 Research And Development (R&D)There isan incentiveof120%taxdeductibleexpensesprovided theresearchanddevelopmentiscarriedoutinNigeria;and140%forR&Donlocalrawmaterials.

Expenses incurred by other companies in respect of R&D are tax deductible to acompanybuttheamountdeductedmustnotexceed10%ofthecompany’stotalprofitforthatyearofassessment.

10 Abolition Of Excise DutyIn order to boost local industries, stimulate trade and reduce business costs, theGovernmentdecidedthatallexcisedutiesbeabolishedwitheffectfrom1January1998but from1January1999excisedutieswere re-introducedon the followingspecificproducts:- Spiritsandotherspirit-basedalcohol;- Cigarettes,cigars,cherootsandcigarillos;- Othermanufacturedtobaccoandtobacco-manufacturedsubstitutes.

11 Re-Investment AllowanceThis incentive is granted to companies engaged in manufacturing which incursqualifying capital expenditure for the purpose of approved expansion, etc. Theincentiveis intheformofagenerousallowanceofcapitalexpenditureincurredbycompanies’forthefollowing:- Expansionofproductioncapacity;- Modernisationofproductionfacilities;- Diversificationintorelatedproducts.

Thisschemeistoencouragere-investmentofprofitsatatimewhensuchinvestmentisdeclining.

12 Companies Engaged In Export TradeWitheffectfrom1January1996:(i) Profits of any Nigerian company in respect of goods exported from NigeriaprovidedthattheproceedsfromsuchexportsarerepatriatedtoNigeriaandareusedexclusivelyforthepurchaseofrawmaterials,plantandequipmentandspareparts,areexemptedfromtax.

(ii) Theprofitsofcompanieswhoseproductsareusedexclusivelyasinputsforthemanufacturingofproductsforexportsistaxexempt.Forthispurpose,theexportermustgiveacertificateofpurchaseoftheinputofexportablegoodstothesellerbeforetheprofitcanbeeligiblefortaxexemption.

13 Taxation Of Export Free Zone EnterprisesAllnewindustrialundertakingsincludingforeigncompaniesandindividualsoperatinginanyExportProcessingZoneinNigeriashallbeallowedafulltaxholidayforthreeconsecutiveyearsofassessment.

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Manufacturing companies can include the assembly and processing of goods forexportprovidedthevalueofexportedgoodsisnotlessthan75%ofthetotalturnoverduringtheassessmentyear.

14 Tax Relief to Export Oriented EnterprisesThe profit or gains of 100% of export oriented undertakings established outsideanexport freezoneshallbe fullyexemptedfrom incometax for threeconsecutiveassessmentyearsprovidedthat:(i) Theundertakingsis100%oriented;(ii) Theundertakingisnotformedbysplittinguporthereconstructionofabusiness

alreadyinexistence;(iii) It manufactures, produces and exports during the relevant year, and the

proceedsorgoodsexportedduringtheyeararenotlessthan75%ofitsturnoverfortheyear;

(iv) Theundertakingisnotformedbytransferofmachineryorplantpreviouslyusedforanypurposetothenewundertakingor,whereitdoes,thewrittendownvaluedoesnotexceed25%ofthetotalvalueoftheplantandmachinery;

(v) Thattheundertakingrepatriatesatleast75%oftheexportearningstoNigeriaandplacesthisinthedomiciliaryaccountwithabankinNigeria.

15 Solid MineralsCompaniesengagedintheminingofsolidmineralsareentitledtoclaiminitialandannualallowancesasfollows:• InitialAllowance: 30%• AnnualAllowance: 20%

Inaddition,theyaretoenjoyatax-freeholidayforthefirstthreeyearsofoperation.

16 Replacement of Industrial Plant And MachineryPlantandmachinerypurchasedtoreplaceoldonesaretoenjoyaonceandforall95%capitalallowancesinthefirstyearandtheremaining5%istoberetainedasthebookvalueuntilthefinaldisposaloftheasset.

Inaddition,aninvestmenttaxcreditof15%wasgrantedforsuchreplacementswitheffectfrom1January1996

17 Tax Incentives For hoteliers And Tourism Services25% of income derived from tourism by hotels in convertible currencies will beexemptedfromtaxwitheffectfrom1996providedsuchincomesaresetasideandput inreservefundtobeutilisedwithinfiveyearsinexpansionortheconstructionofnewhotels,conferencecentresandnewfacilitiesusefulfortourismdevelopment.

18 Tax Incentives For Local ManufacturersAll companies engagedwholly in the fabrication of tools, spare parts and simplemachineryforlocalconsumptionandexportaretoenjoy25%Investmenttaxcreditontheirqualifyingcapitalexpenditure.Anytaxpayerwhopurchaseslocallymanufacturedplantandmachineryandequipmentissimilarlyentitledto15%investmenttaxcreditonsuchfixedassetsboughtforbusinessuse.

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19 Employment Tax Relief (Etr)This is an income tax relief on the employment of persons that do not possessanypreviousworkexperiencewithin threeyearsofgraduating fromschooloranyvocation.Toqualifyforthis,acompanymusthaveaminimumnetemploymentof10employeesinanassessmentyearofwhich60%mustbeanewgraduateswhomusthavenopreviousworkexperiencewithinthreeyearsofgraduating.

‘Net Employment’ is defined as “the difference between incoming and outgoingemployeesofthecompanywithintheassessmentperiod.”

Therelieftobeenjoyedis5%ofthecompany’sassessableprofitandshallbelimitedtothegrosssalaryofthequalifyingemployees.

Itshouldalsobenotedthat,inlinewiththeorder,thetaxexemption(relief)shallonlybeutilisedintheyearofassessmentinwhichtheemployeeswerefirstemployedandanyunabsorbeddeductionshallnotbecarriedforwardtoanotherassessmentperiod.

20 work Experience Acquisition Program Relief (weapr)Thisisareliefontheemploymentandretentionofexperiencedemployees.

Thebasiccriterionisthatacompanymusthaveaminimumnetemploymentoffivenewexperiencedemployeesandretainsuchemployeesforaminimumoftwoyearsfromtheyearofassessmentwhentheemployeeswerefirstemployed.

The company shall enjoy an exemption from income tax of 5% of its assessableprofitsintheassessmentperiodinwhichthecompanyqualifies.

Thetaxexemption(relief)shallonlybeutilised intheyearofassessment inwhichthecompanyqualifiesandanyunabsorbeddeductionshallnotbecarriedforwardtoanotherassessmentperiod.

21 Infrastructure Tax Relief (Itr)TheExemptionOrderalsostipulates that,whereacompany incursexpenditureoninfrastructureorfacilitiesofapublicnature,30%ofthecostoftheinfrastructureorfacilitieswillbegrantedasanexemptionfromincometaxintheassessmentperiodinwhichtheinfrastructureorfacilitieswereprovided.

Theinfrastructureorfacilities,accordingtotheOrderinclude:- Power(electricity);- Roadsandbridges;- Water;- Health,educationandsportingfacilities;and,- Suchother infrastructureor facilities asmaybedeterminedbyOrder IssuedfromtimetotimebytheMinisterofFinance.

BeforeacompanycanqualifyforITR,theinfrastructureorfacilitiesmusthavebeencompletedandinusebythecompanyandthepublic.

Theexemptionshallbeenjoyedintheassessmentperiodinwhichtheinfrastructure

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orfacilitieswasprovidedandmayonlybecarriedforwardforamaximumperiodoftwoassessmentperiodsfollowingtheperiodinwhichitfirstbecameavailable.

Theincentivessetout inthissectionare innowayexhaustiveandneitherarethequantum nor percentage of reliefmentioned fixed for all time.There is the needthereforetoascertainthecurrentoperativefiguresatthetimeofmakinginvestments.

d. CoRpoRAte GRoUps

TherearenoprovisionsforconsolidationofaccountsforgrouptaxationinNigeria.

e. RelAted pARtY And ARtIFICIAl tRAnsACtIons

Relatedpartytransactionsarerequiredbythetaxlawstobedisclosedseparatelyandthetaxofficialsaregivenpowertodeterminewhetherthetransactionsareatarm’slengthandtheadjustmenttobemadetotheliability.Whenadispositionisnot,infact,giveneffecttoandthetransactionisartificialorfictitious,thetransactionmaybesetasidebytheRevenue.

The Tax authority in March 2012 published transfer pricing (TP) guidelines on“connectedtaxableperson”whichincludevariouscategoriesofentities;individuals,companies,partnerships,jointventures,trustsorassociations.ThisregulationshallapplytotransactionsbetweenconnectedpersonswithinandoutsideNigeriacarriedoninamannerconsistentwiththearm’slengthprincipleandincludes:(i) Transactionsbetweenapermanent establishment (PE) and its headofficeor

otherrelatedbranches.Branchesaretreatedasseparateentities;(ii) Salesandpurchaseofgoodsandservices;(iii) Sales,purchaseorleaseoftangibleassets;(iv) Transfer,purchaseoruseofintangibleassets;(v) Provisionofservices;(vi) Lendingorborrowingofmoney;(vii) Manufacturingarrangement;(viii)Anyothertransactionwhichmayaffectprofitandlossoranymatterincidental

totheforegoing.Foreachtaxyear,aconnectedtaxablepersonshall,withoutnoticeordemand,makea disclosure in the prescribed form (through aTP disclosure form)with details oftransactions that are subject to this regulation.TheTP disclosure form and othernecessarydocumentshallbefiledalongwiththeconnectedpersonsannualincometaxreturnsforeachtaxyear.

e. eXCHAnGe ContRol

Exchange control regulations have been abolished in Nigeria. Under the newforeignexchangeand investmentpromotion laws,a foreign investor isguaranteedunconditionaltransferabilityoffundsthroughanauthoriseddealerinfreelyconvertiblecurrenciesinrespectof:• Dividendsorprofit(netoftaxes)attributabletotheinvestment;• Paymentinrespectofloanservingwhereforeignloanhasbeenobtained;• Theremittanceofproceeds(netofalltaxes)andotherobligationsintheevent

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ofasaleorliquidationoftheenterpriseoranyinterestattributabletotheinvestment.AuthoriseddealersofforeigncurrenciesneedtonotifytheCentralBankofNigeriaofanycashtransfertoorfromaforeigncountryofanysuminexcessofUSD10,000.

A taxclearancecertificatemust,however,beobtainedbyanyonewishing to remitdividendandinterestfundsoutsidethecountry.

F. WItHHoldInG tAXes

Certainpaymentstodomesticcompaniesandindividualsandnon-residentcompaniesandinvestorsaresubjecttowithholdingtaxatthefollowingrates:

CorporateBodies (%) Individual (%)

Dividends 10 10Royalties 10 10Interest 10 10DirectorFees 10 10Rent(includinghireofequipment) 10 10Allaspectofbuildingconstructionandrelatedactivities 5 5

Allaspectofcontractactivitiesoragencyarrangementsincludingcontractforsupply(excludingsurvey,designanddeliverieswhichremainat5%)

2.5(Previously5%)

2.5(Previously5%)

Managementservices 10 5Consultancyandprofessionalfees 10 5Technicalservices 10 5Commission 10 5

WithholdingtaxpaidbyaresidentpersonandcompaniesinNigeriaispaymentonaccountof taxandcanbeusedtooffsetpartofpersonalandcompanies’ incometaxexcept in thecaseofdividendand interest (franked investment income)wherewithholdingtaxbecomesafinaltax.Withholdingtaxpaidbynon-residentindividualsandcompaniesisafinaltax.

H. peRsonAl tAX

Whiletheaboveoutlineappliesmainlytocompanies,differenttaxrulesandprinciplesapply to individuals in employment, sole traders, partners in a partnership andtrusteesasoutlinedbelow.

TheconceptofresidencedeterminestheextenttowhichtheincomeoftaxpayerisliabletoNigeriantax.Aresidentpersonisassessabletotaxonhisglobalincome,i.e.incomeaccruingin,derivedfrom,broughtintoorreceivedinNigeria.AnindividualisregardedasresidentinNigeriainanassessmentyearifhe/she:(i) IsdomiciledinNigeria;(ii) SojournsinNigeriaforaperiodorperiodsinallamountingto183daysormore

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ina12monthperiod;or,(iii) Serves as a diplomat or diplomatic agent of Nigeria in a country other than

Nigeria.

Theprofitofatrade,professionorvocation is liabletotax inNigeriaregardlessoftheperiodsucha trade,professionor vocationhasbeencarriedon. Income fromemployment,however,isliabletotaxwhenapersonbecomesresident.

Non-residentpersonspaytaxontheportionoftheirincomesourcedinNigeria.Theybecomeliabletotaxfromthedaytheybegintocarryonatrade,business,professionorvocationinNigeria.Doubletaxationtreatieshavebeenconcludedwithanumberofcountriesanddoubletaxationreliefappliestosuchincome.

Thepay-as-you-earnsystemofcollectionisinoperation.

Thereareanumberofallowancesagainsttotalincome.

INCOME TAX TABLE(1) Reliefshallbegrantedthus:• Higherof1%ofgrossincome;• OraconsolidatedreliefallowanceonincomeataflatrateofNGN200,000;plus

20%ofgrossincome.

(2) TaxExemptIncome;Thefollowingdeductionsaretaxexempt:(a) NationalHousingFundContribution;(b) NationalHealthInsuranceScheme;(c) LifeAssurancePremium;(d) NationalPensionScheme;(e) Gratuities.

(3) Afterthereliefallowanceandexceptionshadbeengrantedin,accordancewithparagraphs1and2oftheScheduletotheNewPersonalIncomeTax(Amendment)Act2011,thebalanceofincomeshallbetaxedasspecifiedinthefollowingtaxtable,subjecttoaminimumof1%ofgrossincomewhicheverishigher.• FirstNGN300,000@7%;• NextNGN300,000@11%;• NextNGN500,000@15%;• NextNGN500,000@19%;• NextNGN1,600,000@21%;• AboveNGN3,200,000@24%.Note:• Grossemolumentisdefinedtoincludebenefitsinkind,gratuitiessuperannuation

andanyotherincomesderivedsolelybyreasonofemployment.• Principal place of residence to include places where branch offices and

operationalsiteofcompaniesaresituated.• Operationalsitesaredefinedinthebilltoincludeoilterminals,oilplatforms,flow

stations,constructionsites,etc.withaminimumof50workers.• Full tax exemption to be granted on interest from bonds issued by Federal,

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StateandLocalGovernmentsandtheirAgencies,corporateentitiesandinterestearnedonshorttermsecurities.

• Interestfordefault intaxremittancetobechargedattheprevailingminimumre-discountrateoftheCentralBankofNigeriaonanannualbasis.

• Individualtaxclearancecertificates(TCC)toberequiredforchangeofownershipofvehiclesandapplicationforlandtitletransferorperfection.

• Duedateforfilingemployeetaxreturnstobe31January.• Stiffer criminal penalties for non-compliance. The penalty for late filing by

corporatebodiesisNGN500,000andNGN50,000forindividuals.• TaxofficerstoapplyforawarrantfromtheHighCourtbeforelevyinganydistress

onataxpayer.• “Itinerantworker”includesanindividualirrespectiveofhisstatuswhoworksat

anytimeinanystateduringayearofassessment(otherthanasamemberofthearmedforces)forwages,salariesorlivelihoodbyworkinginmorethanonestateforaminimumof20daysinatleastthreemonthsofeveryassessmentyear.Therelevanttaxauthoritiesareempoweredtocollecttaxesfromitinerantworker.

SOCIAL SECURITYNigeria operates a national contributory pension scheme.The required rate to becontributedbytheemployerhasbeenincreasedtoaminimumof10%(previously7.5%) of the employee’s monthly emoluments. While the required rate to becontributedbyemployee increased toaminimumof8% (previously7.5%)ofhis/hermonthlyemoluments.

I. tReAtY And non tReAtY WItHHoldInG tAX RAtes

Dividends(%)

Interest (%)

Royalties (%)

Non-TreatyCountries:

10 10 10

TreatyCountries 7.5% 7.5% 7.5%

Presently,Nigeriahasconcludedataxtreatywiththefollowingcountries:

1.Belgium 7.Canada2.China 8.CzechandSlovakiaRepublic3.France 9.Netherlands4.Pakistan 10.Romania5.UnitedKingdom 11.SouthAfrica6.Philippines

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RwandaMEMBERFIRM

Forfurtheradviceorinformationpleasecontact:

CityName C o n t a c tinformation

Kigali BonifaceMutua [email protected]

KEY TAX POINTS• Companiespaycompanytaxbasedoncomputedtaxprofitsatarateof30%.• Categories of supplies of services and goods include exempt supplies and

taxable supplies (i.e. at a rate of 0% and 18% for zero rated supplies andstandardratedrespectively).Exportofgoodsandservicesphysicallyrenderedoutside Rwanda are zero rated supplies. Services rendered within RwandaalthoughconsumedoutsideRwandawillbesubjecttoVATattherateof18%.

• Awithholding taxof15% is leviedondividends, interest, royaltiesandotherlistedpaymentsmadebyresidentindividualsorresidententitiesincludingtax-exemptentities.

A. tAXes pAYABle

COMPANY TAXCompaniespaycompanytaxbasedoncomputedtaxprofitsatarateof30%.

AregisteredinvestmententitythatoperatesinanexportprocessingZoneoraforeigncompanythathasitsheadquartersinRwandaandfulfilstherequirementsstipulatedintheRwandanLawonInvestmentPromotion,areentitledtopaycorporateincometaxattherateof0%.

VenturecapitalcompaniesregisteredwiththecapitalmarketsAuthority inRwandabenefitfromacorporateincometaxof0%foraperiodoffiveyearsfromthedatethedecisionhasbeentaken.

Newly listed companies on capital market are taxed for a period of 5 years onpreferentialratesunderthelaw.

A registered investor isentitled toaprofit taxdiscountonemploymentofagivennumberofRwandans.

CAPITAL GAINS TAXCapitalgainstaxapplicableatarateof30%oncapitalgainsarisingfromthedisposal(saleorcession)ofimmovablecommercialpropertyandsaleofshares.Gainsderivedfromdisposalsofotherbusinessassetsareaggregatedwithotherincomeandaretaxedatthenormalcorporateincometaxrate.Gains arising from disposal of shares listed on the Rwanda Stock Exchange areexemptfromtax.

RWAndACURRENCY: Rwandan Franc (RwF)POPULATION: 12.52 millionGDP GROwTh: 6.7%GDP: US$ 8.8 billioin

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Rwanda

Incaseofcorporatere-organisation,thetransferringcompanyisexemptfromtaxinrespectofcapitalgainsandlossesrealisedonre-organisation.

BRANCh PROFITS TAXBranchofaforeignentitypaystaxrateof30%.

VALUE ADDED TAX (VAT)SuppliesofgoodsandservicesforValueAddedTax(VAT)purposesareeitherexempt,zeroratedorstandardrated.ThestandardrateofVATis18%.

PersonswithinvestmentcertificatequalifyforVATexemptiononseveralcapitalgoodsimported.

FRINGE AND EMPLOYMENT BENEFITS TAXGenerally,benefitsinkindreceivedbyanemployeeareincludedintaxableincomeinconsiderationofmarketvaluefortaxpurposes.

MOTOR VEhICLESThebenefitisvaluedat10%oftheemploymentincomeexcludingbenefitsinkind.

hOUSINGThebenefitisvaluedat20%oftheemploymentincomeexcludingbenefitsinkind.

LOANS TO EMPLOYEESTaxispayableoninterestfreeorlowinterestloanincludingsalaryadvanceexceedingthreemonthssalarygranted toemployees.Thebenefit isvaluedas thedifferencebetween the interest rate offered to commercial banks by the National Bank ofRwandaandtheactualratepaidbyemployees.

OThER BENEFITSBenefitsprovidedbyanemployertoapersonrelatedtoanemployeewhenthereisnoservicerendered,aretreatedasifprovidedtotheemployee.Benefitsprovidedbyacompanytooneofitsmembersareconsideredinthesamemannerasbenefitsanemployergivestoanemployee.

LOCAL TAXESEmploymentincomeistaxedonawithholdingtaxbasisknownasPay-As-You-Earn(PAYE)atagraduatingscaleof0%to30%.

OThER TAXES: MEDICAL INSURANCE SChEME (RAMA)La Rwandaise D’Assurance Maladie (RAMA) is the country’s medical insurancescheme. Employees contribute 7.5% and employers contribute 7.5%. Membersautomaticallyincludeallcivilservants,pensionerswhopreviouslycontributedtowardsmedicalcareandprivateinstitutionswhohaveappliedandbeenaccepted.

SOCIAL SECURITY FUND (CSR)Contributionsaresetat3%foremployeesand5%foremployersinrespectoftheemployees’monthlyincome.Totalremittanceis8%.Includedinthe5%contribution

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byemployersisa2%contributionforoccupationalhazard.


Taxable income is accounting income adjusted for non-taxable income and fornon-deductible expenses.Expensesaredeductible if theyare incurredwholly andexclusivelyintheproductionofincome.

CAPITAL ALLOwANCES

Location RateKigali* 40%OutsideKigali* 50%

*Conditionsapply

Theratesforwearandtearallowancesforbusinessassetsdeductiblefromtaxableprofitsareasfollows:

wear and Tear RateHeavymachineryandequipment 5%Intangibleassetsincludinggoodwill 10%Computersandaccessories,informationandcommunicationsystems,softwareproductsanddataequipment 50%

All other business assets 25%

Industrial building allowances RateBuildings(excludingland)includingbuilt-inequipmentandplant 5%

OThER DEDUCTIONSCostofbaddebts(subjecttorecoveryprocedures)allowable.However,commercialbanksandleasingentitiesdulylicensedassuchareallowedtodeductanyincreaseofthemandatoryreservefornon-performingloansasrequiredbythedirectivesrelatedtomanagementofbankloansandsimilarinstitutionsoftheNationalBankofRwanda.

DEPRECIATIONThisisanaccountingexpensethatisnotallowablefortaxpurposesbutwearandtearallowancesasshownabovearedeductibleallowances indeterminationof taxableincome.

LIQUIDATIONProceedsofsaleofanybusinessassetandliquidationproceedsreceivedduringthetaxperiodareincludedinbusinessprofit.

DIVIDENDSDividendsaretaxedonawithholdingtaxbasiswhichisfinaltax.Standardrateis15%subjecttoprovisionsofdoubletaxationrelief,whereapplicable.

INTEREST DEDUCTIONSInterest incurred wholly and exclusively in the production of income is allowable.

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However, where a company is controlled by a non-resident person, other thancommercialbanksand insurancecompanies, the interestdeductibility is restrictedonlytotheextentthatthetotalindebtednessofthecompanydoesnotexceedfourtimesthepaid-upsharecapitalandrevenuereserves(thinlycapitalised).

LOSSESNetoperating lossesareallowed forcarry forward toamaximumoffiveyearsbydeducting earlier lossesbefore later losses.However, this incentive not applicablewherethedirectandindirectownershipofthesharecapitalorthevotingrightsofacompany,whosesharesarenottradedonarecognizedstockexchangechangesmorethan25%byvalueorbynumber.

FOREIGN SOURCED INCOMEThe following taxable payments are excluded from taxable income resulting fromemployment:(i) EmploymentincomereceivedbyanemployeewhoisnotacitizenofRwanda

from a foreign government or a non-governmental organization under anagreement signed by the Government of Rwanda and when the income isreceivedfortheperformanceofaidservicesinRwanda;

(ii) EmploymentincomereceivedfromanemployerwhoisnotaresidentinRwandabyanon-residentindividualfortheperformanceofservicesinRwanda,unlesssuch services are related to a permanent establishment of the employer inRwanda.

INCENTIVESIncomeaccruingtoregisteredcollectiveinvestmentschemesandemployees’sharesschemeareexemptedfromincometax.

AregisteredinvestmententitythatoperatesinaspecialeconomicZoneoraforeigncompanythathasitsheadquartersinRwandaandfulfilstherequirementsstipulatedin the Rwandan Law on Investment Promotion, are entitled to exemption fromwithholdingtaxmentionedinArticle51ofLawno16/2005of18/08/2005ondirecttaxesonincomeandtaxfreerepatriationofprofit.

Incomederived fromagriculturaland livestockactivities isexempt, if theproceedsfrom these activities do not exceed RWF 12,000,000 in a tax period. Capitaldeductionsareasgivenunder‘Capitalallowances’above.

AregisteredinvestmententitythatoperatesinanexportprocessingZoneandforeigncompanieswithheadquartersinRwandawhofulfiltherequirementsstipulatedintheInvestmentcodeofRwandaisentitledtothefollowingpreferentialtaxrates:• Paycorporateincometaxattherateof0%;• Exemptionfromwithholdingtax;and,• Taxfreerepatriationofprofits.

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Foreigntaxreliefislimitedonlytocountrieswithdoubletaxationrelief.

d. CoRpoRAte GRoUps

Theincometaxlawdoesnotallowthefilingofconsolidatedreturns,thecombiningof profits and losses of affiliated companies or the transfer of losses from losscompanies to profitablemembers of the same group of companies. Generally fortaxpurposes, a corporation tax rate of30%applies to all separately incorporatedcompaniesirrespectiveofgroupsbothinRwandaandoutsideforprofitsderivedinRwanda.


Relatedpartytransactionsareallowableexpensesifincurredwhollyandexclusivelyintheproductionofincomeandtaxedasincomeifearnedoraccruedasbusinessactivities.Transferpricingadjustmentrulesapply.TheRwandanlawondirecttaxeson incomestipulates thatwhereconditionsaremadeor imposedbetween relatedpersons carrying out their commercial relationship which differ from those whichwould be applied between independent persons, the Commissioner General,maydirect that the income of one or more of those related persons be adjusted toincludeprofitsthatwouldhavebeenmadeiftheyoperatedasindependentpersons.ProvisionsforadvanceagreementswithCommissionerGeneralexist.

F. WItHHoldInG tAX

A withholding tax of 15% is levied on the following payments made by residentindividualsorresidententitiesincludingtax-exemptentities:(i) Dividends* except those governed by Article 45 of Law no 16/2005 of

18/08/2005ondirecttaxesonincome;(ii) Interests*;(i) Royalties;(iv) Servicefeesincludingmanagementandtechnicalservicefees;(v) Performance payments made to an artist, a musician or a sportsperson

irrespectiveofwhetherpaiddirectlyorthroughanentitythatisnotresidentinRwanda;

(i) Lotteryandothergamblingproceeds;(ii) Goodssuppliedbycompaniesorphysicalpersonsnotregisteredwiththetax

administration.

* Withholding tax applicable on dividends and interest is a final tax. However,withholding tax on dividends and interest income on securities listed on capitalmarketsand interestarising from investments in listedbondswithamaturityof3yearsandaboveshallbereducedfrom15%to5%whenthepersonwhowithholdsisaresidenttaxpayerofRwandaoroftheEastAfricanCommunity.

Withholdingtaxof5%ofthevalueofgoodsimportedforcommercialuseshallbepaidatCustomsontheCIF{costinsuranceandfreight)valuebeforethegoodsare

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releasedbyCustoms.

Withholding tax of 3% on the sum of invoice, excluding the value added tax, isretained on payments by public institutions to the winner of public tenders. Thefollowingtaxpayersareexemptfromwithholdingtax:(i) Thosewhosebusinessprofitisexemptfromtaxation;and,(ii) ThosewhohaveataxclearancecertificateissuedbytheCommissionerGeneral

ofRwandaRevenueAuthority.

G. eXCHAnGe ContRol

The currency in Rwanda is the Rwandan franc (RWF). Rwanda does not imposeforeignexchangecontrols.

H. peRsonAl tAX

Thetaxratesareasfollows:

Tax bands for monthly income (RwF) Rate0to30,000 0%30,001to100,000 20%100,001andgreaterthan 30%plusRWF14,000

I. tReAtY WItHHoldInG tAX RAtes

RwandahasdoubletaxagreementswithBelgiumandMauritius.

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SierraLeone

Capital:FreetownPopulation:6,092million(2013WorldBank)OfficialLanguage:EnglishMonetaryUnit:Leones(LE)InternationalDiallingCode:+232MinistryofFinance&EconomicDepartment:www.mofed.gov.slTaxAuthority:NationalRevenueAuthority[NRA]

A. tAXes pAYABle

TAXES AND LEVIESTheNationalRevenueAuthority(NRA)inSierraLeoneadministersmostofthetaxespayable includingthemajorrevenuecontributors.TheDomesticTaxesDepartment(DTD)oftheNRAhasbeenestablishedasa‘one-stopshop’fortheadministrationofallSierraLeone’sdomestictaxes–namelytheGoodsandServicesTax,IncomeTaxPay-As-You-Earn(PAYE),CorporationTax,WithholdingTax,PayrollTax,PersonalIncomeTax,RentTaxandForeignTravelTicketTax.In the future, the DTD will also administer non-tax revenues, such as levies androyalties and Excise duties. It exercises its functions with the authority of theCommissionerGeneraloftheNRA

RESIDENTS AND NON-RESIDENTSRESIDENT INDIVIDUAL1. AnindividualshallbetreatedasresidentinSierraLeonefortheentireyearof

assessmentifthatindividual:• HasanormalplaceofabodeinSierraLeoneandispresentinSierraLeoneat

anytimeduringtheyearofassessment;• Is present in Sierra Leone on more than one hundred and eighty two days

(182) ina twelvemonthperiod thatcommencesorendsduring theyearofassessment;or

• IsanofficialoftheGovernmentofSierraLeonepostedoverseasduringtheyearofassessment.

2 AnindividualwhowasnotaresidentintheprecedingyearofassessmentshallnotbetreatedasaresidentfortheperiodprecedingthedaytheindividualwasfirstpresentinSierraLeoneduringtheyearofassessment.

3. An individualwho isnota resident in the followingyearofassessmentshallnotbetreatedasaresidentfortheperiodfollowingthelastdayonwhichtheindividualwaspresentinSierraLeoneduringtheyearofassessmentifduringthatperiodtheindividualhadacloserconnectiontoaforeigncountrythantoSierraLeone.

4. ForthepurposesofthissectionanindividualshallnotbetreatedaspresentinSierraLeoneonanydaywhen:

• The individual crosses the border to Sierra Leone to perform services as anemployeeinSierraLeone;

• TheindividualisintransitbetweentwopointsoutsideSierraLeone;• TheindividualispresentinSierraLeoneforthepurposeofmedicaltreatmentor

full-timestudy;or

sIeRRA leoneCURRENCY: Sierra Leonean Leone(SLL)POPULATION: 6.42 millionGDP GROwTh: 9.9%GDP: US$ 6.1 billion

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Sierra Leone

• The individual is present in Sierra Leone by of diplomatic status or beingdependantofapersonwithdiplomaticstatus.

TEMPORARY RESIDENT INDIVIDUALAn individual treatedas resident,shallbe treatedas temporarily resident inSierraLeonefortheentireyearofassessmentifthatindividual:

IsnotacitizenofordomiciledinSierraLeone;Doesnotintend,duringtheyearofassessment,toresideinSierraLeoneforatotalperiodofmorethanfouryears,andAsoftheendoftheyear,hasnotbeenresidentinSierraLeoneformorethanfouryears.

COMPANY TAXCompanytaxisbasedoncomputedchargeableincome.Residentcompaniespaytaxat30%ontheirworldwideincome.

Temporarily Resident Taxpayer-The calculation of the chargeable income of atemporarily resident taxpayer is similar to that for a resident taxpayer exceptassessableincomeincludesonlySierraLeonesourceincomeandincomefromothersourcesthatisremittedtoSierraLeone.

A company is considered a resident if it satisfies the three alternative tests of residence;placeof incorporation;placeofmanagementandcontrol;andplaceofmajorityofoperations.Subjecttosubsection(2),acompanythatdoesnotsatisfyanyofthesetestsisanon-residentpersonfortheyearofassessment.

Non-Resident companiespay taxat the rateof30%on incomesourced inSierraLeone.

Apermanentestablishmentofanon-residentpersoninSierraLeoneshallbetreatedasaresidentpersonseparatefrombutassociatedwithitsnon-residentowner”

CAPITAL GAINS TAXCapitalgainstaxshallbepayablebyachargeablepersonattherateof30%ofthecapitalgainaccruingtoorderivedbythatchargeablepersonfromthedisposalofachargeableassetownedbyachargeableperson.Chargeableasset”includeslandandsea,propertyattachedandintegratedequipment,fixtures,improvementsincludingleases,anythinggrowingonthelandandallinterestinthepropertyincludingseawhichmayberighttofutureownership,righttooccupyastenant,lifeestate,therighttoexplore,develop,extractorproduceoil,andotherminerals,therighttoshares,stocksandotherinvestmentopportunitiesinanentity,businessorcompany, intellectualproperty rights, reversionofproperty , if it isnotused for its current purpose, an easement across another person’s property andanyotherprivilegesrelatingtotheproperty,businessandbusinessasset includinggoodwillwhereversituated.

Chargeabledisposal”meansthesale,realizationorchangeofhandsofachargeableassetotherthanthosespecificallyexemptfromcapitalgain.

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Chargeableperson”meansaperson,individual,corporationandrelatedorganizationsincluding permanent establishment, associates, affiliates and joint ventureswhichhavemadechargeabledisposalofachargeableassetduringayearofassessment.

EXEMPTION FROM CAPITAL GAINS- Capitalgainofapersonthatisuptoandundertheminimumchargeableincome

ofLe3,600,000perannumorpertransaction;- Capitalgainaccruingtoorderivedbyacompanyoutofamerger,amalgamation

or re-organization of the company where there is continuity of underlyingownershipintheassetofatleastonequarter.

- Capitalgainresultingfromatransferofownershipoftheassetbyapersontothatperson’sspouse,children,parent,brotherorsister;

- capitalgainresultingfromatransferofownershipoftheassetbetweenformerspousesaspartofadivorcesettlementoragenuineseparationagreement;

- Capital gainwhere the amount received on realization is,within one year ofrealization,usedtoacquireachargeableassetofthesamenature(referredtoas“replacementasset”);and

- Where part only of the amount received or realized is used in the mannerreferred to in paragraph (e), any part of the capital gain represented by theamountusedtoacquirethereplacementassetislessthanthecostbaseoftheassetrealizedatthetimeofrealization.”

BRANCh PROFITS TAXA branch in Sierra Leone of a non-resident company shall be subject to tax onrepatriatedincomeattherateof30%asthoughsuchincomewereadividendtaxableattherateof10%,thistaxbeinginadditiontoincometaxonthechargeableincomeofthebranch.

Repatriatedincomeisthehigherof—- Fundsrepatriatedintheyearoutofaccumulatedprofits;and- Thechargeableincomeofthebranchless—- Sierra Leone income tax paid on that chargeable income; and Any profit

reinvestedorretainedinthebranch

SALES TAX / VALUE ADDED TAXTheGoodsandServiceTax(GST)isaformofValueAddedTax(VAT).Itisaimedatbeingcomprehensiveformostgoodsandservices.

Exportwillbezero-ratedandimportswillbeleviedthesametaxesasdomesticgoodsandservicesadheringtothedestinationprinciple.

GSTappliestoeachofthefollowing(withsomeexceptions):• Allgoodssubjecttocustomsduty• Allgoodssubjecttoexciseduty• AllgoodslistedintheFirstScheduleoftheGSTAct2009.Theseincludefoods

andbeverages,winesandspirits,hydrocarbons, tobacco,cement,medicines,paints, perfume and toiletries, soaps, detergents, candles,matches, plastics,paper and paper articles, ammunition andweapons, furniture,motor vehiclebodies,structuresandpartsofstructuresforbuilding,bridges,etc.

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Every registeredGST trader shall in the ordinary course of business,maintain anelectroniccashregisterasmaybedeterminedbytheCommissioner-Generalforthepurposeofrecordingalltransactions.

Turnoverthresholdforsuppliesovera12-monthperiodisLe350,000,000.

Goodsandservices tax shall be imposedon the following inaccordancewith theGoodsandServicesTaxAct2009-- Forminingcompanies,allnon-productionrelateditems;- Forconstructioncompaniesallnon-constructionrelateditems;and- Foragriculturalcompaniesallnon-agriculturalrelateditems.

Theclassificationofitemsthatarenon-productionrelated,non-constructionrelatedandnon-agriculturalrelatedshallbedeterminedbytheCommissioner-General.

TherateofGSTapplicabletoataxablesupplyorimportis:- Ifthesupplyorimportiszero-ratedundertheFirstSchedule,zeropercent;- Inanyothercase,15percent.

FRINGE BENEFITS TAXNon-cash benefits given by employers to employees are included in employmentincomeonthebasisofthehigherofthecosttotheemployerorthemarketvalue.

Non-cash Benefit

Motorvehicle

ValuetobeaddedfortaxpurposesP×(R+20%C)whereCisthepurchasecostorfullleasecostofthevehicle;Pistheproportionoftheemployee’snonbusinessuse;Ristheemployerportionoftherunningcostofthevehicleintheyear.

Accommodation Marketrentofaccommodationreducedbypaymentmadebyemployeetowardthebenefit

Discharge/reimbursementofemployeeutilityexpenditure Amountpaidorreimbursed

Provisionofdomesticassistants Employer’scontributionstowardsthetotalemolumentspaidtodomesticassistant

Provisionofmeal,refreshmentorentertainment

Actualcosttoemployerofprovidingthebenefits

Waiverofanobligation Amountofpaymentorrepaymentwaived

LOCAL TAXESTheCity/TownCouncilsinthe14Districtsadministerlocaltaxes.

OThER TAXES1. National Social Security And Insurance Trust (Nassit)TheNationalSocialSecurityandInsuranceTrust(NASSIT)isaStatutoryPublicTrustset up by the National Social Security and InsuranceTrustAct No. 5 of 2001 to

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administerSierraLeone’sNationalPensionScheme.Theprimary responsibilityof theTrust is thepart replacementof income lostasaresultofthecontingenciesofoldage,invalidityanddeath.Employersandemployeescontribute10%and5% respectivelyof theemployees’employmentincome.

2. Small and micro tax payer regimeTurnover income tax payable in Leones

i. under10,000,000 Nil

ii. 10,000,001-20.000,000 100,000plus2%oftheamountabove10,000,000

iii. 20,000,001-100,000,000 300,000plus4%oftheamountabove20,000,000

iv. 100,000,001-200,000,000 3,500,000plus5%oftheamountabove100,000,000

v. 200,000,000-350,000,000 8,500,000plus6%oftheamountabove200,000,000

3. Payroll taxAllemployersshouldmakeareturnandpaytaxforallnon-citizenemployeestheyemploy,asfollows: ECOWASNationals -Le500,000peremployeeperyear Non-ECOWASNationals -Le3,000,000peremployeeperyear

Theamountpayable,togetherwiththecompletedReturn,mustbesubmittedtotheDTDonorbefore31stJanuaryoftheyearinwhichtheyapply.Whereanon-citizenisemployedinthecourseoftheyear,asubsequentreturnandpaymentmustbefiledwithin14daysfromthedateoftheemployment.

4. Business RegistrationTheOfficeof theAdministratorandRegistrar-General (OARG)dealswithstartingabusinessandregisteringpropertyindicators.Stampdutyisapplicableandratesvaryaccordingtothetypeofinstrument.

Inheritance / Estate duty– a tax duty of 10%of the value of the entire estate ispayable

StampandTransferDuty–Stampdutyratesvaryfrom1%to12.5%.Thisappliestoagreements,billsofexchange,promissorynotes,billsoflading,bonds,leasesandconveyances


Deductions for income tax assessment purposes include expenses incurrednecessarilytoobtain,maintainandpreservesuchincome.TheIncomeTaxAct2000listsspecificregulationsfordealingwithfixedassets,realestate,products,sharesorsecuritiessold,aswellasdeductiblepropertyplantandequipment,depreciation,badanddoubtfuldebtsandmeals,refreshmentandentertainment.

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CAPITAL ALLOwANCESCAPITAL ALLOwANCE DEDUCTION Depreciableassetsareclassifiedintogroupswithdepreciationratesasfollows—GroupAssetsIncludedRateofCapitalAllowance1. Plant,machineryandequipment,includingautomobilesandtrucks- 40%2. Allothertangibledepreciableassetsexceptbuildings-andintangible depreciableassets- 10%3. Buildingsusedtohouseindustrial,manufacturing,oragriculturalactivities15%4.Buildingsusedtohousecommercialactivitiesotherthanthosedescribedingroup 3– 10%5. Buildingsotherthanthosedescribedingroups3and4- 5%6 Expenditureonstart-upcostsonmineralandpetroleumprospectingand exploration 100%7 Productionrightsandotherexpenditureincurredonmineralandpetroleum developmentshallbefollows:• initialallowance 40%• annualallowance 20%

INVESTMENT ALLOwANCESTheamountof investmentallowance tobededucted frombusiness income isfivepercentofthecostoftherelevantasset.

BUSINESS INVESTMENT RELIEFThemaximumrelevantamountofbusinessinvestmentreliefavailabletoanindividualisfiftypercentofqualifyinginvestmentstotalingnotmorethanLe3,000,000inanyyearofassessment.

DEPRECIATIONDepreciationisnotallowed.However,capitalallowancesdeductionfordepreciationofataxpayer’sdepreciableassetsareallowed.

STOCK/INVENTORYTrading stock• Ataxpayerwhomaintainstradingstockshallestablishandmaintaininventories

ofsuchstock.• Adeductionshallbeallowedforthecostoftradingstocksoldduringtheyearof

assessment.• Thecostoftradingstocksoldinayearofassessmentshallbedeterminedby

addingtothevalueofopeningtradingstockthecostofgoodsacquiredduringtheyearandsubtractingthevalueofclosingtradingstock.

• Acash-basistaxpayermaycalculatethecostoftradingstockontheprime-costor absorption-costmethod and an accrual-basis taxpayer shall calculate thecostoftradingstockontheabsorption-costmethod.

• Thevalueoftradingstockonhandattheendoftheyearofassessmentshallbethelowerofitscostormarketvalueatthatdate.

• Whereparticular itemsoftradingstockarenotreadily identifiable,ataxpayermay account for the trading stock on the first-in-first-out method or theaverage-costmethod,butoncechosen,astockvaluationmethodmayonlybechangedwiththewrittenpermissionoftheCommissioner,andataxpayerusing

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thelast-in-first-outmethodshallchangetothefirst-in-first-outortheaveragestockmethodwithinfiveyearsfromthedateofcommencementofthisAct.

CAPITAL GAINS AND LOSSESThegainrealisedor the loss incurredon thedisposalofabusinessor investmentassetistakenintoaccountindeterminingchargeableincome.Thegainfromthedisposalofanassetistheexcessoftheconsiderationreceivedovertheadjustedcostbaseoftheasset.Thelossfromthedisposalofanassetistheexcessoftheadjustedcostbaseovertheconsiderationreceived.Thegainorlossondisposalofanassetwhichisnotabusinessorinvestmentassetisnottakenintoaccountindeterminingchargeableincome.

DIVIDENDSDividends received from an investment in Sierra Leone by a resident and a non-resident person is subject to a final withholding tax at 10%.The withholding taxon dividend does not apply to a dividend paid by a resident company to anotherresidentcompanyortoacomplyingretirementfundresidentinSierraLeone.Undercertainconditions,paymentsother thandistributionsoutofprofitsmaybe treatedasdividends.

INTEREST DEDUCTIONSAtaxpayerthatisnotabankisentitledtoadeductionofeightypercentoftheinterestexpensespaid in respectofadebtobligation incurredby the taxpayer toproduceassessableincome.

LOSSESAnyallowablelosssufferedbythetaxpayertotheextentthatthelosshasnotbeendeductedinapreviousyearofassessmentin-so-farasthetaxpayableeachyearwillbelessthan50%ofthetaxdueifsuchlossisnotcarriedforward;

FOREIGN SOURCED INCOMEIncomeisfromaforeign-sourceifitisderivedfromanactivitywhichoccursoutofSierraLeone.

AnyincomewhichisnotfromasourceinSierraLeoneisforeign-sourceincome.

INCENTIVESImportation of plants, machinery or equipment.Thefollowingshallbeentitledtodutyfreeimportforaperiodofthreeyearsfromthedateoffirstregistration.

• New and existing businesses importing plants, machinery or equipmentexcludingvehicles

• NewbusinessifitinvestsatleastUS$10,000,000.00;and• Anexistingbusiness if it investsat leastUS$5,000,000.00 inexpanding the

business.

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PETROLEUM REFINERYApetroleumrefineryinvestingaminimumofUS$20,000,000andemployingatleastfiftySierraLeoneancitizensshallbeeligibleforthefollowingrelief–a) Acorporatetaxreliefnotexceedingfiveyears;andb) Equipmentandmachineryforestablishingtherefineryshallbeimportedfreeof

dutyforaperiodoffiveyears.

AnewbusinessinvestingaminimumofUS$2,000,000andemployingatleasttwentySierraLeoneancitizensshallbeeligibleforthefollowingrelief–a) Acorporatetaxreliefnotexceedingfiveyears;andb) Equipmentandmachinery forestablishinganewbusinessshall be imported

dutyfreeforaperiodoffiveyears.

AGRICULTURE(1)Entitiesengaged inagriculturalproductionshall beentitled toduty-free importofagriculturalinputsforaperiodoffive(5)yearsfromthedateoffirstregistration.(2)Forthepurposeofthissection“agriculturalinputs”means:(a)Fertilizers;(b)Pesticides;(c)Insecticides;(d)Seedsandseedlings;(e)Hybridtreeseeds;(f)Seedanimalforfeedingpurpose;(g)Day-old-chicks;and(h)Animalsement.

(1)The incomederived from investment inpoultrybusiness shall beexempt fromincometaxforaperiodofthree(3)years:(a)InthecaseofaSierraLeoneancitizeniftheinvestmentisatleastUS$50,000;and(b)Inthecaseofanon-citizen,iftheinvestmentisatleastUS$500,000

(2)Importoffeeds,vaccineandveterinarydrugsforpoultryandlivestockshallattractdutyfreeimportforaperiodoffiveyearsfromthedateofcommencementofbusiness.

RESEARCh AND DEVELOPMENTForthepurposesofincometax,anyexpensesincurredonresearchanddevelopmentbyaninvestor,shallbeeligiblefordeductionfromprofitsof100%ofthecostincurreduptotheextentofprofitsofthesameyeartheexpenditureismadebutanyunclaimedamountshallnotbeavailableforfuturedeductions.

TRAININGForthepurposesofincometax,anyexpensesincurredontrainingoflocalstaffinanapprovedtrainingprogramme,shallbeeligiblefordeductionfromprofitsof100%ofthecostincurreduptotheextentofprofitsofthesameyeartheexpenditureismadebutanyunclaimedamountshallnotbeavailableforfuturedeductions.


• Aresident taxpayer isentitled toanallowable taxcredit in respectof foreign

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incometaxbornebythetaxpayeronassessableincomederivedfromaforeignsource.

• The allowable tax credit in respect of any foreign-source income may notexceedtheSierraLeoneincometaxonthatforeign-sourceincome,calculatedbyapplyingtheaveragerateofSierraLeoneincometaxtotheforeign-sourceincomereducedbyanydeductionproperlyallocatedtothatincome.

• The allowable tax credit in respect of foreign-source income and the SierraLeoneincometaximposedonthat incomearecalculatedseparatelyforeachamountofforeign-sourceincomederivedbyataxpayer.

• Foreign-source incomederivedbya foreignbranchofa residentcompany isaggregatedandconsideredasinglereceiptofincome.

Foreign employment income of residentsForeign-sourceemploymentincomederivedbyaresidentindividualduringayearofassessmentfromemploymentinaforeigncountryshallbeexemptfromincometaxiftheincomeischargeabletotaxintheforeigncountry.

d. CoRpoRAte GRoUps

Therearenospecialrulesexistingforthetaxationofgroups.


Expensesincurredinthesetransactionsareallowable.ButtheCommissionerGeneralhaspower tore-characterisea transactionentered intoaspartofa taxavoidancescheme.

F. eXCHAnGe ContRol

ExchangecontrolsareunderdirectsupervisionoftheBankofSierraLeone.

ForeignExchange:Inordertoimprovetransparencyandefficiencyinforeignexchangetransactionsandachieveamarket-determined foreignexchange rate, theBankofSierra Leone (BSL) has initiated aweekly auctions of non-cash foreign exchange.WhiletheauctionisprimarilydesignedasamechanismfortheBSLtoefficientlyinjectforeignexchangeintothemarket,italsoenvisagesawindowforthesaleofforeignexchangebyothereconomicagentsatmarketrates.

DIAMOND EXPORTING• Residentsandnon-residentsareallowedtofinancetheirdiamondoperationsin

SierraLeoneinUnitedStatesDollars,innotes,draftsorbanktransfers.• DiamondExporters shouldensure thatmoneysbrought intoSierra Leone for

theirtransactionsarechannelledthroughthebankingsystem.ForeignexchangecouldbebroughtintoSierraLeoneinanyofthefollowingways:-

A. LetterofCreditB. TelegraphicTransferC. CashDollarNotes• ForBandCabove,DiamondExporterswillbeallowedtoexportuptotheamount

offundsconfirmedbythecommercialbanksasbroughtin.

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• Onaquarterlybasis,commercialbankswillberequiredtosubmittotheBankofSierraLeonereturnsontheinflowsandoutflowsinrespectofeachlicensedexporter.

• The list of commercial banks in Sierra Leone at any point in timewould beobtainedfromtheBankofSierraLeone.


RatesoftaxapplicabletoindividualsresidentinSierraLeone

Therewasapronouncementoftherevisedminimumwagesin2014toLe500,000.

Tax Threshold Rate of Tax

NotoverLe3,600,000perannum nil

NextLe3,600,000perannum 15%

NextLe3,600,000perannum 20%

ExcessoverLe10,800,000perannum 30%

On a monthly basis, the rates are as follows:

Tax Threshold Rate of Tax

NotoverLe300,000permonth nil

NextLe300,000permonth 15%

NextLe300,000permonth 20%

ExcessoverLe900,000permonth 30%

Further, for individuals receivingemployment income, there isa thresholdonnon-taxableallowanceofLe2,600,000perannumorLe220,000permonth.

Theincometaxyearofassessmentis1stJanuaryto31stDecember.


ThereisadoubletaxtreatywiththeUnitedKingdom(UK).Itisveryoldbutisstillvalidbecauseithasneverbeencancelled.

This UK – Sierra Leone Treaty was extended by the colonial authorities to covercountriessuchasTheGambia;Ghana;Nigeria;Canada;NewZealand;DenmarkandNorway.

However, this doesnot reduce the rate ofwithholding taxesonpayments to non-residents.

wIThhOLDING TAX RATES(a) Rates of tax to be withheld from payments made to residentsTypeofpaymentRatePaymentstocontractors-5%

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Dividends-10%Interests-15%Rents-10%Royalties-25%Pensionsandannuities-15%Naturalresourcepayments-25%Realproperty-10%WinningsofLe500,000andabovefromanylottery-10%

(b) Rates of tax to be withheld from payments made to non-residents:Employmentincome-25%Paymentstocontractors-10%Dividends-10%Interest-15%Rentsandroyalties-25%Pensionsandannuities-25%Naturalresourcepayments-25%Paymentstoorapplicationsforthebenefitofnon-residentbeneficiaries-25%”

INVESTMENT INFORMATIONThe Investment Promotions Act 2004 was enacted to promote and attract bothdomestic and foreign private investment for the development of production andvalueaddingopportunities,toimproveexportandemploymentopportunities.TheActprovides forseveral incentives for investors.Sections8-10of theActprovides forthefollowing;• Expatriatepersonnelwithworkpermitsshallbepermittedtomakeremittances

abroad through their commercial banks, subject to such withholding taxobligationsasarecontainedintheIncomeTaxAct2000.

• The remittance of profits, after taxes, earned by a foreign investor froma business enterprise, is guaranteed as constituting current internationaltransactionsinrespectofwhichpaymentstransferredabroadshallbeallowedwithoutrestriction.

• An investormay freely repatriateproceeds received from the liquidationof abusiness enterprise and awards resulting fromany settlement of disputes inrespectofsuchbusinessenterprise.

• There shall be no restriction on the transfer of repayments of principal andinterestonanarmslengththirdpartyloancontractedoutsideSierraLeoneandregisteredwiththeBankofSierraLeonebut interestpaymentsdueonsuchloansmaybesubjecttothewithholdingtaxobligationsintheIncomeTaxAct,2000.

Residence and work PermitAllforeigncitizensarerequiredtoobtainaworkpermitfromtheMinistryofLabour

ANNUAL BUDGETTheyearlybudgetispresentedtoMembersofParliamentbytheMinisterofFinanceandEconomicDevelopmentfordiscussionandratificationbyParliamentattheendofNovemberofeachyear,forthecommencementofthefinancialyearon1stofJanuary.

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Currency:Dollars(USD) DialCode:+252 DialCodeOut:00

MemberFirm:PKFSomaliaCity:Hargeisa NameAtulShahContactInformation:[email protected]

A. CompAnY tAX

Companytaxisbasedoncomputedtaxprofitsasfollows:

Residentcompanies: 10%Non-residentcompanies: 16.3%

B. CApItAl GAIns tAX

10%ofthenetgain

C. BRAnCH pRoFIts tAX

Branchofaforeignentitypaystaxattherateof16.3%.

d. sAles tAXes/vAlUe Added tAX (vAt)

TheVATrateis5%.

e. loCAl tAXes

Employmentincomeistaxedat6%ofthegrossannualincomeVehicleroadtaxrate0.5%ofthevalueofthevehicle

F. lAnd RAtes

Landratesarebasedonthepercentageofthesitevalue.

G. RentAl InCome tAXes

10%oftherentalincome

H. sInGle BUsIness peRmIt

Dependingonthetypeofbusiness, thispermitcostsaminimumofUSD200toamaximumofUSD600.

I. CApItAl AlloWAnCes

Land0%

Somaliland

somAlIlAndCURRENCY: Somaliland Shilling (SLSh)POPULATION: 3.50 millionGDP GROwTh: 8.5%GDP: US$ 1.4 billion

134

Buildings5%Machinery10%Computers33%Equipment20%Trucks20%

J. peRsonAl tAX

6%onthegrossincome

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135

SouthAfrica

Currency:Rand(R) DialCode:27 DialCodeOut:00

Memberfirm

City Name ContactInformation

A. tAXes pAYABle

FEDERAL TAXES AND LEVIESCOMPANY TAXAcompanyisresidentinSouthAfrica(SA)ifitisincorporated,formedorestablishedinSAorhasitsplaceofeffectivemanagement(daytodaymanagement)inSA.Subject tocertain limitedexemptions,SouthAfricanresidentcompaniesandclosecorporations (companies) are taxed on their worldwide income. Furthermore, andagain subject to certain exemptions, the international ‘anti-avoidance’ practice oftaxing income earned by Controlled Foreign Companies (CFCs) applies to SouthAfricanresidents.

NormaltaxispayablebySouthAfricancompaniesontheirworldwidetaxableincomeattherateof28%.Thetaxispayablebybothpublicandprivatecompaniesaswellasclosecorporations.

Smallbusinesscorporationsareclosecorporationsandprivatecompanieswithonlynatural persons as shareholders, gross income of less than R20million during ayear of assessment, andwhere notmore than 20% of its gross income consistsof investment income or income from the rendering of a personal service.Thesecorporations qualify for taxation at the following rates in respect of the years ofassessmentendingbetween1April2015and31March2016:

Taxable income Rates of tax R0–R73650 NilR73651–R365000 7%oftheamountoverR73650R365001–R550000R550001+

R20395+21%oftheamountoverR365,000R59245+28%oftheamountoverR550,000

Lifeassurersaretaxedaccordingtothefourfundapproach.Thetaxableincomeofwhat isknownasThe IndividualPolicyholderFund is taxedat30%.TheCompanyPolicyholder Fund andThe Corporate Fund are taxed at 28%. Retirement Fund’sreceiptsandaccrualsareexemptfromtax.

Miningcompaniesare,inadditiontotheirspecificcorporateratesoftax,subjecttoaroyaltycalculatedonthegrosssalesrelatingtothetransferofmineralresources.Theroyaltyiscalculatedintermsofaspecificformulaanddependingonwhetherrefinedorunrefinedmineralsaretransferredcanrangefrom0.5%to7%.

South Africa

soUtH AFRICACURRENCY: South African Rand (ZAR)POPULATION: 51.62 millionGDP GROwTh: 2.3%GDP: US$ 352.5 billion

136

TRUSTSSouthAfrican trusts pay tax at a flat rate of 41% (2015: 40%) on each Rand oftaxable income. Notwithstanding the aforementioned, special provisions apply totestamentary trusts (for so longas thebeneficiaries remainminorsunder theageof18years)andtrustscreatedfor thebenefitofmentallyorphysicallychallengedpersons.Thesetrustspaytaxatratesapplicabletoresidentindividuals.

Foundersanddonorsoftrustsmaybetaxedonincomeearnedbythetrustintermsofcertainattributionrules(deemingprovisions).Thesamecanapplytobeneficiariesofnon-residenttrustsincertaincircumstances.

CAPITAL GAINS TAX (CGT)CGTwas introducedwitheffect from1October2001.SouthAfricanresidentsaretaxedontheirworldwideassetswhilenon-residentsareonlysubjecttoCGTonanydirect or indirect interest or right in or to immovable property situated inSA, andassetsofapermanentestablishmentthroughwhichtheycarryonatradeinSA.

CGTistriggeredonthedisposalordeemeddisposalofanassetwhichincludesbutisnot limited toanyevent,act, forbearanceoroperationof law that results in thecreation,variation,transferorextinctionofanasset.

AnoteworthydeemeddisposalarisesonemigrationfromSAorterminationofSAtaxresidence(exitcharge).

CGTnot only affects assets purchasedand sold after 1October2001but it alsoaffectsassetsacquiredpriortothisdateanddisposedofsubsequentto1October2001. In the case of assets acquired prior to 1 October 2001 and disposed ofsubsequent thereto, the gain is calculated based on the growth in value after 1October2001which,ofnecessity,hasresultedinlegislationprovidingforcomplexalternativestodeterminethegainatthetimeofdisposal.

Strictlyspeaking,CGTisnotaseparatetaxbutratherformsanintegralpartofSA’sincometaxlegislation.Inshort,subjecttoanyexclusionsandexemptions,ataxablegainiscalculatedbytakingthedifferencebetweentheproceedsreceivedondisposaloftheassetandthebasecostandthenmultiplyingthisamountbyaninclusionfactor(whichvariesdependingon thenatureof the taxpayer).The resultantsum is thenaddedtothetaxpayer’snormaltaxableincomeandtaxedaccordingly.

Acapitallossresultswherethebasecostexceedtheproceedsondisposal.Capitallossesarehoweverring-fencedandmaynotbesetoffagainstataxpayer’staxableincome from revenue sources butmay be set off against capital gains, with anyexcesscapitallossescarriedforwardforsetoffagainstanycapitalgainsarisinginsubsequentyearsofassessment.

Asummaryofsomeofthemorerelevantinclusionratesandeffectiveratesaresetoutbelow:

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Nature of taxpayer Inclusion rate Maximum tax rate Effective rate

Company/closecorporation 66.6% 28% 18.7%

Naturalperson 33.3% 41% 0%to13.7%Trust 66.6% 41% 27.3%

BRANCh PROFITS TAXWhereabranchofaforeigncompanyoperatesinSouthAfrica,abranchprofitstaxattherateof28%oftaxableincomeapplies.

DIVIDENDS TAX (DT)DividendspaidorthatbecomepayablebyaSouthAfricancompanytoashareholderaresubjecttoa15%withholdingtax.NotableexclusionsfromtheDTaredividendspaidtoanotherSouthAfricancompanyanddividendspaidbyheadquartercompanies.TheDTmaybereducedfordividendspaidtoforeignshareholdersintermsofanyapplicableDoubleTaxAgreement.

VALUE ADDED TAX (VAT)VATisimposedonmostgoodsandservicessuppliedbyavendorat14%.Exportsarezero-rated.Veryfewexemptionsexist.CompulsoryVATregistrationistriggeredwhenthevalueoftaxablesuppliesina12monthperiodexceedsorisexpectedtoexceedR1million.Asfrom1April2014,compulsoryVATregistrationistriggeredwhenthevalueoftaxablesupplieshavealreadyexceededtheR1millionthresholdwithinthepreceding12monthsorthereisawrittencontractualcommitmenttomaketaxablesuppliesexceedingR1millionwithinthenext12months.

FRINGE BENEFITS TAXEmployeesaretaxedonthevalueoffringebenefitsasdeterminedinaccordancewithaseparatescheduletotheIncomeTaxAct.Thetaxleviedisinaccordancewiththetaxratesapplicabletonaturalpersons.

DONATIONS TAXSubjecttocertainexemptions,donationstaxisleviedattherateof20%onthevalueof any property disposed of under any donation (or deemeddonation)madeby anaturalperson,company,municipalityortrustresidentfortaxpurposesinSA.

SECURITIES TRANSFER TAXWitheffect from1July2008,securities transfer tax is leviedonevery transferofasecurity. Asecurity inessence isanyshare inacompany,member’s interest ina close corporation or any right or entitlement to receive any distribution from acompanyorclosecorporation.

Onlysecuritiesissuedbycompaniesincorporated,establishedorformedinsideSAand companies incorporated, established or formed outside SA,which are listed on aSouthAfricanexchange,aretaxable.

Thetaxrateis0.25%andisappliedtothetaxableamountinrespectofanytransfer

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ofasecurity.

TRANSFER DUTYTransferdutyisimposedonthetransferofimmovableproperty(onorafter1March2015)atthefollowingrates:

Property Value Rates of TaxOnthefirstR750000 0%ForR750001toR1250000 3%onthevalueaboveR750000ForR1250001toR1750000 R15000+6%onthevalueaboveR1250000ForR1750001toR2250000 R45000+8%onthevalueaboveR1750000ForR2250000+ R85000+11%onthevalueaboveR2250000

Other taxesTheseinclude,amongstothers,customsandexciseduties,andskillsdevelopmentlevies.


Thetaxableincomeofacompanyisdeterminedbydeductingexpenditureincurredintheproductionofincomeandotherallowableexpensesandallowancesfromthecompany’sincome.CapitalgainsaresubjecttoCGTwitheffectfrom1October2001. Allowances/plant,machineryandequipmentusedinmanufacture

Asset Type Conditions for annual allowance Annual Allowance

Industrialbuildingsorimprovementsandbuildingsused for researchanddevelopment(note 1)

Constructionofbuildingsorimprovementsonorafter1January1989,providedbuildingisusedwhollyormainlyforcarryingonprocessofmanufactureorsimilarprocessorresearchanddevelopment.

Constructionofbuildingsorimprovementsonorafter1July1996to10September1999andthebuildingsorimprovementsareboughtintousebefore31March2000andusedintheprocessofmanufactureorsimilarprocess.

5%ofcost(previously2%)(Note2)

10%ofcost(Note2)

Newcommercialbuildings(otherthan residential accommodation)(Note3)

Anycostincurredinerectinganynewandunusedbuilding,orimprovinganexistingbuildingonorafter1April2007whollyormainlyusedforthepurposeofproducingincomeinthecourseoftrade.

5%ofcost

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BuildinginanUrbanDevelopmentZone

Costsincurredinerectingorextendingabuildinginrespectofdemolishing,excavatingtheland,ortoprovidewater,powerorparking,drainageorsecurity,wastedisposaloraccesstothebuildingimprovementtoexistingbuildings.

20%infirstyear8%ineachofthe10subsequent years

HotelBuildings Constructionofbuildingsorimprovements,providedusedintradeashotelkeeper or used by lessee in trade as hotelkeeper.Refurbishments(Note4)whichcommencedonorafter17March1993.

5%ofcost

20%ofcost

Hotelequipment Machinery,implements,utensilsorarticlesboughtintouseonorafter16December1989.

20%ofcost

Aircraft Acquiredonorafter1April1995. 20%ofcost(Note2)Farmingequipmentandequipmentusedforproductionofrenewableenergy

Machinery,implements,utensilsorarticles(otherthanlivestock)boughtintouseonorafter1July1988forfarmingoperations.Biodieselplantandmachineryboughtintouseafter1April2003.Machineryusedforthegenerationofelectricityfromwindpower,solarenergy,hydropower,biomasscomprisingorganicwastes,landfillgasorplantmaterials.

50%infirstyear30%insecondyear20%inthirdyear

Ships SouthAfricanregisteredshipsusedforprospecting,miningorasaforeign-goingship,acquiredonorafter1April1995.

20%ofcost(Note2)

Plant and Machinery(Note1)

Newandunusedmanufacturingassetsacquiredonorafter1March2002willbesubjecttowearandtearallowancesover4years.

Usedmanufacturingassets

40%infirstyear20%ineachofthe3subsequentyears(Note5)20%ofcost

Plant and Machinery(smallbusinesscorporationsonly)

Newandunusedplantandmachineryboughtintouseonorafter1April2001andusedbythetaxpayerdirectlyintheprocessofmanufacture.

100%ofcost

Non-manufacturingassets(smallbusiness corporationonly)

Acquiredonorafter1April2005. 50%infirstyear30%insecondyear20%inthirdyear

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Licences Expenditure,otherthanforinfrastructuretoacquirealicencefromgovernmentbodytocarryontelecommunicationservices,exploration,productionordistributionofpetroleumortheprovisionofgamblingfacilities.

Evenly over the period ofthelicence,subjecttoamaximumof30years

Communicationlinesandcables

Acquiringelectroniccommunicationlinesorcablesfordirectjointownership.

Premiuminrespectofanindefeasiblerightofuse(IRU)

5%ofcost

Periodofuse(IRUmusthavealegaltermofatleast20years)

Environmentaltreatmentandrecyclingasset and improvements

Anynewandunusedair,waterandsolidwastetreatmentandrecyclingplantorpollutioncontrolandmonitoringequipmentusedinthecourseofthetaxpayer’stradeandrequiredbylawoftheRepublic.

40%infirstyear20%ineachofthethree subsequent years

Environmentalwastedisposalasset and improvementsthereto

Anynewandunusedair,water,andsolidwastedisposalsite,dam,dump,reservoir,orotherstructureofasimilarnatureofapermanentnature,usedinthecourseofthetaxpayer’stradeandrequiredbythelawoftheRepublic.

5%ofcost

NOTES:1. Asfrom1April2012,neworunusedassetsorbuildingsusedforthepurposes

ofresearchanddevelopmentwillalsoqualifyfortheallowances.2. Recoupmentofallowancescanbedeductedfromthecostofthereplacement

asset.3. Allowancesavailabletoownersasusersofthebuildingoraslessors/financiers.4. Refurbishment isdefinedasanyworkundertakenwithin theexistingbuilding

framework.5. Where plant andmachinery is used in a process of manufacture or similar

process,thetaxpayerisobligedtomakeuseoftheallowancesandnotthewearandtearrates.

6. Priorto1January2013,wearandtearonanyassetsacquiredfromaconnectedpersonmayonlybeclaimedontheoriginalcosttotheseller lessallowancesclaimedbytheseller,plusrecoupmentsandCGTincludedintheseller’sincome.

CERTIFIED EMISSION REDUCTIONSIncome received by a person disposing of credit emission reductions (CERs)emanatingfromCleanDevelopmentMechanism(CDM)projectsasenvisagedintheKyotoProtocol,will bewholly exempt from income tax and capital gains tax.Thisexemptionincludes‘inspecie’distributionsandappliesinrespectofCERsdisposalsonorafter11February2009.Thisconcessionceasestoapplyfrom1January2021.

AsCERswill,bydefault,beexported,theywillbezero-ratedforVATpurposes.

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STOCK INVENTORYAlltradingstockonhandattheendofthetaxyearmustbeaddedtoincomewhilealltradingstockonhandatthebeginningoftheyearranksasadeduction.Tradingstockisvaluedatthelesserofcostornetrealisablevalue.Consumablestoresandwork-in-progressonhandconstitutetradingstock.TheLIFOmethodofvaluingtradingstockisnotpermittedinrespectofyearsofassessmentcommencingonorafter1July2000.

RESEARCh AND DEVELOPMENT EXPENDITUREAsfrom2November2006,specificdeductionsareallowedforexpenditureincurredinrespectofqualifyingresearchanddevelopmentactivities.ThedepartmentofScienceandTechnologymustapprovetheentire150%deduction.Onlyexpenditureincurredisonorafterthedateofreceiptoftheapplicationiseligibleforthisdeduction.

Plantandmachineryusedforresearchanddevelopmentqualifytobewrittenoffoverfouryears(40:20:20:20).Asfrom1January2015,theseassetscanbewrittenoffoverthreeyears(50:30:20).Buildingsusedforresearchanddevelopmentactivitiesqualifyfora5%annualallowance.

INTELLECTUAL PROPERTYWhere the expenditure was incurred before 29 October 1999, the deduction isallowedoverthenumberofyearsofthedurationofuseor4%oftheexpenditure,whicheverisgreater.

Wheretheexpenditurewasincurredonorafter29October1999andexceedsR5000theannualdeductionislimitedto:5%oftheexpenditure inthecaseofaninvention,patent,copyright,knowledgeor

otherpropertyofasimilarnature10%oftheexpenditureinthecaseofadesignnorotherpropertyofasimilarnature. Noallowanceisallowedinrespectofanyexpenditureincurredonorafter29

October1999 in respectof theacquisitionofany trademarkorpropertyofasimilarnature.

INTEREST AND FINANCE ChARGESInterest incurred in the production of income is a deductible expense.Where theloan or instrument in respect of which interest is incurred complies with certainrequirements,suchinterestisdeemedtobeincurredonaday-to-daybasis.

Interest incurred prior to the commencement of trade is deductible in the year inwhichtradecommences.

TAX LOSSESSubjecttocertainanti-avoidanceprovisions,companytaxlossesarecarriedforwardtothefollowingyearprovidedthetradingactivityisperpetuatedandincomeisderivedfromthattrade.Fornaturalpersons,taxlossesfromsecondarytradesarering-fencedincertaincircumstances.

INTEREST RECEIVEDInterest received (or accrued) is included in gross income. Where the loan orinstrumentinrespectofwhichinterestisreceivedcomplieswithcertainrequirements,

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suchinterestisdeemedtoaccrueonaday-to-daybasis.

FOREIGN SOURCED INCOMESouthAfrican resident individualsandcorporatesaresubject to tax inSAon theirworldwideincome.

However, this general principle may be overridden by the provisions of a doubletaxationagreementorcertainunilateralreliefprovisionscontainedinSouthAfricantaxlegislation.

Acomprehensivesetofrulesgovernthedeterminationofthesourceofincome.

Foreigndividends,i.e.dividendspaidorpayablebyaforeigncompany,inrespectofashareinthatcompanyaretaxable,subjecttocertainexemptions.Thefollowingforeigndividendsarefullyexemptfromtax:

• Iftheshareholder(whetheraloneortogetherwithanyothercompanyformingpartofthesamegroupofcompaniesasthatperson)holdsatleast10%ofthetotalequitysharesandvotingrightsinthecompany;

• If theshareholder isacompanywhich is in thesamecountryas the foreigncompanypayingthedividend;

• IfthedividendisinrespectofforeignshareslistedontheJohannesburgStockExchangeandfrom1March2014includesadividendinspecie;

• IfthedividendisdeclaredoutofnetincomewhichhasalreadybeentaxedinSAintermsofthelegislationregulatingthetaxationofCFCs,inthehandsoftheshareholder.Certainlimitationsapplyinrespectofthisexemption.

Foreigndividendsthatarenotfullyexemptfromtaxareexemptinpartbasedonaspecifiedformula,theeffectofwhichisthattheforeigndividendwillbesubjecttoaneffective15%tax.

INCENTIVESTheDepartmentofTradeand Industryprovidesanadditional industrial investmentallowanceforqualifyingindustrialassetsandprojects.Notaxholidayschemeis inforce.

REGIONAL hEADQUARTER COMPANY AND INVESTMENT FUND REGIMESAheadquartercompanyregimeappliesfromyearsofassessmentcommencingonorafter1January2011.Qualifyingcriteriaforaheadquartercompanyare:• Forthedurationoftheyearofassessmenteachshareholderoftheheadquarter

companymust haveheld at least10%of theheadquarter company’s equitysharesandvotingrights

• Where the company in question was dormant for a part of the year ofassessmentinwhichthequalifying10%shareholdingstandstobedetermined,theshareholdingduringthedormantpartoftheyearmustbeignored

• Attheendoftheyearofassessmentandallpreviousyearsofassessmentofthatcompany,80%ormoreofthecostofthetotalassetsofthecompanywasattributabletooneormoreofthefollowing:

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- anyinterestinequitysharesin- anyamountloanedoradvancedto- any intellectual property that is licensed by the company to any foreign

companyinwhichthatcompany(whetheraloneortogetherwithanyothercompanyformingpartofthesamegroupofcompaniesasthatcompany)held at least 10% of the equity shares and voting rights (qualifyinginvestments)

• Where the foreign company in question is dormant, the 80% of the cost ofits total assets requirement should be ignored for that part of the year ofassessmentorpreviousyearsofassessmentduringwhichitwasdormant)

• WherethegrossincomeofthatcompanyforthatyearofassessmentexceedsR5million,50%ormoreofthatgrossincomeconsistedofamountsintheformofoneorbothofthefollowing:- anyrental,dividend,interest,royaltyorfeepaidorpayablebyanyforeign

companythatconstitutesaqualifyinginvestment;or- any proceeds from the disposal of any interest in a foreign company or

in intellectual property licensed to a foreigncompany that constitutesaqualifyinginvestment,and

• Thecompanyelectstobeclassifiedasaheadquartercompany.

TheSAtaximplicationsofqualifyingasaheadquartercompanyare:• ThecompanyisresidentinSAfornormaltaxpurposesbutisexcludedfromthe

definitionofaresidentforpurposesofthecorporaterolloverrules.• DividendsdeclaredarenotsubjecttoDividendsTax.• Dividendsreceivedfromaheadquartercompanydonotenjoythegenerallocal

dividendexemptionandaretreatedasforeigndividends,subjecttotheforeigndividendtaxationrules.

• ThedisposalofsharesbytheheadquartercompanyinforeigncompaniescouldqualifyforCGTexemptioninSAintermsoftheparticipationexemptionrule.

• Noapplicationoftransferpricingrulesforbacktobackcross-borderloanstoforeigncompaniesthatconstitutequalifyinginvestments.

• Noapplicationoftransferpricingrulesforbacktobacklicensingofintellectualproperty(lossesasresultofbacktobacklicensingwillhoweverbering-fenced).

• Exemption fromthependingwithholding taxon interest in respectofback tobackloans.

• Exemptionfromwithholdingtaxonroyaltiesinrespectofbacktobackroyaltiespaidtoaforeignshareholder(applicablefrom1January2015).

• Exemptionfromsecuritiestransfertax.

Aregionalinvestmentfundregimealsoappliesfromyearsofassessmentcommencingonorafter1January2011.QualifyingforeigninvestorswillberegardedaspassiveinvestorswithnoexposuretoSouthAfricantaxbecauseoftheuseofaSouthAfricanportfoliomanager.


TaxcreditsaregrantedinrespectofforeigntaxespaidonforeignsourcedincomeinaccordancewithunilateralprovisionscontainedintheIncomeTaxActandnumerousDoubleTaxAgreements.WhereincomeissourcedinSA,noforeigntaxcreditwillbe

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allowedbutadeductionoftheforeigntaxessufferedislikelytobeallowed.Specialrulesapply to foreign taxessufferedon incomereceivedoraccrued fromservicesrenderedinSA.

d. CoRpoRAte GRoUps

Grouptaxationisnotapplicable.However,corporaterulesexistwhichprovidereliefinrespectoftransactionsbetweengroupcompaniesandbetweenfoundingshareholdersandtheircompany.Thereliefprovisionsdealwiththefollowingtransactions:• asset-for-sharetransactions• intra-grouptransactions• unbundlingtransactions• transactionsrelatingtoliquidation,winding-uporderegistration• amalgamationtransactions.

Briefly,thecorporaterulesprovideforthefollowingtaxreliefinrespectoftheabovementionedtransactions,providedcertainrequirementsaremet:• CGT• STC(until31March2012)• DividendsTax(effectivefrom1April2012)• Securitiestransfertax• Incometax,specificallywithrespecttocapitalallowancesclaimed,recoveryof• capitalallowancesandthetransferoftradingstock• Transferduty• VAT.

Thecorporate ruleshavebeenexpanded to includemost inboundand foreign-to-foreignrestructuringtransactionsthatfallwithinthelistoftransactionssetoutabove.Theserulesarecomplex.However,forthemostparttheyrequirethatthetransactionsbeeffectedwithinagroupofcompaniesandthatonlybuilt incapitalgainsassetswouldqualifyfortherolloverrelief.


TheCommissioner for theSouthAfricanRevenueServices isempowered tomakeadjustments to cross-border transactions between related parties that are notconductedonarm’s lengthterms.Whilenospecificthincapitalisationrulesapply,thenormalarm’slengthtransferpricingprincipleappliesinrespectofloansaswell.There are also limitations on certain deductions and allowances on transactionsbetweenconnectedparties.


Royaltyandsimilarincomearesubjecttowithholdingtaxesatsource.Theapplicableratewill increasefrom12%to15%from1January2015.Asfrom1July2013,royaltiespaidbyheadquartercompaniesareexemptfromthewithholdingtax.

A15%withholding taxondividendsearnedbynon-residentsapplies from1April2012.Dividendsinspeciewillbesubjecttothe15%taxbutthecompanydeclaring

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thedividendswillbeliableforthetax.

A15%withholdingtaxoninterestpaidorpayabletonon-residentsistobeimposedfrom1March2015.Notableexclusionsincludeinterestpaidonso-calledportfoliodebt capital, i.e. government bonds, listed securities, debts owing by local banks,domesticbrokerageaccounts,etc.,internationalbankfinanceandinterestpaidbyaheadquartercompany.

Asfrom1January2016,awithholdingtaxoncrossborderconsultancy,managementandtechnicalfeesfromaSouthAfricansourceistobeimposedatarateof15%.Servicefeeswhichconstituteremunerationareexemptfromthiswithholdingtax.

G. eXCHAnGe ContRol

Subjecttocertainlimitedexclusions,SouthAfricanresidentsaresubjecttoexchangecontrols. Exchange controls have been relaxed somewhat in recent years. Non-residentsareexcludedfromtheambitofexchangecontrols.

H. peRsonAl tAX

As a result of the change from a source-based system of taxation to a resident-basisoftaxation,SAresidentindividualsaresubjecttotaxontheirworldwideincomeirrespectiveofthesourceoftheincome,exceptforcertainexclusions.

Non-resident individuals, subject to certain exclusions, are subject to tax on theirSA-sourcedincomeonly.

Anaturalpersonwillbe regardedasa resident for taxpurposes ifhe isordinarilyresidentinSAorwherethepersonisnotordinarilyresidentinSouthAfricabutspendsmorethanacertainnumberofdaysinSA(thephysicalpresencetest).

Theincometaxratesapplicabletonaturalpersonsforthetaxyearending29February2016are:

Taxable Income Rates of TaxR0–R181900 18%ofeachR1R181901–R284100 R32742+26%oftheamountoverR181900R284101–R393200 R59314+31%oftheamountoverR284100R393201–R550100 R93135+36%oftheamountoverR393200R550101–R701300 R149619+39%oftheamountoverR550100R701301+ R208587+41%oftheamountoverR701300

Inrespectofthe2016yearofassessment,thefirstR23,800(2013:R22800)oflocalinterestearnedisexemptfromtaxforindividualsyoungerthan65yearsandthefirstR34,500(2013:R33000)forindividualsaged65yearsorolder.

Deductions available to salaried employees and directors are restricted to thefollowing:• Baddebtallowance

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• Doubtfuldebtsallowance• Wearandtearallowance• Pensionorretirementannuityfundcontributions• DonationstoqualifyingPublicBenefitOrganisations• Homeofficeexpenses,subjecttorequirements• Legalexpenses• Priorto1March2015,premiumspaidintermsofancertainallowableinsurance

policies• Asfrom1March2008,refundedawardsforservicesrenderedandrefunded

restraintoftradeawards.

Retirementsavingcontributiondeductionsaresubjecttocertainlimitations.Medicalexpensesarenotdeductiblebutataxcreditisavailableinrespectofmedicalschemecontributions/fees. In addition to themedical scheme fees tax credit a further taxcredit is available in respect of additional medical expenses, subject to certainlimitations.

DEEMED EMPLOYEESLabourbrokersandpersonalserviceprovidersareregardedasemployees.A labour broker isanaturalpersonwho, forreward,providesaclientwithotherpersonstorender a service for the client or procures such other persons for the client andremuneratessuchperson.

A personal service provider is a company or trust where any service renderedonbehalf of theentity to its client is renderedpersonallybyanypersonwho isaconnectedpersoninrelationtosuchentityandcertainprovisionsaremet.

Alabourbrokerwhoisnotinpossessionofanexemptioncertificatewillbesubjecttoemployees’taxattherateapplicabletoindividualtaxpayers.Apersonalserviceproviderwillbesubjecttoemployees’taxatarateof28%inthecaseofacompanyand40%inthecaseofatrust.

Deductionsavailabletodeemedemployeesarelimitedtoremunerationforservicesrendered,contributionstopensionandprovidentfunds, legalexpenses,baddebts,rent,financecharges,insurance,repairsandmaintenanceandfuel,incurredwhollyandexclusivelyfortrade.


Withholdingtaxratesfordividends,royaltiesandinterest(from1March2015)paidtonon-residentsfromSAaresetoutinthetablebelowTheratesbelowassumesaSouthAfricandomesticwithholdingtaxrateof15%asitappliesinrespectofroyaltiespaidtonon-residentsfrom1January2015(fortheratesasitwouldhaveappliedinrespectofroyaltiespaidtonon-residentspriorto1January2015,pleaserefertoearlierversionsofthisguide).

Royalties %

Dividends %

Interest %

NonTreatyCountries 15 15 15

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Royalties %

Dividends %

Interest %

TreatyCountriesAlgeria 10 10/15 10Australia 5 5/15 10Austria 0 5/15 0Belarus 5/10 5/15 5/10Belgium 0 5/15 10Botswana 10 10/15 10Brazil 10/15 10/15 10Bulgaria 5/10 5/15 5Canada 6/10 5/15 10Croatia 5 5/10 0Cyprus 0 0 0CzechRepublic 10 5/15 0DemocraticRepublicOfCongo 10 5/15 10Denmark 0 5/15 0Egypt 15 15 12Ethiopia 15 10 8Finland 0 5/15 0France 0 5/15 0Germany 0 7.5/15 10Ghana 10 5/15 5/10Greece 5/7 5/15 8Hungary 0 5/15 0India 10 10 10Indonesia 10 10/15 10Iran 10 10 5Ireland 0 5/10 0Israel 0/15 15 15Italy 6 5/15 10Japan 10 5/15 10Korea 10 5/15 10Kuwait 10 0 0Lesotho 10 15 10Luxembourg 0 5/15 0Malawi 15 15 15Malaysia 5 5/10 10Malta 10 5/10 10Mauritius 0 5/15 0Mexico 10 5/10 10Mozambique 5 8/15 8Namibia 10 5/15 10Netherlands 0 5/10 0

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Royalties %

Dividends %

Interest %

NewZealand 10 5/15 10Nigeria 7.5 7.5/10 7.5Norway 0 5/15 0Oman 8 5/10 0Pakistan 10 10/15 10PeoplesRepublicOfChina 7/10 5 10Poland 10 5/15 10Portugal 10 10/15 10Romania 15 15 15RussianFederation 0 10/15 10Rwanda 10 10/15 10SaudiArabia 10 5/10 5Seychelles 0 5/10 0Singapore 5 5/15 0SlovakRepublic 10 5/15 0Spain 5 5/15 5Swaziland 10 10/15 10Sweden 0 5/15 0Switzerland 0 5/15 5Taiwan 10 5/15 10Tanzania 10 10/15 10Thailand 15 10/15 10/15Tunisia 10 10 5/12Turkey 10 10/15 10Uganda 10 10/15 10Ukraine 10 5/15 10UnitedKingdom 0 5/10/15 0Usa 0 5/15 0Zambia 15 15 15Zimbabwe 15 15 15

NoteTheaboveratesareprovidedasaguideonly.AnumberofDTA’sprovideforalternativerates,includingzero,tobeappliedinspecificcircumstances.TheDTA’sareavailableonwww.sars.gov.za

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SouthSudan

Currency:SouthSudanesePound(SSP) DialCode:+211

A. FIsCAl YeAR end


Individuals:31December Foreigncompaniesusetheirfiscalyear-endCompaniesusetheirfinancialyear-end

B. tAXes pAYABle

COMPANY TAXCompanytaxisbasedoncomputedtaxprofitsasfollows:

Corporationtax:10%-forentitieswithturnoveroflessthanSSP1m 15%-forentitieswithaturnoverbetweenSSP1mandSSP75m 20%-forentitieswithaturnoverofoverSSP75m

CAPITAL GAINS TAXCapital gainsaredeemedasbusiness incomesubject to theapplicable corporatetaxrate.

INDIVIDUAL TAXATIONBothresidentandnon-residentaretaxedatprogressiveratesupto15%.Thebasisoftaxationforresidentsisonworldwideincome,whereasfornon-residentsisatsource.

wIThhOLDING TAX

The relevant rates are as follows: Resident Non-Resident

Dividends 10% 10%Interest 10% 10%Royalties 10% 10%Rent 10% 10%Managementservicefee N/A N/A

SALES TAXES

Resident Non-Resident

Salestax 5% 5%

South Sudan

soUtH sUdAnCURRENCY: South Sudanese Pound (SSP)POPULATION: 11.73 millionGDP GROwTh: 19%GDP: US$ 13.6 billion

150

ApplicableongoodsproducedorimportedintoSouthSudan.10%increaseduringperiodsofbudgetaryausterity.0%forgoodsproducedbysmallbusinesses<SSP1minturnover OThER TAXES

Resident Non-ResidentExcisetax 5%to30% 5%to30%

Applicable on excisable goods produced or imported into South Sudan and onexcisableservices.

OThER MATTERS• Exchangecontrols-existforbothresidentsandnon-residents.• Transfer pricing - transactions between related parties are required to be at

arm’slength.• Thincapitalization-Nothincapitalizationrulesexist.• Doubletaxagreements–None.• Treatiesawaitingconclusionand/orratification–None.

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MEMBERFIRMNameofFirm: PKFSwazilandCity: ManziniContact:Name: T h a b s i l eNtshalintshaliTelephone: +268 25054016Email: [email protected]

KEY TAX POINTS• CompanyincometaxinSwazilandisa27.5%flatrateonthetaxableprofitas

adjustedforincometaxpurposes.• Resident and non resident companies are subject to income tax on income

accruedorderivedfromSwaziland.Differentratesapplytoresidentandnon-residentcompanies.

• Notaxispayableoncapitalgains.• VATActno.12of2011wasintroducedinSwazilandon1April2012throughthe

VATActno.12of2011.VATischargeableonimportsandthesupplyofgoodsandservices inSwaziland. It is imposedat14%onmostgoodsandservicessuppliedbyaVendor.Certaingoodsandallexportsarezerorated.

• Swazilandhasenteredintoalimitednumberofdoubletaxationagreementswithcertaincountries,includingSouthAfrica,theUnitedKingdomandMauritius.

• Thereisnowealthtax,realestatetaxorinheritancetax,salestaxorgifttaxinSwaziland.

• Relieffordoubletaxationisprovidedbymeansofcreditforoverseastaxsufferedonoverseasincome.

A. tAXes pAYABle

COMPANY TAXFederal taxes and levies: TheKingdomofSwaziland incometaxsystemissource-based, i.e. incomefromasourcewithinordeemedtobewithinSwazilandwillbesubjecttotaxation.Taxesarepaidintwoinstalmentsinadvancebasedonaprovisionalassessment,whichshouldbeatleast90%oftheprioryeartaxcharge.TheSwazilandtaxyearis30June.

Theestimateoftaxableincomemaynotbelessthanthetaxableincomeassessedforthelatestprecedingyearofassessmentinrespectofwhichanassessmenthasbeenissuednot less thantwentyone (21)daysbefore thedatesuchestimate ismade,unlessthetaxpayercansatisfytheCommissionerGeneralthatthetaxableincomeforthecurrentyearwillbelessthanthatforsuchprecedingyear.

Provisionaltaxpaymentsaremadeasfollows;

First payment: Thispaymentmustbemadewithinsixmonthsfromthecommencementoftheyearofassessmentorapprovedfinancialyear-enddate.Theestimateoftaxableincomemaynotbelessthanthetaxableincomeassessedforthelatestprecedingyearof

Swaziland

sWAzIlAndCURRENCY: Swazi Lilangeni (SZL)POPULATION: 1.27 millionGDP GROwTh: 2%GDP: US$ 4 billion

152

assessment, unless the taxpayer can satisfy the Commissioner General that thetaxableincomeforthecurrentyearwillbelessthanthatforsuchprecedingyear.

Second payment: Thispaymentmustbemadenotlaterthanthelastdayoftheyearofassessmentorapprovedfinancialyearenddate.Wheretherehasbeenanincreaseinthetaxableincomeduringthecourseofthecurrenttaxyear,alltaxpayersareobligedtomakegoodthedifferencerealizedwhenpayingeitherthefirstorsecondprovisionaltax. Third payment: Itmustbepaidonorbeforetheduedateoftheincometaxreturn.Interestattherateof18%perannumwillbechargedonanyamountnotpaidbythedatestatedandinaddition,apenaltyequalto20%ofsuchamountmaybeimposed.

TRUSTS(1) Everytrusteewhomakesanypaymentfromtrustincometoabeneficiarywho

hasavestedrighttosuchincomeshallwithholdtaxattherateofthirty-threepercentofthegrossamount.

(2) Thetaxwithheldshallbeonaccountoftheliabilitytotaxofsuchbeneficiaryontheincomederivedfromthetrust.

(3) Everytrusteewhohaswithheldanytaxshall-(a) within fifteen days from the date of payment remit to theCommissioner the

amountoftaxsowithheld;and,(b) furnish within thirty days after the end of the year of assessment to the

beneficiarytowhomthepaymentismadeacertificate,showingtheamountofthepaymentmadeandthetaxwithheldduringtheyearofassessment.

(4) Everytrusteemakinganypaymenttowhichthissectionappliesshallmaintainarecordshowinginrelationtoeachyearofassessment-

(a) thepaymentmadetoeachbeneficiary;and,(b) thetaxwithheldfromsuchpayment,andsuchrecordshallbekeptfortheperiod

specifiedforexaminationbytheCommissionerasandwhenrequired.(5) Thedeductionoftaxunderthissectionshallnotrelieveabeneficiaryfromthe

obligationtofurnishareturnfortheassessmentofthetaxoranyreturnfromanyotherobligationimposedbytheIncomeTaxOrderof1975Amended.

(6) AtrusteewhofailstowithholdanytaxorhavingwithheldsuchtaxfailstoremitsuchtaxtotheCommissioner,asrequiredshall,inadditiontoanypenaltyforwhich he may be liable, be personally liable to pay the Commissioner thatamountoftaxasifitweretaxdueandpayablebysuchpersonunderPartVIIoftheIncomeTaxOrderof1975asAmended.

BRANCh PROFITS TAXBranches of non-residentCompanies are subject to tax onSwazilandprofits as iftheywereresidentCompanies.Inaddition,branchprofitstaxof15%ischargedonthedeemedrepatriatedincome.SuchbranchprofitstaxbeingpaidorpayabletoaCompanyincorporatedorregisteredassuchinaneighbouringcountry(SouthAfrica,Botswana,Lesotho,MozambiqueandNamibia)andthatitisneitherasubsidiarynorabranchofaCompanyincorporatedorregisteredoutsideaneighbouringcountry,therateoftaxforwhichsuchfirstmentionedCompanyshallbeliable,attherateoftwelveandonehalfpercent(12.5%).

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VALUE ADDED TAX (VAT)ThereisnoSalestaxinSwaziland.ValueAddedTax(VAT)wasintroducedinSwazilandinApril2012. It isadministeredby theVATActNo.12of2011aswellas theVATRegulationsof2012.VAT is tax that ischargedon theconsumptionofgoodsandservices in Swaziland. VAT is also tax charged on the importation of goods andservicesintoSwaziland.

Standard rated suppliesThesearetaxablesuppliesthatareneitherexemptnorzerorated.VATchargedonstandardratedsuppliesis14%. Exempt supplies (first schedule of the VAT Act no. 12 of 2011)• ThesearegoodsandservicesthatdonotattractVATatall• SuppliersofthesegoodsandservicescannotregisterforVAT• Businesses dealing in exempt goods and services when purchasing taxable

supplieshavetopayVAT• They cannot claim the VAT they incurred from their purchases as input tax

becausetheyarenotVATregistered

Zero-rated supplies (second schedule of the VAT Act no. 12 of 2011) • ThesearegoodsandservicesthatattractVATat0%• SuppliersofthesegoodsandservicescanregisterforVAT• SuchbusinessescanclaimtheVATtheyincurredfromtheirpurchasesasinput

taxattheendofeachtaxperiod

VAT DECLARATION – PAYMENT/VAT RETURNTherearetwoapplicabletaxperiods;

Category A - One month tax periodBusinesseswhomakeannualtaxablesuppliesofE20millionandabove;orBusinessesapprovedtodeferredimportVAT;mustsubmitonamonthlybasis.Category B – three month tax periodBusinessesthatmakeannualtaxablesuppliesoflessthanE20millionarerequiredtosubmitreturnsatthreemonthsintervals(quarterly).Thereturnmustbeaccompaniedbyproofofpaymentwhenapplicable.

Advance Payment on VatTaxpayersareadvisedtonotethefollowingonadvancepaymentofVATwhichshallcomeintoeffecton01April2015:a. MonthlyandquarterlyfilersareallowedtomakeadvancepaymentsoftheVAT

dueevenbeforetheendoftheirtaxperiod.Thereturnwillonlybesubmittedonorbeforethe20thdayofthemonthfollowingtheendofthetaxperiod.

b. TaxpayersmusthavemadeallVATpaymentsrelatingtothatparticulartaxperiodonorbeforethe20thdayofthemonthfollowingtheendofthetaxperiod.

c. AdvancepaymentdoesnotabsolvethetaxpayerfromsubmittingtherequiredVATReturnsasstipulatedinSection32oftheVATAct,failuretosubmitonorbeforetheduedateshallcontinuetoattractpenaltiesintermsofSection57oftheVATAct.

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d. ThefacilityprovidedbythisPracticenoteisgivenasanoptiontoboth“CategoryA”and“CategoryB”taxpayers.Taxpayerswhoarecomfortablewiththepaymentintervalsasprescribedinthelegislationmaycontinuetomakepaymentsinthatmanner.

FRINGE BENEFITS TAXIngeneral,benefitsprovidedtoemployeesareaddedtotheirremunerationandtaxedaccordingly.Thereare,however,someexceptions,theseincludeallotherbenefitsinkindthatanemployeemayenjoyattheexpenseoftheemployer;E.g.remunerationofdomesticassistantsby theemployeronbehalfof theemployee; theamountofthe remuneration paid to the assistants is added to the employee’s salary beforecalculationoftax.

Thevalueoffreepassagebyroad,rail,ship,orairthatarepaidforanemployee.Suchvalueisnottaxableifthedurationfortheemploymentcontractistwoyearsormore.Ifthecontractislessthantwoyearsthecontractshouldnotberenewable.

STAMP DUTYStampdutyisleviedonlegalinstrumentsrelatingtothesale,mortgageorleaseofimmovablepropertyandthesaleormortgageofstocksandshares.

LOCAL TAXESEmploymentincomeistaxedonawithholdingtax(WHT)basisknownasPayAsYouEarn(PAYE)atagraduatingscaleof33%perannum.

COMPANIES

Tax Rate Date From Tax Rate Date To Tax Rates

1July2012 30June2013 30%

1July2013 ToDate 27.5%

INDIVIDUALS

Taxable Income Tax Rates

E0 -E100000 0+20%oftheexcessofE0

E100000 -E150000 E20000+25%oftheexcessofE100000


E200000 E47500+33%oftheexcessofE200000

PART TIME EMPLOYEES’ REMUNERATION

Remuneration Tax Rate

0 -8333 20%

8333 -12500 25%

12500 -16666 30%

16666 33%

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155

wIThhOLDING TAX RESIDENT AND NON RESIDENT

Resident And Non-Resident Tax Rate Of Tax Due Date

Non-residentshareholders’tax(NRST)ondividends

SACUArea12.5%.OutsideSACU15%

Within30daysfromthedayonwhichthedividendisdeclared

Non-residenttaxoninterest 10% Within15daysafterthedateofaccrual

Withholdingtaxonroyaltiesandmanagementfees 15% Within15daysfromthe

dateofpayment.Withholdingtaxonnon-residentcontractors 15% Within15daysfromthe

dateofpayment.Withholdingtaxonentertainersandsportsmen 15% Within15daysfromthe

dateofpayment.

RepatriatedBranchProfits 15% Within15daysfromthedateofpayment.

Withholdingtaxonnon-residentpersons 15% Within15daysfromthe

dateofpayment.

CONCESSIONARY RATES OF NORMAL TAX IN ThE CASE OF REDUNDANT OR RETIRING INDIVIDUALS – 2013 TO DATE






OThER TAXES Theseincludeamongstothers,customsandexcisedutiesandgradedtax.

Therearetworatesrelatingtogradedtax;• TherateforallSwaziadultsinreceiptofincomeisE18/annumandthisis

payableviathefirstPAYEremittancesystem.• TherateforanadultmalepersonnotinreceiptofincomeisE4.20/annum.• FemaleadultsnotinreceiptofanincomearenotobligedtopayGradedtax.

EXCISE DUTYSpecialexcisedutiesapplytothefollowing;- Alcohol- Tobaccoproducts- Perfumesetc

Temporary importation Securityisprovidedforthepaymentofcustomsdutiesandothertaxesdueintheeventthatthegoodsarenotre-exportedwithintherequireddeadline-toensure

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156

thatgoodsthatwereimportedforotherthanhomeconsumptionarenotdivertedtosuchconsumption;

Permanent importationReleaseforfreecirculation(Theterm“freecirculation”isusedtodescribeimportedgoodsonwhichallimportformalitieshavebeencompliedwithandanycustomsdutiesorotherchargeshavebeenpaidandnotrepaidinwholeorinpart.)At point of entry -obtaindata to identify thegoodsandapplynon-tariffmeasures(e.glicenses) -performpointofentrycontrols-ifnecessary -collectorsecureimportduties -releasethegoodsTransit–suspensionofdutiesandothercharges,securityrequired.


CAPITAL ALLOwANCESwEAR AND TEAR ALLOwANCE - ITEM AND PERIOD OF wRITE OFF (NUMBER OF YEARS)

Description write off period

Computers software (pc’s); special patterns and tooling; videocassettes 2

Bulldozers; calculators; computers (pc’s); computers software;concrete transit mixers; Dictaphones; fax machines; motorizedconcretemixers;patterns,toolinganddyes;textbooks;trucks(heavyduty)

3

Aircraft (light – passenger / commercial / helicopters); bicycles;compressors; debarking equipment; delivery vehicles; excavators;fork-lifts trucks; front-end loaders; graders; mobile cranes; mobilerefrigeration units; motorcycles; motorized chain saws; pallets;portable concrete mixers; refrigerated milk tankers; tractors;excavators;trucks(others);trackmountedcranes;watertankers

4

Batterychargers;cinemaequipment;cashregisters;computers(mainframe); curtains; dental and doctors equipment; drilling equipment(water);engravingequipment;fireextinguishers(looseunits);gardenirrigation equipment (movable); hairdressers equipment; laboratoryresearch equipment; Laundromat equipment; mobile caravans;motormowers;musical instruments;passengercars;photocopyingequipment;portablegenerators;powertools(handoperated);publicaddress systems; radio communication equipment; scales; solarenergy units; staff training equipment; surveyors field equipment;tape recorders; telephone equipment; trailers; washing machines;workshopequipment;x-rayequipment

5

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Addingmachines;airconditioner(movable);arcweldingequipment;balers; cheque writing machines; cold drink dispensers; cropsprayers; demountable partitions; drills; electric saws; electrostaticcopiers; fertilizers spreaders; fitted carpets; furniture and fittings;gantry cranes; gas cutting equipment; gas heaters; and cookers;gearshapers;grindingmachines;guillotines;harvesters;heatdryers;heating equipment; incubators; ironing and pressing equipment;kitchen equipment; knitting machines; lathes; medical theatreequipment; milling machines; ovens and heating devices; ovensfor heating food; perforating equipment; photographic equipment;planers; ploughs; refrigeration equipment; refrigerators; sanders;seed separators; sewingmachines; shop fittings; spin dryers; spotwelding equipment; television sets; video machines; decoders;typewriters; vending machines (including video game machines);watertanks

6

Burglaralarms(removable);gymnasiumequipment;neonsignsandadvertising boards; surveyors instruments; weighbridges (movableparts)

10

Liftinstallation(goods);liftinstallations(passengers);waterdistillationandpurificationplant 12

DEPRECIATIONWearandTearallowancesordepreciationinrespectofmachinery,plant,implements,utensilandarticles(includingvehiclesandequipment)UnderSection14(1)(c)

Group Description Of Goods Assets Included Depreciation Rate

1 Computer hardware and software; lorries; buses;videorecorders 331/3%

2

Aircraft;constructionequipment(mobile)(including–bulldozers, concretemixers, graders, road scrapers);lifts and elevators; light delivery vehicles (LDV’s);motorcycle;tractors;videotapes;plantandmachineryworking24hoursperday

25%

3

Casino equipment, hotel soft furnishings (includingcarpets); medical equipment; sound and projectionequipment; televisions; trailers; plant andmachineryworkingtwoshiftsperday

20%

4

Furnitureandfittings;legalandprofessionallibraries;musical equipment; office equipment including(accounting machines, air conditioning plant, bindsand curtaining, fans) and any depreciable assetnot included in any other group, includingplant andmachineryworkingoneshiftperday

10%

5 Railroad cars, locomotives and railroad equipment;enginesandturbines;publicutilityplant 5%

6 IndustrialBuildings 4%

Wherea taxpayerelects toclaim thedeductionofwearand tearallowancesona

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straight-line basis, such taxpayer shall obtain approval from the Commissionerof Taxes before claiming the wear and tear on straight-line basis. Requests forallowances to be granted on the“straight-line”will be considered if the followingconditionsinrespectoftheassetstowhichsuchmethodwillbeappliedaresatisfied:(a) Thetaxpayermaintainsadequaterecords(b) Thestraight-linebasiswillapplytoallassetsofthesameclass(c) Theannualreturnofincomecontainsascheduledisclosinginrespectofeach

assetdisposedofduringtheyearofassessment:(i) Thedateofacquisitionandtheoriginalcost(ii) Theincometaxvalueasattheendoftheimmediatelyprecedingtaxyear(iii) Thepricerealisedondisposalorscrappingaswellasthetaxvalueofanyprofit

or loss(d) Theratesofallowancegrantedwillbesuchthattherateperannumreducesthe

valueoftheassettonilattheendofitsagreedestimatedlife(e) AnassetwrittenoffinfullshallbebroughtintoaccountataresidualvalueofE1

forrecordpurposes

Whereataxpayerappliesthestraight-linemethod,theassetshallbewrittenoff inequalannualinstalmentsoveritsestimatedusefullife.Thewearandteardeductionmustbereducedproportionatelyiftheassetwasacquiredandcommissionedduringtheyearofassessment.

Whereataxpayerhasbeengrantedpermissiontoapplythestraight-linemethod,thewrite-offperiodsshallbe in linewith theperiodsprescribedby theCommissioner.Taxpayersmustobtainpriorapprovaltoapplyadifferentwrite-offperiodtoanassetapproved,fortheproposedwriteoffperiodfromtheCommissionerofTaxes.

TRADING STOCK (1) There shall be taken into account, in the determination of the taxable

incomederivedbyanyperson,duringanyyearofassessment, fromcarryingonany trade (other than farming), thevalueofall tradingstockheldandnotdisposedofbyhim(hereinafterreferredtoas“thevalueoftradingstockheld”)atthebeginningandendofeachyearofassessment.

(2) The cost of trading stock disposed of during the year of assessment isdeterminedbyaddingtotheopeningvalueoftradingstockthecostoftradingstock acquired during the year, and subtracting the closing value of tradingstock.

(3) Thevalueoftradingstockheldbyanypersonatthebeginningofanyyearofassessmentshallbedeemedtobe–

(a) where the person carried on trade on the last day of the previous year ofassessment,thevalueoftradingstockheldonthatdate;or

(b) wherethepersoncommencedthetradeduringtheyearofassessment,thecosttothepersonofanystockacquiredpriortothecommencementofthetrade.

(4) The valueof trading stockheld at theendof a year of assessment shall bedeemedtobethelowerofcostormarketvaluetothepersoncarryingonthetrade.

(5) Forthepurposesofthissubsection,thecostofanytradingstockinrelationtoanydateshallbe-

(a) thecostincurredinacquiringsuchtradingstock;and

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159

(b) anyfurthercostsincurreduptosuchdateingettingsuchtradingstockintoitsthenexistingconditionorlocation.

(6) Whereanytradingstockhasbeenacquiredbyanyperson-(a) foraconsiderationwhichcannotbevalued;or(b) otherwisethanbywayofatransactionatarm’slength,suchtradingstockshall

bedeemed tohavebeenacquiredatacostequal to thepricewhich, in theopinionoftheCommissioner,wasthecurrentmarketpriceofsuchtradingstockonthedateofacquisition.

(7) Whereparticularitemsoftradingstockarenotreadilyidentifiable,apersonmayaccountforthattradingstockonthefirst-in-first-outmethodortheaveragecostmethodbut,oncechosen,astockvaluationmethodmaybechangedonlywiththewrittenpermissionoftheCommissioner.

DIVIDENDS

Non-Residents Tax Rate Of Tax Due DateDividendsforcompaniesinBotswana,Lesotho,NamibiaandSouthAfrica

12.5% Within30daysfromthedayonwhichthedividendisdeclared

Dividends-forothercountries 15% Within30daysfromthedayon

whichthedividendisdeclaredResidents Rate Of Tax Due Date

Dividends 10% Within15daysfromthedateofpayment

INTEREST DEDUCTIONSLevyofnon-residentstaxoninterest.Ifanyamountofinterestaccruestoorinfavourof-(a)anyperson,otherthanacompany,notordinarilyresidentinSwaziland;(b)theestateofanydeceasedpersonwho,atthedateofhisdeath,wasnotordinarilyresidentinSwaziland;or(c)acompanynotregisteredinSwaziland;andthedebtorinrespectofsuchamountisordinarilyresidentorcarriesonbusiness inSwaziland,thereshallbe leviedandpaidatax(inthisPartreferredtoasnonresidentstaxoninterest)equaltotenpercentumofsuchamount.

Application of provisionsForthepurposeofthisPart-(a) if interest is payable or is credited to any personhaving an address outside

Swazilandsuchinterestshall,untilthecontraryisproved,bedeemedtohaveaccruedtoanyperson,estateorcompany,asthecasemaybe,

(b) ifthedebtorinrespectofanyamountofinterestistheestateofanydeceasedperson,suchestateshallbedeemedtobeordinarilyresidentortobecarryingonbusinessinSwaziland,ifsuchpersonatthedateofhisdeath,wasordinarilyresidentorwascarryingonbusinessinSwaziland;

(c) ifthedebtorinrespectofanyamountofinterestisacompany,such company shall be deemed to be ordinarily resident in Swaziland if it is

registered,managedorcontrolledinSwaziland;and(d)anyamountaccruingtoanyshareholderinabuildingsocietyoutoftheprofitsof

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suchsocietyshallbedeemedtobeinterest.

LOSSESTax losses canbe carried forward to offset against future profits. Losses that areoffsetmaybecarriedforwardindefinitely.

Lossescannotbecarriedbackagainstprofitsofpreviousyears.

FOREIGN SOURCED INCOMEForeigntaxreliefislimitedonlytocountrieswhichhaveaDoubleTaxationAgreementwithSwaziland.

INCENTIVESTheMemorandumofUnderstanding(MOU)setsouttermsandconditions,whichshallapplyinrespectofthegrantofaDevelopmentApprovalOrder(DAO)bytheMinisterof Finance (MoF) towhicheverCompany that has applied for the (MOU). The taxconcessionisgrantedunderthe(DAO)foraperiodof10years.


Relieffordoubletaxationisprovidedbymeansofcreditforoverseastaxsufferedonoverseasincome.ThecreditistheloweroftheforeigntaxpaidandtheSwazilandtaxontheincomeconcerned.

Foreigntaxreliefislimitedonlytocountrieswithdoubletaxationrelief.Theseinclude;Mauritius,SouthAfricaandtheUnitedKingdom.

d. CoRpoRAte GRoUps

Thereisnospecialregimeforthetaxationofgroupsofcompanies.EachCompanyistaxedasaseparateentity.Lossesincurredbyoneaffiliatemaynotbeoffsetagainstprofitsmadebyanotheraffiliate.


Inter-companypricingbetweenaffiliatedcompaniesmustbecarriedoutonanarm’slengthbasisortheincomeofbothcompaniesisadjustedforincometaxpurposes.

Taxpayersareobliged toprovide the taxauthoritieswithdocumentationcontainingdata about the activities of the taxpayer andother parties to the transaction.Thisincludes a list of theparties to the transaction, thedescription of the transaction,thetermsofthetransaction,methodsofpricing,termsandconditionsofpaymentsetc. functions of the parties of the transaction, information about accepted risksconsideredbythetaxpayerwhenconcludingthetransactionandsoon.

F. eXCHAnGe ContRol

Therearenoexchangecontrolsineffect.

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Personalincometaxisleviedonresidentandnonresidentindividuals,whetherornottheyarecitizensofSwaziland.

INDIVIDUALS – 2013 TO DATE






Whenapplyingtheaboveratesthefollowingshouldbetakenintoaccount:• Taxpayablebyanaturalpersonwillbereducedbyataxrebateamountnot

exceedingE8,200pertaxyear• TheratesareapplicableontheamountexceedingE41000• Thetaxrebatedoesnotapplyinthecaseofredundantorretiringindividuals.• Taxpayablebyanaturalpersonwillbefurtherreducedbyasecondaryrebate

ofadditionalamountnotexceedingE2000ifthepersonisover60yearsoldonthelastdayofassessment.

Taxpayers who are liable to tax on business income are obliged to submit theirincometaxdeclarationsonbusinessincometotheSwazilandRevenueAuthorityby31Octobereveryyear.

All taxpayersmustkeep recordsof their income.Theyareobliged tokeep recordsforat leastfiveyears fromtheyear towhichtheyrelate.Toavoiddouble taxation,Swazilandhasconcludedaconsiderablenumberofdoubletaxationconventions.

H. eXemptIons

ThereareanumberofexemptionswithineachcategoryofincomewhicharedefinedinSection12ofTheIncomeTaxorderof1975Amended.(1) Thereshallbeexemptfromnormaltax–(a) thereceiptsandaccrualsof–(i) apensionfund,aretirementannuityfund,abenefitfundoraprovidentfund;(ii) anycompany,societyorotherassociationofpersons,whetherornotregistered

under any law, the profits or gains of which, other than profits or gainsfrom investments, are derived solely from transactions with or on behalf ofits individualmembers, and the constitution of which does not admit of thedistributionofitsprofitsorgainstoanypersonsotherthanthememberswithwhom or onwhose behalf the transactions took place, and does not conferuponanypersonanybenefitotherthanbenefitsaccruingtothatpersonfromtransactionswithoronbehalfofsuchperson,exceptasregardsanyreceiptsoraccrualsfrominvestmentsbyanysuchcompany,society,orassociationofpersons;and

(iii) anyexemptorganisationotherthanbusinessincomethatisnotrelatedtothe

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functionconstitutingthebasisfortheexistenceoftheorganisation.(b) theincomeofanypersonentitledtoprivilegesundertheDiplomaticPrivileges

ActtotheextentprovidedinsuchAct;(c) the salaries and emoluments of any person in respect of services rendered

to theGovernment of any country other thanSwaziland if that person is notordinarilyresidentinSwazilandorisordinarilyresidentsolelyforthepurposeofperformingsuchservices;

(d) warpensionsorgratuities;(e) dividendsreceivedbyoraccruedtoorinfavourof–(i) anypersonnotordinarilyresidentorcarryingonbusinessinSwaziland;(ii) theestateofanydeceasedpersonwhoatthedateofhisdeathwasnotordinarily

residentorcarryingonbusinessinSwaziland, if,butforthisexemption,suchestatewouldhavebeenliablefornormaltaxinrespectofsuchdividend;and

(iii) anycompany;


DOUBLE TAX TREATIES AND REDUCED RATES

Country Dividends Qualifying Companies (%) Interest Royalties (%)

Mauritius 7.5 5 7.5

SouthAfrica 10 10 10

UnitedKingdom 15 Fullytaxable *

*Taxableonlyinthestateofresidenceoftherecipient

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MEMBERFIRM

Forfurtheradviceorinformationpleasecontact:CityName C o n t a c tinformation

DaresSalaam MustansirGulamhussein +255 [email protected]

KEY TAX POINTS

• Corporate tax is payablebyTanzanian companieson theirworldwide taxableincomeattherateof30%.

• ValueAddedTaxisgenerallychargedatthestandardrateof18%onanysupplyofgoodsorservicesinmainlandTanzania.

• There are several sources of income that are subject to withholding taxes,generallyatratesfrom2%to15%.

A. tAXes pAYABle

CORPORATE TAXAcompany is resident inUnitedRepublic ofTanzania if it is incorporated, formedor established in Tanzania or has its place of effective management (day to daymanagement)inTanzania.

Subject to certain limited exemptions, Tanzanian resident companies and closecorporations(companies)aretaxedontheirworldwideincomeasprovidedonIncomeTaxAct2004section67.

Furthermore, and again subject to certain exemptions as provided on IncomeTaxAct 2004 second schedule, the international ‘anti-avoidance’ practice of taxingincomeearnedbyControlledForeignCompanies(CFC)appliestoTanzaniaresidents.CorporateTaxispayablebyTanzaniancompaniesontheirworldwidetaxableincomeattherateof30%.Thetaxispayablebybothpublicandprivatecompaniesaswellasclosecorporations.

ForIndividuals,wheretheturnoverexceedsTZS20,000,000thetaxpayerisobligedtoprepareauditedfinancialstatementsinrespectofhis/herbusiness.

tAnzAnIACURRENCY: Tanzania Shilling (TZS)POPULATION: 50.96 millionGDP GROwTh: 7%GDP: US$ 40.2 billion

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IfthecompanyhaslessthanTZS20,000,000itwillbetaxedasfollows:

Presumptive Individual Income Tax

Annual TurnoverTaxPayable(incomplete

accountingrecords)

TaxPayable(completeaccountingrecords)

TZS0–TZS4,000,000

NIL NIL

TZS4,000,000–TZS7,500,000

TZS.200,000/= 4%oftheannualturnoverinexcessofTZS4,000,000/=

TZS7,500,000–TZS11,500,000

TZS.424,000/= TZS1400,000plus5%oftheturnoverinexcessofTZS7,500,000/=

TZS11,500,000–TZS16,000,000

TZS.728,000/= TZS340,000plus6.0%oftheturnoverinexcessofTZS11,500,000/=

TZS16,000,000–TZS20,000,000

TZS.1,150,000/= TZS610,000plus7%%oftheturnoverinexcessofTZS16,000,000/=

Miningandoilandgascompaniesaretaxedatthesamefixedcorporatetaxof30%oftaxableincomebutaspertheFinanceAct2013miningcompaniesareagranteddepreciationallowanceof100%onequipmentusedforprospectingandexplorationofmineralsorpetroleum.

INSURANCEGeneral insurance business should be treated separately from the life insurancebusinessfortaxpurposes.

Ageneralinsurancebusinessshallinclude;• anyotheramountstobeincludedundertheIncomeTaxAct• premiumsderivedduringtheyearofincomebythepersonasinsurer,including

asre-insurer,inconductingthebusiness;and• proceedsderivedduringtheyearofincomebythepersonunderanycontractof

re-insuranceinrespectofproceeds;and

Thefollowingarededucted, togetherwithanyotheramountsdeductibleundertheIncomeTaxAct;

• proceedsincurredduringtheyearofincomebythepersonasinsurer,includingasre-insurer,inconductingthebusiness;and

• premiumincurredduringtheyearofincomebythepersonunderanycontractofre-insurance.

Alifeinsurancebusinessshallinclude;• anyotheramounttobeincludedundertheIncomeTaxAct;• premiumderivedduringtheyearofincomebythepersonasinsurer,including

asre-insurer,inconductingthebusiness;and• proceedsderivedduringtheyearofincomebythepersonunderanycontractof

re-insurance;and

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• there shall be deducted only the expenses of managing the business’sinvestments (includingcommission) thataredeductibleunder the IncomeTaxAct;

Thefollowingamountsshallnotbedeductible;• proceedsincurredduringtheyearofincomebythepersonasinsurer,including

asre-insurer,inconductingthebusiness;and• premiumincurredduringtheyearofincomebythepersonunderanycontractof

re-insurance.

TRUSTSA trust or unit trust is liable for tax, however, it will be taxed separately from itsbeneficiariesandtrustees.

Assetsownedand liabilitiesowedbyatrustoratrustee inthecapacityof trustee(otherthanasabareagent)shallbetreatedasownedorowedbythetrustandnotanyotherperson.

Amountsderivedandexpenditureincurredbyatrustoratrusteeinthecapacityoftrustee(otherthanasabareagent),shallbetreatedasderivedor incurredbythetrustandnotanyotherperson.

Thefollowingdistributionsareexempted:• Distributionsofaresidenttrustorunittrustshallbeexemptedinthehandsof

thetrust’sBeneficiaries;• Distributionsofanon-residenttrustorunittrustshallbeincludedincalculating

theincomeofthetrust’sbeneficiaries.

TAXATION OF PARTNERSApartnershipbusinessisnotsubjecttotaxbutpartnersinpartnershiparetaxedbyusingindividualtaxrateandtheirtaxableincomeisdeterminedbytakingpartner’sshareofanypartnershipincome;anddeductingthepartner’sshareofanypartnershiploss,forayearofincomeofthepartnershipendingonthelastdayoforduringtheyearofincomeofthepartner.

CAPITAL GAINS TAX (CGT)GainsfromthedisposalofinvestmentassetssituatedinTanzaniabynon-residentsaretaxedattherateof20%andforresidentsofTanzania,regardlesswhetherthedisposalismadeinsideoroutsideTanzania,thedisposalistaxedattherateof10%onthenetgainrealized.Acquisitioncostsaredeductedfromthegrosssellingprice.

However,areexemptedfromtheCGT;• Ifthepropertywasusedastheindividual’sprivateresidenceforthreeyearsprior

tothesale,capitalgainsareexemptuptoTZS15million(USD8,250);• AgriculturallandwithvaluelessthanTZS10million;• Lessthan25%ofDaresSalaamStockexchange(DSE)sharesheldbyaperson;• 25%ormoreofsharesofaresidentcompanyheldbyanotherresidentcompany

withinthepreviousfiveyears;and,• Unitsinapprovedcollectiveschemes

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BRANCh PROFITS TAXWhereabranchofaforeigncompanyoperatesinTanzania,abranchprofitstaxattherateof30%oftaxableincomeand10%repatriatedincomeapplies.

DIVIDENDS TAX (DT)Gross dividends of a resident company, controlling 25% or more shares, will betaxedat5%whenpaidtoaresidentcompanyand10%whenpaidtoanon-residentcompany.AnycorporationthatislistedontheDaresSalaamstockexchange(DSE)andpayingdividendstoaresidentornon-residententitywillbetaxedattherateof5%.

Dividendsotherthanmentionedabovewillbetaxedattherateof10%forresidentornon-residentcompanies.

VALUE ADDED TAX (VAT)VAT shall be charged at 18% on any supply of goods or services in mainlandTanzaniawhereitisataxablesupplymadebyataxablepersoninthecourseof,orinfurtheranceof,anybusinesscarriedon.Furthermore,acompulsoryVATregistrationistriggeredwhenthevalueoftaxablesuppliesina12monthperiodisorisexpectedtoexceedTZS40millionorTZS10millionina3monthperiod,aVATregisteredpersonisrequiredtolodgeVATreturnsonamonthlybasisandmakethepayment,ifany,ofthesametimewhenlodgingtheVATreturns.

VATontheimportationoftaxablegoodsorservicesfromanyplaceoutsidemainlandTanzania shall be chargedandpayable in accordancewithValueAddedTax (VAT)1997legislationandtheproceduresapplicableundertheCustomsLawsforimportedgoodsshallapplyinrespectofVATimports.

FRINGE BENEFITS TAXEmployeesare taxedon the valueof fringebenefits asdetermined in accordancewithaseparatescheduletotheIncomeTaxAct(the‘fifthschedule’),whichquantifiesthecarbenefit.Theotherbenefitsincludehousing,andloansthatareprovidedforless than twelvemonthperiod anddonot exceed3monthsbasic salary.The taximposedtoindividualisinaccordancewiththetaxbracketsandratesapplicabletonaturalpersons.

OThER TAXESTheseinclude,amongstothers,CustomsandExciseduties,andskillsdevelopmentlevies.


Thetaxableincomeofacompanyisdeterminedbydeductingexpenditureincurredintheproductionofincomeandotherallowableexpensesandallowancesfromthecompany’sincome.

Howtheincomeisdeterminedaswellasallowableexpensesandallowancesthatacompanymaydeductfromthatincomeisdetailedfurtherbelow.

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INCOME FROM A BUSINESS“Business”includesatrade,concerninthenatureoftrade,manufacture,profession,vocationorisolatedarrangementwithabusinesscharacter;andapast,presentorprospectivebusiness,butexcludesemploymentandanyactivitythathavingitsnatureandtheprincipaloccupationofitsownersorunderlyingowners,isnotcarriedonwithaviewtoderivingprofits.If the activities of the company are in line of the above definition of a ‘business’according to theTanzania tax laws, the companywill be treated as conducting abusiness and it’s taxable incomewill be subject to tax at a rate of 30%.Taxableincomeisdeterminedbytakingbusinessincomeanddeductingallowableexpenditureasexplainedbelow.

INCOME FROM INVESTMENTA corporation’s income from investment is its income from activities not directlyrelatedtoitsbusiness.Thisclassofincomemayincludedividends,interestandrentwhich are not core to the business of a corporation. Income from investments iscalculatedasfollows:-- Fromtotalreturnsoninvestment;- Deductanyincomewhichhasbeensubjecttoafinalwithholdingtaxandexempt

dividends;- Deductcurrentexpensesdeductions;- Addnetcapitalgains(i.e.capitalgainsminuscapitallosses);- Deductanylosscarryforwardfrompreviousyear.

GENERAL PRINCIPLES OF DEDUCTIONSThe corporation is not allowed to deduct the expenses of the following nature indeterminingit’staxableincome:• Expenditureincurredbyemployeeoremployerinthemaintenanceofhimselfor

herself,hisorherfamilyorestablishment,orforanyotherpersonalordomesticpurpose;

• Expenditureofthecapitalnaturethatsecureabenefitlastinglongerthantwelve(12)monthsorincurredinrespectofnaturalresourceprospecting,explorationanddevelopment;

• Bribesandexpenditureincurredincorruptionpractice;• Fines and penalty fines and similar penalties payable to a government or a

politicalsubdivisionofagovernmentofanycountry forbreachofany laworsubsidiarylegislation;

• Expenditure to the extent to which incurred by a person in deriving exemptamountsorfinalwithholdingpayments.

INTEREST AND FINANCE ChARGESInterest incurred in the production of income is a deductible expense.Where theloan or instrument in respect of which interest is incurred complies with certainrequirements,suchinterestisdeemedtobeincurredonaday-to-daybasis.Exemptcontrolledresidentsmaydeductinterestbuttoalimitnotexceedingsumofinterestequivalenttodebttoequityratioof7to3.

TRADING STOCKAlltradingstockonhandattheendofthetaxyearmustbeaddedtoincomewhileall

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tradingstockonhandatthebeginningoftheyearisdeducted.Tradingstockisvaluedatthelowerofcostorthenetrealisablevalue.

REPAIR AND MAINTENANCE EXPENDITUREFor thepurposes of calculating a person’s income for a year of income fromanybusiness,thereshallbedeductedallexpendituretotheextentit isincurredduringthe yearof income,by thepersonand in respectof the repair ormaintenanceofdepreciableassetsownedandemployedbythepersonwhollyandexclusivelyintheproductionofincomefromthebusiness.

Nodeductionsareavailableforexpenditureimprovingtheassetsbutthatexpendituremaybeincludedinthecostoftheassetsifcertainrequirementsaremet.

RESEARCh AND DEVELOPMENT EXPENDITUREInaccordance to the IncomeTaxAct2004researchanddevelopmentexpenditureisdeductibleif it isincurredbyapersonintheprocessofdevelopingtheperson’sbusiness and improving business products or process and includes expenditureincurredbyacompanyforthepurposesofaninitialpublicofferandfirstlistingontheDar esSalaamStock Exchangebut excludes any expenditure incurred that isotherwiseincludedinthecostofanyassetusedintheuseinanysuchprocess.

GIFTS TO PUBLIC AND ChARITABLE INSTITUTIONSFor the purpose of calculating a person’s income for a year of income from anybusiness,thereshallbededucted• Amounts contributed during the year of income to a charitable institution or

socialdevelopmentproject;• AnydonationmadetoEducationalinstitutions;• Amountpaid to localgovernmentauthoritywhicharestatutoryobligationsor

governmentdirectivestosupportcommunitydevelopmentprojects.

The deductions available for a year of income shall not bemore than 2% of theperson’sincomefromthebusiness.

DEPRECIATION ALLOwANCE FOR DEPRECIABLE ASSETSFor thepurposes of calculating a person’s income for a year of income fromanybusiness, thereshallbededucted in respectofdepreciationofdepreciableassetsownedandemployedbythepersonduringtheyearofincomewhollyandexclusivelyintheproductionoftheperson’sincomefromthebusinesstheallowancesgrantedundertheschedulebelow.

Class Depreciable Assets Rates1* Computersanddatahandlingequipmenttogetherwith

peripheraldevices,automobiles,busesandminibuseswithaseatingcapacityoflessthan30passengers,goodsvehicleswithaloadcapacityoflessthan7tonnes;constructionandearth-movingequipment.

37.5%

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2* Buseswithaseatingcapacityof30ormorepassengers,heavygeneralpurposeorspecializedtrucks,trailersandtrailer-mountedcontainers;railroadcars,locomotivesandequipment;vessels,barges,tugsandsimilarwatertransportationequipment;aircraft;otherself-propellingvehicles;plantandmachinery(includingwindmills,electricgeneratorsanddistributionequipment)usedinmanufacturingorminingoperations;specializedpublicutilityplantandequipment;andmachineryorotherirrigationinstallationsandequipment.

25%

3* Officefurniture,fixturesandequipment;anyassetnotincludedinanotherClass. 12.5%

4** Naturalresourceexplorationandproductionrightsandassetsreferredtoinsubparagraph(3)inrespectofnaturalresourceprospecting,explorationanddevelopmentexpenditure.

20%

5** Naturalresourceexplorationandproductionrightsandassetsreferredtoinsubparagraph(3)inrespectofnaturalresourceprospecting,explorationanddevelopmentexpenditure.

20%

6** Buildings,structures,dams,waterreservoirs,fencesandsimilarworksofapermanentnatureusedinagriculture,livestockfarmingorfishingfarming.

5%

7** IntangibleassetsotherthanthoseinClass4. OverUsefullife of asset

8** Plantandmachinery(includingwindmills,electricgeneratorsanddistributionequipment)usedinagriculture.Equipmentusedforprospectingandexplorationofmineralsorpetroleum.

100%

Capital allowances on fixed asset expenditure such as initial allowance of 50%appliesonthenetcostofplantandmachineryusedinmanufacturing(andfixedinafactory),fishfarming,orinprovidingservicestotourists(andfixedinahotel).Totalcapitalallowancegrantedtoapersonisavailableintwoportions:thefirstportion(aninitialallowanceof50%),ifapplicable,isavailableintheyearofacquisitionandtheremainingportionisavailableduringthesubsequentyears.

NOTES:* PoolsofDepreciablecalculatedbasingonDiminishingvaluebalancemethod.** PoolsofdepreciableassetscalculatedbasingonstraightlineMethod.

LOSSES ON REALIZATION OF BUSINESS ASSETS AND LIABILITIESFor thepurposes of calculating a person’s income for a year of income fromanybusiness,thereshallbedeductedanylossofthepersonfromtherealizationduringtheyearofincomeofthefollowing:• Abusinessassetofthebusinessthatisorwasemployedwhollyandexclusively

intheproductionofincomefromthebusiness;

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• A debt obligation incurred in borrowingmoney, where themoney is or wasemployedoranassetpurchasedwiththemoneyisorwasemployedwhollyandexclusivelyintheproductionofincomefromthebusiness;

• A liability of the business other than a debt obligation incurred in borrowingmoney,wheretheliabilitywasincurredwhollyandexclusivelyintheproductionofincomefromthebusiness.

LOSSES FROM A BUSINESS OR INVESTMENTForthepurposesofcalculatingtheincomeofaperson(otherthanapartnershiporaforeignpermanentestablishment)forayearofincomefromabusinessorinvestment,thereshallbededucted:• Anyunrelieved lossof the year of incomeof theCorporation fromanyother

businessorinvestment:and,• Anyunrelievedlossofapreviousyearof incomeoftheCorporationfromany

businessorinvestment.

TAX LOSSIf a corporation made a loss from the corporation’s business it is allowed to bedeductedforfiveconsecutiveyearsandonthethirdyearwillbetaxat therateof0.3%onturnover.

INTEREST RECEIVEDInterest received (or accrued) is included in gross income. Where the loan orinstrumentinrespectofwhichinterestisreceivedcomplieswithcertainrequirements,suchinterestisdeemedtoaccrueonaday-to-daybasis.

FOREIGN SOURCED INCOME Tanzania resident individuals and corporate entities are subject to tax inTanzaniaon their worldwide income. However, this general principlemay be overridden bytheprovisionsofadouble taxationagreementorcertainunilateral reliefprovisionscontained in Tanzania’s tax legislation. A comprehensive set of rules govern thedeterminationofthesourceofincome.

INCENTIVESInTanzania there is anenacted lawcalled theTanzania InvestmentAct1997, theActhassetupaone-stopinvestmentcentretocoordinate,encourage,promoteandfacilitateinvestmentinTanzaniaandtoadvisetheGovernmentoninvestmentpolicyandrelatedmatters.TheTanzaniaInvestmentCentre(TIC)assistallinvestorstoobtainpermits,authorisationetc.requiredbyotherlawstosetupandoperateinvestmentsinTanzania.

There are two categories of investors; normal investor and strategic investordependingonthevalueofinvestment.Thestrategicinvestorenjoymoreincentivesthannormalinvestor.WithaTanzaniaInvestmentCentre(TIC)certificatetheinvestorqualifiesfortaxexemptionsoncertainitems.

Theothercategoriesofinvestmentsthatenjoyincentivesinclude;

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Export Processing Zone (EPZ) tax incentives which include:• Exemptionfromcorporationtaxfor10years;• Exemptionfromwithholdingtaxonrent,dividends,interest,royaltyfor10years;• Remission of Customs duty, Excise duty, other tax for goods used as raw

materials,equipment,machinery etc. directly relating to the manufacturingactivities;

• Exemptionfrompaymentofalltaxesandleviesimposedbythelocalgovernmentauthoritiesforproductsproducedforaperiodof10years;

• Exemptionfrompre-shipmentordestinationinspectionrequirements;• OnsitecustomsinspectionofgoodsintheEPZ;• Entitlementtoaninitialautomaticimmigrationquotaofuptofivepersonsduring

thestart-upperiod;

Special Economic Zone (SEZ):SEZ provides incentives depending on the category of the investor. Some of theincentivesincludethefollowing;• Exemptionfrompaymentoftaxesanddutiesformachinery,equipment,heavy

dutyvehicles,buildingandconstructionmaterialsandanyothergoodsofcapitalnaturetobeusedforthepurposeofthedevelopmentoftheSEZinfrastructure;

• ExemptionfrompaymentofstampdutyonanyinstrumentexecutedinoroutsidetheSEZrelatingtotransfer,leaseorhypothecationofanymovableorimmovableproperty in or situated within the special economic zone or any document,certificate,instrument,reportorrecordrelatingtoanyactivity,action,operation,project,undertakingorventureintheSEZ;

• ExemptionfrompaymentofVATonutilitycharges;• Exemptionfrompre-shipmentordestinationinspectionrequirements;• OnsitecustomsinspectionofgoodswithinSEZ;• TreatmentofgoodsdestinedintoSEZastransitcargo.• Remissionofcustomsduty,VATandanyothertaxchargedonrawmaterialsand

goodsofcapitalnaturerelatedtotheproductionintheSEZ;• Provisionofbusinessvisaatthepointofentrytokeytechnical,management

andtrainingstaffforamaximumoftwomonths;thereaftertherequirementstoobtainaresidencepermitaccordingtotheImmigrationAct,1995shallapply


Aresidentcorporationmayclaimforeigntaxcreditsinayearofincomeforanyforeignincometaxpaidbyacorporationtotheextenttowhichitispaidwithrespecttothecorporation’staxableforeignincomefortheyearofincome.

Foreign taxcreditsclaimedshallbecalculatedseparately foreachyearof incomeandshallnotexceedtheaveragerateofTanzaniaincometaxofthecorporationfortheyearof incomeapplied to thecorporation’s taxable foreign income.Howeveracorporationmayelecttorelinquishaforeigntaxcreditavailableforayearofincomeandclaimadeduction for theamountof the foreign incometax;butotherwisenodeductionisavailableforforeignincometax.

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d. CHARItABle oRGAnIsAtIons

A“charitableorganisation”or“religiousorganisation”meansa residententityofapubliccharacterthatsatisfiesthefollowingconditions:• Theentitywasestablishedandfunctionssolelyasanorganizationforthereliefof

povertyordistressofthepublic,theadvancementofeducationortheprovisionofgeneralpublichealth,education,waterorroadconstructionormaintenance;and,

• Theentityhasbeen issuedwitha rulingby theCommissionerundersection131 currently in force stating that it is a charitable organisation or religiousorganisation.

Forthepurposesofcalculatingtheincomeofacharitableorganisationorreligiousorganisationforanyyearofincomefromitscharitablebusiness:(a) Thereshallbeincluded,togetherwithanyotheramountsrequiredtobeincluded

underotherprovisionsoftheIncomeTaxAct,allgiftsanddonationsreceivedbytheorganisation;and,

(b) There shall be deducted, together with any other amounts deductible underotherprovisionsoftheIncomeTaxAct:

(i) Amounts applied in pursuit of the organisation or religious organisation’sfunctions (referred to above) by providing reasonable benefits to residentpersons or,where the expenditure on thebenefits has a source inTanzania,personsresidentanywhere;and,

(ii) 25 percent of the organisation or religious organisation’s income from itscharitablebusiness (calculatedwithoutanydeductionunder subparagraph (i)above)andanyinvestments.


The Commissioner for the Tanzania Revenue Authority is empowered to makeadjustmentstotransactionsbetweenrelatedpartiesthatarenotconductedonarm’slengthterms.Specificthincapitalizationrulesdoapply.


Thereareseveralsourcesofincomethataresubjecttowithholdingtaxesasfollows:

Resident (%)

Non-Resident (%)

Dividends:

-Tocompaniescontrolling25%ofshareormore 5 10

-FromDSElistedcompanies 5 5

-Othercompanies 10 10

Interest 10 10

Royalties 15 15Technicalandmanagementservicetominingcompanies 5 15

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Rental:

-Landandbuildings 10 15

-Aircraftlease 10 0

-ResidentialhouseifexceedsTZS500,000p.a. 10 15

-Otherassets 0 15

Naturalresourcespayments 15 15

Servicesfees 5 15

PaymentforgoodstotheGovernmentofTanzania 2 N/A

Insurancepremium 0 5

Commissiononmobilemoneytransfer 10 N/AAnnualDirector’sfees(otherthanfulltimeservicedirector) 15 15

G. eXCHAnGe ContRol

UndertheInvestmentAct1997,investorsareguaranteedunconditionaltransferability(throughanyauthorizeddealer in freelyconvertiblecurrency)ofnetprofits, foreignloanservices,royalties,feesandtechnologytransfercharges,emolumentsofforeignpersonnelandrepatriationofcapital,aftertaxesonthesaleoftheinvestment,

However,alltransactionsinforeigncurrencyareregulatedbytheForeignExchangeActwhichpermitsanyperson,residentornot,to:• Holdanyamountofforeigncurrency;• Sellanyamountofspecifiedforeigncurrencytoanauthorizeddealer;• Open and maintain a foreign currency account with a bank which is an

authorizeddealer.

H. peRsonAl tAX

Anannualbudgetreformsthestatutoryprovisionseachyearandbelowisaschedulerelatingtothetaxationofpersonal incomecommencingfrom1stJuly2014to30th June2015:

Individual Employment Income Tax Rates

0-170,000 Nil

TZS.170,001-TZS.360,000 12% of the amount in excess of TZS.170,000

TZS.360,001-TZS.540,000 TZS.22,800+20%of the amount inexcessofTZS.360,000

TZS.540,001-TZS.720,000 TZS. 58,800 + 25% of the amount inexcessofTZS.540,000

OverTZS.720,000 TZS.103,800+30%of theamount inexcessofTZS.720,000

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Deductions available to salaried employees and full-time service directors arerestrictedtothefollowing:• Exemptamountsandfinalwithholdingpayments;• On-premisescafeteriaservicesthatareavailableonanon-discriminatorybasis;• Medical services, payment for medical services, payments for insurance for

medicalservicesorpaymentsthatare:- Available with respect to medical treatment of the individual, spouse of the

individualanduptofouroftheirchildren;and,- Madeavailablebytheemployer(andanyassociateoftheemployerconducting

asimilarorrelatedbusiness)onanon-discriminatorybasis;• Any subsistence, travelling, entertainment or other allowance that represents

solelythereimbursementtothereceiptofanamountexpendedbyhimwhollyandexclusivelyintheproductionofhisincomefromhisemploymentorservicesrendered;

• Benefitderivedfromtheuseofmotorvehiclewheretheemployerdoesnotclaimanydeductionorreliefinrelationtotheownership,maintenanceoroperationofthevehicle;

• Benefit derived from the use of residential premises by an employee of theGovernment or any institution whose budget is fully or substantially out ofGovernmentbudgetsubvention;

• Paymentprovidingpassageoftheindividual,spouseoftheindividualanduptofouroftheirchildrentoorfromaplaceofemploymentwhichcorrespondtotheactualtravellingcostwheretheindividualisdomiciledmorethan20milesfromtheplaceofemploymentandisrecruitedorengagedforemploymentsolelyintheserviceoftheemployerattheplaceofemployment;

• RetirementcontributionsandretirementpaymentsexemptedunderthePublicServiceRetirementBenefitsAct,1999;

• Paymentthatitisunreasonableoradministrativelyimpracticalfortheemployertoaccountforortoallocatetotheirrecipients;

• Allowance payable to an employeewho offers intramural private services topatientsinapublichospital;

• Housing allowance, transport allowance, responsibility allowance, extra dutyallowance, overtime allowance, hardship allowance and honoraria payableto an employee or theGovernment or its institutionwhosebudget is fully orsubstantiallypaidoutofGovernmentbudgetsubvention;

• In calculating an individual’s gains or profit frompayment for redundancy orlossorterminationofemployment,anypaymentreceivedinrespectofayearof incomewhichexpiredearlier thanfiveyearsprior totheyearof incomeinwhichitwasreceived,orwhichtheemploymentorservicesceased, ifearliersuchpaymentshall,forthepurposesofcalculationofthetaxpayablethereon,beallocatedequallybetweentheyearsofincomeinwhichitisreceivedor,iftheemploymentorservicesceasedinanearlieryearbetweensuchearlieryearofincomeandthefiveyearsimmediatelyprecedingsuchyearofincomeinwhichsuchpaymentissoreceivedorasthecasemaybe,suchearlieryearofincomeinwhichtheemploymentorservicesceased,andeachsuchportionallocatedtoanysuchyearofincomeshallbedeemedtobeincomeofthatyearofincomeinadditiontoanyotherincomeinthatyearofincome;

• If thecontract is foraspecifiedterm,theamount included ingainsorprofitsshall not exceed the amount whichwould have been received in respect of

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theunexpiredperiodof suchcontractandshall bedeemed tohaveaccruedunevenlyinsuchunexpiredperiod;

• Ifthecontractisforanunspecifiedtermandprovidesforcompensationontheterminationthereof,suchcompensationshallbedeemedtohaveaccruedintheperiod immediately followingsuch terminationata rateequal to the rateperannumofthegainsorprofitsfromsuchcontractreceivedimmediatelypriortosuchtermination;and,

• Ifthecontractisforanunspecifiedtermanddoesnotprovideforcompensationontheterminationthereof,anycompensationpaidontheterminationthereofshall be deemed to have accrued in the period immediately following suchterminationatarateequaltotherateperannumofthegainsorprofitsfromsuchcontractreceivedimmediatelypriortosuchtermination,buttheamountso included in gains or profits shall not exceed the amount of three years’remunerationatsuchrates.


Tanzaniahasadoubletaxationtreaty(DTT)witheachofthefollowingcountries:SouthAfrica, Denmark, Canada, Finland, India, Italy and Norway, However the DTTwithZambiahasno limitationunderthetreatyonwithholdingtaxondividends, interestand royalties.Thesepaymentsareonly subjected to tax in theoriginatingcountryif theyarenot taxable in the recipientcountry.Under theDTTwithCanada, India,andSweden,interestratesarefurtherreducedforcertainpercentagesofownership.

Dividends(%)

Interest (%)

Royalties (%)

Treatycountries:

SouthAfrica 10%/20% 10% 10%

Sweden 25% 15% 20%

India 5%/10% 10% 10%

Italy 10% 12.5% 15%

Norway 20% 15% 20%

Finland 20% 15% 20%

Denmark 15% 12.5% 20%

Canada 25% 15% 20%

Zambia Nolimitation Nolimitation Nolimitation

J. tRAnsFeR pRICInG

TheIncomeTax(TransferPricing)Regulations2014wereissuedbywayofagazettenoticepublishedon7February2014,andcameintoeffectonthepublicationdate.

The regulationsapply to taxpayersdealingwith relatedparties locatedboth insideandoutside theUnitedRepublicofTanzania.Theregulationsaddress thepotentialmismatch between profit allocation and distribution of risks, assets and functions

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acrosstheassociatedenterprises.TheRegulationsrequirescorporationstoprovideddocumentedevidencethatanarm’slengthamountwaspaidforgoods(bothtangibleandintangible)andservicesbetweenrelatedparties.

Documentation requirement TheTransferPricingdocumentationshouldbepreparedbeforefillingtaxreturnsandshouldbesubmittedtowithin30daysuponrequestbytheCommissioner. Stiff Penalties for non-complianceThepenaltiesforanytransferpricingadjustmentmadeaspartofataxauditis100%oftheunpaidtax.Failuretocomplywiththeregulationsisanoffence,anduponconviction,thetaxpayerisliabletoimprisonmentforamaximumof6monthsandorafineofnotlessthanTShs50m(fiftymillion)orboth. Advance Pricing Arrangements TheregulationsalsoprovidethatataxpayercanrequesttheCommissionertoenterintoanAdvancePricingArrangements(“APA”).BasicallytheseAPAcanbeunilateral,bilateralandmultilateralbasedon the taxpayer requestanddetermine inadvancethepricesof the futurecontrolled transactionsoverafixedperiodof time,butnotexceedingfiveyearsofincome.

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MEMBERFIRM

NameofFirm: CLM&coCity:TunisContact:Name:LassaadMAROUANITelephone: 0021671889835Email: [email protected]

KEY TAX POINTS• Companiesaregenerallyliabletocorporateincometaxattherateof25%.• ValueAddedTaxischargedat6%(ITservices,hotelsandrestaurantactivities,

andequipment),12%(rawmaterials,craftindustryproducts,medicalactivities,andcannedfood)or18%(operationsrelatedtoservicesandgoodsnotsubjecttoanotherrate).

• Inheritedpropertyandgiftsaresubjecttotaxatratesvaryingfrom2.5%to35%,dependingontheclosenessofrelation.

• Forcertaincategoriesof income, thepayerof incomehas towithhold taxatsource,fileataxreturnandsubmittheamountoftaxwithheldtothefinances.

A. tAXes pAYABle

FEDERAL TAXES AND LEVIESCOMPANY TAXLimited companies, limited partnerships and cooperatives are liable to corporateincome tax on their profits stemming from any business they carry on inTunisia.ForeigncompaniesnotcarryingonbusinessinTunisiabutderivingcertaintypesofincomefromTunisiaaresubjectedtocompanytax.

Tax rates:Companiesareliabletocorporateincometaxattherateof25%.Itisreduced to from30% to25%since2014.However, a number of companies andlegal entities suchas companies operating in handicraft activities, agriculture andfishingaretaxableattherateof10%.Thistaxrateisalsoapplicabletoprofitsmadeon export activities from 2015. Other companies operating in sectors of banks,insurance, production and services linked to petroleum, telecommunications aresubjecttoarateof35%ontheirincome.

Exporting companies are liable to income tax at 10% since 2014. Individuals aretaxedonthethirdofrevenuesofexportation.

Minimum tax liability:Acorporationhastopayaminimumtaxliabilityof0.2%ofthetotalgrossturnoverwithaminimumaccount,dueevenwithoutanyturnover,ofTND300forcompaniestaxableattherateofthe10%.Forthosetaxableattherateof25%or35%,theminimumamountisTND500.

Legal entities liable to company tax and individuals liable to personal income taxcarryingonatradebusinessaresubjectedtothreetaxinstalmentseachrepresenting30%ofthetotallevycalculatedonincomesandprofitsofthepreviousyear.

Tunisia

tUnIsIACURRENCY: Tunision Dinar (TND)POPULATION: 11.12 millionGDP GROwTh: 3.7% GDP: US$ 50 billion

178

Taxinstalmentsshouldbepaidduringthe28daysofrespectivelythe6th,9thand12thmonthsfollowingthebalancesheetdate.

CAPITAL GAINS TAXCapitalGainsorLosses:Fornon-residentlegalentities,gainsstemmingfromdisposalofbuildingsestablishedinTunisiaorrightsrelatedtothemaresubjecttocorporateincome tax.A capital gain is the difference between sale price and cost price orpurchaseprice.Theseentitiesareimposableawithholdingdischargeof25%ofthecapital gain. For closed-end investment companies and credit institutions, capitalgainsrelatedtosecuritiesaredeductiblefromtaxableincome.

Forbothresidentsandnon-residents,interestissubjecttoawithholdingtaxat20%(amore favourable rate if the case is coveredbyanon-double imposition treaty).Forthenon-resident,theamountwithheldisoffsetagainstordinaryincometaxonthis income.Rental income fromstudentaccommodationorcatering isdeductiblefromtaxableincomeduringthefirst10years.Thisrentshouldrespectspecificationsestablishedbythesupervisoryministry.

From1January2011,thefollowingareexemptfromcapitalgainfromthesaleofsecurities:• ThegainfromthesaleofshareslistedontheStockExchangeofTunisacquired

orsubscribedbefore1January2011andthesaleofshares inatransactionintroductoryStockExchangeofTunisisdeductiblefromtaxableincome.

• ThegainfromthesaleofshareslistedontheStockExchangeofTunisacquiredor subscribed from 1 January 2011 is also deductible from taxable incomewhenthetransfer`takesplaceaftertheexpiryoftheyearfollowingtheyearofacquisitionorsubscriptionofamaximumof10,000dinarsperyear’.

Otherwisethegaindescribedaboveshallbesubjecttoincometaxat10%or25%thereof(individualorcompany).

• Corporation tax is payable by non-resident legal persons not established inTunisiaatarateofsurplusvaluecitedabove.Thecapitalgainsubjecttotaxoncompaniesisequal,inthiscase,tothedifferencebetweenthesalepriceandthepurchasepriceofstocks,sharesorunitsorthesubscriptionpriceandfromtransferoperationsperformedduringtheyearprecedingthetaxafterdeductionofcapitallossfromoperationsinquestion.

VALUE-ADDED TAX (VAT)VATisanindirecttax,inthatthetaxiscollectedfromsomeonewhodoesnotbeartheentirecostofthetax.AlleconomicactivitiesconductedinTunisia,includingindustrialandhandicraftactivities,liberalorcommercialprofessions,aresubjecttoVAT.

ExportsbydefinitionareconsumedabroadandareusuallynotsubjecttoVATandanyVATchargedundersuchcircumstancesisusuallyrefundable.Thisavoidsdownwardpressureonexportsand,ultimately,export-derivedincomeorrevenue.

VATthatischargedbyaVAT-registeredbusinessandpaidbyitscustomersisknownas“outputVAT”(thatis,VATonitsoutputsupplies).VATthatispaidbyabusinessto

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otherbusinessesonthesuppliesthatitreceivesisknownas“inputVAT”(thatis,VATonitsinputsupplies).AbusinessisgenerallyabletorecoverinputVATtotheextentthattheinputVATisattributableto(i.e,usedtomake)itstaxableoutputs.InputVATisrecoveredbysettingitagainsttheoutputVATforwhichthebusinessisrequiredtoaccounttotheTunisiangovernmentor,ifthereisanexcess,byclaimingarepaymentfromtheTunisiangovernment.

ThreedifferentVATratesapplyinTunisia:• 6%: information technology services, hotels and restaurant activities and

equipment;• 12%:rawmaterials,craftindustryproducts,medicalactivities,andcannedfood;• 18%:operationsrelatedtoservicesandgoodsnotsubjecttoanotherrate.

According to article18of theTunisianVATcode, a sales invoice issuedby aVATregisteredbusiness shouldcontain certain compulsory information includingclientname, address and fiscal register, date of the transaction, price of the goods orservicessold,VATrate.

FRINGE BENEFITS TAXFringebenefitsareconsideredtobeapartofthesalarypaidtoanemployee;hencethey are subject to social security and income taxes. Fringe benefits taxable areevaluatedonthebasisoftheirmarketvalue.

LOCAL TAXESThetaxontherentalvalueisamunicipaltaxonbuildings.Theownerofthepropertyisliableforcollectionofthetax.Thebaseofthistaxisthegrossrentalvaluedeterminedinaccordancewithageneralcensuscarriedouteverythreetofiveyearsbythelocalauthorities.Therateisfixedperlocalauthoritywhichmaybedividedintotwozones,urbanandsuburban(wheretherateislower).Thelandtaxonundevelopedlandisowedbyoccupiers,ownersorpersonsenjoyingtheland.

OThER TAXES AND LEVIES:SOCIAL SECURITY TAXESThe social security rates are 9.18% on behalf of the employee and the 16.57%onbehalfoftheemployerand0.5%foremployer’scompensationonbehalfoftheemployer.

REAL ESTATE TAXThepurchaseofrealestateissubjecttothefollowing:• Aregistrationdutyof5%onthepurchasepriceincreasedbyVAT;• AStampDutyofTND15persheetofcontract;• ArealestatepropertyConservationDutyof1%onthepurchasepriceincreased

byVAT;• Aregistrationwillbeincreasedby1%ofthepurchasepricefornon-registration

ofthepropertypurchased;• Asupplementarychargeof3%incaseswheretheownerhasfailedtodeclare

thevalueofhisproperty.Anyrealestatebuyerwhoisanindividualoracorporateentitysubjecttoaregularaccountingsystemmustwithholdtaxontherealestatepurchaseprice.Thistaxis

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2.5%onthepurchasepriceincreasedbyVAT.

EXCISE TAXThisisafederaltaxonspecificgoodsandserviceseitherimportedormanufacturedinTunisia. It is levied on a variety of items such as cigarettes, tobacco, alcoholicbeverages,cosmetics,perfumeandprivatecars.Excisetaxisleviedonsalepriceorcustomsvalueforimportedgoods.

AccordingtotheTunisianExciseTaxCode,severalratesapplytodifferentgoods.Ajointlistisavailableonthecode,fixingdifferentrates.

GIFTS, wEALTh, ESTATE AND/OR INhERITANCE TAXInheritedpropertyandgiftsaresubjecttotaxatthefollowingrates:• Directlinerelatives(children,spouses,parents,etc):2.5%;• Brothersandsisters:5%;• Collaterallinerelatives:25%;• Relativesbeyondthefourthdegree:35%;• Unrelatedindividuals:35%.

VOCATIONAL TRAINING TAXThisispayablemonthlyattherateof2%ofthetotalgrosswages.Aspecialrateof1%isapplicabletothemanufacturingsector.

TAX FOR PROMOTING EMPLOYEES’ ACCOMMODATIONEmployershavetopayataxattherateof1%oftotalgrosssalariestopromotetheemployee’saccommodation.Farmersareexemptfromthistax.


Taxableincomeisdeterminedonthebasisofregularaccountingresults.Whentherearediscrepanciesbetweenfiscal rulesandaccountingprinciples, adjustmentsaremadetotheaccountingresults.

Profits arehabitually consideredgross revenue lessproduction, salary andwagesandrentalexpenses.

Generally, all expenses generated by the conduct of business are deductible iftheyareincurredingainingorproducingassessableincomeandnotpaidcashforamountsmorethanTND20,000.

Taxableincomeincludesalsocapitalgains,exceptforcapitalgainsstemmingfromdisposalofsecuritieslistedontheTunisianStockExchangeandcapitalgainfromaninitialpublicofferingontheTSE.

DEPRECIATIONFixedassetsownedbythecompanyarenormallywrittenoffovertheirnormalusefullife.Fortaxpurposes,thestraight-linemethodisnormallyadopted.

AssetsofalowervaluethanTND200maybefullywrittenoffduringtheirfirstyear.

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Companiesmaychoosethedeclining-balancemethodtocalculatedepreciationonhardware, agriculture equipment and newly purchased manufacturing equipment(from1January1999).From1January2008,acompanyiseligibletousethedecliningbalancemethodtocomputedepreciationonmanufacturingequipmentfinancedbyleasing.

STOCK / INVENTORYForthedeterminationofnetincome,inventoriesmustbevaluedattheircostprice.Ifmarketvalueorrealisablevalueislowerattheendoftheyear,thecompanymustsetupreservesfordepreciationofinventories,whichisdeductiblewithinthelimitof30%ofthetaxableincome.

DIVIDENDSCollecteddividends that are distributedbyTunisian companies are tax-exempt forbothresidentsandnon-residentscompanies. Individualsaresubjecttowithholdingtaxat5%since2015ifitexceedsTND10,000peryear.

The non-capitalised earnings, amounts given to partners or shareholders andattendance fees given to members of the board of directors are assimilated todividendpayment.

Gainsfromstockoptionexercises:inTunisia,stockoptionsarerecognisedonlyinthefollowingsectorsofactivities:• Softwareengineering;• Softwareservices;• Telecommunicationsandnewtechnologiessectors;• Listedcompanies.

Whentheplan isrecognisedbyTunisianLawtobeastockoption, thegain isnotsubjecttotaxation.Thisadvantageisawardedunderthedoubleconditionthat:• Atthedatethestockoptionisgranted,theemployeedoesnotholdmorethan

10%ofthesubscribedsharecapital;and,• Thesharesarenotsoldduringaperiodofthreeyearsstartingfrom1January

ofthesubsequentyearinwhichtheoptionisexercised.

WhenTunisianlawdoesnotrecognisethestockoptionplan,theexercisegainmadebytheemployee(differencebetweentheexercisepriceandthefairmarketvalueofthesharesatthedateofexercise)willbesubjecttoincometax.

INTEREST DEDUCTIONInterestfromforeigncurrencydepositsorfromconvertibleDinarisdeductiblefromtaxableincome.Theinterestsonloansgranted,orleftatthedisposaloftheTunisiancompanybypartnersorshareholdersarefullydeductiblefromthetaxableincomeofshareholdersorpartners,underthefollowingconditions:• Theinterestratedoesnotexceed8%;• Theamountsdonotexceed50%ofthecapitalwhichshouldbefullypaidup.

Alimitationofinterestratesisnotapplicablewhenthepartnerorshareholderwho

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benefits from the interest isabank, inwhichcase interest isdeductible from thetaxablebasetothelimitapplicableonthemarket.

LOSSESThedeficitrecordedduringabusinessyearwhichresultedfromaregularaccountingrecordincompliancewithcorporateaccountinglegislationisdeductedsuccessivelyfromtheresultsofthefollowingbusinessyearsupuntilandincludingthefourthyear.Foranyprofitbusinessyear,thedeductionofdeficitsanddepreciationiscarriedoutaccordingtothefollowingorder:(a) Reportabledeficits;(b) Thedepreciationoftheconcernedbusinessyear;(c) Deferreddepreciationindeficitperiods.

Duringabusinessyearwhentheprofitisnotsufficienttocarryoutthetotaldeductionof thedeficitanddepreciation, the remainingpart isputbacksuccessivelyon theresultsofthesubsequentbusinessyearsupuntilandincludingthefourthyear.

FOREIGN SOURCED INCOMEAccording to theTunisian tax legislation, revenues from foreign-source realisedbyindividualsandwhichweresubject to taxpayment in thecountryoforiginarenottaxed.

Non-resident legal entities are taxable on their Tunisian source income and onthe gain from the disposal of buildings and the disposal of shares in real estatecompanies.Thetaxablecapitalgainisthedifferencebetweenthesalepriceandthepurchasecost.

RelieffromforeigntaxesinTunisiadependsondoubletaxtreatyconcludedbyTunisia.

INCENTIVESTunisiantaxlegislationhasestablishedacertainnumberofincentivestoinvestmentand creation of projects in certain sectors of activity, either byTunisian or foreignpromotersbeingresidentornon-residentor inpartnershipaccordingtotheoveralldevelopmentstrategy.Thesearemainlyaimedatacceleratinggrowthrateand jobcreationwithinactivitiesrelatedtofieldsdeterminedinArticleOneoftheInvestmentIncentivesCode.

Various tax incentives are available for total exporting companies. 100% of theexportingactivity incomeisdeductiblefromtotal taxable income.Thisdeduction ismadenotwithstandingtheminimumtax.From1January2015theexportingactivityincomeistaxableattherateof10%.

Majorincentivesareavailableforinvestmentsmadebyenterprisessettledinareasthat need development (regional development zones). Income stemming frominvestmentscarriedout in theseareas is fullydeductible from the taxable incomeduringthefirsttenyearsofactivitybut,forsubsequentbusinessyears,only50%isdeductiblefromthetaxbase.

Aspart of thepromotionof small andmediumenterprises, theFinanceAct2011

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hasprovidedmanagementmeasurestosupportbusinessescreatedfrom1January2011. It concerns new investment for which the turnover does not exceed TND300,000forserviceactivitiesandnon-commercialprofessions,andTND600,000fortradeandactivitiessuchasprocessingandconsumptiononthepremises.

Suchincomeisdeductiblefromtaxableincome,revenuesorprofitsfromoperationsconductedduringthefirstthreeyearsofoperation.Thebenefitofthisadvantageissubjecttotheconditionthatthekeepingofaccountsinconformitywithaccountinglawfirms.


Relief from foreign taxes in Tunisia depends on whether a double tax treaty hasbeenconcludedbyTunisia.Tunisiahasconcluded67non-doubleimpositiontreatiesapplicableon1January2008.

d. CoRpoRAte GRoUps

WhenaTunisiancompanyholds75%ormoreofthesharesofoneormoreTunisiancompanies, the group may choose to be taxed as a single entity. Hence, thesubsidiaries are treated as branches of the parent company and corporate tax ispayableonlybytheparentcompany.

To benefit from the results integrating scheme, the parent company must makethecommitment to list its shareson thestockmarketbefore theendof theyear.Underthissystem,theprofitsandlossesofallcontrolledbranches,subsidiariesandpartnershipsinTunisiaandabroadareconsolidated.

F. WItHHoldInG tAX

Forcertaincategoriesofincome,thepayerofincomehastowithholdtaxatsource,filetaxreturnandsubmittheamountoftaxwithheldtothefinances.

In the context of harmonization of the rate ofwithholding tax on interest paid forloanstobanks,non-resident,non-establishedinTunisiawiththosecontainedintheconventionsonavoidanceofdoubletaxation;thefinancelawforthemanagementof2011replacedtherateofwithholdingtaxof2.5%by5%.

TheFinanceActfor2014hasproposedarateof25%asawithholdingtaxrateonrevenuesorincomeofnon-residentslocatedintaxfreeareas.

H. peRsonAl tAX

Withrespecttotheinternationaltaxationagreements,personalincometaxisadirecttaxleviedonincomeofanindividualmorethanTND5,000peryear.Taxpayersareclassifiedintoresidentandnon-resident.

AccordingtoTunisianlaws,threecriteriaareusedtoindicatethatanindividualhasahabitualresidenceinTunisia.

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(1) MainresidenceofthepersonisinTunisia;(2) Principalplaceofresidence(periodequalto,ormorethan,183daysduringa

civilyear)isinTunisia;(3) Civilservantorstateemployeecarryingouthis/herduty ina foreigncountry,

wheretheyaren’tsubjecttopersonalincometaxonglobalincome.

A non-resident is subject to tax only on personal income fromTunisian sources.Incomechargeabletopersonalincometaxiscalledassessableincomeandisdividedintosevencategories:(1) Incomefromcommerceandindustry;(2) Incomefromnon-tradingprofessions;(3) Incomefromagricultureandfishingactivities;(4) Wages,salaries,pensionsandlifeannuities;(5) Landincome;(6) Incomeinthenatureofdividendsandinterestsresultingfromthedetentionof

securitiesandbonds;(7) Incomefromanyotheractivitynotspecifiedearlier.

Foreachcategoryofincome,certaindeductionsandallowancesareallowedinthecalculationofthetaxableincome.Ataxpayershallkeepthebooksincompliancewiththeaccountinglegislation,inordertobenefitfromthesedeductions.

Ingeneral,apersonliabletopersonalincometaxhastocomputehistaxliability,filetaxreturnandpaytax,ifany,accordinglyonacalendaryearbasis.

Marriedcouplesfile tax returnsas separate individuals.The incomeof children isreportedonthetaxreturnoftheheadofthefamily.Aspousecanreportincomeofthechildrenonhis/hertaxreturnincertaincircumstances.

INCOME TAX RATES:

Amount (TND) Rate Effective Tax Rate of the Upper

Limit0-1,500 0% 0%

1,501-5,000 15% 10.5%

5,001-10,000 20% 15.25%

10,001-20,000 25% 20.12%

20,001-50,000 30% 26.05%

Over50,000 35% -

For trading and non-trading activities in accordance with the revenue code, aminimumtaxliabilityisdueof0.1%ofthetotalgrossturnoverorreceiptsexceptforturnoverorreceiptsfromexportactivities,withaminimumamountofTND100dueevenwithoutanyturnover.

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• Fees, royalties and non-trading activities compensation paid to non-resident:15%.

• Whenatreatyexists,applythetreatyrateiflessthan15%.• Capitalgainspaidtonon-resident:20%. Whenatreatyexists,applythetreatyrateiflessthan20%.• Interestsonloanspaidtobanksnon-establishedinTunisia:5%. Whenatreatyexists,applythetreatyrateiflessthan5%.• InvoicethatexceedsTND1,000(VATincluded):1.5%.

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UGANDA

Currency:Shilling(UGX) DialCode:256 DialCodeOut:000MemberFirmCity Name: ContactInformationKampala CharlesOguttu [email protected]

KEY TAX POINTS• Residentcompaniesaretaxableontheirworldwideincomeandgainswhereas

non-residentsaresubjecttotaxonincomesourcedinUganda.• The standard rate of corporate income tax applicable to resident and non-

residentcompaniesis30%,althoughspecialratesapplytosmallbusinessesandminingcompanies.

• Capitalgainsandlossesonlyariseinrespectofnon-depreciableassetsownedbyabusiness.Gainsareaddedtoandtaxedalongwithordinaryincome.

• A tax at 15% is charged on repatriated profits of overseas companies withbranchesinUganda

• VATischargedatastandardrateof18%butsomesuppliesarezeroratedorexempt.

• Dividendsaregenerallysubject towithholding taxwherepaid to residentsornon-residentsatarateof15%(or10%wherethepayerislistedontheUgandanStokeExchange).

• Other payments for goods and services are subject to withholding tax withdifferentratesinsomecasesdependingonwhethertherecipientisresidentinUganda.

• Incometaxisleviedontheworldwideincomeofresidentindividuals(aforeigntaxcreditisgrantedforforeignsourcedincomenotexceedingtheappropriateUganda income tax payable) and on the income of non-resident individualssourcedfromUganda.

A. tAXes pAYABle

NATIONAL TAXES AND LEVIESCOMPANY TAXResidentcompaniesaretaxableontheirworldwideincomeandgainswhereasnon-residentsaretaxedonincomesourcedinUganda.Uganda-sourcedincomeisclearlydefinedforpurposesoftheIncomeTaxAct.Thetaxratesapplicabletoresidentsandnon-residentsareasfollows:• forcompanies(otherthanminingcompanies)andretirementfunds–30%• forminingcompanies–calculatedaccordingtothefollowingformula:

• 70—1500/XwhereXisthenumberofpercentagepointsrepresentedbytheratioofthechargeableincometothegrossrevenueofthecompany.

• Iftherateoftaxcalculatedaboveexceeds45%,thentherateoftaxshallbe45%and,iftherateoftaxcalculatedaboveislessthan25%,thentherateoftaxshallbe25%.

Special ratesof taxapply to income fromsmall businesses (i.e. thosebusinesses

UGAndACURRENCY: Ugandan Shilling (UGX)POPULATION: 40.72 millionGDP GROwTh: 6.3% GDP: US$ 26.9 billion

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wheretheincomedoesnotexceedUGX50mperyear).Thesepresumptivetaxratesfallindefinedbands/rangesofgrossincome.ThefiscalyearinUgandarunsfrom1Julyto30June.Companiesmustfileareturnofincomeeachyearby31Decemberfollowingtheendofthetaxyear.Adifferentaccounting period (referred to as substituted year) can be opted for by seekingpermissionfromtherevenueauthorities.Insuchcases,returnofincomeshouldbefiledwithinsixmonthsofapplicableyearend.

CAPITAL GAINS TAXCapitalgainsareaddedtotheincomefromallothersourcesandtaxedattherateapplicabletothatperson.

BRANCh PROFITS TAXNon-resident companies are subject to Ugandan corporate income tax in respectofprofitsearnedfrombranches inUganda. Inaddition, thebranch is taxedontherepatriatedincomeattherateof15%.

RENTAL INCOME TAXEffectiveJuly2014, rental income,expenditureand lossesgeneratedbya taxableindividualorcompanyisrequiredtobedeclaredinarentalincometaxreturnseparatefromtheusualbusinessincometaxreturn.

VALUE ADDED TAX (VAT)VATispayableon:• everytaxablesupplyinUgandamadebyataxableperson• everyimportofgoodsotherthananexemptimport• thesupplyofanyimportedservicesbyanyperson.

Ataxablesupplyisdefinedas‘asupplyofgoodsorservices,otherthananexemptsupply,madebyataxablepersonforconsiderationaspartofhisbusinessactivities’.

A taxable person is a personwho is required to be registered under the statute.Personswhoarerequiredtoberegisteredarethosewho:• duringanyperiodof threecalendarmonthsmake taxablesupplies, thevalue

ofwhich exclusive of any tax exceeds onequarter of the annual registrationthreshold

• havereasonablegroundstoexpectthatinanyperiodofthreecalendarmonthswillmaketaxablesupplies,thetotalvalueofwhichwillexceedone-quarteroftheannualregistrationthreshold

• theannualregistrationthresholdis,atpresent,UGX50m.

Rates Of Tax (VAT)There are three categories of supplies forVATpurposes: exempt, zero-rated andstandardrated.Thestandardrateis18%.Sometypesofsuppliesarezeroratedorexempt.

FRINGE BENEFITS TAXThis is notapplicableinUgandabutbenefitstoemployeesarevaluedasperrulesofvaluationundertheIncomeTaxAct1997andaddedtotheemploymentincometo

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determinethetax.

LOCAL TAXESLocal service tax is levied by local authorities on resident individuals (with a fewexceptions)whoareabovetheageof18andareingainfulemploymentwitheffectfrom1July2008.Local HotelTax was also introduced with effect from 1 July 2008, collected andremittedtothelocalauthorityonamonthlybasedonbands.

OThER TAXESExcise,importandcustomdutiesareapplicableonseveralitemseitheronadvalorembasisoratspecificrates.


CAPITAL ALLOwANCESTheIndustrialbuildingallowanceis5%onstraight-linebasis.Effective July 2014, initial allowance deduction on eligible items and industrialbuildingswasrevoked.

The mining allowance is 100% of capital expenditure incurred in searching for,discoveringandtestingorwinningaccesstodepositsofmineralsinUganda.

Start-upcostsforabusinessorexpenditureincurredintheinitialpublicofferingatthestockmarketareallowedatarateof25%onastraight-linebasis.Horticulture business allowance is 20% on straight-line basis of the capitalexpenditureincurredintheacquisitionorestablishmentofahorticulturalplantortheconstructionofagreenhouse.

DEPRECIATIONDepreciationisallowableonwritten-downvaluebasisatthefollowingrates:

1. Computersanddatahandlingequipment 40%

2.Automobiles,busesandminibuseswithaseatingcapacityoflessthan30 passengers, goods vehicles with a load capacity of less than 7tonnes,constructionandearth-movingequipment 35%

3.

Buseswithaseatingcapacityof30ormorepassengers,goodsvehiclesdesignedtocarryorpullloadsof7tonnesormore;specialisedtrucks,tractors, trailers and trailer-mounted containers, plant andmachineryusedinfarming,manufacturingorminingoperations 30%

4

Railroad cars, locomotives and equipment, vessels, barges, tugs andsimilar water transportation equipment, aircraft, specialised publicutility plant, equipment and machinery, office furniture, fixtures andequipment,anydepreciableassetnotincludedinanothergroup. 20%

STOCK/INVENTORYA deduction is allowed for the cost of trading stock disposed of during a year ofincome.Theclosingvalueof tradingstock is the lowerofcostormarket valueoftradingstockonhandattheendoftheyear.

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CAPITAL GAINS AND LOSSESCapitalgainsorlossesaretaxableonlyiftheassetonwhichthegainorlossarisesis owned by a business and is a non-depreciable asset. This is determined bysubtracting the cost base of the asset from the consideration received on sale oftheasset.

Cost base of the asset is the original cost to the taxpayer as increased by anyexpenditure incurred toalteror improve theassetwhichhasnotbeenallowedasadeduction.Incaseofimmovablepropertypurchasedpriorto31March1998,thetaxpayermaysubstitutethemarketvalueofthepropertyason31March1998fortheoriginalcostoftheasset.

Capital gains and losses are added or subtracted from the other income of thetaxpayerforthatyearofincomeandnottaxedseparately.

DIVIDENDSDividendsaresubject to15%withholdingtaxexceptdividendspaidbycompanieslistedonthestockexchangetoresidentindividualswhichis10%.

EffectiveJuly2013,dividendshavebeenexpandedtoincludeissueofbonusshares.However,thesharesareonlytaxableupondisposal.

INTEREST DEDUCTIONSAllowable in full exceptwhere a foreign-controlled resident companywhich is nota financial institution has a foreign debt-to-equity ratio in excess of 1:1 at anytimeduringayearofincome.Adeductionisdisallowedfortheinterestpaidbythecompanyduringtheyearonthatpartofthedebtwhichexceedsthe1:1ratio.

LOSSESAssessed lossesareallowed tobecarried forwardandallowedasadeduction indeterminingthetaxpayer’schargeableincomeinthefollowingyearofincome.Theseareallowedtobecarriedforwardindefinitely.

FOREIGN SOURCED INCOMEThegrossincomeofaresidentpersonincludesincomederivedfromallgeographicsourcesandthegrossincomeofanon-residentincludesonlyincomederivedfromsourcesinUganda.

INCENTIVESIndustrialzonesfortheproductionofexportsarebeingsetupandinvestorslocatinginthesezoneswillbeentitledtoaten-yearcorporationtaxholiday;dutyexemptionon raw materials, plant and machinery and other inputs; stamp duty exemption;dutydrawbacktoapplyonimportofgoodsfromdomestictariffarea;noexporttaxongoodsexported;exemptionofwithholdingtaxoninterestonexternalloans;anddividendsrepatriatedtogetrelieffromdoubletaxation.

From1July2008,thefollowingnewincentivesweregranted:1)Residentairlineshavebeengrantedexemptionfromincometaxandwithholdingtaxonleaserentals.

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2)FromJuly2014,thetaxexemptiononbusinessincomederivedfrommanaging,operatingandrunningschoolsandtertiaryeducationalinstitutionswasrevoked.3)FromJuly2014,theexemptiononinterestincomeearnedbyafinancialinstitutionona loangranted toanyperson for thepurposeof farming, forestry,fish farming,beekeeping,animalandpoultryhusbandryorsimilaroperationshasbeenrevoked.4)Newagri-processinginvestmentssetupoutsidea30kmradiusofKampalaareexempt from income tax.Witheffect from1July2009 thishasbeenmodified toexemptincomeofapersonderivedfromagro-processingwherethepersonappliesinwriting to theCommissioner tobe issuedwithacertificateofexemptionat thebeginningofhisorherinvestmentandinvestsinnewplantandmachinerytoprocessagriculturalproductsforfinalconsumption.TheprocessshouldinvolveprocessingofagriculturalproductsgrownorproducedinUganda.


A resident taxpayer is entitled to a credit for any foreign income tax paid by thetaxpayer inrespectof foreign-sourcedincomeincludedinthegross incomeofthetaxpayer.


Inordertoregulatetransactionsbetweenrelatedparties,TransferPricingRegulationshavebeen introducedwitheffect from1July2011.Theregulationsshallapply toa “controlled transaction” where a taxpayer, who is a party to the transaction, islocatedinoroutsideUganda.Theregulationsexpresslyrequirethatataxpayerwhohastransactionswithrelatednon-residentorresidententitiesmustpreparetransferpricingdocumentation.Thisdocumentation,forayearofincome,mustbeinplacepriortotheduedateoffilingtheincometaxreturnforthatyear.

F. WItHHoldInG tAX

Withholdingtaxisafinaltaxon:• interestpaidbyafinancialinstitutiontoaresidentindividual• interestpaidtoanypersonontreasurybillsbytheBankofUganda• dividendspaidtoaresidentindividual.

RATES OF wIThhOLDING TAX ARE AS FOLLOwS:

Resident Non-resident

Managementfeesandroyalties 6% 15%

Consultancy,agencyfees,etc 6% 15%

Professional fees 6% 15%

Dividends1 15%or10% 15%

Interest2 15% 15%

Sportspersonsandpublicentertainers Nil 15%

Re-insurancepremiums Nil 15%

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1 Itdoesnotapplywherethedividendincomeisexemptfromtaxinthehandsofashareholder.2 It does not apply to residentswhere: (i) interest is paid to a natural person;and (ii) interest other than interest from government securities paid to a financialinstitution.The6%withholding taxdoesnotapply to taxpayerswhomtheCommissionerhasexemptedfromwithholdingtax.InterestondepositauctionfundsissuedbyBankofUgandaistaxableat20%.Withholdingtaxat10%isapplicableonpurchaseofanassetbyaresidentpersonfromanon-resident,Interestpaymentongovernmentsecuritiestononresidentsissubjecttotaxat20%.Besidestheabove,withholdingtaxisalsoapplicableandchargedonimportofgoodsattherateof6%.Incaseoflocaltransactionsofgoodsandservices,6%withholdingtaxisapplicablewhere the payer is the Government, a Government body or a company/persondesignatedbytheMinister.Therateofwithholdingonpaymentstonon-residentsisreducedinsomecasesundertheprovisionsofdouble taxationagreementsentered intowithasmallnumberofoverseasterritories(seeSectionIbelow).FromJuly2014,apersonwhomakespaymentsforwinningsofsportsbettingorpoolbettingshallwithholdtaxonthegrossamountofthepaymentatof15%.FromJuly2014,aresidentpersonwhomakesapaymentofpremiumforreinsuranceservices to a non-resident person shall withhold tax on the gross amount of thepaymentatarateof15%.Thisdoesnotapplytoreinsuranceservicesprovidedbyafewspecifiedreinsurers.

G. eXCHAnGe ContRol

Therearenorestrictionsonforeigncurrencyflowsinandoutofthecountry.Realisedexchangegainsandlossesaretaxable/allowableintheyearofrealisation.

H. peRsonAl tAX

Income tax is levied on the worldwide income of resident individuals and on theincomeofnon-residentindividualsfromsourcesinUganda.

AnindividualwillberegardedasresidentinUgandaifheorshe:• hasapermanenthomeinUganda• ispresentinUgandaforaperiodof,orperiodsamountinginaggregateto183

daysormoreinany12-monthperiodthatcommencesorendsduringtheyearofincome

• ispresentinUgandaduringtheyearofincomeandineachofthetwoprecedingyearsofincomeforperiodsaveragingmorethan122daysineachsuchyearofincome

• isanemployeeorofficialofthegovernmentofUgandapostedabroadduringtheyearofincome.

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1. The income tax rates applicable to resident individuals are as follows.

Chargeable income (UGX) Rate of tax

0-UGX235,000 Nil

UGX235,001-UGX335,000 10%oftheamountexceedingUGX.235,000.

UGX335,001-UGX410,000 UGX.10,000+20%oftheamountexceedingUGX.335,000.

ExceedingUGX410,000UGX25,000+30%oftheamountexceedingUGX.410,000+10%oftheamountexceedingUGX10,000,000

2. The income tax rates applicable to nonresident individuals are —

Chargeable income (UGX) Rate of tax

0-UGX.335,000 10%

UGX335,001-UGX410,000 UGX33,500+20%oftheamountexceedingUGX335,000.

ExceedingUGX410,000 UGX48,500+30%oftheamountexceedingUGX 410,000 + 10% percent of amountexceedingUGX10,000,000

Whereataxpayer’sincomeconsistsexclusivelyofemploymentincomederivedfromasingleemployerandfromwhichtaxhasbeenwithheld,notaxreturnneedstobefiled.Small businesses with income not exceeding UGX 50m per year run by residentindividualsdonotneedtofileareturn.

I. tReAtY RAtes oF WItHHoldInG tAX

Country Dividends Interest Royal-ties

Technical/ manage-ment fees

Individuals/ companies

Qualifying companies

(%) (%) (%) (%) (%)

Denmark 15 10 10 10 10

India 10 10 10 10 10

Mauritius 10 10 10 10 10

Norway 15 10 10 10 10

SouthAfrica 15 10 10 10 10UnitedKingdom 15 15 15 15 15

Italy 15 15 15 10 10

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Country Dividends Interest Royal-ties

Technical/ manage-ment fees

Individuals/ companies

Qualifying companies

(%) (%) (%) (%) (%)

Netherlands 15 0-5 10 10 10

1 Acompanyisa‘qualifyingcompany’ifitownsatleast25%ofthecapitalofthecompanypayingthedividend.

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BASICFACTSFullname: RepublicofZambiaCapital: LusakaMainlanguages: EnglishPopulation: 14,309,466(2012estimate)Majorreligion: ChristianityMonetaryunits: Zambiankwacha(ZMW)Internetdomain: .zmInt.diallingcode: +260

KEY TAX POINTS• Companieswhetherresidentornon-residentandareinreceiptofincome,which

hasasourceordeemedsourceinZambia,areliabletotax.• Normal tax ispayablebyZambiancompanieson their taxable incomeat the

followingrate:a. Farmingandagro-processing 10%b. Charities–onincomefrombusinessactivities 15%c. Ruralmanufacturingbusiness-first5years 30%d. Exportofnon-traditionalproducts 15%e. Trading,manufacturingandanyother35%f. Manufactureoforganicandchemicalfertiliser 15%• There is no capital gains tax in Zambia. Instead there is what is known as

PropertyTransferTax (PTT)which is leviedon thesaleordeemedsaleofallimmovablepropertyandsharesat10%oftherealisablevalue.

• VAT ischargeableonall taxablegoodsandservicessuppliedbyaregisteredsupplieratastandardrateof16%.

• Zambian resident individualsandcompaniesaresubject to tax inZambiaonforeigninterestanddividends.

• Tax credits are granted in respect of foreign taxes paid on foreign sourcesof income in accordancewith the IncomeTaxAct and thenumerousDoubleTaxationTreaties.

• Grouptaxation isnotapplicable inZambia.Allgroupcompaniesaretaxedasseparateentities.

• The Zambia Revenue Authority Commissioner-General is empowered tomake adjustments to non-arm’s length cross-border transactions and thincapitalisationbetweenrelatedparties.

• Income from rent, royalties, commission,dividends,publicentertainmentandsimilarincomesaresubjecttowithholdingtaxesatsource.Non-residentsaresubject to withholding tax on construction and haulage operations, royalties,management&consultancy,commission,publicentertainment,dividendsandinterest.

• ZambianresidentindividualsaresubjecttotaxontheirincomefromasourceordeemedsourcewithinZambia.Foreign interestanddividends receivedbyindividualsordinarilyresidentinZambiaincludingcompaniesistaxable.

A. tAXes pAYABle

COMPANY TAXACompanyisresidentinZambiaforanychargeyearifitisincorporatedorformed

Zambia

zAmBIACURRENCY: Zambian Kwacha (ZMw)POPULATION: 15.52 millionGDP GROwTh: 7.2% GDP: US$ 28.9 billion

195

undertheLawsofZambiaorifthecentralmanagementandcontrolofthecompany’sbusinessoraffairsareexercisedinZambiaforthatyear.

InZambiaallcompanieswhethertheyareresidentornon-residentandareinreceiptof income,whichhasasourceordeemedsource inZambiaare liabletotax. ForthepurposesoftheZambianIncomeTaxAct,incomeforanychargeyearincludes:• Gainsorprofitsfromanybusinessforwhateverperiodoftimecarriedon;• Emoluments;• Annuities;• Dividends;• Interest,chargesanddiscounts;• Royalties,premiumsoranylikeconsiderationfortheuseoroccupationofany property;• Incomefromlettingofanyproperty;• Lumpsumpayments,capitalrecoveriesetc.

Normal tax is payablebyZambian companies on their taxable incomeat the rateof35%.Thetax ispayablebybothpublicandprivatecompaniesaswellassmallbusinesses.However,thereareconcessionalratesoftaxapplicableoncertainsectorsasfollows:- Agriculture 10%- Ruralmanufacturingbusiness(first5years) 30%- Exportofnon-traditionalproducts 15%- Charities(onincomefrombusinessactivity) 15%

ThetaxratesapplicableontheMobileTelecommunicationssectorisasfollows:- OnincomeuptoZMW250,000 35%- Onincomeinexcess 40%

SmallbusinesseswithgrossincomesofuptoZMW800,000inachargeyear,subjectto certain exemptions, can register to pay tax at 3%on gross income, under theturnover taxsystem.However,smallbusinessprovidingconsultancy isnotcoveredbythisexemption.

Miningcompaniesinvolvedintheminingofbasemetalsandearnincomefromtollingorprocessingofpurchasedmineralores,concentratesandanyothersemi-processedmineralspaytaxat30%.Thisisinadditiontothe6%mineralroyaltiespayable.

Mining companies involved in underground mining operations pay 8% mineralroyaltiesasfinal taxwhile those inopencastminingoperationspay20%mineralroyaltiesasfinaltax.ItmustbesaidthatnegotiationsarestillongoingbetweenminingcompaniesandGovernmentovertheroyaltyrates.

TRUSTSZambianTrustslikedeceasedestatesandbankruptcyestatespaytaxataflatrateof35%.Notwithstandingtheaforementioned,theTrustneednotbetaxedonallofitsnetincomewhereabeneficiaryisentitledtothewholeorpartoftheincomeofthetrust,asitistaxedinhishandsinsteadofbeingtaxedasincomeoftheTrust.Wheretaxhasalreadybeenpaidonsuchincomebeforeitreachesthehandsofthebeneficiary

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itwillbesetoffagainstanytaxraisedonhim(beneficiary).InpracticeunderZambianLaw,thebeneficiaryandnottheTrustistobetaxedon:- Income in which the beneficiary has a vested interest where this is paid or

accumulatedtohim;- SumsappliedforthebenefitofthebeneficiaryunderthetermsoftheTrust;and- Sumpaidtoorappliedforthebenefitofthebeneficiaryinexerciseofdiscretion.

Underthetaxavoidancerules,theCommissioner-Generalmayavoidatrustwherehedeterminesthatthemainaimorpurposeofatrustwastominimiseoravoidtax.

CAPITAL GAINS TAXThereisnocapitalgainstaxinZambia.However,thereisaPropertyTransferTax(PTT)whichischargedontherealisablevalueofthepropertybeingtransferred.

PTTispayablebythetransferoroftheproperty.ItischargedonthesaleortransferofallimmovablepropertyandanysharesissuedbyacompanyincorporatedinZambia.PTTisalsochargeableonthesaleortransferofMiningRight/InterestinMiningRight.PTTinrelationtoimmovablepropertyexcludeslettingorsub-lettingofpropertyandleasing,under-leasingorsub-leasingforaperiodoflessthan5years.

Inrelationtoshares,transferofpropertyexcludestheallocationofthesamebythecompanytothememberinwhosenamethesharewasfirstregistered.TherateofPropertyTransferTaxinchargeyear2015is10%.

BRANCh PROFITS TAXWhereabranchofaforeigncompanyoperatesinZambia,thebranchtaxableincomeissubjecttotaxattherateof35%oranyotherrateapplicableaccordingtothesectorthebranchisoperatingin.Effective1January2015,externalisationorrepatriationofbranchprofitswillattractawithholdingtaxof15%.

DIVIDEND TAXDividendspaidorthatbecomepayablebyaZambiancompanytoitsresidentornon-residentshareholdersaresubjecttowithholdingtaxat15%.

Notable exclusions fromdividend tax are dividendspaid for the first 5 years by acompany operating in the agricultural sector and a company with tax incentivesgrantedundertheZambiaDevelopmentAgency(ZDA)ActNo11of2006issuedpriorto11October2013.Anywithholdingtaxondividendspaidtoforeignshareholderscanbe reducedor tax credits claimed in termsof anyapplicableDoubleTaxationAgreement.

PARTNERShIPSInZambiaaPartnershipisnotrecognisedasadistincttaxableentity.Forthisreasonitisnotchargeabletotaxinstead,eachpartnerisassessedseparately.

TaxableincomeforthePartnershipiscomputedjointlyandthensharedbetweenthepartnersaccordingtotheagreedratiosandeachpartnerissubjecttotaxonhisshareofprofitsastradeincome.

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VALUE ADDED TAX (VAT)VATisimposedonmostgoodsandservicessuppliedbyavendorat16%exceptzero-ratedandexemptsupplies.Allexportsarezero-ratedandthegrowingofaselectedfewagriculturalproductsarealsozero-rated.

Exempt supplies inmost casesconstitutemostly agricultural products, food stuffsaswellaseducationalservices.CompulsoryVATregistration is triggeredwhenthevalue of taxable supplies in a12monthperiod exceeds or is expected to exceedZMW800,000.However,othercompaniesmayregistervoluntarilywithoutmeetingthethreshold.Thistypeofregistrationisrenewableeveryyear.

FRINGE BENEFITS TAXThe IncomeTaxAct provides that any advantage or benefit which is not capableofbeing turned intomoneyormoney’sworth that isprovided toemployees isnotallowedasadeductionfortaxpurpose.Suchbenefitsoradvantagearenotsubjecttotaxinthehandsoftheemployees.Theseincludethefollowing:• Freehousingwhere30%ofemployees’annualtaxable incomeisdisallowed;

and,• Personaltoholdermotorvehicleswheretheamountsdisallowedareasfollows:-1. Upto1800ccenginecapacity ZMW9,0002. Between1800ccand2800ccenginecapacity ZMW15,0003. Above2800ccenginecapacity ZMW20,000

Inallothercases,wheretheemployer,onbehalfoftheemployee,makespaymentofelectricitybills, telephonebills,waterbills,school feesandassociationandclubmembershipfees,theemployerwillberequiredtogrossupandaddsuchpaymentstothesalaryoftheemployeeanddeducttaxunderPAYE.Theaboveexpensesareallowabledeductionsinarrivingatthetaxableincomeoftheemployer.

All cash benefits, given in form of allowances, are taxable in the hands of theemployees.

wIThhOLDING TAXRent, royalties, dividends, management and consultancy fees, commission andinterestaresubjecttowithholdingtaxesatsource.Thewithholdingtaxrateapplicableforresidentsis15%inallinstancesexceptforrentwhichisat10%.Thewithholdingtax rate on royalties, commission, management and consultancy fees, publicentertainmentandforeigncontractorsapplicabletonon-residentsis20%exceptfordividendsandinterestwhichisat15%.

CategoryCharge year

2015 2014 2013

Withholdingtaxandotherrates

Non-miningdividendpay-outs 15% 15% 15%

Profitsdistributionbybranchesofforeigncompanies 15% 15% 0%

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Managementfeestonon-residents 20% 20% 20%

Royaltiestonon-residents 20% 20% 20%

Winningsfromgaming,lotteriesandbetting(Finaltax) 20% 20% 0%

Debentures interest paid to Zambian investors in apropertyloanstockcompanylistedontheLusakaStockExchange

0% 0% 15%

Interestforindividualsonsavingsanddepositaccounts(Finaltax) 0% 0% 0%

Interestontreasurybillsforindividuals(Finaltax) 15% 15% 15%

Interest on treasury bills (Final tax for Public BenefitOrganisations) 15% 15% 15%

Commissionstonon-residents 20% 20% 15%

Publicentertainmentfeestonon-residents(Finaltax) 20% 20% 15%

Non-residentcontractors 20% 20% 15%

Rentals(Finaltax) 10% 10% 15%

Medicallevy 0% 0% 0%

NAPSAtaxallowablethreshold/month K255 K255 K255

OThER TAXES

Turnover tax

Threshold UptoK800,000 UptoK800,000 UptoK800,000

Standardrate 3% 3% 3%

Turnover tax under declaration penalties

Penaltyfornegligence 1.5% 1.5% 1.5%

Penaltyforwilfuldefault 3% 3% 3%

Penalty for fraud 4.5% 4.5% 4.5%

CARBON EMMISSIONS SURTAX Thisisleviedonallvehiclesbeingimportedaswellasthosevisitingandtransiting.Forregisteredvehiclesinthecountry,itisanannualchargebasedontheenginecapacityofthevehicleasfollows:

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Surtax

Engine capacity in cubic centimetres rate

1500ccandbelow 50

Between1500ccand2000cc 100

Between2001ccand3000cc 150

3001ccandabove 200

STAMP DUTYInZambiaStampDutyisleviedontheincreaseofsharecapitalandregistrationofdebentures.TheStampDutyontheincreaseofsharecapitalispresentlyat2.5%ontheamountofincrease.TheStampDutyontheregistrationofdebenturesis1%ofthedebenturevalueupforregistrationtotheminimumofZMW300andthemaximumofZMW3,000.


Thetaxableincomeofacompanyisdeterminedbydeductingexpendituresoallowedtobededucted in termsof the IncomeTaxAct. Inall instances,unlessspecificallyexcludedby theprovisionsof the IncomeTaxact,expenditure incurredwhollyandexclusivelyforthepurposesofgeneratingincomefromthatsourceisallowable.

TheActprovidesforthreetypesofdeductionswhicharespecificdeductions,generaldeductionsandprohibiteddeductions.Specificdeductionsaredeductionsallowableforaspecificsource.Ifasourceofincomedoesnotexistinachargeyearnospecificdeductionsrelatingtothatsourceshouldbeallowed.Generaldeductionsarethosedeductionswhichareallowablefromtotalincomeliabletotaxfromallsources.Andprohibiteddeductionsare thosedeductionswhicharenotdeductible incomputingincome.

Capital allowances and tax losses from the same source are also allowable indeterminingtaxableincome.

CAPITAL ALLOwANCES

AssetInitial Allowance

Investment Allowance

Improvement Allowance

wear & Tear Allowance

Notes

Industrialbuildings

10 10 100 5 1,2

Commercialbuildings

- - 100 2 3

Farm,agro,plant and machinery

- - - 50 4

Farmimprovements

- - - 100 7

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Farmworks - - - 100 8

Farmdwelling - - - 100 5

AssetInitial Allowance

Investment Allowance

Improvement Allowance

wear & Tear Allowance

Notes

Manufacturingplant and machinery

- - - 50 4

Leased machineryandequipment

- - - 50 4

Tourismimplementsandmachinery

- - - 50 4

Commercialmotorvehicles - - - 25 -

Non-commercialvehicles

- - - 20 -

Plant,machineryandequipment

- - - 25 -

Lowcosthousing 10 - 25 1,5

NOTES:1. Initialallowanceisgrantedonanewlyconstructedindustrialbuilding.Noinitial

allowanceisgrantedonanindustrialbuildingwhichhasbeeninexistenceforsometimeandissubsequentlypurchased.Butinitialallowancecanbegrantedon a new addition to an existing industrial building. Housing units (Low costhousing)constructedoracquiredtohouseemployeeswillqualifyforindustrialbuildingallowancebutthecostofeachhousingunitshouldnotexceedZMW20,000.Allhousingunitsconstructedoracquiredonorafter1April1997willqualifyforindustrialbuildingallowanceprovidedthecostdoesnotexceedZMW20,000perunit.

2. Theinvestmentallowanceisalsograntedoncapitalexpenditureincurredontheconstructionof,additiontooralterationofanyindustrialbuildingtobeusedforpurposesofbusinessasamanufacturer.

3. Theimprovementallowanceonconstructedindustrialandcommercialbuildingsisonlygrantedtothoseoperatinginindustrialparksandmultifacilityeconomiczones.

4. Acceleratedwearand tearallowancesat50%areonlyavailableon farming,manufacturing,andtourismandleasedassetsunderoperatinglease.

5. ThecostforfarmdwellingandlowcosthousingforwearandtearpurposesisrestrictedtoZMW20,000perunitperyear.

6. Premiumallowanceisalsograntedfortherighttouseanypatent,design,trade

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markorcopy rightor for theuseofotherpropertywhich theCommissioner-Generaldeterminesisofalikenature,wheresuchrightisusedforpurposesofbusiness.Theamountofallowanceallowedforanychargeyearshallnotexceedtheamountofthepremiumorlikeconsiderationdividedbythenumberofyearsforwhichtherightofuseisgranted.

7. Farmimprovementsmeansanypermanentwork,whichincludesfarmdwelling,fencingandanybuildingconstructedforandusedforthewelfareofemployees,andinrelationtofarminglandownedoroccupiedbythefarmerclaimingtheallowance.

8. Farmworksincludesexpenditureonstumping,clearing,boreholes,wells,aerialandgeophysicalsurveys,preventionofsoilerosionandwaterconservation.

STOCK / INVENTORY Alltradingstockonhandattheendofthetaxyearmustbeaddedtoincomewhilealltradingstocksonhandthebeginningoftheyearranksasadeduction.Tradingstockisvaluedatthelesserofcostornetrealisablevalue.Consumablestoresandwork-in-progressonhandconstitutetradingstock.TheLIFOstockvaluationmethodisnotacceptablefortaxpurposesinZambia.

RESEARCh AND DEVELOPMENT EXPENDITURE Qualifying expenditure and other expenditure of a capital nature, incurred in thechargeyearincarryingoutscientificexperimentorresearchrelatingtothebusinessisallowedinfull.AlsoallowedarecontributionstoascientificandeducationalsocietyorinstitutionorlikebodyapprovedbytheCommissioner-Generalsubjecttostipulatedconditions.

INTELLECTUAL PROPERTY Adeductionisallowedfortherightofuseofanypatent,design,trademarkorcopyrightorfortheuseofotherpropertywhichtheCommissioner-Generaldeterminesisofalikenature,wheresuchrightisusedbythatpersonforpurposesofhisbusiness.Thedeductionallowedforanychargeyearshallnotexceedtheamountofthepremiumorlikeconsiderationdividedbythenumberofyearsforwhichtherightofuseisgranted.

SUBSIDIES TheincomeTaxActprovidesforcapitalallowancesonlyforcapitalexpenditureactuallyincurred. If thetaxpayer isabletorecoverpartof thisexpenditurefromsubsidyorgrantfrompublicfundsthecapitalallowanceswillbecalculatedonthenetamount.

INTEREST AND FINANCE ChARGESInterest incurredintheproductionof incomeisadeductibleexpense. Interestofarevenuenature incurredwithin18monthsprior to thecommencementof trade isdeductibleintheyearinwhichbusinesscommences.Interestofacapitalnatureisnotdeductiblebutranksforcapitalallowancesaspartofthecostofcapitalexpenditure.

TAX LOSSESSubject to certain anti-avoidance provisions, tax losses are carried forward to thefollowingyearprovidedsuchlossesmaynotbecarriedforwardforaperiodofmorethan 5 years in any other case and 10 years formining activities and hydro andthermal power generation. Losses carried forward can only be deducted from

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incomeofthesamesource.

Effective1January2015carryforwardofminingtaxlossesnotapplicable.

INTEREST RECEIVEDInterest received (or accrued) is included in the gross income .Normally interestis regardedashavingaccruedat thedate inwhich itbecomesdueas incomeofthechargeyearinwhichthatdateoccurs.Iftheinterest,forsomereason,remainsunpaidintheyear inwhichitwasdueandpayable, itshouldnevertheless,stillbeassessedinthatyear.Thetaxpayercanclaim,ifhecanprovetothesatisfactionoftheCommissioner-General,unpaidinterest.

FOREIGN SOURCED INCOMEForeign interestanddividends receivedby resident individualsandcompaniesaresubjecttotax inZambia.However,thisgeneralprinciplemaybeoverriddenbytheprovisionsofaDoubleTaxationTreatyorcertainunilateralreliefprovisionscontainedintheZambiantaxlegislation.

INCENTIVESOnlybusinessesgrantedlicencesundertheZambiaDevelopmentAgencyActNo11of2006after11thOctober2013 inaprioritysectorandoperating inMulti-FacilityEconomic Zones (MFEZ) or Industrial Parks qualify for incentives. The incentivesavailableare:

Income Tax whT on DividendsRuralmanufacturingenterprises–firstfiveyearsfromcommencement 0% 0%

Enterprises in priority sector (MFEZ/Industrial Park)- first five years fromcommencement

0% 0%

MINING TAX RATES

CategoryCharge year

2015 2014 2013

Mining-BaseMetals/Gemstones/PreciousMetals Nil 30% 30%

OtherMiningoperations 30% 30% 30%

Mineralroyaltyrates Mineralroyaltyonbasemetals,preciousmetalandgemstones-undergroundmining 8% 6% 6%

Mineralroyaltyonbasemetals,preciousmetalandgemstones-opencastmining 20% 6% 6%

Capitalallowancesdeductions Miningequipmentandrelatedcapitalexpenditure(*claimwhenassetisbroughtinto use)

N/A 25%* 100%

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Commercialmotorvehiclesandotherplantandmachinery N/A 25% 25%

Non-commercialmotorvehicles N/A 20% 20%

Carryforwardoftaxlosses

Miningoperations N/A 10years

10years

Prospectingandexploration N/A 5years 5years

Otherspecialincentives

Importdutyoncertainminingequipment Rebate Rebate Rebate

Vatdefermentscheme No No No

Otherrates

Withholdingtaxondividends 0% 0% 0%Withholdingtaxonmanagementfeestonon-residents 20% 20% 15%

ExportdutyonCopperandCobaltconcentrates 10% 10% 10%

Exportdutyonallotherunprocessedorsemiprocessedmineralores 10% 10% 10%

Thincapitalisationthreshold 3;1 3;1 3;1

Taxationofhedgingincome 35% 35% 35%Propertytransfertaxonsaleortransferofminingright 10% 10% 10%

Transferpricingrulesoninterestpaymentsmadebyminingcompaniestoapply Yes Yes No


Tax credits are granted in respect of foreign taxes paid on foreign income inaccordancewithunilateralprovisionscontainedintheIncomeTaxActandnumerousDoubleTaxAgreements.Where incomeissourced inZambia,noforeigntaxcreditwillbeallowed.

d. CoRpoRAte GRoUps

Grouptaxationisnotapplicable.However,corporaterulesexistwhichprovidereliefinrespectoftransactionsbetweengroupcompaniesandbetweenfoundingshareholdersandtheircompany.Thereliefprovisionsdealwiththefollowingtransactions:• Asset-for-sharetransactions;• Intra-grouptransactions;• Unbundlingtransactions;• Transactionsrelatingtoliquidation,winding-uporderegistration;and,• Amalgamationtransactions.

Briefly,thecorporaterulesprovideforthefollowingtaxreliefinrespectoftheabove

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mentionedtransactions,providedcertainrequirementsaremet:• PropertyTransferTax(PTT);and,• ValueAddedTax(VAT).


The Commissioner-General of the Zambia Revenue Authority is empowered tomakeadjustmentstocross-bordertransactionsbetweenrelatedpartiesthatarenotconductedonarm’s length terms.Whilenospecific thincapitalisation rulesapply,thenormalarm’slengthtransferpricingprincipleappliesinrespectofloansaswell.However, formining companies theDebt to Equity Ratio of 3:1 thin capitalisationprincipleapplies.

There are also limitations on certain deductions on transactions between relatedparties.

F. eXCHAnGe ContRol

TherearenoexchangecontrolregulationsundertheliberalisedZambianeconomy.Norestrictionsontherepatriationofprofitsorinvestmentcapital.However,evidenceof tax payments should be produced before repatriation as well as meeting antimoneylaunderingregulations.


Zambia operates a resident-basis system of taxation; therefore Zambian residentindividualsaresubjecttotaxontheirworldwideincomeirrespectiveofthesourceoftheincome,exceptforcertainexclusions.

Non-resident individuals, subject to certain exclusions, are subject to tax on theirZambian-sourcedincome.

Anaturalpersonwillbe regardedasa resident for taxpurposes ifhe isordinarilyresidentinZambiaorwherethepersonisnotordinarilyresidentinZambiabutspendsmorethan183daysinZambiainataxyear(thephysicaltest).

Thetaxratesapplicabletonaturalpersonsfortheyearending31December2015are:

INCOME TAX BANDS PER ANNUM RATE

0-ZMW36,000 0%

ZMW36,001-ZMW45,600 25%

ZMW45,601-ZMW70,800 30%

OverZMW70,800 35%

The only deduction available to salaried employees and full time whole servicedirectors isadeduction inrespectofcontributionstoapensionfundorretirementannuityat5%ofgrosspaytothemaximumofZMW3,060perannum.

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205

(ROE$1=ZMW6.3)


The withholding tax rates applicable on payments to non-residents on dividends,interest,royaltiesandmanagementandconsultancyfeesunderthevariousDoubleTaxationAgreementsasfollows:

Dividends(%)

Interest (%)

Royalties (%)

Management Fees (%)

Canada 15% 15% 15% 0%

Denmark 15% 10% 15% 0%

Finland 5%/15%** 15% 5%/15% 0%

France NewDTAyettobesigned.Oldonestillinforce

Germany 5%/15%** 10% 10% 0%

India 5%/15%** 10% 10% 10%

Ireland 0% 0% 0% 0%

Italy 5%/15%** 10% 10% 0%

Japan 0% 10% 10% 0%

Kenya 0% 15% 20% 20%

Mauritius 5%/15%** 10% 5% 0%

Netherlands 5%/15%** 10% 10% 0%

Norway 15% 10% 15% 0%

Romania 10% 10% 15% 0%

SouthAfrica 15% 15% 20% 20%

Sweden 5%/15%** 10% 10% 0%

Switzerland 5%/15%** 0% 0% 0%

Tanzania 0%* 15% 20% 20%

Uganda 0%* 15% 20% 20%

UnitedKingdom 5%/15%** 10% 10% 0%

NOTES:*Rateappliesifdividendsubjecttotaxincountryofrecipient.**The5%rateappliesiftherecipientisacompanywhichcontrolsdirectlyor indirectlyatleast25%ofthevotingpowerinthecompanypayingthedividend.

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206

MEMBERFIRMNameofFirm: PKFCharteredAccountants(Zimbabwe)City: HarareContact:Name: SydneyBvurereTelephone: +263(4)2918463;Mobile+263777373214Email: [email protected]

KEY TAX POINTS• Residentcompaniesandprivatebusinesscorporationsaretaxedonnon-exempt

incomefromasourcewithinordeemedtobewithinZimbabwe.Incomefromaforeignsourceattractstaxonlyifitfallswithinthespecificprovisionsrelatingto deemed source. However, a residence based income tax system is underconsideration.

• NormaltaxispayablebyZimbabweancompaniesontheirtaxableincomeattherateof25%.A3%AIDSlevyisimposedonthetaxchargeablegivinganeffectivetaxrateof25.75%.

• CapitalGainsTaxisleviedontaxablegainsfromasourcewithinZimbabwefromthesaleordeemedsaleof immovablepropertyandanymarketable security(specifiedasset).

• VATisimposedonallgoodsandservicessuppliedbyaregisteredoperatoratastandardrateof15%.

• ZimbabweanresidentindividualsandcorporatesaresubjecttotaxinZimbabweonforeigninterestanddividends.Foreigndividendsaresubjecttotaxataflatrateof20%.

• Tax credits are granted in respect of foreign taxes paid on foreign sourcesincome in accordance with the Income Tax Act and numerous Double TaxAgreements.

• Grouptaxationisnotapplicable.However,corporaterulesexistwhichproviderelief in respect of transactions between group companies and betweenfoundingshareholdersandtheircompany.

• TheRevenueAuthorityCommissioner is empowered tomakeadjustments tonon-arm’s length cross-border transactions and thin capitalisations betweenconnectedparties.

• Income from royalties, dividends, interest, and similar income are subject towithholding taxes at source.Non-residents are subject towithholding tax ondividends,royalties,feesandremittances.

• Zimbabwean resident individuals are, save for certain exclusions, subject totaxontheirincomefromasourcewithinZimbabwe.Non-residentindividuals,subject to certain exclusions, are subject to tax on their Zimbabwe-sourcedincomeonly.

A. tAXes pAYABle

FEDERAL TAXES AND LEVIESCOMPANY TAXAcompany is resident inZimbabwe if it is incorporated, formedor established in

Zimbabwe

zImBABWeCURRENCY: Zimbabwean Dollar (ZwD)POPULATION: 15.73 millionGDP GROwTh: 3.2% GDP: US$ 14.4 billion

207

Zimbabwe or has its place of effectivemanagement (day to daymanagement) inZimbabwe.

Zimbabwe resident companies and private business corporations (companies) aretaxedonnon-exemptincomefromasourcewithinordeemedtobewithinZimbabwe.Incomefromaforeignsourceattractstaxonlyifitfallswithinthespecificprovisionsrelatingtodeemedsource.However,aresidencebasedincometaxsystemisbeingconsidered.

Theproposednewincometaxlawalsoseekstodivideincomeintofivecategories:1) Employmentincome;2) Businessincome;3) Propertyincome;4) Gainsondisposalofinvestmentproperty;and,5) Otherincomewith.

NormaltaxispayablebyZimbabweancompaniesontheirtaxableincomeattherateof25%.A3%AIDSlevyisimposedonthetaxchargeablegivinganeffectivetaxrateof25.75%.Incometaxratesonexportingcompaniesreducedaccordingtolevelsofexports :20% for thoseexporting30% to40%of theirproducts;17.5% for thoseexporting41%to50%;and15%forthoseexporting51%andabove.Thereductioniseffectivefrom1January2015.

Thetaxispayablebybothpublicandprivatecompaniesaswellasprivatebusinesscorporations.

The tax year usually runs from 1 January to 31 December, although differentbalancedatesareavailableincertaincircumstances.Taxispayableinfourquarterlyinstalments(QPD’s)onthe25thofMarch,25thofJune,25thofSeptemberand20th of Decemberbywhichdates10%,25%,30%and35%ofthetaxliabilityfortheyearmustbepaidrespectively.

SmalltomediumsizeenterpriseswithoutorganisedrecordsandwithannualturnoverbelowUSD60,000maypaypresumptivetaxesinsteadofnormaltax.Presumptivetaxesareperiodictaxes,absolutefiguresorpercentage-based,whichareleviedoncertainspecifiedbusinessoperations,usuallyundertakenbysmallandmediumsizeenterprises.

Miningcompaniesare,inadditiontotheirspecificcorporateratesoftax,subjecttoaroyaltycalculatedonthegrosssalesrelatingtothetransferofmineralresources.Theroyaltyiscalculatedusingdifferentpercentagesapplicabletoeachtypeofmineral.Thepercentagesrangefrom1%onbasemetalsto15%onpreciousstones.

TRUSTSZimbabwe trusts pay tax at the same rate as companies (25% on each dollar oftaxableincomeplusa3%AIDSlevyonthetaxchargeable).Thisrateisapparently,thesameastheoneapplicabletoanindividual’stradeandinvestmentincome.Therearenopersonalcreditstoatrustcreatedintermsofthewillofadeceasedtaxpayer.

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208

IncaseswheretheincomeofatrustthatisordinarilyresidentinZimbabweincludesforeign interest or dividends, such income is taxable (dividends at 20% flat rate).Reliefisgrantedforforeigntaxsuffered.

PARTNERShIPSPartnerships are not separate legal entities. This means they have no existenceseparate from the individual partners that comprise them.Taxable income for thepartnershipiscomputedjointlyandthensharedbetweenthepartnersaccordingtotheagreedratiosandeachpartneristhensubjecttotaxonhisshareofprofitsastradeincome.

CAPITAL GAINS TAX (CGT)CGT is levied on taxable gains from a source within Zimbabwe from the sale ordeemedsaleof immovableproperty andanymarketable security (specifiedasset)accordingtotheCapitalGainsTaxAct.Non-residentsareonlysubjecttoCGTonanydirectorindirectinterestorrightinortoimmovablepropertysituatedinZimbabwe.

CGTistriggeredonthedisposalordeemeddisposalofanassetwhichincludesbutisnot limited toanyevent,act, forbearanceoroperationof law that results in thecreation, variation, or transfer of a specified asset, subject to any exclusions andexemptions. Liability of the tax arises regardless of the date of acquisition of thespecifiedasset.Incertaincircumstances,electionstodeferliabilityareavailable.

Inregardtoassetsacquiredafter1February2009,ataxablegainiscalculatedbytakingthedifferencebetweentheproceedsreceivedondisposaloftheassetandthecostoftheassetplusanyadditions,inflationallowance,directsellingexpenses,baddebtsandcertainlegalcostsincurredinCGTappealstocourts.

The all items consumer price index (CPI) is used as the base for the inflationallowance.Acapital lossresultswherethecostsexceedtheproceedsondisposal.CGT is a separate tax and any amounts included as incomeor deductions in thecalculation for incometaxareexcludedfromCGT.Aflat rateof20%isapplicableonthegain(thiscouldchangeastheproposednewincometaxlawseekstoincludecapitalgainswithbusinessincomeandsubjectbothtotaxatthesamerate).

As forassetsacquiredbefore1February2009, thesellingprice isdeemed tobethecapitalgainsandaflatrateof5%isapplicableonthisgain.CapitalgainsfrommarketablesecuritieslistedontheZimbabweStockExchangearesubjecttoafinalwithholding taxof1%.Awithholding taxof5%appliesonprivatesecuritieswhilea rate of 15% applies on gains from immovable property.This withholding tax iscreditedonassessment.

BRANCh PROFITS TAXThereisnobranchprofitstaxinZimbabwe.

VALUE ADDED TAXVAT is imposed on all goods and services supplied by a registered operator at astandardrateof15%.Exportsandsomespecifiedgoodsandservicesarezero-ratedwhileafewgoodsandservicesareexempt.Un-beneficiatedchromeissubjecttoVAT

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209

at the rateof20%uponexport.Witheffect from1January2014un-beneficiatedhides are subject toVAT at the rate of 15%.Un-beneficiated platinumand roughdiamondswillbesubjecttoVATattherateof15%uponexportwitheffectfrom1January2017.CompulsoryVAT registration is triggeredwhen thevalueof taxablesuppliesina12monthperiodexceedsorisexpectedtoexceedUSD60,000.

FRINGE BENEFITS TAXEmployeesaretaxedonthevalueoffringebenefitsasdeterminedintheIncomeTaxAct.Thefringebenefitsareaddedtothetaxableincomeoftheindividualandtaxisleviedatthetaxratesapplicabletonaturalpersons

STAMP DUTYStampDuty is leviedonspecified instrumentsand transferof immovableproperty.Thespecifiedinstrumentsincludebonds,brokers’notes,off-marketsharetransfers,chequesandpoliciesofinsurance.

TransferDutyisimposedonthetransferofimmovablepropertyatthefollowingrates:

Duty (USD)

FortransfersofuptoUSD5,000-foreveryUSD100orpartthereof

1

FortransfersbetweenUSD5000andUSD20,000-foreveryUSD100orpartthereof

2

FortransfersbetweenUSD20,000andUSD100,000-foreveryUSD100orpartthereof

3

FortransfersinexcessofUSD100000–foreveryUSD100orpartthereof

4

OThER TAXESTheseinclude,amongstothers,CustomsandExciseduties,carbontax,andskillsandstandardsdevelopmentlevies.


Thetaxableincomeofacompanyisdeterminedbydeductingexpenditureincurredforthepurposesoftradeorintheproductionofincomeandotherallowableexpensesandallowancesfromthecompany’sincome.CapitalreceiptsaresubjecttoCGT(butmaybeincludedwithbusinesstaxableincomeaccordingtotheproposednewincometaxlaw).Expenditureisallowedtotheextentthatitisofarevenuenature.

CapitalAllowances-buildings,plant,machineryandequipment

Asset Special Initial Allowance (%)

wear & Tear Allowance (%)

Notes

IndustrialBuildings 25 5 1,6

Farmimprovements 25 5 1,4

Commercialbuildings 2,5

Railwaylines 25 5 1

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210

Staffhousing 25 5 1,2

Motorvehicles 25 20upto33,33 1,3,5

Articles, implements,machinery

10 5

Notes:(1) TheSIAisgrantedintheyearofpurchaseinrelationtomovablesandintheyear

ofconstructioninrespectofimmovableoryearinwhichtheassetisfirstused.InsubsequentyearsacceleratedW&Tisallowedonoriginalcost.

(2) Asfrom1January2009theamountqualifyingfortheallowancesinrespectofeachunitofstaffhousingwassetatUSD10,000(onlyavailabletounitsthecostofwhichdoesnotexceedUSD25,000).

(3) AllowancesonmotorvehiclesrestrictedtoacostofUSD10,000forvehiclespurchasedonorafter1January2009.

(4) Includes permanent schools, nursing homes, hospitals and clinics (w.e.f 1January2009anypartofthecostinexcessofUSD10,000ofsuchpermanentschools,nursinghomes,hospitalsandclinicswillbedisregarded.

(5) W&Tonallmovables isgenerallyona reducingbalancebasiswhile thatonimmovableisonstraightlinebasis(oncost).

(6) Includeshotelswithliquorandcasinolicenses.

STOCK / INVENTORYAlltradingstockonhandattheendofthetaxyearmustbeaddedtoincomewhilealltradingstockonhandatthebeginningoftheyearranksasadeduction.Tradingstockisvaluedatthelesserofcostornetrealisablevalue.Consumablestoresandwork-in-progressonhandconstitutetradingstock.TheLIFOmethodofvaluingtradingstockisnotpermitted.

RESEARCh AND DEVELOPMENT EXPENDITURE (R&D)Qualifying expenditure incurred by the taxpayer during the year of assessmentin carrying out experiments and research relating to his trade, other than capitalexpenditure on plant, machinery, land or premises or on the acquisition by thetaxpayerofrights,whetherforthepurposeofhistradeorotherwiseisallowedinfull.However,contributionstosuchexpenditurebyanothertaxpayerareallowedtothatothertaxpayerwithsomerestrictions.

EXPORT-MARKET DEVELOPMENT EXPENDITUREExporterscanclaimasadeductiontheamountofanyexport-marketdevelopmentexpenditureincurredduringtheyearofassessment,togetherwithanamountequalto100%of suchexpenditure.The term“exportmarket development expenditure”meansexpenditure,notbeingexpenditureofacapitalnature,thatisprovedtothesatisfaction of the Commissioner to have been incurred wholly or exclusively forthepurposeofseekingopportunities for theexportofgoods fromZimbabweorofcreatingorincreasingthedemandforsuchexportsandincludesexpenditureforanyoneormoreofthefollowingpurposes-Itincludesexpenditureforanyoneormoreofthefollowingpurposes:

(1) Research into, or the obtaining of information relating to, markets outside

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211

Zimbabwe;(2) ResearchintothepackagingorpresentationofgoodsforsaleoutsideZimbabwe;(3) Advertising goods outside Zimbabwe or otherwise securing publicity outside

Zimbabweforgoods;(4) SolicitingbusinessoutsideZimbabweorparticipatingintradefair;(5) Investigating or preparing information, designs, estimates or other material

for thepurposeofsubmitting tenders for thesaleorsupplyofgoodsoutsideZimbabwe;

(6) BringingprospectivebuyerstoZimbabwefromoutsidethecountry;and,(7) ProvidingsamplesofgoodstopersonsoutsideZimbabwe.

INTELLECTUAL PROPERTYThedeductionofexpenditure,inanysingleyear,incurredfortherightofuseofaninvention,patent,copyright,knowledgeorotherpropertyofasimilarnatureordesignorotherpropertyofasimilarnatureisnotpermittedtoexceedanamountdeterminedbydividingthetotalpremiumbythenumberofyearsrepresentingthedurationoftheagreement.Iftheagreementisforadurationofmorethantenyears,orthedurationisindefinite,thenthedurationisdeemedtobetenyears.

INTEREST AND FINANCE ChARGESInterest incurred in the production of income is a deductible expense. Interestincurredpriortothecommencementoftradeisdeductibleintheyearinwhichtradecommences.However,interestincurredduringbuildingoperationsonaloanusedforbuildingpurposesiscapitalisedandranksforcapitalallowancesaspartofthecostofthebuilding.Pre-incorporationexpenditureisnotdeductible.

TAX LOSSESSubject to certain anti-avoidance provisions, tax losses are carried forward to thefollowing year provided such losses may not be carried forward for a period ofmorethansixyears,exceptforlossesfromminingoperations.Lossesfromtradingoperations cannot be offset with employment income.The proposed new tax lawseekstoseparatetaxlossesfromleaseofimmovablepropertyfromlossesfromotherbusinessoperations.

INTEREST RECEIVEDInterest received (or accrued) is included in gross income to the extent that suchinteresthasnotbeensubjectedtowithholdingtaxatsource(mainlybankinterest).

FOREIGN SOURCED INCOMEZimbabweanresidentindividualsandcorporatesaresubjecttotaxinZimbabweonforeigninterestanddividends.Foreigndividendsaresubjecttotaxataflatrateof20%.However,thisgeneralprinciplemaybeoverriddenbytheprovisionsofadoubletaxationagreementorcertainunilateralreliefprovisionscontainedintheZimbabwetaxlegislation.

INCENTIVESThefollowingtable indicatesapplicablenormaltaxratesof25%andindicatestheexistingtaxholidayschemesintheformofreducedtaxrates.INCOME TAX RATES

Zimbabwe

212

Yearsending31December2015and2014

Notes 2015 2014

CompaniesandTrusts 1 25% 25%

Miningcompaniesandminingtrusts 25% 25%

ApprovedBOOTandBOTprojects 2 0% 0%

IndustrialParkDeveloper 3 0% 0%

Licensedinvestor 3 0% 0%

SpecialMiningLease 15% 15%

Pension Funds 15% 15%

Operatorofatouristfacility 3 0% 0%

Manufacturingcompanyexporting30%ormore 1 20%,17.5%,15% 20%

NOTES:Subject to 3%Aids levy giving effective rates of 25.75%; 20.60%;15.45% and18.03%.Theratesforexportingcompaniesaredeterminedbythefollowing levelsofexports:a. Export30%to40%ofproducts-20%b. Export41%to50%ofproducts-17.5%c. Export51%andaboveofproducts-15%(2) The0%rateappliesforthefirstfiveyearsandthena15%appliesinthenext

fiveyearsand25%thereafter.(3) The0%rateappliesforthefirstfiveyearsand25%appliesthereafter


TaxcreditsaregrantedinrespectofforeigntaxespaidonforeignsourcesincomeinaccordancewithunilateralprovisionscontainedintheIncomeTaxActandnumerousDoubleTaxAgreements.WhereincomeissourcedinZimbabwe,noforeigntaxcreditwillbeallowed.

d. CoRpoRAte GRoUps

Grouptaxationisnotapplicable.However,corporaterulesexistwhichprovidereliefinrespectoftransactionsbetweengroupcompaniesandbetweenfoundingshareholdersandtheircompany.Thereliefprovisionsdealwiththefollowingtransactions:• Asset-for-sharetransactions;• Intra-grouptransactions;• Unbundlingtransactions;• Transactionsrelatingtoliquidation,winding-uporderegistration;and,• Amalgamationtransactions.

Briefly,thecorporaterulesprovideforthefollowingtaxreliefinrespectoftheabovementionedtransactions,providedcertainrequirementsaremet:• CGT;

Zimbabwe

213

• StampDuty;• Incometax,specificallywithrespecttocapitalallowancesclaimed,recoupment

ofcapitalallowancesandthetransferoftradingstock;• TransferDuty;and,• VAT.


TheCommissioner for theZimbabweanRevenueAuthority isempowered tomakeadjustments tonon-arm’s lengthcross-border transactionsand thincapitalisationsbetween connected parties. There are also limitations on certain deductions andallowancesontransactionsbetweenconnectedparties.


Incomefromroyalties,dividends,interest,andsimilarincomearesubjecttowithholdingtaxesatsource.Non-residentsaresubjecttowithholdingtaxondividends,royalties,feesandremittances.Zimbabweanresidentindividualsaresubjecttowithholdingtaxatsourceondividendsandbankinterest.

Zimbabwean resident companies are not subject to dividend withholding tax ondividendspaidbylocalcompaniesbuttheirbankinterestissubjecttowithholdingtax.Therateofwithholdingtaxis15%inallcasesexceptfordividendsfromsecuritieslistedontheZimbabweStockExchangeforwhichtherateis10%.

G. eXCHAnGe ContRol And IndIGenIsAtIon

Subjecttocertainlimitedexclusions,Zimbabweanresidentsaresubjecttoexchangecontrols. However, currently (since the beginning of the dollarization period) theexchange controls are relaxed to the extent that one can export dividends andprofits without a hiccup. Non-residents are excluded from the ambit of exchangecontrolsexceptwhenitcomestoinvestinginsecuritieslistedontheZimbabweStockExchange.

TheZimbabweanAuthoritiesareintheprocessofintroducingcontrolsoverownershipofcompaniesinalmosteverysector.Thetargetisthateachlocalcompanyshouldbeowned51%byindigenouspersonsandforeignerscanownupto49%only.Themajorthrusthasbeenintheminingsectorwherelargeresourcesofpreciousmineralslikediamondsandgoldhasbeendiscovered.Investorscannegotiatetheirwaythroughthe Zimbabwe InvestmentAuthority and the Ministry of Youth Empowerment andIndigenisation.

H. peRsonAl InCome tAX

Zimbabweanresident individualsare,saveforcertainexclusions,subject totaxontheirincomefromasourcewithinZimbabwe.However,theprobabilityofmovingtoaresidencebasedsystemisthere,butnotintheimmediatefuture.

Non-resident individuals, subject to certain exclusions, are subject to tax on their

Zimbabwe

214

Zimbabwe-sourcedincomeonly.

EmployerswithacceptableaccountingrecordsareallowedtousetheFinalDeductionSystemfortheirpayrolltax.Thissystemrequiresthattheemployersdeductthepayrolltaxaccuratelysuchthattheindividualemployeesdonothavetosubmitincometaxreturns for their employment income to the tax authorities at the end of the yearunlesstheyhaveotherincome.

The income tax rates applicable to natural persons for the tax year ending 31December2015are:

Annual Taxable Income USD Rate Cumulative Tax

Chargeable USDUpto3,600 0% 0

From3,601to18,000 20% 2,880

From18,001to36,000 25% 7,380

From36,001to60,000 30% 14,580

From60,001to120,000 35% 35,580

From120,001to180,000 40% 59,580

From180,001to240,000 45% 86,580

Above240,000 50% 86,580+50%

Note:Husbandsandwivesaretaxedseparately.Taxableincomefromemploymentisarrivedatafterdeductingpensionandsocialsecuritycontributionsandtradeunionsubscriptions.AnAIDSlevyof3%ontaxchargeableis imposedafterdeductionofcredits. The maximum effective rate is therefore 51.50%. The above rates applyonlytoremunerationfromemploymentandpensions.Creditsformedicalexpensesandmedicalaidcontributions,physicallydisabledpersonsandelderlypersonsaregrantedwithstipulatedmaxima.

Anytaxableincomeforanindividualwhichisreceivedbyoraccruestohimfromanytradeinvestmentorotheractivity(excludingemploymentorpension)istaxedataflatrateof25%.The3%AIDSlevyisalsoapplicabletothetaxonthisincome,givinganeffectiverateof25.75%.


The IncomeTaxAct subjects a number of payments towithholding tax at source.Theseareasfollows:

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215

NormalRate oftax%

Double Taxation Agreements Notes

UK%

Germany%

Netherlands%

Sweden%

1

Non-ResidentTaxonDividends(NRST)CompanieslistedontheZimbabweStockExchange

Othercompanies

10

15

5

5

10

10

10

10

15

15

2,5

2,5

Non-Resident’sTaxonInterest(NRTI)

(Repealedw.e.f.30September2009)

Non-Resident’sTaxonFees(NRTF)Includesdirector’sfeesaccruingtonon-residents

15 10 7,5 10 10 5

Non-Resident’sTaxonRemittances(NRTR)This applies to branchoperationsonly and applies to expensesallocabletotheZimbabweoperation

15 20 20 20 20 6

Non-Resident’sTaxonRoyalties(NRTRoy)

15 10 7,5 10 10 5

ResidentTaxonDividends(RST)(CompaniesresidentinZimbabwereceivingdividendsareexempt)CompanieslistedontheZimbabweStockExchangeOthercompanies

10

15

5

5

Resident’sTaxonInterest(RTI)-BanksandBuildingSocieties

15 3,4,7

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216

NormalRate oftax%

Double Taxation Agreements Notes

UK%

Germany%

Netherlands%

Sweden%

1

RBZTreasuryBillsandBAs

15 3,4,5

AutomatedFinancialtransactionstaxIntermediarymoneytransfertax

USD0.05

USD0.05

7

7

CapitalGainsTax

ListedSecurities

Privatesecurities

Immovableproperty

1

5

15OtherRentpaidbyinformaltraders

Commissionon property or insurance

Non-executivedirector’sfees

Contractswithouttaxclearancecertificates(ITF263)

10

20

20

10

6

5

5

NOTES:(1) Other existing Double Taxation Agreements include Norway, South Africa,

Bulgaria,Mauritius,Canada,Poland,FranceandMalaysia.(2) Payablebyallnon-residentpersons, includingcompanies.For the lower rate

to apply, the non-resident shareholdermust hold aminimum of 25% of theZimbabweCompany’sshares.

(3) Thistaxisfinal.(4) Taxpayerswhoareovertheageof55yearsareexemptonthefirstUSD250per

month.(5) Duedateiswithin10daysafterthedateofpaymentoraccrual,whicheveris

earlier.(6) Duedateiswithin10daysoftheremittanceoftheallocableexpenditure.(7) Due date iswithin 10 days of the end of themonth following themonth of

payment.

Zimbabwe

NAMIBIA

GHANA

SIERRA LEONENIGERIA

TANZANIA

BURUNDIRWANDA

TUNISIA

LIBYA

ZIMBABWE

ZAMBIA

BOTSWANA

KENYAUGANDA

EGYPT

GAMBIA

ANGOLA

MOZAMBIQUEMAURITIUS

MOROCCO

CAPE VERDE

SOUTH AFRICA

LESOTHO

SWAZILAND

SOUTH SUDAN

SOMALILAND

www.pkf.com

DIAMONDS

ALUMINIUMCRUDE OIL

CRUDE OIL

CRUDE OIL

PETR

OLE

UM

COTTON

GOLD

DIAMONDS

DIAMONDS

CRUDE OILCRUDE OIL

DIAMONDS

TEACOFF

EE LIVES

TOCK

FISH

CRUDEOIL

ALUM

INIU

M

IRON ORE

PLATINUM

CLOTHING & TEXTILES

COCOA BEANS

CRUDE OIL

GRAINSCOFFEE

COPPER

PLATINUM

GOLD

AfricaTax Guide

2015

africa tax guide 2015

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