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Tax Reform in Angola

This reform has been anticipated as an extremely necessary measure to strengthen the industrial sector and to promote foreign investment and job creation. It is a consequence of the severe impact of the significant reduction in oil production and in the economic activities; the need for the reform was felt event more as a result of the COVID-19 pandemic thus the urgency in the enactment of the measures.

It was expected that the reform favoured the investor, however not all is good news for foreign investors or prospective investors in general. We have both good news and bad news:

Good news:

  • Reduction of the Corporate Income Tax (“Imposto Industrial” or “II”) rate from 30% to 25% (and in the case of oil companies from 50% to 35%);
  • Extension of the period to carry forward tax losses from 3 to 5 years;
  • Elimination of the period for carrying forward the credits arising from provisional payments of CIT and withholding taxes;
  • Reduction in fines;
  • Extension of litigation deadlines.

Bad news:

  • The withholding tax rate applicable to services provided by non-resident entities increases to 15%;
  • The disregard of unrealised foreign exchange differences for tax purposes may mean an immediate and effective increase in taxation with no guarantee that such losses will ever actually occur;
  • Increase of the effective taxation of the Personal Income Tax (“Imposto sobre os Rendimentos do Trabalho” or “IRT”).

The main measure regarding CIT is the reduction of the general rate from 30% to 25% for mostly all companies. For some sectors, such as agriculture, fishing, forestry and others, the tax rate fell from 15% to 10%. Note that for oil companies there was a reduction of the tax rate from 50%/65.75% to 35%. Nevertheless not all sectors have benefited from this reduction, in fact for the banking, insurance and telecom industry the CIT rate went up from 30% to 35%.

We highlight the extremely controversial tax treatment of unrealised foreign exchange differences. The government decided to finally end the controversy and litigation around this issue, however if the solution is better or worse is not clear. As of 2020 unrealised foreign exchange differences will not be allowed as tax deductible expenses and parallelly unrealised gains will be excluded from taxation. This measure will significantly harm companies as no currency expenses will be recognised until they pay their creditors. This may be seen as a double penalty on companies as sometimes these losses are not materialized simply for lack of currency. This means that companies are harmed as their losses will not have tax relevance and they may not be able to pay off debts due to currency restrictions. We expect further debate on this topic.

One of the measures with significant direct impact on foreign investment is the increase from 6% to 15% of the withholding tax rate applicable to services provided by non-resident entities. Note that Angola aims to promote its competitiveness at this moment therefore this measure may come across as nonsensical. This measure, understandably, aimed to dissuade foreign hiring and therefore promote local services, however, it seems to deter foreign investment as well. It may not be efficient for its intended purpose as the domestic market does not have many of the technical competencies which can be found overseas. What this effectively means is that companies will still need to hire overseas and that will now present an additional cost. 

The increase of the withholding tax rate will be an additional deterring factor for foreign investors who already saw their margins get crushed by the fall in oil price and the exchange risk caused by the devaluation of the Kwanza.

Since withholding tax cannot be reduced for most countries who render services in Angola, greater agility and speed in negotiation is to be expected along with new double taxation treaties as to protect key investments from strategic countries. 


Tax Reform in Angola

Corporate Income Tax (“Imposto Industrial”)

Tax Regimes

For the purpose of Corporate Income Tax, Groups A and B are extinguished and make room for the General Regime and the Simplified Regime.

For all registration and declaration of commencement of trading purposes, taxpayers are automatically enrolled in the General Regime for registration with a few exceptions.  Taxpayers who fulfil the relevant requirements, namely those not liable for VAT, will be within the Simplified Regime.

The following are also excluded from the Simplified Regime:

  1. Public companies and Public entities
  2. Financial institutions;
  3. Companies under special tax regimes;
  4.  Telecom operators;
  5.  Subsidiaries or branches of foreign companies.

The General Regime will be applicable to taxpayers whose revenue is over USD 250,000 either for two consecutive or non-consecutive years.

Taxpayers under the Simplified Regime must fill out the Simplified Declaration Model as to assess the relevant Corporate Income Tax. Law 26/20, of 20 July, creates further rules for the computation of the  Corporate Income Tax

Profits and gains

Foreign exchange gains will only be relevant for tax purposes if actually realized (they are disregarded if unrealised).

Costs and losses

Foreign exchange losses will only be relevant for tax purposes if actually realized (they are disregarded if unrealised).

Property tax costs, including those incurred by private ownership,  will no longer be physically deductible. 

There is an increase from Akz 7 000 000 to Akz 20 000 000 of the cap for the tax deduction of costs incurred the depreciation of light passenger or mixed vehicles (tax deduction is disallowed above this limit). This rule does not apply in the case of vehicles used for the operation of public transport services or if intended for rental within the normal business of the company.

Rates

 

Previous Regime

Law 26/20, of 20 July

General CIT rate

30%

25%

Agricultural activities, aquaculture, beekeeping, poultry farming, livestock farming, fishing, forestry (except logging activities)

15%

10%

Angolan Oil Companies (Presidential Decree 32/12, of 16 March)

50%/65.75%

35%

Banking, insurance and telecom operators

30%

35%

Withholding tax - Rendering of services by non-resident entities

6.5%

15%

Temporary Settlements

As of now services rendered by resident entities which are exempt from withholding tax become relevant for the assessment of the temporary sales tax and as such are taxed at 2%.

There is no longer a time limit to carry forward of credits related with provisional CIT payments (the amount should be by the Tax Authorities).

The withholding tax rate applicable to services rendered by non-resident entities increases from 6.5% to 15%.

Tax Losses

The period for the carry forward of tax losses is extended from 3 to 5 years;

Investment reserves

There have been several changes made to the tax benefits linked to the investment reserve regime.

The deduction of investment reserves against the taxable income can be made in the 5 tax years following the year in which the investment is concluded (formerly, 3 tax years).

If the reinvestment is made in the Province of Luanda or the Municipality of Lobito (or in any other province capitals) the deduction can go up to 40%. However, it can go up to 80% if such reinvestment is made outside the province capitals.

In order to access this tax benefit, the taxpayer must make an official request to the Tax Authorities up to the last working day of February of the year following the conclusion of the reinvestment. The taxpayer is then dependent on the authorization of the Tax Authorities.

Tax Obligations

In addition to the Corporate Income Tax return (Form 1/“Declaração Modelo 1”), the preparation and submission of cash flow statement becomes compulsory.

The deadline for complying with tax obligations and the final Corporate Income Tax payment is now the last working day of the month (formerly, the last day of the month).

Penalties

The fine for late payment of the Corporate Income Tax is reduced from 35% to 25%.

Employment Income Tax (“Imposto sobre os Rendimentos do Trabalho” or “IRT”)

The main change to the Employment Income Tax relates to the tax rates. The aim of this change is to remove the burden imposed on lower incomes, maintain the tax burden imposed on average incomes, and progressively increase the tax burden imposed on high incomes. New tax brackets are included, and the minimum tax applicable to incomes over Kz 10,000,000 increases from 17% to 25%.

Along with the increase in tax rates, the tax base is also increased, and some exemptions are struck out.

Tax Base Increase

The tax base is increased to encompass accessory income along with any patrimonial or financial rights and benefits which are not included in the main source of income. These new additions have to be earned by employees or workers while on the job or in connection to a job and must represent an economic advantage for the relevant beneficiary.

The following elements are now fully taxed:

  • Cashier’s allowance;
  • Housing allowance (these were previously taxed at 50% of the value in the lease agreement);
  • Severance payments (these were only taxed if they went beyond the limits established in the General Labour Law);
  • Holiday pay and Christmas Subsidy.

Rates

Self employment income of Groups B and C is now subject to a withholding tax rate of 6.5% on the amount of the service provided (in line with the Corporate Income Tax rules foreseen for the payment of services)..

Similarly, random services acquired from non residents are subject to withholding tax at the rate of 15%

The table applicable to income from Group A becomes the following: 

       Rates as per article 16/1, Law 28/20, of 22 July

No.

 

Income

Rate

 

 

 

Up to

 

 

 

Fixed portion

0

 

In excess of

0

1 bracket

Starting

--

to

70,000

Fixed portion

0

 

In excess of

0

2 bracket

Starting

70,001

to

100,000

Fixed portion

3,000

10.0%

In excess of

70,000

3 bracket

Starting

100,001

to

150,000

Fixed portion

6,000

13.0%

In excess of

100,000

4 bracket

Starting

150,001

to

200,000

Fixed portion

12,250

16.0%

In excess of

150,000

5 bracket

Starting

200,001

to

300,000

Fixed portion

31,250

18.0%

In excess of

200,000

6 bracket

Starting

300,001

to

500,000

Fixed portion

49,250

19.0%

In excess of

300,000

7 bracket

Starting

500,001

to

1,000,000

Fixed portion

87,250

20.0%

In excess of

500,000

8 bracket

Starting

1,000,001

to

1,500,000

Fixed portion

187,250

21.0%

In excess of

1,000,000

9 bracket

Starting

1,500,001

to

2,000,000

Fixed portion

292,250

22.0%

In excess of

1,500,000

10 bracket

Starting

2,000,001

to

2,500,000

Fixed portion

402,250

23.0%

In excess of

2,000,000

11 bracket

Starting

2,500,001

to

5,000,000

Fixed portion

517,250

24.0%

In excess of

2,500,000

12 bracket

Starting

5,000,001

to

10,000,000

Fixed portion

1,117,250

24.5%

In excess of

5,000,000

13 bracket

De

10,000,001

to

 

Fixed portion

2,342,250

25.0%

In excess of

10,000,000

Property Tax  (IP)

The new Property Tax (“Imposto Predial”) rules consolidates in a single Code the provisions of the former Urban Property Tax, the Inheritance and Gifts Tax and the Property Transfer Tax. The following becomes liable to Property tax:

  • Owning of property (on the tax registered value);
  • Income from rental of property (on the amount of the rent);
  • Free or onerous transfers of real estate (formerly, “SISA”).

Tax Base

  • Property Tax is levied on the real estate or on the income arising from urban and rural property and land for construction, as well as on the transfer of real estate (as a gift or for consideration)
  • The transmission and lease of any property is VAT exempt
  • The tax due on leased property cannot be less than the tax which would be levied on non-leased property.
  • The taxable income for rural properties corresponds to a tax registered value of Kz 10 397.00 per hectare.
  • The deadline for taxing sub lettings under the Property Tax regime was reduced from 20 years or over to 10 years.
  • The taxation of the sale of shares in the value of over 50% of the capital of a property-owning entity[1]  now applies to situations of purchase of participation units  owned by real estate funds.
  • The tax base mentioned above is no longer restricted to share acquisition for possession of property owned by the company. Now, it applies to any kind of transmission of shares or purchase of participation units of any entity which owns property.
  • Similarly, any transfer of property for consideration, regardless of its form, is subject to Property Tax.

Rates

  • The Property Tax levied on non-leased urban buildings is determined according to the rates and fixed amounts as per the following table: 

Tax registered value

(Kz)

Rate(%)

Fixed amount

(Kz)

Up to 5,000,000

0.1

-

From 5,000,001 to 6,000,000

-

5,000

Over 6,000,000 (on the excess of 5,000,000)

0.5

-

  •  The rate of Property Tax applicable to leased properties is kept at 25% of the taxable income (60% of the value of rents), thus the effective rate is 15%. The current withholding rules remain unaltered.
  • The Property Tax rate levied on the transfer of properties is of 2%.
  • There is an aggravated taxation (in 50% of the amount of the Property Tax due) in case of buildings which have been vacant for over a year and land for construction that has not been effectively given use for 3 consecutive or alternate years. This deadline is computed as from the date of entry into force of the Property Tax Code, the granting of the real estate, its occupation or last acquisition. 

Value Added Tax (VAT)

The IVA regime is altered as to expand exemptions laid out in article 12(1)(e) of the VAT Code, to the conveyance and lease of property, whether for commercial, industrial, housing or any other purpose. 

The rendering of accommodation services by the hospitality or other similar sectors are not exempt and as such are taxed under the IVA Code. 

The VAT exemption does not encompass the financial lease of property, as per Tax Circular 000052/DNP/DSIVA/AGT 2020.

It is also important to note the changes made by Presidential Decree 194/20, of 24 July,  to the ‘self-billing’ regime. 

This diploma repeals article 10 of the Legal Regime of Invoices and Equivalent Documents (“Regime Jurídico das Facturas e Documentos Equivalentes” or "RJFDE"). 

As per the new regime, the ‘self-billing’ requirement is applicable to entities fiscally resident in Angola and which possess organised accounts. These companies must also acquire, in the course of business, national products in any given sector, not only the agricultural, aquaculture, beekeeping, poultry farming, livestock farming, fishing as in the old law. 

The invoices/receipts issued shall not exceed 20% of the total cost of goods sold and materials consumed and the cost of supplies and services from third parties of the issuer. 

All self-billing documents should be issued by properly certified IT programs which comply with the relevant legal requirements. 

Self-billing entities must withhold the Corporate Income Tax.

General Tax Code (“Código Geral Tributário”)

Definitions and interpretation of tax rules

  • Simplification and significant clarity on definitions and interpretation of tax rules.

Tax Benefits 

  • Become only either automatic or subject to administrative recognition, either objective or subjective. Tax benefits of administrative recognition should be published by the Ministry Department responsible for Public Finance. 
  • Tax benefits for acquisition of goods will expire if the goods are disposed of within 5 years as opposed to the 8 years established in the previous legislation. 

Taxpayer’s garantees and duty of cooperation

  • The right to legally binding information becomes widespread and is applicable to the rights and duties of taxpayers. This type of information is personal and as such, only the individual taxpayer may profit from its content. The information will imply the payment of a fee yet to be defined. 
  • All public entities are obliged to provide information to the Tax Authorities regarding tax verification procedures, as such, the duty of secrecy is waived. 

Tax residency of taxpayers

  • In order to be tax resident in Angola, taxpayers would need to own a house which they intend to keep or use as a family home or they would need to be in Angola for a period of 90 days in a year, whether consecutive or not.  These requirements are to be fulfilled by the 31st December of each year. 

Tax procedure, legally binding information and deadlines

  • In case of an administrative claim or hierarchical appeal, the right to prior hearing only applies where the claimant or appellant had not previously exercised this right at an earlier stage, and the situation results from an action by the Tax Authorities.
  • The right to a prior hearing must be exercised within 30 days, subject to notification.
  • The deadlines to file an administrative claim against a tax assessment and any other administrative acts related to taxes shall be 30 days counted from the respective notification. The decision on these claims shall be made within a maximum period of 60 days.
  • The hierarchical appeal against the final decision of a tax procedure is addressed to the highest body of the Tax Administration. It should be filed to the author of the claimed act within 30 days following the notification of the decision. Hierarchical appeals shall be decided within a maximum period of 60 days.
  • In case of insufficient notification, the deadline for requesting the absent documents or an equivalent certificate, is now of 5 days, and is free of charge. 

Late assessment interest

  • Debts paid voluntarily within 15 days allow a reduction of 30% of the late assessment interest due.

Credit compensation and tax debts

  • The extinction of the tax obligation through an offset is extended to customs duties; debts or customs credits can be offset against other taxes.

Expiration

  • If the delay in liquidation stems from a tax crime, the statute of limitation is extended to 10 years. 
  • As long as there is no specific rule, the deadline for the taxpayer to request tax credits is of 5 years.

Fines, voluntary payment and during the course of a tax audit

  • The standard fine for non-payment or delayed tax assessment decreases from 35% to 25%.
  • The amount applicable to fines paid voluntarily by the offender if no tax audit is underway is reduced by 50%, provided that the offence does not constitute a tax crime, nor is the offender in a repeat offender. The voluntary payment of debts including the tax due as well as the fine and any additional charges should be made within 15 days following the notification (the reduction does not apply once this deadline elapses).
  • When the offender has fulfilled his tax compliance obligations, the fines assessed during the course of a tax audit are reduced by 20%, provided that the infraction does not constitute a crime, nor is the offender a repeat offender. In this case, the fine should be paid within15 days of the notification otherwise the taxpayer will lose this benefit. 

Anti-abuse rules

  • New rules have been introduced regarding transactions which aim to obtain a tax benefit through the exploitation of a legal procedure. These transactions may be disregarded for tax purposes and may be taxed in a manner which reflects its true economic value, therefore disregarding any tax benefit. These transactions will be subject to an late assessment interest at the rate of 2.5%. 
  • The aforementioned anti-abuse rules should be applied when the local tax office assesses and collects taxes due. There is the possibility to individually define the procedure to apply anti-abuse rules for each specific tax, in a separate regulation. 

Provision of information to the Tax Authorities and bank accounts

  • The Tax Authorities can request information from any authority, natural or legal person or entity. The request can be made to anyone in Angola or who carries out operations in Angola. Similarly, they are obliged to provide any kind of information, including that which may be within exceptional limitations or cover by the duty of secrecy. 
  • Individual and collective taxpayers (and similar organisations) must provide to the Tax Authorities several elements upon their initiation of activity in Angola. These entities must report on relevant bank accounts used for payments and transfers related with their business activity along with any transactions made by such accounts. While conducting audits, the superior Tax Authorities’ body may access all these informations and bank statements, whether with or without consent, but only in specific situations such as: 
  • Whenever there is suspicion of a tax crime;
  • If reporting obligations are not complied with;
  • In case it is necessary to verify documentation of taxpayers that are covered by the VAT cash scheme;
  • Whenever there is a need to prevent avoidance stemming from a tax benefit. 

A fine of double the unpaid amount can be levied on any financial institution which refuses to present bank documents upon their request.

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Rosa Areias

Rosa Areias

Tax Lead Partner, Membro da Comissão Executiva, PwC Angola

Tel: +351 225 433 101

Cristina Teixeira

Cristina Teixeira

Tax Partner, PwC Angola

Susana Claro

Susana Claro

Partner, PwC Angola

Luís Andrade

Luís Andrade

Director, PwC Angola

Inês Cunha

Inês Cunha

Director, PwC Angola

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