Angola approves extensive tax reform
Tax Insights from International Tax Services Angola approves extensive tax reform December 24, 2014 In brief Angola, in October, 2014, published diplomas reforming the country’s tax system with key changes made to the corporate tax, personal income tax, stamp duties and administrative laws. Some provisions that could affect US multinational companies (US MNCs) doing business in Angola include: reduction in local corporate tax (IIT) from 35% to 30% increase in withholding tax from 3.5%/ 5.25% to 6.5% introduction of a branch profit tax at 10% a tax amnesty to pardon certain tax liabilities accruing for tax periods up to December 31, 2012. Most of the provisions enter into force in 2015 while others will impact the 2014 tax period. This Tax Insights addresses the tax regulatory changes arising from the tax reform. US multinational companies (US MNCs) should consider how these changes may affect their Angolan operations and adjust their tax provisions accordingly. In detail Corporate Income Tax (II) The new II Code enters into force effective January 1, 2015 except for the change in corporate tax rate which is effective from the 2014 tax period. Some of the changes include: Corporate tax rate reduced: The general corporate income tax rate is reduced from 35% to 30%, effective beginning with the 2014 tax period. Withholding tax rate increased: The withholding tax rate on service fees is now 6.5%, up from 3.5% (applied to services related to immovable property) and 5.25% (applied to other services like technical assistance and management fees) effective January 1, 2015. The withholding tax is creditable against final corporate tax payable by Angolan residents and permanent establishments (PEs). However, it is a final tax for nonresidents without a PE. Angolan residents are now limited to the five-year period for utilizing withholding tax credits, as specified in the General Tax Code. Tax losses: Generally, tax losses may be carried forward three years, but may not be carried back. Under the new provisions, there are additional limitations on loss carryforwards. Tax losses arising during periods in which the taxpayer benefitted from an exemption or reduced tax www.pwc.com Tax Insights rate may not be offset against taxable income arising in periods subsequent to the end of the exemption. Taxable income and expenses The tax reform has introduced additional provisions or clarification on taxable items. For example: Positive equity variations excluding share capital injections or accumulated loss absorptions are now taxable Tax rules concerning amortization and depreciation have been clarified. Tax deductible doubtful debt provisions are to be calculated based on their age. Some costs are expressly non-tax deductible like interest arising from shareholder loans, expenses that are confidential, unduly justified, not verifiable or not identifiable as defined in the code, etc. Inadequately documented or confidential expenses are also to be taxed separately at an autonomous tax rate even where the taxpayer has no taxable profits during the period. Tax rates could be 2%, 4%, 30%, or as high as 50% when the expense give rises to profits which are exempt from II. The autonomous tax rates enter into force on January 1, 2017. 2 – Tax neutral mergers: A tax neutral regime is now possible for mergers or demergers subject to meeting certain conditions. – Payments on account: Payments on account of corporate income taxes are to be calculated at 2% of sales made during the first six months of the tax period. The rules do not apply to services which are subject to the 6.5% withholding. Investment Income Tax (IAC) The changes to the tax code essentially expand the income subject to IAC effective November 20, 2014. Income subject to 10% IAC now includes: profits repatriated by Angolan PEs premiums on the amortization or reimbursement and other forms of remuneration: (i) of bonds and securities or others analogous issued by any company; (ii) of Treasury Bills and Treasury Bonds and (iii) of Central Bank Securities accrued interest relating to the securities referred to above capital gains, provided they are not subject to corporate or personal income tax. A reduced tax rate of 5% was introduced for certain income types, including interest and profits derived from bond and securities admitted to trade on a regulated market. Stamp Duty The stamp duty code has also been republished and entered into force on November 21, 2014. The code clarifies persons responsible for payment of stamp duties and changes the tax rates on specified instruments. For example, Angolan residents are required to assess and pay the tax due when contracting with nonresident entities. Several exemptions have also been introduced. They affect: inheritances and donations between parents and children mortgages related to the acquisition of a family home financial instruments negotiated on a regulated market sale of negotiable securities transmissions of real estate, within the scope of merger, demerger or incorporation operations employment contracts export operations, except for the export of products listed in the Stamp Duty Table. General Tax Code The code enters into force in January 2015 and amendments include: the rate of interest due on late payment of taxes is 1% per month (previously 2.5%) indemnity interest is calculated at the rate of 4% per annum the general limitation period of 5 years is maintained but may be extended to 10 years when the nonliquidation by the taxpayer is the result of an offense; the prescription period (i.e., the time allowed for the tax authorities to collect outstanding taxes) is reduced from 20 to 10 years. Tax Enforcement Code and the tax amnesty regime The tax enforcement code enters into force in January 2015. Some amendments include the reversal of tax debts against jointly and severally liable debtors, subsidiary debtors, personal guarantors and employees. The Code also introduces a tax amnesty regime (exceptional regularization of tax debts) which comes into force on October 23, 2014. Taxpayers that take advantage of the amnesty will benefit from a waiver of the tax, interest, fines and legal costs accruing for tax periods up to pwc Tax Insights December 31, 2012. The waiver is subject to compliance with certain requirements and is only available for Corporate Income Tax (II), Personal Income tax (IRT), Stamp duty (IS), Investment Income Tax (IAC) and Property tax (IPU). It does not apply to customs debts or social security contributions. The regime also does not apply to, among others, companies subject to the special tax regime applicable to petroleum and mining activities and companies whose corporate object or business areas include the treatment, storage, export, transport, refining, transformation, distribution or selling activities of petroleum, fuel, bituminous products or any other petroleum derived products. The details of the requirements to enjoy the amnesty are not entirely clear but we are discussing the details with the tax authorities. The takeaway The Angolan tax reform is extensive. It covers almost every tax including personal income taxes which we have not discussed in this Tax Insights. Some of the changes such as the reduction in the corporate income tax rate are welcome but the increase in withholding tax rate to 6.5% will impact cash flows. Note that the tax reform introduces a new 10% tax on profits repatriated by branches. This is similar to a tax on subsidiary distributions. In another interesting change, interest on shareholder loans is no longer a tax deductible expense. However, it is still liable to IAC source deduction at 10%. This increases the tax cost on such loans to about 40%. Additional information is still required on how the tax amnesty regime will work. For example, does a taxpayer have to file an application? If so, is there a time limit for filing? US MNCs with Angolan affiliates should consider the impact of the changes on their existing operations and review their existing structures accordingly. Also, consider the changes in detail when restructuring organizations or planning entries into Angola. Let’s talk For a deeper discussion of how this might affect your business, please contact: International Tax Services, United States Emuesiri Agbeyi +1 646 471 8211 [email protected] Gilles de Vignemont +1 646 471 1301 [email protected] International Tax Services, Angola and Portugal Jaime Esteves +351 225 433 212 | [email protected] Pedro Calixto +244 227 286 109/111 [email protected] Eduardo Paiva +244 227 286 109/111 [email protected] Augusto Paulino +244 227 286 109/111 [email protected] Catarina Gonçalves +351 22 543 3121 [email protected] Luís Andrade +244 227 286 109/111 [email protected] Inês Barbosa Cunha +351 213 599 716 [email protected] © 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the United States member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. SOLICITATION This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. 3 pwc
© Copyright 2024