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Africa – Massive Opportunities

Africa – Massive Opportunities. A population of more than 1 billion people (projected 1,5 billion by 2030) 55 Countries 3000 languages Positive age demographic Urbanisation Strong Economic Growth Big investment in infrastructure

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Africa – Massive Opportunities

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  1. Africa – Massive Opportunities • A population of more than 1 billion people (projected 1,5 billion by 2030) • 55 Countries • 3000 languages • Positive age demographic • Urbanisation • Strong Economic Growth • Big investment in infrastructure • Western Europe and Africa are the 2 major sources of FDI in Africa • Strategic Growth through partnerships • Knowledge and Understanding

  2. Which African regions are most important for your business growth?

  3. In which sub-Saharan African region do you find it the easiest to manage your tax affairs?

  4. Rate your experience of the extent of the following challenges in dealing with your tax affairs in Africa from 1 to 5

  5. Which of the following is the most critical Tax consideration for your African business?

  6. To what extent do developments in Tax such as BEPS impact the way you do business in Africa?

  7. A Focus on Tax In Africa Why Are We Here? Unsophisticated Revenue Authorities? Good or bad? Does a pilot manage your Tax affairs in country? Should you even take a meeting with revenue? Do you have skilled Tax resources in country? Do we? You can solve this country by country right? BEPS!

  8. A Southern African Perspective • Sophisticated laws – transparent, world class, connected, ATO, ATAF key • Concerns over key staff at Revenue Authorities – good or bad? • Slowing economy, growing social responsibilities • Growing aggressiveness – different dispute resolution needs • Is future of Tax in good hands? • But opportunities provided eg SEZs, R&D, youth employment incentives, green?

  9. KPMG at your disposal • Venter Labuschagne : Africa Tax Solution Centre • Victor Onyenkpa : West Africa (Nigeria) • Richard Ndungu : East Africa (Kenya) • Louison Kiyombo : Central Africa / Francophone (DRC) • Emmanuel Asiedu : Ghana • Wasoudeo Balloo : Mauritius • Michael Phiri : Zambia • Quintino Cotao : Mozambique • Nigel Dixon-Warren : Botswana • Carolyn Chambers : Africa Mobility Services • SOUTH AFRICA TAX • Natasha Vaidanis, Michael Fortmann, Michael Rudnicki& Johan van der Walt

  10. Tax on the African Continent • Africa for Africans – Increased investment from Investors on the Continent • General reduction in corporate income taxes • UN Target: Tax collection at least 20% of GDP • Sophistication and Complexity of Tax Systems • Introduction of anti-avoidance rules (GAAR & SAAR) • BEPS and the Africa Tax Administration Forum • US FATCA (Foreign Account Tax Compliance Agreements) • High Trade Taxes (customs duties etc) • Fewer exemptions – Broadening the Tax Base • Comprehensive changes to Natural Resource Taxation Laws • Development of Regional Communities

  11. Economic Regions - Tripartite Free Trade Area (TFTA) • Angola • Botswana • Burundi • Comoros • Djibouti • Democratic • Republic of Congo • Egypt • Eritrea • Ethiopia • Kenya • Lesotho • Libya • Madagascar • Malawi • Mauritius • Mozambique • Namibia • Rwanda • Seychelles • Swaziland • South Africa • Sudan • Tanzania • Uganda • Zambia • Zimbabwe

  12. A Comprehensive Analysis Framework Key Considerations for Africa Tax Inventory Logistics Country Analysis Inventory Analysis Indirect Tax Analysis Network Analysis Political Stability Customs and Duties Analysis ABC Classification Port and Route Availability and Accessibility Health Risks Storage and Material Handling Requirements Industrial Development Zone Areas Incentives and rebates Distribution Methods Tax rules, regulations and exposure Import Prohibitions Availability of skills and talent Logistics Cost Considerations Inbound and Outbound Tax Implications Collaboration Opportunities Quality of Infrastructure Contribution Value Scenario Comparison Review & Selection Option Generation Sensitivity & Risk Analysis

  13. Countries Covered Ghana, Nigeria, Sierra Leone Easy access to revenue authorities at all levels Stakeholder consultation

  14. Taxation of dividends – Nigeria EXCESS DIVIDEND TAX Section 19 of the CIT Act provides that dividend paid where a company records no total profits or total profits less than dividend paid, shall be charged to tax as if the dividend is the total profits of the company. A recent ruling upholds tax based on dividends, whether or not such profits have already suffered tax. DIVIDENDS PAID FROM GAS OPERATIONS Exemption from WHT of dividends paid out of profits that have suffered PPT. The Act defines petroleum operations to include natural gas and gas income are taxable under CITA and not PPTA. The Tribunal recently ruled that the WHT exemption does not apply to dividends from gas income

  15. Topical items / new developments Ghana Nigeria Sierra Leone • Value Added Tax at 15% on non-core banking and insurance services. • 15% corporate income tax on free zone enterprises after first 10-year tax holiday. • The National Fiscal Stabilization levy of 5% of profit before tax, on select industries has been extended to 2017. • 2.5% National Health Insurance Levy. • NRCs now required to file taxes on actual profits basis • Progress on the Integrated Tax Administration System • Amendment to withholding tax regulations • Lower prices affecting the mining industry • Ongoing restructuring of the energy (electricity) sector

  16. Investment Opportunities / Investment Incentives Real Estate Ghana Power Nigeria Tourism Sierra Leone • Companies that partner with government to construct low-cost residential premises for sale or lease can enjoy tax holiday in their first five years of operation • 3-year tax holiday, renewable for additional two years. • Import duty exemption on machinery, equipment or spares imported into Nigeria for power projects utilizing gas. • 3-year import duty exemption for the construction of an “approved development” on materials, equipment etc. • 5-year corporate tax relief for the period of initial Investment. • Manufacturing companies investing $2m and employing at least 20 locals will benefit from CIT relief for period not less than 5 years including duty free importation of equipment.

  17. Top five things to remember 100% foreign ownership of companies Reasonable corporate tax rates (30%) and tax holidays for selected sectors No restriction on profit repatriation Introduction of transfer pricing / aggressive tax revenue drive Tax authorities are open to engagement; dispute resolution process in the event of disagreement

  18. How to engage the authorities KRA is the 'Big Brother' authority in the region; most aggressive and influential to the other EA authorities Automation of the tax systems in the region: e-filing, e-payments, e-registration platforms One Stop Shops e.g. Huduma Centers, Rwanda investment center - allows for easier business registration Tax authorities can issue advance tax rulings on contentious issues Tax Revenue Appeals Tribunals have been established for the resolution of tax related issues

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  20. Challenges in tax law Tax payer's perception of KRA overstepping the mandate- Flight 540 had expected this to cover only Aug and Sep 2012 Court held that KRA did not overstep its mandate in charging tax on accrued VAT Act, 2013 has now exempted the same KRA overstepping mandate in CGT collection mechanism- compelling brokers to collect tax Applicability of the law - Pharmaceutical Manufacturing (K) Co Ltd Vs KRA(2014) - The packaging materials were not exempt yet the taxpayer declared them as exempt prior to VAT Act, 2013 The Revenue Authority expecting the case to be settled on a number rather than technical arguments

  21. Some of the biggest areas of investments in East Africa include: Oil & Gas - exciting prospects with for exploration and production companies Mining industry Infrastructure developments-Road, bridges and Railways Real Estate-Residential and Commercial Buildings Financial Services- Nairobi as a hub IT development

  22. Top five things to remember East Africa is an emerging economy East Africa has good tax incentives Infrastructure-Lapsetproject, Mobile and Banking Infrastructure Average GDP of 6% Strategic Location-Access to ports and abundant natural resource

  23. Doing Business in the Francophone Region What do these countries have in common Same Language Belong to the OHADA organization Where mostly colonized by French speaking western countries except Equatorial Guinea

  24. DRC Democratic Republic of Congo Sized to 2,345,000 Km², DRC is 4 times bigger than France with +70 million population; 60% under 30 years. Language: French Wealth: DRC detain 42 types of minerals including Diamond, copper , cobalt , Tantalite, Tin– 10% reserve of world forest – Big potential of hydroelectric power, agriculture, infrastructures, etc. Join the OHADA since 2012 and companies can be created with no minimum capital amount. Exchange control: Stable currency since 6 years. No restriction on funds transfer in or out; except payment of 0,2% transfer fee. Businesses are free to use both the local currency (CDF) and foreign currencies. Permanent establishment for foreign companies: when operating during more than 183 days during a year. Two double treaties signed with Belgium and RSA but not yet in force. TAX REGIME: DECLARATION Corporate tax: 35% / 30%minimum 1% of Turnover ; VAT: 16% / 0%; Salaries’ tax: from 15% to a maximum of 30% on the net. Expat tax : 25% / 10%; WHT on dividends : 20% / 10%; Tax inspection: every year SOCIAL CONTRIBUTIONS 12,5% pension (3,5% by employee and 9% by employer); Training contribution : 1 to 3% by employer. Contribution to national employment agency 0,2%.

  25. DRC Democratic Republic of Congo INVESTMENT INCENTIVES Investment code, gives tax holidays and free custom; The mining code allows mining operators and subcontractors reduced tax and customs rates as well as they are allowed to keep books in Foreign currencies; Abolition of nationalization and expropriations; Reduction of corporate tax rate: from 40% to 35% and 30% Reduction of interest rate: from 10% to 4% per month. Standardization of monthly declarations date to 15th of the month. Introduction of transfer pricing by 2015 financial law POTENTIAL INVESTMENT AREAS Road, port, rail, and civil engineering infrastructure Agriculture, fishing, livestock, forestry, storage of plant, animal, and fish products Production or transformation manufacturing industry: Building materials industry; Metals industry; Wood industry; Packaging industry; Agro-processing industry; Tourism, facilities, tourism industry, and other hospitality activities Cultural industries (books, music, cinema, documentation centers, audio-visual production centers, etc.) Energy (water and electricity); Services in the following sub-sectors:

  26. Ivory Coast Size : 322,462 Km² Capital city: Abidjan Population: +25 million Language: French Currency: CFA Resources: Agriculture (Cocoa, cashew nut, coffee, etc) – Mining sector growing – Fishing – Infrastructures and public work – Banking and Manufacturing, etc. Investor friendliness of tax legislation IC has put on place an investment code and free trade zones. Codes in specific sectors were recently modified to increase tax holidays (petroleum code, mining code, etc.) Ease of engaging with revenue authorities IC is improving transparency when dealing with taxpayers. Topical items for new developments and specific tax incentives Infrastructures projects, Mining and Housing sectors. Inter country co-operation by Tax Authorities IC is in touch with OECD Experts and willing to implement Transfer pricing rules.

  27. Cameroon Size : 475,442 Km² Capital city: Yaounde Population: +20 million Language: French and English Resources : Petrol, Bauxite, Iron ore, Timber, Hydropower, etc. Investor friendliness of tax legislation Cameroon has put on place a new investment code in April 2013. There are also financial and administrative incentives for investors. Ease of engaging with revenue authorities Cameroon has implemented an information office for tax payers. The tax administration organize every year an information seminar on the Finance Law. Topical items for new developments and specific tax incentives Corporate tax reduced from 35 to 30%. Cameroon has signed 3 tax treaties with: FRANCE - CANADA - TUNISIA Inter country co-operation by Tax Authorities Cameroon has implemented transfer pricing rules similar to the OECD TP.

  28. Guinea-Conakry Size : 245,860 Km² Capital city: Conakry Population: +11,5 million Language: French Currency: CFA Resources: bauxite, iron ore, diamonds, gold, uranium, hydropower, fishing, Agriculture, etc. Investor friendliness of tax legislation Guinea is a free investment flexible policies market. No restrictions for foreign investors. One-shop investment and the investment code have been put on place. Ease of engaging with revenue authorities Guinea has created the API (Promoting Investment Agency) to allow investors to talk to only one administration. Topical items for new developments and specific tax incentives Sectors classified as priority: agricultural production, industrial crops with a stage of processing and packaging of products, fishing, production of fertilizers, health and education, tourism, hotel, investment bank or lending institutions, etc. Inter country co-operation by Tax Authorities Guinea is member of AU and several regional organizations. No treaty with a specific country.

  29. Equatorial Guinea Size : 28,050 Km² Capital city: Malabo Population: +20 million Language: Spanish, French and English Resources : Petrol and agriculture. Investor friendliness of tax legislation Equatorial Guinea has on place an investment code which emphasize all the tax advantages. Ease of engaging with revenue authorities Tax authorities communicate with Taxpayers through exchange of correspondences and the Administration’s announcements. Topical items for new developments and specific tax incentives Agriculture and manufacturing. Inter country co-operation by Tax Authorities Equatorial Guinea has ratified the UDEAC Tax convention. The tax code includes Transfer pricing provisions and the BEAC Exchange control rules apply.

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