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
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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.
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–
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
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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]
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