A set of laws have recently been published introducing significant changes to the Angolan tax regime. Find the main aspects of such changes highlighted below, regarding to the following:
I – Amendments on the Industrial Tax Code– Law no. 4/19, of 18 April;
II – Introduction of VAT in Angola - Law no. 7/19, of 24 April;
III – Creation of the Special Consumption Tax - Law no. 8/19, of 24 April; and
IV – Amendments to the Income Tax Code - Law no. 9/19, of 24 April.
I - AMENDMENTS TO THE INDUSTRIAL TAX CODE - LAW NO. 4/19, OF 18 APRIL
On April 18 2019 the Law 4/19 which amends the Industrial Tax Code (Law no. 10/14 of October 22) was approved and introduced the following amendments:
1. Activities subjected to industrial tax: The exercise of a liberal profession such as the Law practice is now included in the industrial tax category either in the Lawyers’ Association model or at the Law Firm model.
2. Persons and entities subjected to industrial tax: in addition to commercial entities, the industrial tax shall apply to civil firms with or without a commercial activity object, cooperatives, foundations, autonomous funds, public companies and other public or private law bodies with headquarters or place of effective management within the Angolan territory.
3. Indication of a general rule for the inclusion in a specific taxation group: the rule which defined the automatic inclusion of the taxpayers in the Group B of the Industrial Tax Code was revoked.
4. Profits or earnings: Currency exchange rates variations over 7% per annum in respect of fixed assets and liabilities are excluded from the definition of profits or earnings.
5. Costs or expenses: Currency exchange rates variation over 7% per annum in respect of fixed assets and liabilities are no longer considered as costs or expenses.
6. Deductibility of costs related to loans or capital supplements’ interest: Those items are accepted as deductible costs. Only the portion that exceeds the annual reference rate of interest established by the Central Bank is to be added to the taxable profit.
7. Costs documentation:
a) Costs not adequately documented shall not be accepted as deductible costs to the taxable amount of the industrial tax. The previous regime where those expenses were subject to autonomous taxation at the rate of 2% was consequently revoked.
b) Costs not documented shall no longer be subjected to autonomous taxation and an exceptional regime, the self-billing of the invoices and equivalent documents framework, is established.
c) Not properly documented Expenses are defined as those to which the taxpayer documentation is not in compliance with the elements required in the legal regime of invoices and equivalent documents.
d) Non-documented Expenses are defined as those to which no valid documentation of expenditure exists as per the law requirements notwithstanding their occurrence and nature being materially verifiable.
e) The costs incurred with Urban Property Tax (“IPU”) related to real estate not leased are accepted as deductible cost to the taxable amount of industrial tax.
8. Reporting obligations: the Group B taxpayers which present their reporting obligations under the terms applicable to Group A taxpayers shall deduct from their administrative expenses those related to acquisition of IT equipment and relevant licenses, the hiring of accountants, as well as other associated costs, for over 3 financial years, starting from the financial year 2019.
9. Determination of Group B taxable amount. The following changes were applied:
a) Whenever it is not possible to identify the total volume of sales and services provided, the taxable amount of the taxpayers referred to in no. 2 of Article 59 of the Industrial Tax Code, corresponds to the total volume of purchases made and/or acquired services.
b) Whenever it is not possible to identify the total volume of purchases made or acquired services, the rules provided for in the table of minimum profits shall apply.
c) Upon occurrence of the above, the taxpayers of Group B are required to pay an additional amount of Kz. 200.000,00 (two hundred thousand Kwanzas).
10. Provisional settlement. The following highlights occurred:
a) In case of prove tax overpayment at the provisional settlement period of precedent taxation exercises, the excess amount shall be deducted in the final or provisional settlement over the sales in subsequent exercises up to a limit of 5 years.
b) Taxpayers that issue invoices on behalf of their suppliers, via the self-billing scheme (as defined by law) are required to withhold 2, 4%.
11. Subjection to Special Taxation Regime of incidental Services. Currently, the provision of the services indicated below are not subjected to the special taxation regime:
a) Educational activity, as per defined on the Law of the basis of the Education System, services rendered by nursery schools, nurseries and similar establishments.
b) Any services which the total value of the service does not exceed Kz. 20.000,00 (twenty thousand Kwanzas).
12. Failure to report obligations:
a) The failure in providing any legal statement or their delivery after the expiry of the legal deadline, implies the payment of Kz. 200.000,00 (two hundred thousand Kwanzas) fine for taxpayers of Group B that shall present Declaration Form 2 (“Declaração Modelo 2”).
b) For taxpayers of Group A and B that shall present Declaration Form 1 (“Declaração Modelo 1”) the potential fine is of Kz 300.000,00 (three hundred thousand Kwanzas).
It should be noted that the fines applied to taxpayers of Groups A and B that shall present Declaration Form 1, upon as a result of non-compliance were reduced from Kz. 800.000,00 (eight hundred thousand Kwanzas) to Kz. 300.000,00 (three hundred thousand Kwanzas).
The Law no. 4/19 of April 18 became effective on 18 April 2019.
II – INTRODUCTION OF VAT IN ANGOLA - LAW NO. 7/19, OF 24 DE APRIL
The Law No. 7/19 which approves the Value Added Tax Code was published on April 24th 2019. Below a brief summary of its regime:
I - INCIDENCE AND RATE
The single VAT rate is of 14% and VAT is levied upon:
a) The transmission of goods and services rendered within the Angolan territory;
b) The importation of goods.
Taxpayers that are subjected to VAT:
a) Any Individual or entity that perform any of the acts to which VAT is levied;
b) Any Individual, legal entity or entities that acquire services from non-resident entities without domicile, headquarters or permanent establishment in the national territory;
c) The Estate, the governmental entities and other public bodies, Public Institutes, Municipalities, Public Institutions of pension and social security, except when they act within their powers of authority from and as long as no distortions of the competition arise thereafter;
d) Political parties and coalitions, trade unions and religious institutions legally constituted, which perform the operations defined as subjected to VAT.
II - ENFORCEABILITY
VAT is due upon the following events:
a) In case of transmission of goods, when the goods are made available to the acquirer;
b) In case of provision of services, at the time of its effectiveness;
c) On importation, at the customs clearance moment, regardless of the incidence or not of customs duties.
III - EXEMPTIONS
a) Transmission of medicinal products aimed exclusively for therapeutic and prophylactic effects;
b) Wheelchairs and similar vehicles or motorized wheelchairs for disabled persons, devices and typewriters with braille characters, to be used by blind individuals or to correct hearing handicaps;
c) The transmission of books, including those in digital format;
d) The management and practice of games of chance and gambling or games of social entertainment, as well as the respective commissions and all related transactions, whenever they are subjected to the Special Tax applicable to the Gaming and gambling activities;
e) Financial broking operations;
f) The provision of life insurance and its reinsurance;
g) Importation of gold, currency or banknotes as long as performed by the National Bank of Angola;
h) Definitive importation of goods whose transmission within the national territory is exempted from taxation.
IV - ENTRY INTO FORCE
The effective implementation of the VAT will be phased according to the following scheme:
1. Entrance into force on July 1st 2019 to:
a) All Taxpayers registered as “High Taxpayers” before the “High Taxpayers” Tax Office;
b) Every Importation of goods.
2. After July 1st 2019 any taxpayer registered before any other Tax office may voluntarily join the VAT system provided that they jointly meet the following requirements:
a) Have an organized accounting structure and have an updated registration at the General register of the Taxpayer System;
b) Do not have any tax or customs debt or any overdue payments;
c) Have the appropriate means to issue invoices or equivalent documents, via data processing;
d) Have the appropriate means of submitting electronically the tax settlement forms to which the taxpayer is subjected as well as all of its invoicing and accounting elements;
3. On January 1st 2021, the voluntary adhesion regime ceases to apply to all taxpayers subjected to VAT.
During the said transitional period, i.e. July 1st 2019 through January 1st 2021 Taxpayers may benefit from the simplified taxation regime provided that they have reached an annual turnover or a level of operations, in the previous year, of more than USD 250.000.
III – CREATION OF THE SPECIAL CONSUMPTION TAX - LAW NO. 8/19, OF 24 APRIL
On April 24th 2019, Law no. 8/19 approving the Code of the Special Consumption Tax ("CIEC") was published. The following relevant elements are than extracted:
The Special Consumption Tax ("IEC") is a category of tax that is autonomously, and with aggravated rates, applicable to alcoholic beverages, beverages with added sugar or other sweeteners, tobacco and its derivatives, fireworks, jewelry and golden articles, leisure aircraft and boats, firearms, artwork, collection items, antiquities and petroleum products, due to its potential of harm to the environment and the high cost of the consumption induction and the non-essential nature of their use.
Passive subjects - The IEC taxation applies to:
Individuals or legal entities who: (i) perform production operations, regardless of the processes or means used; (ii) import goods; iii) carry out auctioning or sale of goods by public offer processes; (iv) by regular or irregular means, introduce in the market products for consumption subjected to IEC; (v) owns goods subjected to IEC held for commercial purposes, which have not been objects of taxation.
The taxable amount subjected to the IEC is:
a) For goods produced within the country, the cost of production;
b) For imported goods, the customs value;
c) In sales or sales carried out by the Customs Authorities or any other public services, the value by which they were sold;
d) In case of release of products for consumption subjected to IEC or possession of goods subjected to IEC, the price of the sale to the public or, if the latter is unknown or cannot be determined, the market value of the goods.
Tax settlement responsibility
IEC is due and has to be settled: i) in production, when goods are made available to the purchasers; (ii) on imports, at the customs clearance; iii) in auctions, at the auction exercise; (iv) in the release of products subject to IEC for consumption or in case of possession of goods subjected to IEC, whenever the lack of payment of IEC is identified.
The settlement of IEC is due by the producers, in case of the goods produced in Country, in case of importation of the goods by the Customs Authorities and in case of auctions or public sales by the Tax authorities or by the service carrying out the sales.
The settlement must be calculated during the invoicing process or process of equivalent documents; at the customs clearance; at the time of payment or when the tax
is calculated, and when applicable by the Customs Authorities, by the service conducting the auction or public sale or the Tax Authorities.
The IEC has a variable rate ranging from 2% to 19%.
The following categories are excluded from IEC: i) goods exported either by the producer himself or the entity designated for this purpose; ii) goods imported by diplomatic and consular representations, whenever there is reciprocity; (iii) raw materials for domestic industry and goods intended for use in health facilities; (iv) goods intended for laboratory and scientific research purposes.
The application of IEC becomes effective from 1st July 2019.
IV- AMENDMENTS TO THE INCOME TAX CODE - LAW NO. 9/19, OF 24 APRIL
On April 24 2019, Law No. 9/19, which amends the Income Tax Code (approved by Law no. 18/14 of 22nd October) was published.
The main changes indicate a will of adjustment to the current phase of reduction of public investment and, at the same time, increase of private investment and attraction of foreign investment.
The law enlarged the basis for taxation by increasing the list of professionals whose salaries are included in the Taxation Group B. As an example, professionals such as hairdressers, massage therapists and Disc Jockeys (DJ) are now subjected to the income tax regime applied to the remuneration of other independent professionals.
Another major change concerns the distribution of profits to members of (merely civil) companies, with or without a commercial form of incorporation (Article 1 (f)). This income, when distributed in favor of the partners, is now part of Taxation Group A (Article 3 (2) (d)).
The remuneration of board members was included in Group A which implies an equivalence with third party direct employees (Article 3 (2) (c)).
Article 2 (1) (b) of the previous law which excluded from taxation the end of carrier bonuses was revoked.
All Taxpayers from Group B and C, with an organized accounting system, are now subjected to the same regime of Group A of the Industrial Tax Code with regards to the determination of the amount subjected to taxation. (Article 8 (4) and Article 9 (6)).
Similarly to the regime applicable to Group A, for income perceived by Group B Taxpayers, the prohibition of transferring the tax burden of the employee to the employer now applies. It became prohibited to grant the employee a net income higher than the amount defined in the contract as remuneration. Violations to the said prohibition is subjected to fine, and an additional tax settlement (Article 8 (5)).
A new Table of Minimum Profits was approved and Group C taxpayers shall present their Tax settlement up to March.
The Executive Decree No. 15/09 of 3 March which approved the minimum profits table was revoked.
With regards to specific exemptions, only the income perceived in relation to the Compulsory military service within the National Security System, pursuant to the general Military Law, is now exempted from income tax.
This new law also establishes the exemption from stamp duty and from succession and donations tax - for the transfer of real estate assets of an individual to a commercial company owned by the trader himself - upon authorization from the Head of the Tax Authority.
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