Tax leg­is­la­tion be­ing stream­lined in Africa

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - Celia Becker

THE past two years have seen sig­nif­i­cant changes to tax ad­min­is­tra­tion leg­is­la­tion and prac­tices on the African con­ti­nent. In An­gola, the es­tab­lish­ment of a General Tax Ad­min­is­tra­tion was ap­proved on Septem­ber 18 2014, merg­ing the Na­tional Cus­toms Agency and the Na­tional Tax Ad­min­is­tra­tion to en­sure greater ef­fi­ciency in the col­lec­tion of taxes by stream­lin­ing avail­able re­sources.

As part of a process of ex­ten­sive tax re­forms in the coun­try, a new Tax En­force­ment Code (Law no 20/14) also be­came ef­fec­tive on Jan­uary 1 2015 which pro­vides for the ex­e­cu­tion process over tax debts and re­places the 2011 Sim­pli­fied Tax En­force­ments Regime.

The Tan­za­nian Tax Ad­min­is­tra­tion Act 2015 came into force on 1 July 2015. The act con­sol­i­dates ad­min­is­tra­tive pro­vi­sions in a sin­gle act, re­peal­ing the rel­e­vant tax ad­min­is­tra­tion pro­vi­sions pre­vi­ously in­cluded in ex­ist­ing tax leg­is­la­tion.

The new act ad­dresses the in­ter­pre­ta­tion of tax laws, the re­la­tion­ship be­tween the Tan­za­nia Rev­enue Au­thor­ity, tax­pay­ers and tax con­sul­tants, com­mu­ni­ca­tion and doc­u­men­ta­tion, tax re­turns, ac­cess to in­for­ma­tion and as­sets, as­sess­ments and ob­jec­tions, pay­ment, re­cov­ery, re­mis­sion and re­fund of tax, in­ter­est, penal­ties, of­fences and tax pro­ceed­ings.

In terms of the Tax Ad­min­is­tra­tion Act the rul­ing pro­vi­sions (pre­vi­ously in­cluded in sec­tion 131 of the In­come Tax Act, 2004), are ex­tended to in­clude not only pri­vate rul­ings, but also class rul­ings. Records and ac­counts are to be kept in ac­cor­dance with gen­er­ally ac­cepted ac­count­ing prin­ci­ples for at least five years, but ex­cep­tions ap­ply to doc­u­ments rel­e­vant to tax dis­putes not yet de­ter­mined and where the Tan­za­nia Rev­enue Au­thor­ity has served a no­tice re­quir­ing longer re­ten­tion. In terms of sec­tion 36 of the act, the use of an elec­tronic fis­cal de­vice is now manda­tory for any per­son who is trad­ing, but the au­thor­ity has the power to pub­lish a list of tax­pay­ers ex­empt from this re­quire­ment.

The rev­enue au­thor­ity is re­quired to con­sider and make a re­fund de­ci­sion (or make a re­quest for fur­ther in­for­ma­tion) within 90 days from the date of re­ceipt of a writ­ten re­fund ap­pli­ca­tion, sup­ported by rel­e­vant ev­i­dence.

Where fur­ther in­for­ma­tion is re­quested, the au­thor­ity must serve the no­tice within 30 days of re­ceipt of the in­for­ma­tion re­quested and pay the tax re­fund within 14 days of the re­fund de­ci­sion, sub­ject to the right of the au­thor­ity to off­set the re­fund against any tax due from the tax­payer un­der any tax law. The au­thor­ity is re­quired to main­tain a sep­a­rate bank ac­count for re­funds and en­sure that the ac­count is ad­e­quately funded.

The Kenyan Tax Pro­ce­dures Act be­came ef­fec­tive on Jan­uary 19 and cov­ers pro­ce­dures for in­come tax, value-added tax and ex­cise duty, with the ob­jec­tive to pro­vide uni­form pro­ce­dures for con­sis­tency and ef­fi­ciency in tax ad­min­is­tra­tion.

The act re­duces the time re­quired to main­tain records for tax pur­poses to five years (pre­vi­ously 10 years for in­come tax and seven years for ex­cise duty). But the Kenyan Tax Pro­ce­dures Act does not ap­pear to delete the pro­vi­sion in the In­come Tax Act that re­quires preser­va­tion of books for 10 years, re­sult­ing in con­flict­ing pro­vi­sions.

A penalty of 100,000 Kenyan shillings has been in­tro­duced for fail­ing to com­ply with the elec­tronic tax sys­tem, in­cen­tivis­ing tax­pay­ers to file re­turns and make pay­ments elec­tron­i­cally. It also stip­u­lates that where a tax­payer pays less than the to­tal amount of tax, penalty and in­ter­est due, the amount paid shall be ap­plied to set­tle the tax li­a­bil­ity first, then the penalty and fi­nally the in­ter­est. If the tax­payer faces more than one tax li­a­bil­ity at the time pay­ment is made, the pay­ment shall be ap­plied in the or­der in which the tax li­a­bil­i­ties arose. Pre­vi­ously no pro­vi­sions gov­erned the or­der of ap­pli­ca­tion of pay­ments by the Kenya Rev­enue Au­thor­ity.

The Kenyan Tax Pro­ce­dures Act scraps the pro­vi­sion un­der the pre­vi­ous law in terms of which a party seek­ing to ap­peal an as­sess­ment by the Kenya Rev­enue Au­thor­ity was re­quired to pay the tax not in dis­pute as well as 30% of the tax in dis­pute. Pub­lic and pri­vate rul­ings have been in­tro­duced in re­spect of all taxes (pre­vi­ously only the VAT Act pro­vided for such rul­ings) and the au­thor­ity is now re­quired to re­spond to an ob­jec­tion to a tax as­sess­ment within 60 days.

Even coun­tries that have not im­ple­mented spe­cific tax ad­min­is­tra­tion leg­is­la­tion (yet) are ad­dress­ing prac­ti­cal tax ad­min­is­tra­tion is­sues in their Tax Amend­ment Acts or through prac­ti­cal guide­lines is­sued by the rev­enue au­thor­ity.

The Botswana In­come Tax (Amend­ment) Act, 2015 em­pow­ers the com­mis­sioner-general to re­fund tax over­paid and set-off any re­fund due against any tax, duty, levy, in­ter­est or penalty payable un­der any of the rel­e­vant laws that he is re­spon­si­ble for. In terms of the Demo­cratic Re­pub­lic of the Congo Finance Law 2016, ef­fec­tive from Jan­uary 1, se­nior tax of­fi­cers are al­lowed to pro­pose an am­i­ca­ble ar­range­ment with re­spect to tax penal­ties. In this re­spect, penal­ties rang­ing from 500-mil­lion Con­golese francs to 2.5-bil­lion Con­golese francs are un­der the tax ad­min­is­tra­tion’s ju­ris­dic­tion. For penal­ties ex­ceed­ing 2.5-bil­lion Con­golese francs, only the finance min­is­ter has the power to pro­pose an ar­range­ment with the tax­payer.

The Mau­ri­tius Rev­enue Au­thor­ity in­tro­duced new tax ob­jec­tion guide­lines ef­fec­tive from July 1 last year, in­clud­ing guid­ance on in­stances where an amount equal to 10% of the tax as­sess­ment is to be paid in or­der for the ob­jec­tion to be valid, pos­si­ble meth­ods of pay­ment of the 10% and the con­di­tions un­der which a bank guar­an­tee may be pro­vided should the tax­payer be un­able to pay 10% of the tax as­sess­ment be­cause of cash flow is­sues.

A num­ber of coun­tries are up­dat­ing laws and are mov­ing to greater ef­fi­ciency in the col­lec­tion of taxes

Celia Becker is an Africa Reg­u­la­tory and Busi­ness In­tel­li­gence ex­ec­u­tive at ENSafrica.

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