Following the implementation of VAT in October 2019, there have been huge changes to the Angolan tax framework, leading to subsequent major challenges for tax authorities and taxpayers. Angolan entities have seen a range of rules approved in relation to corporate income tax (locally called ‘industrial tax’), personal income tax (PIT) and taxes on property.
Major changes to industrial tax
Among the changes, the one that will certainly have a larger impact on foreign companies investing in the country would be the increase of the industrial tax withholding rate applicable on payments, made in connection with services rendered by non-resident suppliers from 6.5% to 15%.
This rate can only be reduced in the case of entities covered by a double tax treaty, such as the one entered into between Angola and Portugal. For those companies benefiting from this tax treaty, the industrial tax withholding rate may be avoided or reduced to 5% (applicable to payments made in connection with technical services – understood as services of a managerial, technical or consultancy nature). This represents a major advantage for Portugal as a hub of investment in Africa, as the country also has double tax treaties in place with Mozambique, South Africa, Cape Verde, Guinea Bissau and Sao Tome e Principe, especially in comparison with other European nations.
The same reduced rate on technical services applies under the double tax treaty signed between Angola and the UAE, which has also been recently ratified by the Angolan president.
In parallel, the general industrial tax rate has decreased from 30% to 25%. A 35% rate is now applicable to insurance and banking entities, telecom operators and Angolan oil companies.
Personal income tax rates amended
At the level of personal income tax, tax brackets were amended and now vary from 70,000 Akz ($112) to more than 10,000,001 Akz. The progressive tax rates have also been considerably increased up to 25% (previously, 17%). These amendments will certainly have a significative impact on local and expatriates’ employees working in Angola, even if the maximum rate continues to be fairly below those foreseen in other African countries (for instance, in Mozambique, the higher PIT rate is of 32%). These amendments enhance progressivity of higher income and lead to a tax relief of lower income, a goal that has been in the mind of the authorities since the beginning of the tax reform back in 2011.
There is also a higher similitude between taxation applicable to self-employed individuals and the one applicable to companies, as the former are now also generally subject to a 6.5% or 15% withholding rate, depending on whether they are resident or non-resident in Angola.
The evolving property tax
In addition, a new property tax has been approved, which has revoked the former Urban Property Tax Code and all the legal provisions regarding the taxation of real estate. The previous provisions had been earlier established by the regulation regarding the assessment and the collection of the inheritance and gift tax, and SISA levied on the acquisition for consideration of real estate properties. Unlike the former urban property tax, the new tax is levied on both rural and urban properties. The applicable rates vary depending on the nature of the property (urban, rural or plots for construction). In relation to the transfer of real estate, the former 2% rate applicable for purposes of SISA was maintained.
All the above changes, which have come into action almost simultaneously, come with a real impact to the Angolan tax legislative framework, which is becoming increasingly modernised and focused in generating revenue. In this regard, reference should also be made to the recent introduction in the Angolan tax law, of a general anti-abuse rule allowing the authorities to make corrections in case of abusive tax arrangements.
Embracing the developments
At a time when the world is adapting to the COVID-19 pandemic, it is still to be seen how the above changes will affect current and future investment in Angola. These are the days to review agreements that are already in place, and to adjust the ones that will enter into force.
Companies will need to be well informed of the updated rules and be aware of the tax burden so that they can take all the changes in consideration when it comes to negotiating their prices. The double taxation treaties could perhaps provide the breakthrough for all those companies that wish to maintain solid and longstanding investments in the country.
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