- Here are all you need to know about Angola’s tax administration.
An overview of Angola’s Tax Framework is very critical to navigating tax compliance in Angola. Despite being one of the richest countries in Africa in terms of natural resources, Angola still has a lot of improvements to make regarding its education and health care, logistics, transport, energy network, and infrastructure.
The country’s economy is largely dependent on petroleum exports which often subjects it to the fluctuations in oil prices in the international markets.
In recent times, the country has been actively trying to diversify its economy and reduce its dependency on petroleum.
Angola is a vast market with numerous investment opportunities for local and foreign investors in various fields of activity. With general elections coming up later this month, and oil prices again on the rise leading to an increase in valuation of the currency (kwanza), there is a positive outlook.
The country has recently enacted legislation to streamline foreign exchange procedures and expedite private investment by approving a free trade zone law with several incentives and benefits, the single investment window, and corrections to the private investment law to expedite the process to approve private investment projects and negotiate investments. The most recent development is the enactment of the Tax Benefits Code.
An overview of Angola’s Tax Framework: Main Qualities of the Tax Regime for Business
The Angolan tax regime has several taxes being levied on different taxable events. Generally, income made by companies is usually subject to Industrial Tax, or IT. Capital Income (royalties, dividends, interest) is subject to a different tax—Investment Income Tax, or IIT.
An overview of Angola’s Tax Framework: Inbound commercial income
Income Tax (IT) is charged at a 25% rate on income generated from business activities done by companies with their effective management in Angola and by permanent establishments of nonresident entities.
Resident companies are subject to tax on profits generated worldwide, while PEs of nonresident entities are only subject to tax on profits generated in Angola.
It should be noted that Angolan companies offering services to nonresident clients may face double taxation as there are no tax relief mechanisms available for taxes paid abroad.
Efforts to diversify the country’s economy and for local companies to export services to become regional service provider leaders clashes with the number of double tax treaties.
An overview of Angola’s Tax Framework: Inbound capital income
Dividends, royalties, and interest received by Angolan residents are usually subject to an IIT with rates that vary between 5% and 15% and there are no tax relief mechanisms in the IIT Code for taxes paid abroad.
An overview of Angola’s Tax Framework: Outbound service income
Currently, the payment of service fees to nonresident entities that have no PE in Angola, for services rendered in Angolan territory or paid by Angolan entities are subject to 6.5% IT withholding. This is the nonresident’s final tax liability in the country.
The State Budget Law for 2022 has enacted a special transitory regime that allows for a reduced 6.5% rate—in line with the rate in force before the latest change to the IT Code in 2020.
An overview of Angola’s Tax Framework
Outbound capital income
Dividend or remittance of profits payments by a taxpayer to its foreign shareholder subject to 10% IIT withholding. Double tax relief for the tax withheld in Angola will depend on the domestic law of the beneficiary. The DTTs with Portugal and UAE foresee a reduced 8% rate.
IIT withholding tax rate shall be 10%. Under the DTTs with Portugal and UAE, the rates for withholding tax on interest are reduced to 8% for the UAE, and 10% for Portugal.
Capital gains generated from the sale of shares in an Angolan company by nonresident shareholders will be subject to 10% IIT.
Transfer pricing provisions were approved by Presidential Decree 147/13, of Oct. 1, 2013—PD 147/13—under which the tax authorities may make the necessary adjustments to the taxable profit of a taxpayer if, due to a special relationship between the taxpayer and another entity, the business conditions deviate from what should be considered as a price established under the arm’s-length principle. Such rules apply on a subsidiary basis to all IT taxpayers.
Companies listed as major taxpayers by the tax authorities with an annual turnover of more than 7 billion Angolan kwanza ($16 million) must prepare and submit a transfer pricing file identifying the relations and the prices charged to the companies with which they have a special relationship as defined by PD 147/13.
Double tax treaties
At the moment, Angola has two DTTs in effect, with Portugal, and with the UAE. Both treaties follow the UN Model Convention and foresee reduced rates:
Dividends: 8% or 15%
Technical services: 5%
Interest: 8% for UAE, 10% for Portugal
The standard VAT rate is 14%, with no reduced rates. There are certain issues in Angola, notably the so-called captive VAT regime. To allow inspection of a smaller number of entities, very large taxpayers, such as the state and petroleum companies, have to “withhold” VAT assessed by their suppliers.
This results in a deformity of the system and a considerable VAT credit position for the suppliers.
Other than VAT charged at imports, customs duties can be a huge cost for companies doing business in Angola. There are benefits for industrial products/raw materials, but rates vary between 2% and 70%.
Main Tax Incentives
For a private investor, the main tax incentives and conditions can be found in the Private Investment Law, which sets out the rules applicable to investments made in Angola, including investor protections and special rules on repatriation of funds by foreign investors.
The granting of tax incentives and benefits is available to certain sectors defined in the Private Investment Law, such as education; agriculture; health services; forestry; textiles; tourism and leisure; construction, public works, and so on.
The main tax incentives and benefits are tax deductions, accelerated depreciation, tax credits, exemption and reduction of tax rates and customs duties, and tax deferrals.
If a project is included in a priority sector and a least-developed area, and the amount to be invested justifies it, a maximum of 15 years of significant reduction of tax rates is available.
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