Africa & Middle East
The Minister for Finance and Planning (MoFP) on 8 June 2017, issued to the National Assembly the estimates of government revenue and expenditure for 2017. The government plans to organise and spend TZS 31,712.0 billion in the 2017/18 budget.
The Budget reflects priorities to speed up economic growth to achieve middle income status, keep back revenue leakage and resource wastage, develop infrastructure, and reform government bureaucracy to boost service delivery. The Budget Bill 2017 has been published, pending tabling before the National Assembly for debate and approval. It is assumed that this Bill will be enacted into law later in the year. It will be effective from 1st of July 2017 as specified in the Bill. The overview of tax proposals contained in Budget 2017 are given below:
- A 5% withholding tax (WHT) on payment made for specified minerals (minerals that a licenced dealer is authorized to deal with) or minerals supplied by a resident person.
- A reduction of the corporate income tax rate (from 30 per cent to 10 per cent) applicable for new plants to assemble vehicles, tractors and fishing boats or outboard engines for those who have a performance agreement with the Government for the first five years from commencement of operations.
- The bill provides for a rise in the threshold from TZS 15 million to TZS 30 million to apply for tax relief on non-commercial motor vehicles.
- A zero VAT rate is proposed for ancillary transport services in relation to goods in transit in Tanzania. This will reduce costs of transporting goods through Tanzania and will ultimately make Tanzanian ports more competitive.
- An extension of time to submit VAT returns to the first working day following a weekend or public holiday when the due date falls on a Saturday, Sunday or a public holiday.
- Tax exemption is proposed on machinery and plant used in textile, edible oil, leather and pharmaceutical (including veterinary) industries. It is geared towards promoting investments in small and medium scale industries.
- The Bill also includes some amendments to the Excise (Management and Tariff) Act. A 5% excise duty increase is proposed on specific non-petroleum products, including alcohol, soft drinks and tobacco (except locally produced water, fruit juices and spirits).
- A decrease of excise duty is proposed on locally produced fruit juices and wines.
- An increase in excise duty on petrol, diesel and kerosene by TZS 40 per litre.
- The Minister has proposed an increase of TZS 40 per litre in the excise duty on fuel.
- An increase of 5% or 3,481 per litre in excise duty is proposed for imported spirits.
The Minister of State for Finance and Economic Cooperation presented the draft budget to Parliament on 8 June 2017.
The Council of Ministers proposed to spend 320.8 birrs (USD 13.8 billion), which is a rise of 2.02 billion (16.9%) over the current financial year. Of this total, approximately $ 4.9 billion is allocated to investment spending, while some $ 3.55 billion is scheduled for regular spending.
Over $ 5.08 billion (around 36.6%) is allocated to subsidies to regional states. About 303 million US dollars are made available to implement the goals of sustainable development (SDGs).
The State Secretary said that the draft budget was designed to take into account socio-economic activities and the impact of the continental and global economic situation as well as the promises of the international donors.
After discussion, Parliament referred the draft budget to the committee for budgetary and financial matters for further consideration. It is expected to be approved by the end of June 2017.
The Government of Morocco published the Finance Law 2017 on 12th of June 2017 in the official gazette. The law provides an anti-avoidance rule, a tax relief in case of dividends, interest, and rental income for real estate collective investment undertakings under some conditions, A 3 years VAT postponement for the acquisition of equipment developed for investment projects of at least MAD 100 million according to an investment agreement with the government for both new and remaining corporations, a tax relief extends for five years for profits resulting from export operations to indirect exporters conditioning that exporters do not stayed inside the free zones. Additionally, the conditions for tax exemption in case of rental income are: the only activity of the undertaking is the lease of immovable features used for professional purposes, no less than 85% of the annual rental profits are distributed and the assets added to the undertaking are measured by a certified contributions assessor and kept for at least 10 years. The Finance law 2017 applies from 1st January 2017 and it is available in French language.
The Government on 14th of June 2017, approved the signing by Nigeria of the Multilateral Instrument (MLI) to implement into bilateral tax treaties the tax treaty-related measures arising from the OECD / G20 BEPS Project to tackle base erosion and profit shifting. First signing ceremony held on 7th of June 2017 in Paris. That time, eight countries, including Nigeria formally expressing their intent to sign.
The BEPS recommendations combat tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. The multilateral instrument will enable countries to adjust their bilateral tax treaties to include BEPS treaty-related recommendations without having to renegotiate each bilateral treaty.
The Finance Ministry of the United Arab Emirates (UAE) on 10th of May 2017 arranged a briefing session in respect of the new Excise Tax Law. Implementation of the UAE Excise Tax Law follows the Gulf Cooperation Council (GCC) Ministers of Finance approval in principle, of a unified agreement, in June 2016. In accordance with agreement, excise duty will be introduced in the UAE by the fourth quarter of 2017. The other GCC Member States also have a plan to implement the excise tax by the end of 2017. The 5 per cent excise tax is to be implemented across the GCC countries by 2018. The UAE government has proposed a 50 per cent excise tax on carbonated drinks, and a 100 per cent tax on energy drinks, tobacco and tobacco products. The importer will need to pay the accurate amount of excise tax to the tax authority before discharging the goods from the designated storage area. The final excise tax law is expected to be published before the end of June.
The Ministry of Finance announced in a statement on 7 June 2017, that Mauritius will sign the OECD Multilateral Agreement to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) by the end of June 2017. The agreement will amend bilateral tax treaties to include measures recommended by the OECD project on BEPS.
About 70 countries at all levels of development have signed this Multilateral Instrument (MLI) at the OECD Centre in the presence of Secretary-General OECD. A number of jurisdictions have also expressed their intention to sign the MLI as soon as possible and other jurisdictions are also actively working towards participation in the multilateral instrument.
With regards to Double Taxation Avoidance Agreements that will not be covered by the Multilateral Convention, discussions will be held on a bilateral basis with the concerned countries to ensure the country’s compliance with the BEPS recommendations while safeguarding the legitimate interests of Mauritius.
Previously in June 2015 Mauritius also signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, jointly developed by the Council of Europe and the Organization for Economic Cooperation and Development (OECD). Mauritius is equally a member of the Early Adopters Group committed to the early implementation of the Common Reporting Standard on the automatic exchange of financial account information.
Moreover, the country was the first in Africa to have signed up to the Intergovernmental Agreement with the United States for the implementation of the Foreign Accounts Tax Compliance Act.
In view of further supporting its pledge as a cooperative IFC, Mauritius has actively participated in the Ad-Hoc Group set up by the OECD to work on the drafting of the Multilateral Instrument as recommended under Action 15 of the BEPS Report. More recently, the country equally joined the Inclusive Framework to implement the BEPS Recommendations and the new initiative on the exchange of Beneficial Ownership information.
On 8 June 2017, the Prime Minister and Minister of Finance and Economic Development delivered the Budget speech for 2017-18 to the parliament with little change to economic policy. Key points of the budget are summarised below:
Reduced corporate tax rate on profits from the export of goods: Profits from exports of goods will be taxed at the lower rate of 3%, instead of 15%.
Tax Holidays: An 8-year income tax holiday has been introduced for new companies engaged in the manufacturing of pharmaceutical products, medical devices and high tech products; and for companies engaged in the exploitation and use of deep ocean water for providing air conditioning installations, facilities and services.
Tax Incentives: A tax incentive has been introduced for research and development in the form of an accelerated capital allowance of 50% that will apply to capital expenditure incurred on research and development.
A 200% tax deduction is available for:
- Qualifying expenditures on research and development if the expenditure relates to the current business of the taxpayer, applicable for 5 income years from 2017/2018 to 2021/2022;
- Expenses incurred in relation to deep ocean water air conditioning for a period of 5 consecutive years; and
- Expenditure on the acquisition and setting up of water desalination plants.
Transfer of non-incurred tax losses: As in the case of the transfer of losses in takeovers or mergers, unrelieved income tax losses brought forward are to be made available to compensate future taxable income where there is a change in the shareholding of a manufacturing company of more than 50%, provided that conditions relating to the public interest, such as securing employment, are met.