By Jana Botha, VAT Consultant, Baker McKenzie Johannesburg
There have been significant developments in indirect tax within Sub-Saharan Africa (SSA) in the past year. The vast majority of developments have been based around VAT amendments and policies, as well as general budget updates for 2022 across SSA. This article includes key developments from Ghana, Kenya, Namibia, Nigeria, South Africa, Tanzania, Zambia and Zimbabwe.
Ghana
The Parliament of Ghana passed the Value Added Tax (Amendment) Act, 2021 (Act 1072) to bring VAT proposals into effect. The Amendment Act came into force 1 January, 2022.
The policy includes a revision of the VAT flat rate scheme (VFRS). Act 1072 has now revised the application of VFRS to only cover retailers of goods where the value of taxable supply is between GHS 200,000 and GHS 500,000 at the end of any 12-month period. Retailers whose annual taxable supplies exceed GHS 500,000, and wholesalers, will now account for VAT under the standard VAT regime. There will also be an extension of the application of the VAT zero-rate on approved locally manufactured textiles for two years. Importantly, the Government of Ghana has indefinitely suspended a policy directive to remove the benchmark value discount regime, which provided a discount on the transaction value of imported goods used in the determination of import duties.
Ghana has also implemented an Electronic Transfer Levy (ETF), with effect from 1 May 2022. The levy is imposed at 1.5% on electronic transfers of mobile money and bank transfers on instant pay digital platforms. The levy is chargeable at the time of transfer by electronic money issuers, payment service providers, banks, specialized deposit taking institutions and other financial institutions.
Kenya
Kenya introduced the Finance Bill, 2022 which proposes a number of tax-related amendments, including measures that would affect income tax, VAT, excise tax, and other taxes. The Bill proposes to provide clarity on the application of VAT on digital marketplace supplies by revising the definition of a digital marketplace and exempting taxable supplies made over the internet, an electronic network or through a digital marketplace from being subject to reverse charge VAT upon importation. While still unclear, it seems that business-to-business transactions would not be subject to VAT once the proposed amendments are passed by Parliament.
The Bill also includes proposals in relation to the deduction of input tax. One such proposal is to limit the deduction of input tax to the period in which the supply of importation occurred, rather than within six months from that date, which is currently the case. It is further proposed to increase the documents that the Commissioner would ordinarily request to verify input tax deductions by the taxpayer. Such documents may include an original tax invoice, duly certified customs entry and a receipt for the payment of the tax, customs receipt and a certificate signed by the proper officer, credit note and a debit note.
Namibia
Namibia provided their mid-term budget review for 2021/22. The review included revisiting VAT proposals from the initial budget speech made prior in the year.
The VAT Amendment Bill is in its initial stages of ministerial approval, but will undergo stakeholder consultation before it is tabled. The Bill included the incorporation of zero-rating the supply on sanitary pads throughout Namibia. Sanitary pads are currently subject to VAT at 15%. Further, the Bill provided an extension of the standard VAT rate to fees of all asset managers, to ensure fairness within the tax system. Only fees of non-listed asset managers are subject to VAT at 15%, listed asset managers are exempt from fees.
Nigeria
The Nigerian Ministry of Finance (MOF) has issued the VAT Modification Order, 2021 which took effect from 30 July 2021. The Minister issued the 2021 Order pursuant to Section 38(b) of the VAT Act, which empowers the Minister to amend, vary or modify the list set out in the First Schedule to VAT Act, which lists the goods and services designated as VAT exempt and zero-rated.
On 7 December 2021, Nigeria’s President submitted the Finance Bill, 2021 to the National Assembly for its consideration. The Bill proposes various tax law changes, including modification of the VAT provisions to allow for easier collection and remittance of VAT on “business-to-customer” e-commerce transactions.
South Africa
South Africa has included measures for implementation of the carbon tax in their 2022 budget, specifically concerning the extension of the first phase of the carbon tax by three years through 31 December 2025.
The carbon tax legislation specifies that the initial rate of carbon tax of ZAR120 per tonne will be increased by consumer price inflation +2% per year until 31 December 2022, and thereafter the rate of tax will be increased only by CPI. Therefore, the carbon tax rate will increase from ZAR134 per tonne of carbon dioxide equivalent to ZAR144 per tonne of CO2e for the 2022 calendar year.
Tanzania
The Tanzanian Finance Bill, 2022, was tabled before Parliament on 17 June 2022 and proposes a number of tax changes, including the implementation of a Digital Services Tax (DST) at 2% of the gross payments to supplies made through a digital marketplace by non-Tanzanian residents. The Parliamentary Budget Committee (PBC), inviting public comment, indicated that a meeting would be held on 21 and 22 June 2022 for a public hearing of the views submitted to the PBC on the Finance Bill, 2022. Public views can also be submitted via email.
VAT proposals in the Bill include the exemption of goods or services for implementation of approved special strategic investments, as well as the importation or supply of goods or services to a non-governmental organization having a financing agreement with the Tanzanian Government, provided that the agreement provides for VAT exemption. The Bill also proposes the zero rating of double refined edible oil or fertilizer supplied by a local manufacturer; which zero rating will apply for a period of one year effective 1 July 2022. A further notable proposed change is that non-resident persons supplying goods or services in Tanzania would be able to apply to the Commissioner to be registered for VAT in Tanzania, if it is not practicable, due to the circumstances of the business, to appoint a local tax representative.
Zambia
In October 2021, the MOF of Zambia presented the 2022 budget. The budget proposes to zero-rate the VAT on solar charge control units and solar streetlights, as well as on selected agricultural equipment. It also introduces VAT at the standard rate on property and non-life insurance, and on booklets and newspapers.
Zimbabwe
On 25 November 2021, the MOF of Zimbabwe announced the budget for 2022. The budget includes measures which are included in the Finance Act (No. 7), 2021, such as the introduction of a 5% levy on the value of imported dairy products as well as an increased excise tax to 25% on cigarettes.
