Tax authorities sprint to implement realtime reporting, as more African countries continue to tax the digital economy
Assessing the changes across Africa’s tax landscape in the past year
PwC Africa is pleased to release the ninth edition of the VAT and indirect taxes in Africa: A Guide, 2023 publication.
Formerly known as the PwC VAT in Africa Guide, we have renamed this year’s publication as we have expanded the scope of coverage to include more than VAT and its equivalents. We highlight the recent developments of other indirect taxes, such as excise duty, carbon or environmental taxes, and relevant miscellaneous levies and fees across the continent.
The purpose of this publication is to bring awareness to the developments in African indirect tax policies, in an effort to assist our clients and other interested stakeholders keep abreast of policy changes, so they are able to adapt their business to the changing environment. This edition, which has been compiled by PwC Africa’s indirect tax experts, covers a total of 43 African countries, with Burkina Faso and Togo being included in the publication for the first time.
Job Kabochi, PwC Africa Indirect Tax Leader, says: “At PwC, we have embraced the strategy of solving complex problems together. Therefore, we work to help our clients remain up-to-date, grow and thrive amidst a fragmented and chaotic world. We are cognisant of the current turbulent economic landscape in many African countries, and how this has become a driving force to the changes in tax policies that we’re seeing. We trust that this guide will continue to direct our readers’ attention to critical tax policy changes, demonstrate PwC’s commitment to solving challenges in a collaborative manner, and bridge a connection to our experts across Africa.”
Realtime reporting
The theme of this year’s publication is ‘A digital Africa’, as it largely delves into the various technological changes we have seen in the past year across Africa’s tax landscape. Kabochi says the continent is experiencing greater adoption of new technologies in varied economic facets, including taxes. “Tax authorities are digitising tax administration processes and procedures leveraging technology-enabled solutions to achieve more streamlined workflows and processes. Among these are realtime reporting, the implementation of e-invoicing, automating the processing of tax compliance certificates, and phasing away the manual filing of tax returns.”
Notably, Kenya upgraded the Tax Invoice Management System (“TIMS”) to introduce e-TIMS, a software-enabled solution that taxpayers can adopt instead of physical devices. Tanzania adopted electronic VAT reporting through Virtual Fiscal Devices (“VFD”), while Uganda made updates to its Electronic Fiscal Receipting and Invoicing System (“EFRIS”) to allow for input VAT claims relating to electronic invoices, which was previously not the case.
Ghana also introduced the Certified Invoicing System (“CIS”) effective 1 January 2023, to be integrated with taxpayers’ systems for realtime reporting.
Cape Verde is currently investing in a fully digital transformation programme to promote the dematerialisation of the relationship between the tax administration and taxpayers.
Susana Monteiro Caetano, PwC Portugal, Angola and Cape Verde Indirect Tax Director, says: “Cape Verde has implemented the obligation to issue and communicate invoices and other tax-relevant documents electronically. Since June 2022, this has covered all taxpayers who carry out commercial, industrial, agricultural and fishing activities, including service providers and real estate lessors.”
To facilitate the transition to this new obligation, tax authorities have made available a Public Issuer, on the e-invoice platform, which allows taxpayers to issue and communicate electronic tax documents for free.
In collaboration with PwC Africa, The Cape Verde government recently implemented the second edition of the Technology Learning Hub — a training programme in the technology area — which aims to create skills that can be applied from the archipelago in the various technological solutions and global platforms that PwC is involved in. This is yet another step taken by the government towards technological innovation through the digital transformation of companies.
Continued taxing of the digital economy
Abeku Gyan-Quansah, Indirect Tax Services Leader for West Africa, says: “We continue to see the increasing trend of African governments taxing the digital economy as a means to increase their indirect tax base, with more African countries adopting tax policies that require non-resident countries to register and levy VAT on the supply of digital services.”
In Tanzania, since 1 July 2022, non-residents providing specific electronic services are required to have a VAT registration. Kenya had originally introduced VAT (Digital Marketplace Supply) Regulations in 2020, where affected suppliers had to register and account for VAT on business to consumer (B2C) transactions with effect from April 2021. This requirement has been refined to include a broader range of service providers by the VAT (Electronic, Internet or Digital Marketplace Supply) Regulations 2023 with effect from 15 March 2023.
Uganda has also made updates to the compliance aspects of its VAT on electronic services. Effective 1 July 2022, non-resident suppliers of electronic services were required to register and account for VAT on electronic services on a quarterly basis using an online platform. In West Africa, Senegal also introduced VAT on digital supplies for non-resident suppliers, while Ghana effected the registration for VAT of non-resident suppliers of ecommerce services.
New indirect tax developments
As many governments strive to remain economically independent, lawmakers have not shied away from increasing VAT rates. Ghana increased the standard VAT rate from 12.5% to 15% (effective 1 January 2023), while Zimbabwe made a slight increase of 0.5%, taking the VAT rate to 15%. Morocco increased its VAT rate to 20% (previously 10%) for lawyers, interpreters, notaries, bailiffs and veterinarians.
Excise duty has undergone changes in various countries. In Ghana, bills to amend the Excise Duty Act were passed into law in March 2023, where cigarettes and tobacco products now attract both an ad valorem rate and a specific duty rate among other changes.
On an environmental, social and governance (ESG) front, The Gambian government expanded its list of second-hand goods/materials that are now subject to the five percent (5%) environmental levy, while Senegal introduced a tax to be levied on plastic bags, pouches and cones or similar plastic material. Pamela Natamba, PwC Uganda Tax Partner, says, “These changes remain a testament that Africa is gaining momentum in effecting ESG measures and relying on indirect taxes for responsible environmental behaviours.”
Significantly, South Africa introduced a domestic reverse charge mechanism on transactions relating to gold to curb VAT refund fraud that had been prevalent in the second-hand gold market. This domestic reverse charge applies where both the supplier and recipient are registered vendors, and it places the requirement to declare the VAT on the sale of the valuable metal on the recipient and not the supplier.
“Our VAT and other indirect taxes guide is a document we trust will be very useful to tax and business leaders across Africa, as it has been in the past. Africa’s tax landscape is constantly evolving, demanding an agile approach from us all. We trust that all our readers will find this document useful and insightful,” Kabochi concludes.
This analysis is based on tax laws in force as of 1 May 2023.
*PwC Africa has tax experts across Africa who are available for client meetings and media interviews to unpack changes across the continent’s tax landscape.