The entry into force of the Value Added Tax (VAT) in Angola, scheduled for July 1, was postponed until October, according to an agreement reached between the Government and the Business Technical Group (GTE).
The decision was reached last Friday evening by the two parties, as it was a strong challenge to the various economic sectors in the country to introduce the new tax in July – VAT, with a rate of 14%, was originally planned for take effect on January 1 of this year.
After three hours of meeting, the Angolan Government and the GTE, the executive’s partner for private business policies, agreed to change the date, although everything is still dependent on a timetable to be taken by the General Tax Administration (AGT), the entity responsible for driving of the Angolan State’s tax policies.
Among other recommendations, the meeting between the executive and its social partners chose to “reduce the VAT rate” to 7% for companies in the Transitional Regime, for an “effective analysis” of the application of VAT in the private education sector and by deduction , of at least 2%, on the value of the stocks in the net amount of the Industrial Tax (II).
The main stakeholders in the VAT project (AGT and Large Taxpayers) had the task of meeting with the software companies, in order to assess the real hypothesis of VAT being introduced in October, even though the AWG , the date of January 1, 2020, one year later than planned by the Angolan authorities.
The executive and the AWG also decided to consider new mechanisms to propose the creation of a specific legal instrument to avoid double taxation in the case of advances to official brokers.
For now, the postponement of the implementation of the VAT Code balances the positions defended both by entrepreneurs, who say that the country is not prepared for VAT, and by the AGT, which guarantees that the whole machine will be fine-tuned in order to operationalize the new tax, at least in the framework of the taxpayers who are registered in the Fiscal Responsibility of Major Taxpayers (RFCF).
The VAT Code provides for a flat rate of 14% for all imports of goods and for all large taxpayers with income in excess of KRW 15 million (approximately EUR 40 000) and large public enterprises and financial institutions banking services.
In general, the new taxes are applied as soon as VAT is implemented, which should replace the previous taxation with the use of the Consumer Tax (IC).
These include the Special Consumption Tax (IEC) and the new Income Tax (IRT).
The IEC Code is mandatory for all natural persons or legal persons and other entities engaged in production operations, regardless of the processes or means used, and import goods.
Manufactured tobacco, alcoholic, carbonated and sweetened beverages, firearms, petroleum products, aircraft, recreational craft, jewelery and other articles of jewelery are now taxed under the IEC as soon as VAT is levied.
The IEC that is proposed for Angola focuses on importers, producers, auctioneers and holders for commercial purposes.
The IRT, on the other hand, provides for the distribution of profits in favor of the members of purely civil companies, with or without commercial form, and income earned by holders of corporate bodies of legal persons to be considered as income subject to tax.
The implementation of VAT in Angola should introduce substantial changes in the framework of Angolan consumption taxation, but it does not exempt the maintenance of a separate level of consumption taxation, whose main objective is the tax increase of certain goods that the taxpayers choose to consume, burdening them and, in parallel, may be inducers of certain behaviors, discouraging, by fiscal means, access to them.
The programmatic guidelines established in the Executive Branch for Tax Reform (LGRT), approved by presidential decree in March 2011, point to a tax model that more heavily taxes superfluous and luxury consumption and deprives basic necessities and for excise duty and excise duty for the imposition of certain excise duties, justified on financial and non-financial grounds, covering alcohol and alcoholic beverages, tobaccos and possibly heavy or luxury vehicles and derivatives of oil.
Angola is the only country in the Southern African Development Community (SADC) where there is no VAT yet. In other member countries of the regional economic bloc the rate of this tax is over 14% and has been one of the main taxes for revenues of the State Budgets.