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Wharton School - Overview of Sub Saharan Tax

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Wharton School - Overview of Sub Saharan Tax

  1. 1. EY Africa Sub Saharan Africa tax overview Wharton School of Business The University of Pennsylvania September 2015
  2. 2. Page 2 1 Welcome Jim Deiotte, EY Africa Tax Lead and member of AMCHAM (American Chamber of Commerce) 8:00 – 8:30 2 Africa attractiveness Survey 2015 - Making choices Sylvester Taku, EY Africa Assurance Q&A and open floor discussion 8:30 – 9:30 3a Financial Services: Extending reach into Africa Presented by Graham Thompson, EY Africa Knowledge Leader 10:00 – 10:50 3b Sub-Saharan Africa tax overview Presented by Jim Deiotte 10:00 – 10:50 3c Africa Private Equity Presented by Graham Stokoe, EY Africa Private Equity Leader 10:00 – 10:50 4 Guest speaker Jeff Nemeth President Ford Motor Company of SA, AMCHAM Board 11:00 – 11:30 5 Welcome Jim Deiotte, 11:30 – 12:00 Agenda
  3. 3. Page 3 Foundations for success
  4. 4. Page 4 Leadership tools
  5. 5. Page 5 Complexities around handling cycles
  6. 6. Page 6 1 EY in Africa 4 – 6 2 The Africa landscape 7 – 12 3 The Africa Tax landscape 13 – 19 4 Sub Saharan Africa tax filing landscape 20 – 23 5 Transfer Pricing in Africa 24 – 29 6 Africa Tax Coordination Services 30 – 32 7 Overview of considerations when establishing a legal presence in Africa 33 – 34 8 Upcoming EY Africa events 35 - 40 Contents
  7. 7. Page 7 EY in Africa
  8. 8. Page 8 EY Africa: An integrated practice
  9. 9. Page 9 EY Africa tax practice Size of tax practice by cluster Africa Tax Leader 28 countries East cluster 6 countries Jim Deiotte 70 Partners & Executive Directors 890 Professional staff Catherine Mbogo 9 Partners & Executive Directors 116 Professional staff Francophone cluster 9 countries Central cluster 3 countries Joseph Pagop Noupoue 8 Partners & Executive Directors 181 Professional staff Nigel Forsgate 7 Partners & Executive Directors 62 Professional staff West cluster 2 countries Southern cluster 8 countries Abass A Adeniji 5 Partners & Executive Directors 94 Professional staff Mark Goulding 41 Partners & Executive Directors 437 Professional staff
  10. 10. Page 10 Africa landscape
  11. 11. Page 11 Africa Tax Administration Forum member countries Great potential for exchange of information ATAF member countries EY office No EY office, but support available With the active role that ATAF is taking in driving the focus on transfer pricing and BEPS, we expect the transfer pricing controversy landscape to change significantly in the near future. ► ATAF is an international organisation which provides a platform for cooperation among African tax authorities. Through mutual cooperation between member states, ATAF works towards increasing the level of voluntary tax compliance whilst combating tax evasion and avoidance
  12. 12. Page 12 Africa in context
  13. 13. Page 13 Currency devaluation in Africa against the US Dollar over 12 months -35.00% -30.00% -25.00% -20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 1 July 2014 - 30 June 2015 Botswana Pula Egyptian Pound Ghanaian Cedi Kenya Shilling Nigerian Naira South Africa Rand Uganda Shilling Zambian Kwacha
  14. 14. Page 14 Reporting language considerations in Africa ► With an estimated 1,500 to 2,000 African languages spoken, Africa is a continent with exceptional linguistic diversity. ► In both Angola & Mozambique returns are completed in Portuguese. ► UEMOA countries complete returns in French. French speaking Portuguese Spanish Amharic Arabic
  15. 15. Page 15 Statutory reporting considerations in Africa OHADA member states Benin Burkina Faso Cameroon Central African Republic Chad Comoros Congo Cote d’Ivoire Democratic Republic of Congo Equatorial Guinea Gabon Guinea Guinea-Bissau Mali Niger Senegal Togo Statutory reporting No information available Local GAAP OHADA IFRS
  16. 16. Page 16 Africa Tax Landscape
  17. 17. Page 17 Challenges at the Policy Level ► Rising democracies and freedoms ► Gradually improving legislative processes ► Easing conflicts ► Growing pressures against local corruption ► Narrow tax base (over-emphasis on multinationals and formal sector) ► Exchange controls and currency shortages ► Immigration restrictions ► Infrastructure shortages (roads, energy etc…) ► 90 billion in infrastructure needs plus rising social pressures ► Falling commodity prices ► Funding reduced due to the steady reduction of quantitative easing ► African overspending on payroll, current expenditure and rising debt ► Outdated tax laws ► One-side tax policies driven indirectly by the revenue authorities (and donor organisations) ► Retro-activity in laws ► Domestic legislative treaty overrides Rising Economic Challenges Uncertainty of African tax laws Ongoing obstacles Positive developments
  18. 18. Presentation title
  19. 19. Page 23 Sub Saharan Africa tax filing landscape
  20. 20. Page 24 Due dates for various tax returns for African countries 5 9 4 6 2 2 0 1 2 3 4 5 6 7 8 9 10 CIT return submission due date 6 5 7 10 4 16 7 4 13 6 5 14 0 2 4 6 8 10 12 14 16 18 Provisional Tax due per month
  21. 21. Page 25 Due dates for various tax returns in Africa 1 3 1 14 5 1 3 1 2 0 2 4 6 8 10 12 14 16 7th 10th 14th 15th 20th 21st 30th 31st N/A Number of Monthly WHT returns to be filed ► N/A = South Africa is based on transactions date 1 10 1 4 2 1 3 3 1 2 0 2 4 6 8 10 12 Number of Monthly VAT returns to be filed
  22. 22. Page 26 Due dates for various tax returns in Africa 2 2 2 15 5 1 3 1 0 2 4 6 8 10 12 14 16 7th 10th 14th 15th 20th 21st 30th N/A Number of Monthly PAYE returns to be filed ► N/A = South Africa is based on transactions date 7 3 3 1 1 2 1 9 0 1 2 3 4 5 6 7 8 9 10 Number of Annual PAYE returns to be filed
  23. 23. Page 27 Transfer Pricing in Africa
  24. 24. Page 28 Setting the scene Transfer pricing in Africa over the last 20 years Countries with transfer pricing legislation / rules There has been more than a 100% increase in transfer pricing legislation in Africa over the past 5 years. * TP legislation came into effect 1 January 2015 ** Draft TP legislation 1995 - 2000 2001 - 2005 2006 - 2010 2011 – 2015 South Africa Namibia Algeria Algeria Malawi Zambia South Africa Egypt Angola Mozambique** Zambia Kenya Burkina Faso Nigeria Malawi Egypt Namibia Namibia Cameroon Senegal South Africa Congo South Africa Zambia DRC* Tanzania Ghana Uganda Gabon Zambia Kenya Zimbabwe Sierra Leone
  25. 25. Page 29 Africa transfer pricing landscape Southern Africa East Africa West Africa Central Africa North Africa Countries with TP legislation / rules The nature of TP legislation varies across the continent Tanzania DRC Angola Namibia South Africa Zambia Zimbabwe Malawi Mozambique Nigeria Egypt Algeria Ghana Senegal KenyaCameroon Gabon Burkina Faso Congo Uganda Sierra Leone
  26. 26. Page 30 Transfer pricing audit landscape High audit activity and numerous queries Medium audit activity Low or no audit activity to date We expect there to be considerable audit activity in the near future Mauritius NigerMali Morocco Algeria Sudan Chad Ethiopia South Africa Ghana Nigeria Tanzania Zambia Central African Republic Botswana Angola Democratic Republic of Congo Kenya Lesotho Malawi Mozambique Swaziland Uganda Zimbabwe Mayotte Comoros Tunisia Cameroon Gabon Equatorial Guinea Cote d’Ivoire Togo Benin Senegal Gambia Guinea Burkina Faso South Sudan
  27. 27. Page 31 Be audit ready Understanding key TP risks Ensure alignment with the commercial reality of the operationsFunctional analysis Legal agreements Implementation of policy TP method applied Non-disclosure in tax return Non-disclosure of transactions Comparables Support for negative results Ensure alignment with the commercial reality and TP documentation Ensure proper justification for TP method used Ensure TP policy has been correctly implemented Ensure all material transactions are properly disclosed in TP policy Availability of appropriate internal or external comparables Provide detailed support where poor results were achieved Tax Administration Act penalties may apply if non disclosure
  28. 28. Page 32 Risks associated with not having an appropriate transfer pricing policy properly implemented Higher possibility of a tax dispute Significant reputational damage caused by perceptions of inappropriate pricing Risks Double taxation, penalties and late payment interest Internal challenges due to inconsistencies in pricing Scrutiny by local tax authorities with respect to other taxes Unnecessary difficulties with repatriation of funds 66% of companies identified “risk management” as their highest priority for transfer pricing in the EY 2013 Global Transfer Pricing Survey. This is a 32% increase from 2010.
  29. 29. Page 33 Africa Tax Coordination Services
  30. 30. Page 34 Africa Tax Coordination Services (ATCS) Our Africa Tax Coordination Services (ATCS) team was established 8 years ago, the purpose being to project manage tax engagements for clients and provide them with visibility and oversight of their tax affairs across the continent. Our team consist of 18 full time tax resources whose primary function daily is to track and monitor that we meet the deadlines of our clients; respond timeously to requests and provide regular feedback and updates to our clients. The ATCS team has vast experience in coordinating tax advisory and tax compliance services for multinationals with operations across Africa and the Globe. Many of our clients provide feedback that the EY team’s approach of combining a central point of contact with access to in-country professionals has positively impacted their service experience. The role of the coordination team is to ensure: ► You have a central-point-of-contact ► Your goals, objectives and needs are clearly articulated to our teams ► A consistent approach and service delivery ► Connecting the right people at the right time ► Visibility and access to your compliance status and progress on specific projects Natasha Meintjes Africa Tax Coordination Services Leader Tel: +27 11 772 3923 Mobile +27 83 611 1859 E-mail: Natasha.Meintjes@za.ey.com
  31. 31. Page 35 Our service delivery model
  32. 32. Page 36 Overview of considerations when establishing a legal presence in Africa
  33. 33. Page 37 Overview of considerations when establishing a legal presence in Africa ► Minimum Nominal amounts of less than US$1 (e.g. Botswana) up to US$50,000 (e.g. Ghana) ► Local shareholding requirements may exceed 50% (e.g. Angola 50% shares +1) ► Also consider minimum investment requirements e.g. US$1mil in Angola ► Minimum 1 to 2 directors ► Consideration for Local director requirements in many countries ► 3 days (Mauritius) to 6 months (DRC) calculated from date of submission of all required documentation ► Subsidiary – limited (private) and public entities ► Branch is an option in most countries (limited activity allowed – auxiliary services mostly) ► REP office – not always recognised legal form e.g. Botswana; Tanzania; Kenya; Mauritius; Namibia Timeframe to register an entity Legal Entity Form Director requirements Shareholding requirements ► Appointment of local director if no local employees’ in management positions ► Opening of a bank account ► Translation of documentation ► Not having all the required documents available ► More than one registration required – business & regulatory ► Business premise address Lessons learned on what delays registrations (examples)
  34. 34. Page 38 Upcoming EY Africa events
  35. 35. Page 39 EY Strategic Growth Forum™ Africa 2015 Accelerating progress. A better story, told better
  36. 36. Page 40 Profile of attendees includes: ► EY Entrepreneur of the Year Awards 2015 Finalists, Judges, EOY Alumni, Entrepreneurial Winning Women Alumni and a renewed focus on attracting Africa entrepreneurs as delegates. ► Board, CEO and C-Suite, CFO, Strategic Directors of our G360; Focussed core accounts, in addition to clients and companies from across Africa and Global. Public and private sector and leading government officials. Why SGF? ► Offers dynamic speakers, topical sessions, panel discussions, networking opportunities and inspirational entrepreneurs and executives – all exploring and sharing strategies for growth. ► Plays a significant role in the Entrepreneurship/Middle Market, MSL and Sector agenda in terms of the proven direct impact it has on reputation, relationships, and revenue with clients. ► Help to break down barriers and explore a wealth of growth opportunities in growth markets. Clearly demonstrate EY’s convening power, insight, expertise and point of view on operating internationally. Provides the opportunity to spend 2-3 days exclusively with your target/client. The results can be immediate and long lasting! A stimulating environment | Networking | Reinforcing relationships Competitive advantage | Insightful | Connected | Revenue EY Strategic Growth Forum™ Africa 2015 Accelerating progress. A better story, told better
  37. 37. Page 41 EY Africa Tax Conference 2014 Building a better working world in Africa
  38. 38. Page 42 EY Africa Tax Conference™ 2015 Towards tax harmony in Africa
  39. 39. Page 43 Africa Thought Leadership Africa 2030 Africa 2030: Realizing the possibilities builds on EY’s flagship Africa attractiveness series, reinforcing the tremendous progress that has been made in Africa over the past 15 years. EY Survey: growing war for talent in Africa A growing war for talent is emerging in Africa, as firms are recruiting to support their growth ambitions on the continent. Africa by numbers Whether entering into or expanding across Africa, we believe it is critical to develop a structured analytical framework for prioritising markets into which to expand and for assessing different strategic options Africa by Numbers: a focus on Nigeria Nigeria continues its robust and sustained economic growth. Harvesting growth: the rise of private equity exits in Africa Africa’s economic development over the last few years has been impressive, with many countries across the continent starting to see the benefits of government and economic reforms and increased FDI flows. Unlocking value in Africa In the current global economic context, it would be difficult to find an alternative investment destination that offers 10 to15 years of sustained economic growth. EY Africa Business Centre Thought Leadership Africa Attractiveness surveys Making choices We remain confident that, despite economic headwinds, the “Africa rising” narrative remains intact and sustainable. Executing Growth Our 2014 Africa attractiveness survey reveals a dramatic improvement in the continent’s perceived attractiveness, now at second place, and although FDI numbers paint a mixed picture, companies are successfully growing in Africa Getting down to business Africa’s rise over the past decade has been very real. While sceptics still abound, and there are people who still seek to debate the point, the evidence of the continent’s clear progress over the past decade is irrefutable Building Bridges Our second edition of Africa Attractiveness builds on the theme of the African growth story, while emphasising the need to bridge a perception gap that continues to exist among many potential investors not yet doing business on the continent. 2011: It’s time for Africa Understanding Africa’s strengths and challenges and bring strategic within the framework of these can help African countries position themselves more competitively and also help focus investment for optimal returns.
  40. 40. Page 44 Disclaimer This document is intended to be used for discussion purposes only and the comments set out in this document do not constitute advice by EY. The information in this pack is intended to provide a general outline of the subjects covered. It should not be regarded as comprehensive or sufficient for making decisions, nor should it be used in place of professional advice. By you having access to the information in this pack, you do not, acquire rights against EY, any other member firm of the global EY network, or any of their respective affiliates, partners, agents, representatives or employees (collectively, the “EY Parties”) and EY assumes no duty or liability to you in connection with this pack’s information. By you having access to this pack’s information, you release each of the EY Parties from any and all claims or causes of action that you hereafter may or shall take in using this packs information. You further shall indemnify, defend and hold harmless the EY Parties from and against all claims, liabilities, losses and expenses suffered or incurred by you arising out or in connection with your use of the information contained in this pack.
  41. 41. EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. © 2015 EYGM Limited. All Rights Reserved. EY refers to the global organization and/or one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organisation can accept any responsibility for loss occasioned to any person acting or refrainingfrom action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor. ey.com

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