The complicated tax environment - What you need to know?
The Angolan government imposed a special contribution tax at 10% on any transfers pertaining to the value of payments for technical assistance and management services rendered by non-residents since mid-2015.
Given the characteristics of the special contribution tax and the economic situation in Angola, the objective of the regime were two-fold: enhance Angolan tax revenue and help retain capital in Angola by reducing payments to foreign entities.
However, the aforesaid purposes oppose one another in terms of efficiency, simply because if Angola succeeds in reducing exchange transactions, which alleviate the shortage of foreign currency, they also deny itself the desired tax revenue increase.
The special contribution was also intended to discourage economic agents from sending capital out of Angola by imposing a tax burden on transferring money abroad. Angola has been encountering a shortage of foreign currency for quite a long time, rendering it difficult or even impossible, to cope with all the requests for foreign payments and for transferring money abroad.
By creating a tax cost on transfers for payments to non-resident entities, the special contribution tried to encourage the use of economic structures that keep money in Angola.
The tax burden of the special contribution is on the payer entity, which might be seen as creating an incentive to the acquisition of services from Angolan entities instead of non-resident entities. However, considering the shortage of Angolan entities providing various administrative, scientific and technical specialized services, the measure might encourage international providers of those services to establish themselves in Angola to provide services through local structures. That would prevent the correspondent service payments from being subject to the special contribution.
Having said that, it would be harder to encourage international service providers to establish themselves in Angola if the repatriation of salaries of the foreign individuals providing those services in Angola would be taxed when the salaries were transferred abroad. As such, the approval and entry into force of the more moderate system provide brighter perspectives are always warranted.
Alternative solution – What you can do?
Given the complications of recent signing of FATCA with the US, no double tax agreement with other countries, stringent foreign exchange control, shortage of foreign currency, as well as broad and high taxes, etc., it is always very challenging and difficult for foreign investors doing business in Angola, particularly when considering repatriating their profit out of Angola back to their home country. Under a lawful context, certain multiple parties cross border transactions, probably a combination of related and non-related parties with commercial rationality, making use of trading as well as financing, can be conducted in view to facilitate the money flow with an effective cost.