The last few months of 2017 saw the usual flurry of legislation being passed in countries across Africa, most of which will come into force during 2018. Here is a taste of some of the most important changes:
Angola
International employers with a presence in Angola will have been pleased to see the ‘Amendment of the Angolan General Tax Code by Law 18/17’ that came into force on 17 August 2017.
It says that if a taxpayer obtains more than 60% of their income in a foreign currency during an assessment year, they are allowed to pay tax in that foreign currency. Prior to this change in legislation, all taxes had to be paid in the local currency, the Kwanza, which proved challenging at times.
Uganda
Uganda has changed the methodology used to value employee motor vehicles for benefit-in-kind/fringe benefit purposes. The Income Tax (Amendment) Act 2017 introduced an amendment to the Fifth Schedule of the Income Tax Act, which provides for a reduction in the valuation of motor vehicle benefits.
The change took effect from 1 July 2017. Previously the base value used to determine this fringe benefit was fixed at its initial market value. Therefore, over a number of years, the employee received no reduction in fees due to the decline in the vehicle’s market value.
The change now allows for the base rate to be depreciated on a reducing balance basis at a rate of 35% for each subsequent year. This amounts to a substantial saving over a number of years, and it is thought other African countries may adopt this approach.
South Africa
South Africa’s National Minimum Wage (NMW) Bill, which includes an amendment to the Basic Conditions of Employment Act (BCEA) and the Labour Relations Act (LRA), was approved recently by cabinet and published in Government Gazette No. 41257 of 17 November 2017 for public comment.
The NMW Bill provides for the introduction and enforcement of a minimum wage of ZAR20 (US$1.57) per hour, which is due to come into effect on 1 May 2018. There are a few exceptions, which mean that the minimum wage for:
- Farm workers will be 90% of ZAR20 per hour (ZAR18 (US$1.42) per hour);
- Domestic workers will be 75% of ZAR20 per hour (ZAR15 (US$1.18) per hour);
- Workers on an expanded public works programme will be R11 (US$0.87) per hour.
Namibia
On 4 September 2017, the Ministry of Finance in Namibia published a Public Notice informing taxpayers that a second and last Tax Arrear Recovery Incentive Program was to be implemented from 11 September 2017 to 11 March 2018. Under the Program, 100% of penalties and 70% of interest on unpaid tax arrears will be waived, provided that certain requirements are met.
The incentive programme applies to all taxes administered by the Inland Revenue Department, including income and employee's tax. It would be advisable for employers or staff members who are currently in dispute or have outstanding tax issues to make use of this Program.
Lesotho
In Lesotho, Legal Notice No. 83 of 22 September 2017 set out tax rate changes that took effect from 1 April 2017. As Lesotho regularly publishes changes to tax rates that are backdated to an earlier period, payroll managers need to ensure they have been applied correctly.
The new rates see the first M58,680 (US$4,623) of chargeable (taxable) annual income being taxed at a rate of 20%, while any amount in excess of that figure will be subject to a rate of 30%. A non-refundable tax credit of M6,960 (US$548) per annum was also tabled.
The year ahead
High levels of foreign investment continued to flood into Africa during the last quarter of 2017, and this is how the situation is likely to affect payroll in 2018:
IT governance
As in the rest of the world, African businesses are racing to implement new technologies. Better use of data to predict future events and anticipate expansion ahead of time is growing in importance as are online activities of all kinds. But this increased reliance on tech comes with an associated risk of organisational data being subject to cyberattack.
As a result, IT governance is likely to become progressively important during 2018, not least because of the seemingly endless headlines about cyber-breaches at major corporations, which tend to focus senior executives’ minds. Payroll is a large user and holder of data and, therefore, has an important role to play here in IT governance terms.
Compliance
The automatic exchange of financial account information was one of the top items on the agenda when the heads of tax administration met in Oslo, Norway, in September 2017 for the 11th meeting of the Forum on Tax Administration (FTA).
Responding to recent news coverage on the "Paradise Papers" leaks, Hans Christian Holte, director general of the Norwegian Tax Administration and new FTA chair, said while speaking at the Tax and Crime Forum 2017 in London: “The world has turned strongly against tax evasion and aggressive tax planning. Thanks to ground-breaking international agreements, it is no longer possible to hide assets by simply placing them in offshore accounts or structures.”
He continued: “Banking secrecy has been quickly disappearing and cooperation between tax administrations is rapidly improving. The FTA’s Joint International Task Force on Shared Intelligence and Cooperation was well prepared for this leak."
In a bid to coordinate efforts on tackling tax evasion and aggressive tax avoidance, however, the FTA has also got together with the Organisation for Economic Co-operation and Development, the G20 (an international forum for governments and central bank governors) and the Global Forum on Tax Transparency to take action.
Another thing to bear in mind, not least because of the increased global mobility of modern workforces, is that employers will need to ensure their staff members pay taxes in the correct jurisdiction and that they accurately declare workers’ earnings. This means that compliance will remain a key focus during 2018.
Conclusion
Africa remains a growth area in global economics terms but to maintain that momentum, the continent will have to address IT governance challenges alongside the rest of the world. Not only will data need to be carefully protected from cyberattack, but compliance issues will come increasingly to the fore as more and more financial information is shared between world tax authorities. As a result, payroll professionals will undoubtedly have a valuable role to play in both areas during 2018.
Sharon Tayfield is a senior manager, with extensive experience in global outsourcing and a special interest in payroll. She has undertaken senior management roles at a range of multinational companies, including a wholly-owned subsidiary of Anglo America where she was financial director. Prior to her current role, Sharon was chief operating officer for a payroll service company specialising in outsourced services to Africa and the UK.
The last few months of 2017 saw the usual flurry of legislation being passed in countries across Africa, most of which will come into force during 2018. Here is a taste of some of the most important changes:
Angola
International employers with a presence in Angola will have been pleased to see the ‘Amendment of the Angolan General Tax Code by Law 18/17’ that came into force on 17 August 2017.
It says that if a taxpayer obtains more than 60% of their income in a foreign currency during an assessment year, they are allowed to pay tax in that foreign currency. Prior to this change in legislation, all taxes had to be paid in the local currency, the Kwanza, which proved challenging at times.
Uganda
Uganda has changed the methodology used to value employee motor vehicles for benefit-in-kind/fringe benefit purposes. The Income Tax (Amendment) Act 2017 introduced an amendment to the Fifth Schedule of the Income Tax Act, which provides for a reduction in the valuation of motor vehicle benefits.
The change took effect from 1 July 2017. Previously the base value used to determine this fringe benefit was fixed at its initial market value. Therefore, over a number of years, the employee received no reduction in fees due to the decline in the vehicle’s market value.
The change now allows for the base rate to be depreciated on a reducing balance basis at a rate of 35% for each subsequent year. This amounts to a substantial saving over a number of years, and it is thought other African countries may adopt this approach.
South Africa
South Africa’s National Minimum Wage (NMW) Bill, which includes an amendment to the Basic Conditions of Employment Act (BCEA) and the Labour Relations Act (LRA), was approved recently by cabinet and published in Government Gazette No. 41257 of 17 November 2017 for public comment.
The NMW Bill provides for the introduction and enforcement of a minimum wage of ZAR20 (US$1.57) per hour, which is due to come into effect on 1 May 2018. There are a few exceptions, which mean that the minimum wage for:
- Farm workers will be 90% of ZAR20 per hour (ZAR18 (US$1.42) per hour);
- Domestic workers will be 75% of ZAR20 per hour (ZAR15 (US$1.18) per hour);
- Workers on an expanded public works programme will be R11 (US$0.87) per hour.
Namibia
On 4 September 2017, the Ministry of Finance in Namibia published a Public Notice informing taxpayers that a second and last Tax Arrear Recovery Incentive Program was to be implemented from 11 September 2017 to 11 March 2018. Under the Program, 100% of penalties and 70% of interest on unpaid tax arrears will be waived, provided that certain requirements are met.
The incentive programme applies to all taxes administered by the Inland Revenue Department, including income and employee's tax. It would be advisable for employers or staff members who are currently in dispute or have outstanding tax issues to make use of this Program.
Lesotho
In Lesotho, Legal Notice No. 83 of 22 September 2017 set out tax rate changes that took effect from 1 April 2017. As Lesotho regularly publishes changes to tax rates that are backdated to an earlier period, payroll managers need to ensure they have been applied correctly.
The new rates see the first M58,680 (US$4,623) of chargeable (taxable) annual income being taxed at a rate of 20%, while any amount in excess of that figure will be subject to a rate of 30%. A non-refundable tax credit of M6,960 (US$548) per annum was also tabled.
The year ahead
High levels of foreign investment continued to flood into Africa during the last quarter of 2017, and this is how the situation is likely to affect payroll in 2018:
IT governance
As in the rest of the world, African businesses are racing to implement new technologies. Better use of data to predict future events and anticipate expansion ahead of time is growing in importance as are online activities of all kinds. But this increased reliance on tech comes with an associated risk of organisational data being subject to cyberattack.
As a result, IT governance is likely to become progressively important during 2018, not least because of the seemingly endless headlines about cyber-breaches at major corporations, which tend to focus senior executives’ minds. Payroll is a large user and holder of data and, therefore, has an important role to play here in IT governance terms.
Compliance
The automatic exchange of financial account information was one of the top items on the agenda when the heads of tax administration met in Oslo, Norway, in September 2017 for the 11th meeting of the Forum on Tax Administration (FTA).
Responding to recent news coverage on the "Paradise Papers" leaks, Hans Christian Holte, director general of the Norwegian Tax Administration and new FTA chair, said while speaking at the Tax and Crime Forum 2017 in London: “The world has turned strongly against tax evasion and aggressive tax planning. Thanks to ground-breaking international agreements, it is no longer possible to hide assets by simply placing them in offshore accounts or structures.”
He continued: “Banking secrecy has been quickly disappearing and cooperation between tax administrations is rapidly improving. The FTA’s Joint International Task Force on Shared Intelligence and Cooperation was well prepared for this leak."
In a bid to coordinate efforts on tackling tax evasion and aggressive tax avoidance, however, the FTA has also got together with the Organisation for Economic Co-operation and Development, the G20 (an international forum for governments and central bank governors) and the Global Forum on Tax Transparency to take action.
Another thing to bear in mind, not least because of the increased global mobility of modern workforces, is that employers will need to ensure their staff members pay taxes in the correct jurisdiction and that they accurately declare workers’ earnings. This means that compliance will remain a key focus during 2018.
Conclusion
Africa remains a growth area in global economics terms but to maintain that momentum, the continent will have to address IT governance challenges alongside the rest of the world. Not only will data need to be carefully protected from cyberattack, but compliance issues will come increasingly to the fore as more and more financial information is shared between world tax authorities. As a result, payroll professionals will undoubtedly have a valuable role to play in both areas during 2018.
Sharon Tayfield is a senior manager, with extensive experience in global outsourcing and a special interest in payroll. She has undertaken senior management roles at a range of multinational companies, including a wholly-owned subsidiary of Anglo America where she was financial director. Prior to her current role, Sharon was chief operating officer for a payroll service company specialising in outsourced services to Africa and the UK.
