You are on page 1of 9

Investing in Africa Angola

This information was last updated in May 2006 For further details and updates, please contact: Eduardo Queiroz Phone: +244 222 391 808 Fax: +244 222 391 972 Luis Belo Phone: +351 (21) 034 5000 Fax: +351 (21) 034 3343

Page - 1 -

Investing in Angola
Forms of Business Organisation In establishing a business in Angola, a foreign company may choose to form an Angolan company, operate through a branch, or enter into a joint venture with a local partner. Alternatively, a company can appoint a local representative, which can be either an individual or a company, to promote its business, or it can decide to open a representative office. The operations of the representative office are limited to the promotion of the business of the foreign company; it is not recognised as a local commercial entity and therefore may not conduct business in its own name. There are two forms of companies in Angola: the private limited liability company (sociedade por quotas) and the public limited liability company (sociedade anonima). A public company must have a minimum of five shareholders. In principle, any foreign investment must be approved by the National Private Investment Institute. Certain industries, such as telecommunications and armaments, are closed to private investors. Exchange Controls The Angolan monetary unit is the Kwanza (AKZ). Exchange controls are administered by the central bank (Banco Nacional de Angola) and are reviewed on a regular basis. Any import or export of funds must be in accordance with the rules established by the central bank. In particular, certain transactions, such as the payment of dividends must be authorised by the Ministry for Finance. However, under the countrys foreign investment legislation, foreign investors can be guaranteed the free repatriation of profits and dividends arising in Angola. The importation of goods into Angola requires an import license granted by the Ministry of Commerce. Both foreign and local companies are allowed to maintain foreign currency bank accounts. The use of such funds is regulated by the central bank. Companies operating in the petroleum and mining sectors are subject to more favourable terms under the exchange control regulations. Local Participation or Management Requirements There are no nationality or residence requirements for shareholders, and companies may be 100% foreign owned. The Commercial Law applies to all Angolan companies irrespective of ownership. Investment Incentives To attract foreign investment into Angola, the country offers foreign investors various incentives and guarantees under its private investment legislation. Special incentives are also offered under tax regulations for projects located in rural areas that will aid the development of those areas. The recently enacted private investment law, gives tax relief to non-residents who invest $100 000 or more in specifically identified sectors such as agriculture, fishing, civil construction; health and education, infrastructure, and heavy transport equipment for cargo and passengers. Relief from customs duties, corporate income tax, capital gains tax and transfer duties is given. The amount of relief given is dependent on the geographical location of the investment made.

Page - 2 -

Taxation of Resident Entities


A company that is resident in Angola (a company that has its head office or effective or continuous operations in Angola) is subject to tax on its worldwide profits. Corporate Income Tax Rates All companies carrying out activities in Angola, whether or not they have a local office, a local representative, or any other form of corporation in Angola, are subject to corporate income tax (imposto industrial). Taxable income is the net income (gross income minus all costs incurred in Angola) reported in a companys financial statements, adjusted for tax purposes. For most companies, the effective tax rate is 35%. Since January 1998, all companies that have signed a contract or subcontract with a resident company to provide services in Angola are subject to corporate income tax. The taxable income is a percentage of the total value of the contract. In the case of construction work the taxable income will be 10% of the total invoice and for services the taxable income is 15% of the total invoice. The tax rate applicable is 35%. A withholding tax applies in such cases. Every time the resident company makes any payment to the service company, it must withhold tax at the rate of 3.5% (for construction service companies) or 5.25% (for service companies) of the total invoice. If the service company is a resident company, it may deduct from the annual corporate income tax, the amounts already withheld by its clients. If the service company is non-resident, the amounts withheld by the local clients are the only tax due. Special tax regimes apply to the petroleum and mining sectors. In the petroleum sector, the regime may vary based on the contract between the foreign investor and the state oil company, Sonangol. Tax rates applicable to the sectors are shown in Table 1. Taxable Income Taxable income is the income reported in a companys financial statement, as adjusted for tax purposes. Inventory Valuation There are no special rules for inventory valuation; the tax authorities will usually accept the system adopted by the taxpayer. Dividend Income In general, companies are subject to tax on the gross amount of dividends received. An exemption applies if the recipient has owned at least 25% of the capital of the payer for at least two years. A 10% withholding tax is imposed on taxable dividends and may be credited against income tax due on the companys annual return. Foreign-source Income No relief is granted for foreign taxes paid by an Angolan taxpayer. Capital Gains Capital gains are included in taxable income and subject to tax at the normal corporate income tax rate. Exchange Differences Foreign exchange gains and losses are taxed or relieved when they are realized. Deductions Expenses incurred in the production of income are deductible from a companys gross revenues. Depreciation Tax depreciation of fixed assets is allowed in accordance with a fixed table. The straight line method is used. The rates allowed are shown in Table 2. Interest Interest incurred during a tax year is deductible from the companys gross income for tax purposes.

Page - 3 -

Management Fees Management fees are generally deductible, but the tax authorities may question fees that appear excessive. Management support in the form of technical services, studies, financial assistance, or procurement is usually deductible without limitation. Taxes Any tax payments not related to income tax are deductible for income tax purposes. Provisions Provisions for inventory losses or bad debts can be included as a cost in the year in which the provision is established and are deductible from taxable income, subject to certain limitations. Tax treatment of Losses A company that incurs a net loss during a tax year may carry forward the loss against taxable income in the following three years. Losses may not be carried back.

Taxation of Non-Resident Entities


Non-resident entities that derive revenue from activities in Angola are subject to corporate income tax as described under Corporate Income Tax Rates. (Refer to Taxation of Resident Entities.)

Tax Treatment of Groups of Companies


Under Angolan law, each company is a separate legal entity and is treated as a separate taxpayer. Group taxation, as such, does not exist. However, the tax authorities have the power to adjust the taxable income of any taxpayer that conducts transactions with a related taxpayer.

Tax Treatment of Branches and Subsidiaries


A non-resident with a permanent establishment (such as a branch) in Angola is subject to corporate income tax only on the profits derived by the permanent establishment in Angola.

Corporate Assessments and Payments


The tax year is the calendar year ending on 31 December. Corporate income tax must be paid annually based on an income tax return, which the taxpayer files with the tax authorities together with its financial statements. The tax return must be submitted by the 31st of May of each year for the previous tax year. The taxpayers tax registration number (obtained when the taxpayer registers with the Ministry of Finance) must be used on all documents submitted. In the case of a joint venture, each partner must file a separate tax return and is responsible for paying the tax on his share of the joint ventures profits. A company must make a small provisional tax payment at the beginning of each tax year. This payment will be deducted from the final tax payment due when the companys tax return is filed.

Tax Treatment of Individuals


Individuals, whether resident or non-resident, are taxed on all income derived in Angola from employment or personal business. Resident individuals must also declare to the tax authorities any income earned from services performed outside the country.

Page - 4 -

Treatment of Families Taxable income is computed individually for each member of a family. Personal Income Tax Rates An individuals employer withholds personal income tax from his or her salary or wages. Amounts withheld are final. The rates applying to monthly income are shown in Table 3. Residents and non-residents are subject to tax on salaries and business income at the same rates. Taxable Income Taxable income includes all of the individuals revenue from employment or self-employment in Angola, regardless of the origin of the income, location of receipt, or currency used. Employment Income Employment income includes an individuals salary or wages, plus any bonuses, allowances, or benefits, in cash or in kind, received from employment. However, if the benefits received do not exceed the level of benefits granted to public servants, the employee will not be subject to tax on them. Employment income earned by an employee of a diplomatic mission or international organization is exempt from tax if the home country of the organization or mission offers reciprocal treatment. Dividend Income Individuals are subject to a 10% withholding tax on the gross amount of dividends received from a resident company. Business Income An individuals income from a business is taxable in the same manner as a companys income (see Taxation of Resident Entities). Capital Gains In theory, capital gains are subject to tax at normal personal income tax rates. In practice however, the tax authorities may not seek to tax such gains. Deductions and Reliefs Self-employed workers can deduct the basic costs associated with self-employment, such a rent, telephone bills, motor vehicle costs and insurance.

Personal Assessments and Payments


Employees do not normally have to submit a tax return as the employer is responsible for computing and deducting any tax due from the employees salary. Self-employed workers must file income tax returns under rules that are similar to the ones applicable to companies (see Corporate Assessments and Payments).

Withholding Taxes
Basic Rates Resident companies must withhold tax from payments of dividends and royalties at the rate of 10%. A 15% rate applies to payments of interest. These rates apply to resident and non-resident recipients, whether they are individuals or companies. Rates Under Double Tax Treaties Angola has not concluded any treaties with other countries that would reduce or eliminate the Angolan tax payable in cases of double taxation.

Page - 5 -

Other Taxes
Stamp Duties In general, most documents and agreements are subject to stamp duty at variable rates. Rates range from 0.01% to 10%. All receipts from clients are subject to stamp duty at a tax rate of 1% of the value of the receipt. Social Security Contribution A social security contribution is levied on the total amount received by an employee as remuneration. The total rate is 11%; the employer withholds 3% from the employees pay and pays the remaining 8% itself. For expatriates, payments are not compulsory, provided that they contribute to the social security program of another country. Customs Duties and Consumption Tax Almost all goods imported are subject to customs duties. Rates vary depending on the product imported. Imported goods are also subject to a consumption tax. Rates vary from 2% to 30%. Transfer duties A SISA tax is payable on the acquisition or registration of buildings. Rates vary from 2% to 10%.

Page - 6 -

Tables
TABLE 1: TAX RATES FOR THE PETROLEUM AND MINING SECTORS
TYPE OF TAX Petroleum sector: Joint ventures: Petroleum production tax Petroleum income tax Petroleum transaction tax Production sharing agreements: Petroleum income tax RATE (%)

10% / 20% 65.75 70 50

Mining Sector: Royalty Precious stones and minerals Semiprecious stones Iron and metallic mineral Other minerals Mining income tax Surface tax (per 2 square kilometers): First two years Third year Fourth and fifth years

5 4 3 2 35 US$1 US$3 US$4

TABLE 2: RATES OF DEPRECIATION

CATEGORY Industrial buildings Administrative and commercial buildings Furniture Heavy machinery and tools Light machinery and tools Vehicles Intangible fixed assets
* The rate is 5% under the special regime for the petroleum sector ** The rate is 25% under the special regime for the petroleum sector

RATE 4* 2 10 10 16.66** 33.33 33.33

NOTE: The depreciation for the JV in the petroleum is the same used for the other industries. For the Production Sharing Agreement it is 20% to 25% depending on the contract

Page - 7 -

TABLE 3: PERSONAL INCOME TAX RATES ON MONTHLY INCOME

BAND OF MONTHLY TAXABLE INCOME (KZ) 0 8,500 8,501 11,000 11,001 16,000 16,001 21,000 21,001 26,000 26,001 36,000 36,001 56,000 56,001 76,000 >76,001

RATE OF TAX ON BAND (%) 2 4 6 8 10 12.5 14 15

CUMULATIVE TAX ON UPPER LIMIT OF BAND (KZ) 50 250 550 950 1,950 4,450 7,250

Page - 8 -

www.deloitte.com Deloitte Touche Tohmatsu is an organisation of member firms devoted to excellence in providing professional services and advice. We are focused on client service through a global strategy executed locally in nearly 150 countries. With access to the deep intellectual capital of 135,000 people worldwide, our member firms, including their affiliates, deliver services in four professional areas: audit, tax, consulting, and financial advisory services. Our member firms serve more than one-half of the world's largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies. Deloitte Touche Tohmatsu is a Swiss Verein (association), and, as such, neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other's acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names "Deloitte," "Deloitte & Touche," "Deloitte Touche Tohmatsu," or other, related names. The services described herein are provided by the member firms and not by the Deloitte Touche Tohmatsu Verein. For regulatory and other reasons, certain member firms do not provide services in all four professional areas listed above. 2007 Deloitte Touche Tohmatsu. All rights reserved. DISCLAIMER This document is intended to provide general information on a particular subject or subjects and is not an exhaustive treatment of such subject(s). Accordingly, the information in this document is not intended to constitute accounting, tax, legal, investment, consulting or other professional advice or services and should not be relied upon as a substitute for such advice. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. This material has been prepared by professionals in the member firms of Deloitte Touche Tohmatsu. While all reasonable attempts have been made to ensure that the information contained herein is accurate, Deloitte Touche Tohmatsu accepts no responsibility for any errors or omissions it may contain. Your use of this information is at your own risk. You assume full responsibility and risk of loss resulting from the use of the information contained on this CD. None of Deloitte Touche Tohmatsu, or any of its national practices or affiliates, or any partners, principals, stockholders, or employees of any, thereof will be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of the information contained on this CD. The information in this document should be used for informational purposes only. The document is for non-commercial purposes only and may not be sold for reward. Any copy of this document or portion thereof must include this copyright notice and disclaimer in its entirety.

Page - 9 -