angola regulatory and tax framework...withholding tax determined by special regime for taxation of...
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AngolaRegulatoryand Tax framework
Angola Oil & Gas
June 2019 www.pwc.com/ao
PwC
Agenda
Overview of Angola’s business environment
2PwC
Oil & Gas Companies - Specific Framework
Regulatory and Tax Framework 3
15
1.Regulatoryand Tax framework
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Business vehicles
Incorporated company Independent entity and allowed to carry out commercial activities
Branch Dependent entity and allowed to carry out commercial activities
Representative office Dependent entity and not allowed to carry out commercial activities
Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
Regulatory & Tax Framework
Regulatory& Tax
Framework
Investment law regimes
Prior declaration regime General regime: applies to investments not covered by the special regime
Special regime Applicable only to certain businesses in priority sectors
How can the investment be made?
Importation of funds from abroad
Funds in local or foreign currency deposited in non-resident bank accounts domiciled in Angola susceptible of being transferred
abroad pursuant to the Foreign Exchange Law
Application in the Angolan territory of profits in the context of a reinvestment
Importation of machinery, equipment, accessories and other tangible assets
Technology and know-how
Indirect investment (e.g. shareholders’ loans, supplementary capital contributions, trademarks)
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Corporate Income Tax
Investment Income Tax
Employment Income Tax
Consumption Tax & VAT
Stamp Tax
Real Estate Transfer Tax -SISA
Real Estate Income Tax
Social Security
Special Contributions
Tax Regime
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Framework
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Regulatory & Tax Framework
Taxes on Income
Taxes on Consumption/Value
Property Taxes
Others
Primary taxes
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Entities Income
Taxpayers with head-office or place of effective
management in Angola.Worldwide profits.
Taxpayers without head-office or place of effective
management in Angola, with a permanent
establishment herein.
Profits attributable to the PE.
Sales in Angola of goods or merchandise
of the same or a similar kind to that sold by the PE.
Any other business activity that is of the same
or similar kind to that conducted by the PE.
Taxpayers with head-office or place of effective
management outside Angola, without a permanent
establishment therein.
Withholding tax determined by special regime
for taxation of services.
CIT is levied, currently at a 30% rate,
on the profits deriving from business
activities carried out in Angola
by resident entities or non-resident
entities with a tax permanent
establishment (PE), as defined
by Angolan domestic legislation.
Regulatory & Tax FrameworkCorporate Income Tax
Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
30%
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Regulatory & Tax FrameworkCorporate Income Tax
Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
Under the tax regime of Corporate
Income Tax, the following earnings
are subject to tax payments.
Subject income Rates
Sales of the first semester (first six months) – provisional payment 2%
Services rendered by entities with head-office, place of effective management
or permanent establishment (excluding raw materials, associated components
and materials) are subject to withholding tax
6,5%
Services rendered by entities without head-office, place of effective management
or permanent establishment are subject to withholding tax6,5%
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Section AInvestment income includes the following:
• Interest on credit facilities
• Interest on loans
• Income derived from deferred payments
Section BInvestment income includes the following:
• Dividends
• Capital gains
• Bond interest
• Treasury bond interest
• Interest on loans, granted by shareholders
• Royalties
• Etc.
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Regulatory & Tax FrameworkInvestment Income Tax
Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
The Investment Income Tax Code
covers interest, dividends, royalties,
and other income of a similar nature,
dividing such income into two taxable
sections.
15% Tax rate 10% Tax rate
Tax rates of 15% or 5% when the type
of income meets certain conditions
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Regulatory & Tax FrameworkEmployment Income Tax
Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
Group Type of Income Rates
A Employment Income0% – 17%
(depending on the gross income assessed)
B Self-Employment Income10.5%
(effective rate)
C
Business Income
(industrial and commercial activities)30%
(standard rate)
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Regulatory & Tax FrameworkValue Added Tax
Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
• Enters into force in 1 July 2019, with a transitional period until 31 December 2020
• The VAT regime in Angola will be a modern one, with a single VAT rate of 14%
• The Consumption Tax is revoked and the Stamp Tax Law has been amended
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Other tax rates
Stamp Tax0.1% - 1%
(1% on receivables)
Real Estate Transfer Tax - SISA 2%
Real Estate Income Tax 15% (leased real estate)
Up to 0.5% (non leased real estate)
Social Security 3% (employee)
8% (employer)
Special Contribution on foreign technical assistance services 10%
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Regulatory & Tax FrameworkOther Taxes
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Regulatory& Tax
Framework
Regulatory & Tax Framework
Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
Goods
• Operations for the payment of imported or exported goods
• Registration with the Exporters and Importers Registry (“REI – Registo de Exportadores
e Importadores”) is required
• Other formalities and authorizations depend on the amount, form of payment and nature
of the goods
Capital
• Transactions made under contractual arrangements between residents and non-
residents, including credit and loan transactions, foreign investment operations
and capital transactions of personal nature
• Subject to prior approval by the BNA, regardless of the amount
Invisible
items
of trade
• Services and other transfers (e.g. transport, insurance, travelling, commissions
and brokerage, trademarks, salaries and other personal services costs, income
payments) are subject to prior approval by the BNA when the amount is higher
than AOA 300M for services providers to the oil and gas industry
• Technical assistance and management services agreements are subject
to prior approval by the Ministry of Economy if the amount is higher than AOA 300M
for services providers to the oil and gas industry
• Dividends exceeding the annual amount equivalent to AOA 500M are subject
to prior authorisation by the BNA
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Regulatory& Tax
Framework
Regulatory & Tax Framework
Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
Provision
of services
to O&G
companies
• Non-competitive regime: activities exclusively reserved to Angolan companies (held in,
at least 51%, by Angolan citizens)
• Semi-competitive regime: activities which foreign companies may engage in provided
that they do so in association with Angolan companies
• Competitive regime: all oil-related activities that are not listed under the non-competitive
or semi-competitive regimes.
Tender
Process
• Angolan and foreign companies must be duly registered with MIREMPET as service
providers to the O&G industry.
• The contracting of services and acquisition of goods for oil operations should be made
by means of a tender procedure, as follows:
• If services or goods are in an amount lower than USD 1.000.000,00, the O&G company
should only send a mere communication to ANPG
• A tender must be launched for agreements in excess of USD 1.000.000,00, but the
selection of the successful bidder is at the discretion of the operator.
• If the amount of the contract exceeds USD 5.000.000,00, ANPG will not only monitor the
procedure but also validate the awarding decision.
Recruitment
and training
• The recruitment of foreign employees by services providers to the O&G sector
is treated as exceptional and companies need to demonstrate to MIREMPET that there
are no Angolan candidates with the required qualifications and experience.
• Service providers are required to sign the so-called “Contrato-programa” with
MIREMPET
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A new Legal Regime on Foreign Citizens was recently published and will enter into force on 22 of July, with the
following main changes:
• Elimination of the ordinary visa, which scope is now included in the tourist visa. The tourist visa will allow multiple
entries and a stay up to 30 days, renewable twice for an equal period of time
• Investors' visa replaces privileged visa, but it still valid for a period of 2 years, renewable for equal periods of time.
However, it now allows the obtainment of a temporary residency authorization after 3 years
This new legal regime is still to be further regulated.
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Framework
Regulatory & Tax Framework
Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
Labor
In general, non-resident foreign employees may not represent more than 30% of the total workforce, which means that a minimum of
70% of the employees must be Angolan nationals
Non-resident foreign employees are required to sign a local employment agreement with the Angolan company, which is subject to a
special regime.
Labour and foreign exchange legislation allow the transfer abroad of the salaries of non-resident foreign employees.
Immigration
The only visa allowing its holder to undertake remunerated activities in Angola is the work visa, which is valid for 1 year, being
renewable for equal periods until the end of the contract
The granting of a work visa is subject to the provision of a deposit made by the employer in order to ensure the costs of a potential
repatriation of the employee
2.Oil & Gas Companies - Specific Framework
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Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
Oil & GasSpecific Framework
Specific rules and regulations
Petroleum operations may only be exercised under a prospecting licence issued by the MIREMPET, or pursuant to an oil concession awarded by the Government
For the performance of the authorized petroleum operations, it is required an association between Angolan or foreign companies and the National Agency
for Petroleum, Gas and Biofuels (ANPG), which may take the form of (ii) a commercial company, (ii) consortium, (iii) Production Sharing Agreements
or (iv) Risk Services Agreements
• Private Investment Law is not applicable to O&G companies
• Foreign O&G Companies should finance fully in foreign currency their share of the investment necessary for the execution of petroleum operations. Consistently,
Angolan financial institutions are not allowed to grant credit, either in national or foreign currency, to foreign investor companies
There is a specific foreign exchange regime for Oil & Gas companies, according to which:
• Companies should open accounts with banks domiciled in Angola (i) in foreign currency to settle any tax obligations and to pay goods and services
to non-residents and (ii) in national currency for liquidating goods and services to resident entities.
• They are authorized to transfer abroad dividends and profits to their foreign shareholders
• No authorization is required for the execution of foreign exchange transactions, with the exception of capital operations consisting of an investment abroad
• Every quarter, O&G companies should provide to the BNA a list of the contracts for goods and services executed with non-resident entities
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Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
Oil & GasSpecific Framework
Law 13/04 of 24 December establishes the tax regime
applicable to the entities which carry out activities of
exploration, development, production, storage, sale, exports,
treatment and transportation of crude oil and natural gas.
The tax charges applying to the entities are the following:
• Petroleum Production Tax
• Petroleum Income Tax
• Petroleum Transaction Tax
• Surface Fee
• Levy for the training of Angolan personnel
The entitiesare not exemptfrom other taxesor fees, unlessthey have beenexpressly indicated.
“
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Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
Oil & GasSpecific Framework
Tax Taxable income Rates
Petroleum Income Tax
Taxable income generated by activities of exploration, development,
production, storage, sales, exports, treatment and transportation of petroleum,
wholesale trading and other activities.
50%
(PSA)
65.75%
(RSA and other forms of
association)
Petroleum Transaction Tax
Petroleum and other substances produced under Production Sharing Agreements
are not subject to these taxes.
70%
Petroleum Production Tax 20% (10%)
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Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
Oil & GasSpecific Framework
Other Taxes Taxable income
Surface charge Due at an annual amount of USD 300 per Km2
Training Levy
The training levy is imposed differently for oil companies (and depending on the phases of the petroleum
activities carried out) and for the suppliers of goods and services to oil companies.
• USD 100,000 – to oil companies that only have research license
• USD 300,000 – to oil companies that are carrying out research activities
• USD 0.15 per oil barrel – to oil companies that are in a production stage
• USD 0.15 per oil barrel – to oil companies that carry out oil refining activities
• 0.5% of the annual turnover – to companies that carry out storage, transportation,
• distribution and commercialization activities of crude oil
• 0.5% of the values of contracts – to companies that render services to oil companies on a
• regular basis
Importation of assets to be used directly and exclusively in the oil activities are exempt of all import-related duties, with the exception of a statistical fee of 0.1% and
stamp duty at 1%.There are lists of exempt equipment. – Law 11/04, 12 November.
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Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
Oil & GasSpecific Framework - VAT Specifics
• Items where input VAT is not deductible:
• Supply of water and energy;
• Services relating to electronic communications
and telecommunications;
• Hotel and accommodation services;
• Lease of equipment, except if it qualifies as royalty;
• Consultancy, legal, tax, financial, accounting, IT services;
• Security services; and,
• Lease of vehicles
• A captivation regime exists for O&G Operators.
VAT is mentioned in the invoice, but it is not paid
to the supplier – rather directly to the State.
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Oil & GasSpecific Framework
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Bidding
Process Impact
Aims to streamline the
process of assigning
the status of Associate
of the National
Concessionaire and
simplify the process
of contracting services
and acquisition of
goods in the oil sector.
Presidential Decree
nr. 86/18, 2 April
Marginal Field
Legislation
Establishes the
incentives and
procedure for
adjusting contractual
and fiscal terms
applicable to Qualified
Marginal Areas.
Presidential Decree
Law nr. 6/18, 18 May
Natural Gas
Legislation
To create a legal
and fiscal regime base
that fits and promotes the
exploitation of natural gas,
at the same time ensuring
the necessary flexibility
and adaptability to allow
the economic viability
of future projects.
Presidential Decree Law
nr. 7/18, 18 May
Expansion of
Development Zones
Creates an
exceptional regime for
conducting additional
exploration activities
to be performed on
Development Areas in
order to maximize
production levels.
Presidential Decree
Law nr. 5/18, 18 May
Abandonment
of Wells
Defines abandonment
and decommissioning
rules for all upstream,
onshore & offshore
facilities
Presidential Decree
nr. 91/18, 10 April
Oil & Gas Companies - Specific FrameworkRegulatory and Tax Framework
PwC
Contacts
Overview of Angola’s business environment
22
Cristina TeixeiraTax Director | Tax
+244 227 286 109
Luís AndradeTax Director | Merger & Acquisitions
+351 225 433 175
Building relationships, creating value
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