VAT revolutionizes tax base structure

Luanda Angola once again registered, in 2019, a tough economic year marked by the adoption of several measures aiming to re-launch the economy and achieve an increase in the tax base, with highlight on the implementation of the Value Added Tax (VAT).

After several postponements, since last October 1st Angola joined the SADC countries that charge the VAT, having an initial and unique tax rate of 14% (one of the cheapest in the region), based on the reforms that got started since 2010.

With the VAT, that replaced the Consumption Tax, the Executive intends to expand its tax base and make it become the main source of state revenue.

The postponing of the VAT implementation, from July 1st to October 1st, forced the executive to lose huge amounts of public funds, in a total of AKz 89 billion.

It’s important to remind that until last October 1st, Angola was the only one of the 16 SADC member states that did not have such a tax, whose rate is levied on all transactions of goods and services and imported products.

Being a new process, its implementation generated fear, doubt and uncertainties to the national economic players, which forced several negotiations between the government and the various economic agents, including entrepreneurs.

At that time, businesspersons used to argue lack of proper preparation in terms of technology and human resources to incorporate this new tax.

On its initial implementation phase the General Tax Administration (AGT) prioritized the big contributors, framing them in the General Regime.

For the other clients the transitional and non-subjection regime are an obligation from 2020 onwards.

In the start-up, in addition to the 421 big taxpayers selected, another 1,800 transitional regime companies voluntarily joined the process.

Speculative Bubble

Weeks before the entry into force, many traders, especially those not allowed to charge VAT, took advantage of the context to engage in speculative bubble.

A few days after its entry into force, the market witnessed an almost widespread rise in prices, generating some misunderstanding and social debate in the face of the sharp fluctuation in prices.

Similar to Luanda, other regions saw price increases, which led taxpayers to hypothetically point to VAT as the cause of this change.

Four days after the entry into force of VAT, related services registered over 453 complaints from consumers warning about price speculation in the market.

On-the-spot investigations showed that initially, along with VAT, excise duty (10 per cent) and stamp duty (1 per cent) were still being jointly charged.

To cope with speculation, multisectoral teams in the country’s 18 provinces worked with major retail outlets, warehouses, markets and shops.

The insistence of some trader on illegally charging VAT on the sale of goods and services has led to the closure of 31 businesses in the capital alone.

According to the authorities, there was no basis for traders to raise prices, especially for staple products such as rice, cooking oil, milk, wheat flour, corn, bass drum, beans and others, as they are exempt from customs duties.

Refund to Taxpayers

However, as regards reimbursement, the General Tax Administration (AGT) promised that it would be able to always return the money to the taxpayer who has the requested tax credit in cash within 90 days.

For the taxpayer’s legal certainty, if the tax authority is late with the legal repayment procedures, i.e after three months, then it will obligatorily return with compensatory interest.

If the taxpayer opts for the credit certificate, the company can offset this credit by another tax, such as Income Tax (IRT), Urban Property Tax (IPU), among others.

In terms of deadlines, for the credit certificate, AGT has 45 days to review and deliver this document to the taxpayer.

For this purpose, a specific account has already been created, where VAT revenue is now deposited, with 60 per cent intended for public expenditure and 40 per cent to return taxpayers’ claims as refunds.

From January 2020, companies will start to submit electronic invoices, which will be controlled in detail, in terms of monitoring the collection of this tax.

For the year 2021, all taxpayers with an annual turnover or transaction volume equivalent in kwanzas to USD 250,000 will be required to join the VAT contribution process.

Source: Angola Press News Agency