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Africa Tax

Overview

Understanding the diverse tax systems of 54 different countries on the African continent can be challenging. Our team of Africa tax specialists advise on investments in Africa including:

  • designing and implementing appropriate investment vehicles;
  • minimising tax leakage on cross-border cash flows between African and foreign holding company jurisdictions; and
  • managing the tax implications of exiting a particular investment.

We have an extensive best friend network of many of the leading law and tax advisory firms in Africa. These relationships offer a competitive advantage as they enable us to project manage the largest and most complex cross-border transactions in Africa.

Company income taxes and withholding taxes

Most African countries operate source-based tax systems as compared to the residence-based system used in more developed countries. Because of this, African countries tend to impose high taxes on income (up to 45%) and high withholding taxes (up to 35%) on cross-border cash flows, including dividends, interest, royalties and management and consultancy fees.

Minimising such taxes through the use of appropriate tax treaties is challenging for a number of reasons including the facts that:

  • most African countries have few or no tax treaties;
  • if there are tax treaties, they are often based on the United Nation's Model Convention, which generally does not materially reduce the taxing rights on revenue flows originating from the African country; and
  • if there is a tax treaty in place that reduces withholding taxes, the source country does not always interpret the treaty correctly and may levy a withholding tax even if the tax treaty does not allow it to do so.

There is not a "one-size-fits-all" tax structure for African investments. However, with a sound understanding of the tax systems of the countries involved and careful tax planning, it is generally possible to reduce the tax cost of doing business in Africa.

Key Contacts
Nola
Brown
Position:
Associate Director
Telephone:
+27 11 530 5454
Department:
Tax
Email:
nola.brown@webberwentzel.com