Much progress, but still a scarcity of African Double Taxation Agreements

A number of tax treaties involving key territories in Africa have recently entered into force, however, no one jurisdiction has an excellent treaty network with African countries and the number of tax treaties between African countries remains low.

Tino Saladino, who heads up the PricewaterhouseCoopers Africa Tax Desk, says that when a South African based company or foreign multinational is expanding into Africa, it often considers using an offshore holding company with (inter-alia) a good treaty network with African countries, in order to help reduce withholding taxes on dividends, interest and royalties, and in some instances, gains subject to tax, in the counterparty territories.

Saladino highlights that both South Africa and Mauritius each have reasonably good tax treaty networks with the rest of Africa, “However, for South African companies, obtaining exchange control approval for foreign direct investments, continues to be a hindrance.”

While countries such as South Africa and Mauritius have double taxation treaty networks with various African countries, there are countries such as Angola and the DRC that do not have tax treaties with any counterparties. “This is mainly because the direction of investment is very much inwards and there is no great incentive for these countries to enter into these types of accommodating arrangements” explains Saladino.

Apart from South Africa and Mauritius, some African countries have double taxation agreements, due to historic links with France, Belgium and the Netherlands. However, between African countries themselves, Saladino says tax treaties are quite scarce and this can often limit continental trade and investment. He would like to see more inter-African tax treaties.

The most recent key tax treaties concluded by African countries include the Nigeria-China double tax treaty effective January 1, 2010; the ratification of the treaty between the United Kingdom and Libya on 10 February 2010; the initialling of the Egypt and Mauritius income tax treaty in Port Louis on 30 January 2010, and on 30 March, Belgium and Rwanda signed a revision to the Belgium-Rwanda income and capital tax treaty of 16 April 2007.