WITHHOLDING TAX IN AFRICA-UNDERSTANDING THE CHALLENGES

In Africa, where voluntary compliance is low, countries have long used withholding tax as an efficient tax collection mechanism. Withholding tax is also increasingly being used as a strategic tool to broaden the revenue base and boost government resources. South Africa has joined the growing trend b...

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Bibliographic Details
Published in:Journal of International Taxation 2015-04, Vol.26 (4), p.49
Main Authors: Olaogun, Dele A, Ndzipo, Mzukisi
Format: Article
Language:English
Subjects:
Capital gains
Compliance
Dividends
Income taxes
International taxation
Multinational corporations
Nonresidents
Permanent establishment
Royalties
Tax collections
Tax rates
Tax refunds
Tax revenues
Tax treaties
Taxpayers
Treaties
Withholding taxes
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Summary:In Africa, where voluntary compliance is low, countries have long used withholding tax as an efficient tax collection mechanism. Withholding tax is also increasingly being used as a strategic tool to broaden the revenue base and boost government resources. South Africa has joined the growing trend by introducing withholding tax on capital gains, dividends, interest, and service fees paid to nonresidents. This trend can create numerous issues for multinational companies (MNC) investing into Africa. Consequently, MNCs operating on the continent must understand the withholding tax landscape so that they can successfully navigate the pitfalls. Withholding tax in Africa can present challenges for the unwary foreign investor. With proper planning, however, it is possible to manage the complexities and limit the tax leakages that could result from application of withholding tax in the region. MNCs doing business or contemplating investments in African jurisdictions should consider their withholding tax exposures when designing or restructuring their business operating models.
ISSN:1049-6378