The COVID-19 pandemic has affected every country in the world, but in different ways and to varying degrees. The public health system has been the main concern and challenge at all levels, with one national health system after another collapsing, unable to give an immediate response or manage overburdened hospitals. This question is increasingly relevant since risk mitigation is the main function of modern governments.
In addition, abrupt changes in consumption patterns and the temporary disruption of production chains have considerably slowed down already sluggish economic growth. The Portuguese-speaking African countries, namely Angola and Cabo Verde, the first highly dependent on foreign investment and extractive industries and the second on tourism, were no exception and are also facing a recession.
Temporary tax measures to support businesses and families have been adopted to overcome this problem and revive the economy.
Presidential Decree 98/20 in Angola extended the deadline for companies included in Groups A and B to prepare their financial statements/accounts and submit their industrial tax declarations. A 12-month VAT tax credit has been approved on the amount of tax payable on the importation of goods and raw materials used for the production of goods listed in Presidential Decree 23/19.
The law also postponed the payment of the social contribution payable by the employer (8% of the employee’s salary) to Q2/2020. Cabo Verde’s Decree-Law 36/2020 approved a moratorium on taxes to be paid between April 1, 2020 and December 31, 2020, extended the deadline for filing annual tax returns and allowed corporate taxpayers to pay the VAT in several installments that can demonstrate a real slowdown in business, namely a reduction of at least 30% in turnover.
The state budget proposals for 2022 currently under discussion include structural measures in addition to these temporary measures. In Angola, the most important proposal includes changes to VAT rates. A rate of 7% is proposed for hotel and restaurant services. To be eligible, service providers must issue invoices through electronic invoicing systems, submit tax returns for previous tax years, and register the properties and motor vehicles they own or use for the development of their business. Rates of 5% and 7% are proposed for certain goods, in line with what had already been put in place by the 2021 State budget. The difference is that in 2021 there was a single reduced rate of 5% and the list of eligible goods was shorter.
Legal persons without registered office, effective management or permanent establishment in Angola could, under the new budget, benefit from a reduction in the withholding tax rate levied on ancillary services, from 15% to 6.5%. Cabo Verde’s draft state budget for 2022 proposes significant changes to VAT, starting with a reduced rate of 10% on accommodation services, a reduced rate of 8% on electricity distribution and water supply to end users, and an increase in the standard VAT rate from 15% to 17%. The draft budget, however, maintains the tax incentives for start-ups, first-time job seekers and electric mobility already approved in last year’s budget.
In short, like all countries, Angola and Cape Verde have suffered the economic impact caused by the pandemic, and after implementing temporary fiscal measures, they hope that their state budget proposals for 2022 will revive the economy.
It is not yet certain that all these measures will stand the test of parliamentary discussions, but it is clear at this stage that governments will continue to try to modify their tax systems to better respond to the international situation.
carlos lobo
Founding Partner, Lobo Vasques
Tiago Barbosa
Consultant, Lobo Basins
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