Changes to the VAT Code
It was recently published Law 14/23, of December 28th – Law on the Changes to the VAT Code, that established several changes and introductions to such Code, including the republishing of the same. One of the aims of such Law was to include in the VAT Code several changes to this tax that were “spread” among many other diplomas, including the last three State General Budgets. Below we list sone of the main changes introduced:
i. Replacement of the VAT Non-Subject Regime by the Exclusion Regime and introduction of the Simplified VAT Regime into the Code
ii. The transfer of services and services ancillary to other transfers of goods or services are no longer an integral part of the same
iii. Offers made in accordance with commercial usage with a unit value equal to or less than Kz 32,000.00 and a global annual value less than or equal to Kz 2,000,000.00 are now excluded from the concept of transfer of goods. The aforementioned exclusion no longer extends to duly justified stock losses
iv. The concept of taxation of international electronic commerce in the national territory is introduced, which always occurs when the purchaser is a tax resident there or the payment originates in the national territory, or is intermediated by a financial institution established there. The assessment and payment of tax is of the responsibility of the entities that own or manage digital or electronic platforms. This obligation for non-resident entities may be fulfilled through the appointment of a tax representative or through the option for simplified registration in the General Taxpayer Registry, under terms to be regulated. It should be noted that, in the latter case, the tax that has been assessed under international electronic commerce before the implementation of the simplified registration system can be paid afterwards such implementation without any penalty.
v. Clarification that the tax is payable with the issuance of the invoice if within the deadline for issuing the same, according to the Legal Regime of Invoices (RJF), within the limit of that period in accordance with the same RJF, or if receipt occurs before its issuance (advance payments)
vi. Confirmation of exemption in the rental of properties, with the exception of the provision of accommodation services within the scope of hotel and similar activities
vii. Late payment interest due to late fulfillment of credit obligations by customers of financial institutions is now exempt from tax
viii. Clarification of the concept of tax-exempt public passenger transport services, as well as the provision of educational services and medical health services which are tax-exempt. The medical equipment and materials that are now exempt from tax are now only those listed in Annex IV to the Code
ix. The taxable value includes (i) the amount paid for participation in games of Lotteries and Betting (and not the respective prize) and; (ii) in condominiums, only the amount paid corresponding to the management or administration fee for the same. Commercial discounts and rebates stated on the invoice are excluded from the taxable value. These discounts do not cover rappelling bonuses or discounts
x. In addition to the current general tax rate of 14%, rates of 7% are now introduced into the Code for the Simplified Regime and Hotel and Similar Services; 5% for the importation and transmission of widely consumed food and agricultural inputs listed in Annexes I and II of the Code; and 1% for imports and transmissions of goods subject to the special regime applicable to the Province of Cabinda, with the exception of those contained in Annex III of the Code
xi. With regard to captive VAT, it was clarified that telecommunications operators required to captivate 50% of the tax contained in invoices are only those holding a unified global title. On the other hand, the obligation to captivate VAT does not apply to transactions carried out between entities required to captivate VAT at 50%.
xii. Still on the subject of captive tax, when it is not captive by the entities obliged to do so, then the responsibility for paying it reverts to the invoice issuer, who must pay it by the last day of the month following receipt of the value of the invoice.
xiii. Tax deduction is extended to exempt transactions under article 16 of the VAT Code
xiv. The tax deduction must be made in the declaration for the period or the period following the one in which the invoice or Receipt (not Settlement Note) for the payment of VAT on importation was issued, provided that the declaration is submitted by 12 (twelve) months after the issuance of the invoice or receipt for payment of VAT on importation
xv. There will be no exclusion of the right to deduction for transactions provided for in article 24 of the VAT Code, when they relate to goods and services for which tax has been paid upon sale (activity of the taxable person), with the exception of goods and services purchased for own consumption or of its collaborators
xvi. The existing minimum credit limit of more than 3 months for a refund request is increased to Kz 700,000.00
xvii. In the case of taxpayers included in the Simplified Regime, reimbursement can only be requested if the credit is maintained after 12 months
xviii. The real allocation method is only applicable when the acquired goods are intended for sale
xix. When the calculated deduction percentage (prorata) is greater than 98%, VAT is deducted in full
xx. With regard to the provisions relating to the issuance of invoices (article 34), mention to “Equivalent Documents” has been removed
xxi. Only taxpayers under the General Regime must mention VAT on the invoices issued by them.
xxii. Amendment of the rules relating to tax regularizations/rectifications, that should follow the provisions of the RFJDE. Regarding deductions for doubtful debts and bad debts, tacit approval is eliminated in case of non-response from AGT within the period provided for in the Law
xxiii. Rules relating to joint and several liability for payment of tax are stricter for purchasers, which should increase their duties and diligence when receiving invoices from its suppliers
xxiv. In the new Exclusion Regime now provided for in the VAT Code, the maximum limit for inclusion in it increases to 25 million Kwanzas. The rules already foreseen for this regime and for the previous non-subject regime are maintained, in general, and it is worth highlighting the obligation of these taxable persons to deliver the map of suppliers referring to acquisitions to taxable persons under the General Regime on a monthly basis, being able to benefit from the tax deduction of 10% of VAT incurred to the Corporate Income Tax (Imposto Industrial) to be paid
xxv. As previously mentioned, the Simplified Regime is now included in the Code, which covers taxpayers who, in the previous year, had a turnover greater than 25 million Kwanzas and less than 350 million Kwanzas. Regarding the previous rules foreseen for this regime, it should be noted that they will have to pay VAT, at the rate of 7%, on the turnover actually received from all operations, including exempt ones, and in the case of property rental, the rate to be applied will be 1%. They can deduct 10% of the VAT incurred, and the deduction exclusions provided for in article 24 of the Code do not apply to them. In the case of transactions with the State and its bodies, the tax is withheld by the latter.
xxvi. Taxable persons under the general regime who exclusively carry out tax-exempt transactions, which do not allow the right to deduction, are obliged to pay the Stamp Tax of 1% on receipts
xxvii. Fines for late or non-delivery of the periodic VAT declaration are increased to Kz 600,000.00, being doubled every three months whenever the declaration is not submitted
xxviii. For non-delivery of tax, or delivery less than due, the penalties set out in the General Tax Code apply, including in the cases of delay or non-payment of captive tax (previously, in these cases, the fine amounted to double the tax due)
xxix. It is now clarified in the Code that the cost of VAT that will not be deductible for Corporate Income Tax (Imposto Industrial) purposes corresponds to the VAT deductible under the terms of the VAT Code
xxx. Obligation created for Quarterly Reporting by Banking Financial Institutions to AGT of the summary of operations processed in APTs
As referred, the above are some of the main changes that we consider relevant to highlight, although other relevant ones also occurred, some specific to certain activity sectors or taxpayers, reason that we advise you to read the full text of the Law. We are also available to support on any question or doubts on the above or that may occur on the interpretation of the changes introduced by this new Law.
The above changes come into force with the publication of the Law that approves the same, December, 28th, 2023.