The Mauritius government ratified, on 30 August, a new Double Taxation Agreement (DTA) with Angola that was signed in May. It will come into force once it has also been ratified by the government of Angola. The DTA will provide tax certainty to investors of the two countries and create a conducive environment for greater investment flows from the Mauritian global business sector to Angola, by providing tax incentives.
Under the tax treaty, dividend withholding tax is limited to 5% of the gross dividend if the beneficial owner of the dividend is a company that holds directly at least 15% of the capital of the company paying the dividend over a 365-day period that should include the day the dividend is paid. In other cases, the withholding tax is limited to 8% of the gross dividend if the shareholder is the beneficial owner of the dividend.
The withholding tax for interest is limited to 8% of the gross interest if the recipient is the beneficial owner. For royalties withholding tax is limited to 7% if the recipient is the beneficial owner of the royalties. Royalties include the use of or the right to use industrial, commercial or scientific equipment (ICSE).
The DTA includes a Principal Purpose Test (PPT), which is in line with the OECD’s Base Erosion and Profit Shifting Action (BEPS) Plan. Under the PPT, treaty benefits can be denied where it is reasonable to conclude from all relevant facts and circumstances that obtaining treaty benefit was the principal purpose of any arrangement or transaction.
As of June 2021, Mauritius had outward investments of USD818 million to Angola. The DTA is expected to further boost investments from Mauritius to Angola, particularly as Angola has only two other DTAs in force, with Portugal and the United Arab Emirates.
The Southern African Development Community (SADC) Secretariat has stepped up activities to facilitate negotiations of Double Tax Avoidance Agreements (DTAAs) between member states as part of the efforts to increase the treaty network and develop an aligned tax treaty policy throughout the trade bloc.
There are currently 59 DTAAs in force among SADC Member States. SADC has recently facilitated two DTAA negotiations under its ‘Support to Improving the Investment and Business Environment (SIBE) Programme’: one between Lesotho and Malawi in May and June 2022, and the other between Botswana and Mauritius in August 2022.
These negotiations, said SADC, represent an important step in facilitating regional investment and improving the business environment. They will also help to accommodate tax developments at regional and international levels, in particular those related to BEPS and the challenges of the digitalised economy.
The SADC is a Regional Economic Community comprising 16 Member States: Angola, Botswana, Comoros, Democratic Republic of Congo, Eswatini, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Tanzania, Zambia and Zimbabwe.