It’s taxing doing business in Africa

Logistics companies wanting to move into Africa to support their clients and be positioned to take advantage of the many opportunities being created by relatively strong economic growth, will need to factor in high tax rates. “African countries are known for their high corporate tax rates, high withholding tax rates (on dividends, interest, royalties, and management fees) and capacity challenges of the various tax authorities,” says Charlotte Arigye- Kaija of PwC’s Africa Desk. Different business ownership models may also be required. “In our experience, there is no single favoured holding company location for all of Africa,” she says. “Also, there is a tendency for tax authorities to focus excessively on multinationals at the expense of paying sufficient attention to small and medium sized enterprises. But, things are changing. “There are positive developments where countries are making changes to their tax legislation to make themselves more competitive. “A case in point is Ghana which has reduced its withholding taxes over the years, for example, from 20% to 15% on the gross income of nonresidents. “A number of countries in Africa have also reduced corporate tax rates,” she says. African countries with a 25% corporate income tax now include Botswana, Cote d’Ivoire, Ghana and Senegal. African countries have tax incentives aimed at encouraging foreign direct investments.