Interview with tax lawyer Emiel Reijerse, partner of U advisors and accountants in the Netherlands, about his expertise and experience with the African continent
What is your connection in Africa?
Our firm is providing services for three multinational companies headquartered in India and France with over 100 subsidiaries in more than 20 countries on the African continent. The African subsidiaries are managed and financed from the Netherlands through intermediate holding companies. Apart from the regular financial and tax compliance services for these Dutch intermediates, we take care of tax related subjects such as transfer pricing, anti-abuse legislation and withholding taxes
What is making taxes in Africa special?
African countries are known for their withholding taxes on almost everything. A withholding tax is levied at the source of various types of payments or obligations. The tax is due to the tax authorities in the country of origin. There is not only withholding tax on interest, dividend and royalty but often also on management fees and technical services. For multinational companies working in Africa it’s a challenge not to pay to much of these withholding taxes, especially in cases where amounts due are not actually paid.
Furthermore, the tax systems of a lot of African countries are in transition to more solid and professional systems with regard to transfer pricing and anti-abuse legislation. Therefore, all intra-group activities have to be investigated thoroughly for their tax consequences where in the past not much attention was given to this topics.
What could be done to mitigate the tax burden?
Have a close look at the specific tax treaty with the country involved and determine if and how the withholding tax could be settled with corporation tax. In case there is no tax treaty, then the very beneficial Dutch unilateral arrangement to avoid double taxation should be considered. Because the calculation methods to settle withholding taxes with corporation tax are not easy, it takes some effort to meet the requirements.
To avoid unpleasant surprises, one needs to be aware of the growing interest and knowledge for complex tax subjects by the tax authorities in the African countries. It is necessary to have proper documentation (agreements, bench mark studies etc) in place to make sure the regulations are followed.
What do you undertake to maintain your expertise?
Apart from being member of several expert groups we deal with practical tax items in this field on a daily basis. Therefore, our experience with African taxes and tax authorities is growing every day.
In order to follow the latest developments, we attend to training courses mainly provided by the International Bureau of Fiscal Documentation (IBFD) in Amsterdam. Most recently in July 2017, I personally followed a four days training program from IBFD regarding tax planning in Africa and the Middle East. The participants of the training are from all over the world and also three inspectors from the Nigerian tax authorities attend to the training. It was very useful.
What do you recommend companies planning to set up activities in Africa?
Be informed! The times of easy and inattentive tax authorities are over. The tax systems of almost all African countries are rapidly developing to professional systems, if not already, and should not be underestimated. Anyone in need of more information about taxes on the African continent could contact me at any time to find out if and how we could support you!