BUSINESS STRUCTURES

Business Structures

(Summary authored by PwC Angola)

Business can be conducted in a variety of forms in Angola, such as:

1. Private or public limited liability companies (in Portuguese, “sociedades por quotas” or “sociedades anónimas”, respectively);
2. Branches of foreign companies;

• Partnerships (e.g. joint ventures);

1. Representative offices.

However, the business structures most commonly used by foreign investors are subsidiaries (private or public limited liability companies), branches or representative offices, which main differences are identified in the following table:

 

 

The process of the incorporation / registration of the company / branch in the context of a private investment project include:

1. Corporate name approval
2. Tax registration: the new entity should request its tax registration, which will be required for the opening of a bank account.
3. Opening a bank account: the initial purpose of the bank account is to be credited with the funds to be transferred into Angola.
4. Importation of funds: once the bank account has been opened, the investors should transfer the funds from abroad to such account.
5. Incorporation / registration procedures: include the execution of the incorporation deed or the signature of the articles of association with recognition of the signatures of the shareholders or their representatives.
6. Registration with the Commercial Registry Office
7. Publication of the articles of association in the Angolan Official Gazette (branches are required to publish the articles of association of their parent companies).
8. Registration for statistical, labour and social security purposes.
9. Obtainment of the relevant operating licenses.

The incorporation process may be carried out before the Guichê Único da Empresa, which functions as a “one-stop office” that concentrates all the required services for the incorporation (e.g. Public Notary, Commercial Registry Office, Commercial Bank).

(Summary authored by PwC Angola)

 

Trade Agreements

African Growth and Opportunity Act (AGOA

The African Growth and Opportunity Act (AGOA) is a United States Trade Act, enacted on 18 May 2000 as Public Law 106 of the 200th Congress and renewed in 2015 until 2025. The legislation significantly enhances market access to the U.S. for qualifying Sub-Saharan African countries. In order to qualify and remain eligible for AGOA, each country must be working to improve its rule of law, human rights, and respect for core labor standards. The AGOA eligibility requirements are listed in more detail on the AGOA site (https://agoa.info/about-agoa/country-eligibility.html).  

AGOA builds on existing U.S. trade programs by expanding the (duty-free) benefits previously available only under the country’s Generalised System of Preferences (GSP) program.

For more information on AGOA, please visit the AGOA website (https://agoa.info/).

 

Trade and Investment Framework Agreement (TIFA)

The Trade and Investment Framework Agreement between the Government of the United States of America and the Government of the Republic of Angola concerning the development of trade and investment relations has been signed in May 2009 and can be found on the following website (https://agoa.info/images/documents/5188/US-Angola%20TIFA%20English.pdf).

 

Procedures – Registering a Company

(Summary authored by EY Angola)

Notwithstanding the rules of national or foreign private investment that may be applicable and any requirements that specific sectors of activity may require, companies must be registered with the Commercial Registry Office, Tax Office, National Security Institute Social, and the National Institute of Statistics, among others.

Currently, it is possible to carry out many of the acts inherent to the incorporation of a company or venture in the Company’s Single Counter, including, for example, the application for admissibility of the name to be adopted, the public deed, the commercial register, as well as the publication of the Articles of Association of the venture in the Official Gazette

 

Financing

(Summary authored by EY Angola)

Generally speaking, the Angolan financial, banking and non-banking system, has shown some stability, in large part as a result from the transformation process to align with the best international practices. However, the banking financial system still has some systemic constraints, particularly with regards to high credit default ratios.

To address the challenge of bad credit, the State created an asset management company, Recredit, which has been acquiring high-risk assets from the public banks credit portfolios, and is working with other banks to acquire part of their bad credit.

 In 2016, the total credit granted was more than USD $ 20,000 million, knowing that from about 30 banks authorized to operate in Angola, six control more than 65% of the total assets.

The financing of large public projects has been mostly provided by external financial institutions, such as international credit agencies, which require sovereign guarantees.

With regards to internal financing intended for the private sector, the Angolan Government has been developing some initiatives aimed at the creation and development of micro, small and medium-size companies. These initiatives are aimed at strengthening some priority sectors, such as the “Angola Investe” (Angola invests) initiative, promoted by the Ministry of Economy, which offers subsidized interest rates.

As a rule, for financing in foreign currency, Angolan commercial banks have avoided providing guarantees due to the existing exchange rate risk. Nevertheless, multilateral institutions such as the African Development Bank and the World Bank have concluded financing agreements with the Angolan government for the development of sectors such as agriculture, environment, rural development, health and education.

The venture capital market in Angola is still taking its first steps, already having the contribution of some public funds, such as the FACRA and FSDEA, and private funds, associated with banking or large business groups.

Summary authored by EY Angola

 

Foreign Exchange Regime

(Summary authored by PwC Angola)

The foreign exchange legislation in force in Angola qualifies as “foreign exchange operations” all the transactions between the national and a foreign territory, as well as between residents and non-residents for foreign exchange purposes.  The foreign exchange operations are then divided into current invisible, goods and capital operations, each of them being subject to a specific legal regime.

 

1. Current invisible

The so-called “current invisible” operations basically consist of transactions involving any services or transfers between a resident and a non-resident entity related to, amongst others, transport, insurance, travelling, capital gains, commissions and brokerage, trademarks and patents and other intellectual property rights, administrative and operating costs, salaries and other personal services costs, as well as other services, income payments and private transfers.

Order 13/13, of 6 August 2013, of the Angolan Central Bank provides the applicable legal regime, establishing that contracts related to the provision of services are subject to prior approval of the Central Bank in the following situations:

• When the services contracts are of an amount higher than Kz 300M, and the beneficiary / payer of the services is a service provider to the oil and gas industry and is duly registered or/and has signed a “contrato programa” with the Ministry of Petroleum;
• When the services contracts are of an amount higher than Kz 100M and the beneficiary / payer of the services does not fulfil the requirements mentioned above.

If the amount of the services contract is below the foregoing thresholds, the operation should only be registered by the commercial bank in an electronic system called ‘SINOC – Sistema Integrado de Operações Cambiais’.

For the purposes of determining the amount of a given transaction, operations executed in the period of 1 year by the same payer to the same beneficiary, and which are of the same nature, are considered to be a part of the same contract.

 

Technical Assistance Agreements

Presidential Decree 273/11, of 27 October 2011, as amended by Presidential Decree 123/13, of 28 August 2013, sets forth the legal regime applicable to the so-called technical assistance and management services agreements. Although being a current invisible operation, these agreements are subject to a specific regime.

A technical assistance agreement consists of the provision of specialized administrative, scientific and technical services by a non-resident entity required by the local entity to maintain, improve or increase its production capacity in respect of goods and services, as well as to enhance the professional training standards of local employees when the required knowledge may not be found in the country.

These agreements are subject to prior approval by the Ministry of Economy in the following situations (consistent with the provisions of the abovementioned Order 13/13):

• When the technical assistance contracts are of an amount higher than Kz. 300M and the beneficiary / payer of the services is a service provider to the oil and gas industry and is duly registered or/and has signed a “contrato-programa” with the Ministry of Petroleum; and
• When the technical assistance contracts are of an amount higher than Kz. 100M and the beneficiary / payer of the services does not fulfil the requirements mentioned above.

If the amount of the technical assistance agreements is below the foregoing thresholds, the operation should only be registered with the Ministry of Economy.

 

1. Goods

Foreign exchange operations related to the payment of imported goods are foreseen in Order 6/18, of 17 July, and are not subject to prior approval by the Angolan Central Bank, only being required the registration of the operation by the commercial bank in the SINOC.

However, in order to ensure that the commercial bank registers the operation in the SINOC and actually executes the payment, the importation of the goods itself needs to be licensed in accordance with the relevant legislation. The licensing requirements are nonetheless quite straightforward, and almost automatically executed.

 

1. Capital transactions

Capital operations refer to transactions made under contractual arrangements between residents and non-residents (e.g. credit and loan transactions, capital transactions of personal nature). These operations are subject to prior approval by the Angolan Central Bank, regardless of the respective amount.

Instruction 1/2003, of 7 February 2003, of the Central Bank defines the type of transactions which qualify as capital operations, setting forth the corresponding requirements for their being approved by the Central Bank.

Summary authored by PwC Angola

 

Tax Regime

(Summary authored by EY Angola)

The Angolan tax system is composed of several taxes that are subdivided in taxation of income, sales and assets. The Oil & Gas sector has a specific tax regime. It should also be noted that currently Angola has no agreement to avoid double taxation with other countries in force.

Taxation of Income industrial Tax Profits from the business and industrial activities are subject to a tax rate of 30% The tax is calculated in the annual statement of income “Model 1,” which must be delivered by the end of May or April of the following year, depending on whether the company belongs to the Taxation Group A or B.

The provision of services to Angolan entities is, in most cases, subject to withholding tax at the rate of 6 5%. In addition, companies are subject to settlement and payment of the provisional Industrial Tax at the rate of 2% on sales of the first 6 (six) months of the current fiscal year, which must be delivered by the end of August and July of the current year, depending on whether the contributor belongs to Group A or B. It should be noted that the withholding tax on services and the settlement of the Provisional Industrial Sales Tax are for the purposes of calculating the final tax determined in the annual income tax return “Model 1”, when they are deducted from the final tax collection.

 

Tax on labor income (“iRT”)

Income earned by single employees on the basis of work is taxed at progressive rates up to 17%, in accordance with the income levels stipulated in the table attached to the IRT Code.

The income earned by holders of management/administration positions or hold ersof corporate bodies is subject to withholding tax at the rate of 15%.

The income earned by independent service providers is subject to a tax of 10 5% in Group B and 6.5% or 30% if they qualify for Group C.

In general, the delivery of the tax occurs through withholding by the entity that makes the payment of the income.

 

Taxes on capital Gains

Income derived from capital gains is subject to taxation ranging from 5% to 15%, of which we emphasize:

• Dividends, royalties, interest on supplies, interest on demand investments and/or term deposits and positive balance between gains and losses – 10%
• Other income derived from the application of capital and interest on loans for financial loans – 15%

It should be noted that the taxable income can either result from its attribution and/or payment, or from the presumption of its existence Asset Taxation Property Tax (“IPU”)

The IPU is levied on real estate assets and is due both for having property of own use and for the income from the lease of urban buildings

Thus, the following are subject to IPU:

• Own property – rate of 0 5% on amount that exceeds the asset value of AKZ 5,000,000
• Rental income – effective rate of 15% on the amount of income actually received

 

Succession and Donation Tax and SISA

The onerous transfer of real estate is subject to SISA at the rate of 2% on the acquisition value of the property

 

Consumption Tax

The consumption tax is levied on the production, importation and sale of goods, as well as on the provision of certain services. The tax rate is 10% for the production and import of goods, although some goods have a lower rate, which may amount to 0%, while other goods may increase to 50%.

The services included in the scope of incidence are subject to rates of 5% or 10%. In the event that the service subject to Consumption Tax is provided by a non-resident entity, the Angolan beneficiary entity must proceed with the self-assessment of the tax

With the expected entry into effect of the Value Added Tax on 1 January 2019, the Regulation of the Consumption Tax will be cancelled

 

Value-added Tax

In accordance with the present draft law, Angola will introduce the Value Added Tax (“VAT”) as of January 1, 2019, and the current Consumer Tax Regulation will be cancelled. Its introduction will be divided in phases during the first two years and will be only mandatory for companies included in the list of Major Taxpayers.

Although the bill has not yet been approved, it is expected that the tax rate will be set at 14%.

 

Stamp Duty

Stamp Duty is due on acts, agreements, documents, titles, operations and other facts provided in the Schedule attached to the Stamp Duty Code. Among others, below some tributary facts and the respective rates are presented:

• Issuance of receipts of payment – 1%
• Financing – 0 1% to 0 5%, depending on the maturity of the loan
• Issuance of insurance policies – 0 1% to 0 4% depending on the type of insurance
• Acquisition of property – 0 3%

 

Contributions to Social Security

The income attributed to employees is payable to Social Security, in accordance with the following rates, on salary and other remuneration components:

• Workers’ share – 3%
• Employer’s share – 8%

Contributors who have documented proof that they are subject to another Social Security scheme in foreign territory are not bound by this regime

Summary authored by EY Angola

 

Customs Regime

(Summary authored by EY Angola)

The new Customs Tariff entered into force on August 7, 2018. With reference to the previous customs tariff that had entered into force in the beginning of 2014, a transverse increase of customs rights occurred, while the rates of the consumption tax decreased for certain goods.

The following fees shall be levied on the importation of goods (including equipment), calculated on the customs value and determined in accordance with the applicable legislation:

• Import duties: between 2% and 70%
• Consumption tax: between 2% and 30%
• Stamp duty: 1%
• General customs duties: 2%

It should be noted that the Consumption tax rates will be revoked and will be replaced by new VAT rates, after the entry into force on January 1, 2019.

 

Import and Export

(Summary authored by EY Angola)

The Presidential Decree No 75/17 dated April 7, 2017 established the new Administrative Procedures for the Licensing of Imports, Exports and Re-exports. As a rule, we must emphasize that the Register of Exporters and Importers (known as “REI”), which consists of the registration of economic operators in the Integrated System of Foreign Trade, is mandatory. By means of the present registration, the respective Certificate is granted to importers and exporters, which is valid for five years (although an update must take place every two years), under the aforementioned diploma.

For the purpose of recording and monitoring import, export and re-export operations, all operators involved in the operations in question shall use the Integrated External Trade System (“SICOEX”), under the supervision of the Ministry of Commerce.

The import, export and re-export operations may or may not be subject to licensing, which, in turn, may be automatic or not, under the terms of this Law. By means of example, it is not subject to licensing the temporary importation of goods subject, by law, to this customs regime, or the importation of parts and accessories covered by guarantee agreements, as well as the importation of donated goods, unless they are used.

The import, export and re-export of materials sent abroad for the purpose of testing, examination or research, for industrial or scientific purposes, or the import, export and re-export of samples are also exempt from licensing.

The settlement of import, export and re-export operations shall comply with the requirements and enforce applicable exchange rules and procedures under the Foreign Exchange Act and related diplomas.

With regards to the settlement of import and export operations of goods, we emphasize that the National Bank of Angola recently issued the Notice No 5/18 dated July 17, 2018, which established new rules and exchange procedures to consider in the payment procedure of these operations

Summary authored by EY Angola

 

 

Bank Account Opening

Notice No 2/17, defines new rules for the opening and movement of accounts in Angolan banks, held by non-residents for foreign exchange purposes. Accounts in national currency can be operated by credit through income from economic activity in Angola or by conversion of foreign currency Debt transactions now include domestic transfers or use of debit cards, among others.

For accounts in foreign currency, this present notice limits the credit operations to funds coming from abroad and interest. Some players already offer the solution of opening an account online, though most still require the opening of the account to be done in person.

Documentation required to open an account:

Individual Account

• Letter of account opening, which can be obtained from the financial Institution
• Photocopy of identification documents of account holders or identity card for national citizens
• Passport with Work Visa, Residence Visa or Residence Card, in case of foreign citizen
• Photocopy of the Taxpayer Card
• 1 colour photocopy of each of the holders
• Service statement (optional)
• Statement from the Ministry of Finance (only needed for civil servants)
• Minimum amount for the initial deposit (amount defined by the financial institution)

Business account

• Account opening form to be obtained from the financial institution
• Letter from the company requesting the opening of the account
• Certificate of Commercial Registration
• Memorandum of association published in the Official Gazette and its amendments, if any
• Tax Registration Card
• Certificate of Statistical Registration
• Proof of Tax Settlement
• Permit to exercise the activity
• Photocopy of identification documents of the company representatives
• Certificate of power of attorney containing the names of company representatives, if any
• 1 color photograph of each titleholder
• Minimum amount for the initial deposit (amount defined by the financial institution)

Authored by EY Angola

 

Compliance

(Summary authored by EY Angola)

The world’s largest economies are observing a growing importance of regulatory and compliance obligations, with a particular focus on the Prevention of Money Laundering (PBC), combating the financing of terrorism (CFT) and combating corruption. This concern has increasingly significant impacts on emerging economies such as Angola, where foreign investment represents an opportunity for development.

Regulatory bodies have been increasing pressure by applying fines of millions of USD to companies that do not make all the necessary efforts for PBC/CFT and to fight against corruption. This pressure, strong in other countries, especially in the USA and in the countries of the European Union (EU), also is felt by Angolan companies which are obliged to comply with compliance programs in order to establish business relations.

The adoption of better compliance practices by Angolan companies will have two effects of great impact. On the one hand, it will improve the efficiency of the company by reducing the cases of fraud, corruption and loss of revenues in such way. On the other, it will give a clear signal to the market and international investors that they are engaged in a new culture of ethics and integrity.

Companies that are quicker to respond to these requirements will be better positioned to attract international partners, by demonstrating policies aligned with the highest levels of demand in these areas. The compliance function is no longer a formality It has become a decisive factor in the competitiveness of Angolan companies for the attraction of investment.

Summary authored by EY Angola