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Investment Guide - Botswana
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
TABLE OF CONTENTSGeneral Overview _________________________________________________________________________________4
Political Overview __________________________________________________________________________________5
Economic Overview ________________________________________________________________________________5
Regulatory Environment ____________________________________________________________________________5
Bilateral and Multilateral Treaties _____________________________________________________________________6
Investment Promotion ______________________________________________________________________________6
Institutions Governing Investment Promotion 6
Investment Incentives 6
Tax ______________________________________________________________________________________________7
Income Tax 7
Withholding Tax 7
Capital Gains Tax 7
Other Tax 7
Transfer Pricing and Thin Capitalisation 8
Stamp and Transfer Duty 8
Accounting Principles ______________________________________________________________________________8
Industrial Relations_________________________________________________________________________________8
Expropriation _____________________________________________________________________________________9
Corruption _______________________________________________________________________________________9
Competition and Consumer Protection________________________________________________________________9
Legal Forms of Incorporation in Botswana _____________________________________________________________9
Industry Sectors ___________________________________________________________________________________10
Agriculture 10
Banking and Financial Services 11
Energy 11
Manufacturing 11
Mining 11
Telecommunications 11
Water 12
Intellectual Property ________________________________________________________________________________12
Dispute Settlement ________________________________________________________________________________12
Investment Guide 2015 - Botswana
4
Capital City: Gaborone
Currency: Botswana Pula (BWP)
Languages: English and Setswana
Government: Parliamentary Republic
President: Lieutenant General Seretse Khama Ian Khama
Population: 2.039million (2014 estimate)
Timezone: GMT + 2
GDP: US$14.78billion (2013 estimate)
General Overview
Investment Guide 2015 - Botswana
5
Political Overview
Regulatory Environment
Economic Overview
Botswana is considered to be one of Africa’s most stable countries and the continent’s longest continuing multi-party
democracy. The governing party has governed since the country gained independence in 1966. The President is both the
head of state and the head of government. The next elections are due in October 2019. According to the 2014 Mo Ibrahim
Index of African Governance, Botswana’s Government was ranked 3rd in the continent, and it is considered one of the top
five African nations in terms of ‘safety and rule of law’, ‘human development’ and ‘sustainable economic opportunity’.
Since independence, Botswana has consistently been one of the world’s best-performing economies. Botswana has
transformed itself, from a chronically poor country to a dynamic economy, encouraging private enterprise. In addition
to political stability, sound management and fiscal discipline, the diamond industry has been responsible for much of
Botswana’s economic expansion. Diamond mining currently accounts for one third of GDP and over 70% of export earnings.
Efforts are being made to diversify the economy and consumer services, real estate, financial services and tourism are all
regarded as important emerging sectors.
Botswana is open to foreign investment and trade, with a straight-forward and transparent regulatory environment
promoting competitiveness and flexibility. In the 2014 Index of Economic Freedom, Botswana is ranked as the 27th freest
economy in the world, and the 2nd freest out of 46 countries in sub-Saharan Africa. It ranks well above regional and world
averages. Several attempts have been made to diversify the economy away from diamond production and attract foreign
investment. These include the introduction of competitive corporate tax rate of 22% (tax rates remain among the lowest
in Southern Africa) and the streamlining of the application process for business ventures. Botswana’s independent judiciary
provides strong protection of rights. Foreign exchange controls were abolished in 1999, allowing the repatriation of profits
and direct investment from Botswana without restriction.
Investment Guide 2015 - Botswana
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Bilateral and Multilateral Treaties
Investment Promotion
Botswana is a member of the World Trade Organisation, the African Caribbean Pacific-European Union Partnership
Agreement, the Southern African Global Competitiveness Hub, the Southern African Customs Union (SACU) and the
Southern African Development Community (SADC). Botswana is also a member state of the Multi lateral Investment
Guarantee Agency formed by the World Bank Group whose mission is to promote direct foreign investment into developing
countries to help support economic growth, reduce poverty and improve lives.
Botswana has concluded double taxation agreements with Barbados, China, France, India, Mauritius, Mozambique,
Namibia, Russia, Seychelles, South Africa, Swaziland, Sweden, United Kingdom, Zambia and Zimbabwe. Double taxation
agreements with Belgium, Luxembourg, Malawi and Tanzania are awaiting ratification.
The Botswana Investment and Trade Centre (BITC), is an autonomous organization, mandated by an Act of Parliament
to encourage, promote and facilitate the establishment of export-orientated enterprises, work with the Government to
ensure that the country has a conducive investment climate and recommend certification of international financial services
centre companies. BITC also assists investors to secure licences, work and resident permits, visas, utility connections and
infrastructural facilities such as land and factory space in the shortest time possible. After company startup, BITC continues
to provide services addressing any problems encountered. The granting of investor support from BITC is based on whether
the proposed project is in line with the Government’s diversification plans, contributes to the growth of a priority sector
showing high growth potential, and provides employment and training opportunities to Botswana citizens. Investment may
be made by way of proprietorship, partnership, branch (external company) or company incorporated in Botswana.
Trading activities require licensing. The type of licence is industry specific and issued in terms of industry specific legislation.
Investment is also assisted through the following:
• National Development Bank
• Citizen Entrepreneurial Development Agency
• Botswana Development Corporation (BDC)
Institutions Governing Investment Promotion
Investment Incentives
Notable investment incentives include an incentive for the manufacturing industry in the form of a grant, at a reduced rate
of 15% in terms of a Manufacturing Order issued by the Minister. Application can be made for a tax agreement between
the Government (acting through the Minister of Finance) and a taxable company, with a project which promotes the
economic development of the country. The agreement may provide for the exemption of any dividend, interest, royalty,
management or consultancy fee paid by the company to a non-resident, and relief from any duty, responsibility or liability
under the Income Tax Act. Such agreement requires the approval of Parliament for its effect.
Investment Guide 2015 - Botswana
7
Tax
Income Tax
Withholding Tax
Botswana’s tax regime is based on “source”– resident and non-residents are liable to tax on income sourced, or, deemed
sourced in Botswana. A company is tax resident if it is incorporated, or, managed in Botswana. Corporate income tax of
22% is payable by a resident company and 30% by a non-resident company on Botswana source income. Foreign source
dividends, interest and business profits of foreign source are taxable when remitted to Botswana. Branches of foreign
companies are taxable in Botswana on income which has its source or is deemed to be sourced, in Botswana at the rate of
30%.
All dividends paid by a resident company to a resident, or, non-resident are subject to a withholding tax of 7.5% on the
gross amount paid. Such tax is a final tax on dividend in the hand of the recipient. Interest paid to a non-resident is subject
to a 15% withholding tax while interest paid to residents is subject to a 10% (on excess of BWP1, 950 per quarter)
tax. Such tax on interest in the hands of the non-resident recipient is a final tax. There is withholding tax on royalties,
management, consultancy, technical and administration fees payable to non-residents at the rate of 15%. The values of
withholding tax maybe reduced in terms of a Double Taxation Avoidance Agreement, if any, between Botswana and the
country of tax residence, of the recipient.
Companies certified by the Minister on recommendation of BITC, as international financial services centre companies not
doing business in local currency in Botswana have the following additional incentives:
• A corporate tax rate of 15%;
• Exemption from withholding taxes in Botswana;
• Exemption from tax on dividends received from foreign source where the company holds 25% or more of the equity;
• Exemption from capital gains tax in Botswana;
• Credits for withholding taxes levied elsewhere; and
• Access to Botswana’s Double Taxation Treaty network.
Capital Gains Tax
Other Tax
The proceeds of disposal of capital assets form part of the gross income of a taxpayer, for tax purposes. In the case of
moveable assets, 75% of the disposal proceeds of the sale, minus the expenses of the sale, the cost of acquisition and
expenses incurred in the acquisition, accrue to gross income. The disposal of shares listed on the stock exchange, which
have been held in excess of one year, are exempt from tax. In the case of immovable assets, 100% of the gain, equal to
the disposal proceeds, less the cost of the sale, the cost of improvements, if any, which improvements are indexed from the
date of improvement to present, cost of acquisition and expenses incurred when the asset was purchased indexed from the
date these were incurred to the present, accrues to gross income.
Property Tax is charged on developed land, although tax holidays may be granted for new buildings and those located in
specified development areas.
Investment Guide 2015 - Botswana
8
Transfer Pricing and Thin Capitalisation
Stamp and Transfer Duty
There are no transfer pricing rules or thin capitalisation requirements (except with respect to mining companies).
There is no Stamp Duty or Capital Duty on the purchase, issuance or sale of securities. Transfer duty is levied on the transfer
of immovable property at a rate of 5% on property, other than transfers of agricultural land to non-citizens, which is levied
at a rate of 30% and which requires the approval of the Minister of Lands and Housing.
Transfer duty is deemed input Value Added Tax and deductible from output Value Added Tax.
Accounting Principles
Botswana applies International Accounting Standards and International Financing Reporting Standards.
Customs and Excise Duty is payable at the rate of 10% of the value of taxable goods and services supplied in or imported
into Botswana.
Value Added Tax is charged on all taxable activities in Botswana at the rate of 12%. Exports and the supply of certain
specified goods and services are zero rated.
Withholding Tax (or PAYE) is deductible from the earnings of the employee by the employer, for which the employer is
required to be registered for, with the Botswana Unified Revenue Service. An employee’s earnings include accrued salary,
wages, leave pay, commission and bonus pay.
Withholding Tax of 3% is chargeable on payments in respect of a construction contract.
Industrial Relations
Botswana’s employment regulations are relatively flexible. The Employment Act [CAP. 47:01] provides basic guidelines
for employment in Botswana. The legislation sets industry specific minimum wages, length of work weeks, annual and
maternity leave, hiring and termination. Furthermore, the country adheres to International Labour Organisation conventions
protecting worker rights, the Industrial Relations Division of the Ministry of Labour and Home Affairs is responsible for
ensuring compliance with these conventions.
Work and resident permits are required for expatriates seeking employment in Botswana. Work permits are generally
granted only when local citizens do not possess the necessary industry specific expertise. The granting of such permits to
expatriates may be made contingent upon establishment of demonstrable “localisation” efforts. The work and residence
permits of senior executive expatriates companies within the international financial services centre are fast tracked.
Investment Guide 2015 - Botswana
9
Expropriation
Corruption
The Constitution prohibits the expropriation/nationalisation of private property without compensation and the independent
judiciary provides strong protection of property rights.
Administrative corruption is low. The 2014 Corruption Perception Index compiled by Transparency International, ranked
Botswana 31st out of 174 countries. Botswana has specific anti-corruption legislation, a dedicated enforcement unit the
Directorate on Corruption and Economic Crimes (DCEC) and significant criminal penalties for acts of corruption. Overall,
DCEC is regarded as an active and effective organisation.
Competition and Consumer Protection
Competition is regulated in terms of the Competition Act, [CAP46:09] which governs inter alia mergers and acquisitions,
market inquiries which may be conducted by the competition authorities, prohibited practices such as horizontal and
vertical trade agreements, price fixing, market allocation, bid rigging, restraints on production or supply, collusion and
abuse of dominance. The Consumer Protection Act, [CAP42:07] provides for the protection of consumers by means of
investigation, prohibition and control of unfair business practices.
Legal Forms of Incorporation in Botswana
The principal business entities are public or private companies with liability limited by shares, or, public, or, private companies
limited by guarantee, close company and external company. The Registrar of Companies and Intellectual Property, part of
the Ministry of Trade and Industry, is responsible for company incorporation, registration of business names and protection
of intellectual property rights.
A private company cannot have more than 25 shareholders and must have a minimum of one shareholder (if limited by
shares), and one director, must be ordinarily resident in Botswana. There is no restriction on the number of shareholders in
a public company but there is a requirement for a minimum of 2 directors to be ordinarily resident in Botswana. Audited
financial statements must be prepared within five months and seven months of the year end, for a public and private
company, respectively, and filed with the Registrar of Companies. A qualified company secretary must be appointed.
The World Bank Group rates Botswana 74th out of 189 economies in terms of the ease of doing business. The table below
provides a summary of the procedures and the indicative timelines and cost for setting up a trading company.
Investment Guide 2015 - Botswana
10
Procedure Time to complete Cost to complete(BWP - Botswana Pula)
1 Select and reserve company name 10 days BWP 20
2 Sign the declaration of compliance of statutory requirements for incorporation before a commissioner of oaths
1 day BWP 75
3 Return the complete statutory return to the Registrar of Companies in respect of re-allotment, directors, auditors, company secretary, and registered officers
1 day BWP 2000 where registration is done by an agent
4 Register the company with the Registrar of Companies at the Ministry of Trade and Industry
2-3 weeks BWP 360 (registration of constitution)
5 Complete application forms for Trade licence
6 Obtain an approval of the working conditions after an inspection of company premises. As part of the licence application process the company’s premises will be inspected by the health and environmental authorities to ensure compliance with minimum standards
2 days No charge as this procedure is done by the municipal authorities (called Councils)
7 Advertise the intention of applying for a license in the official gazette
3 weeks BWP 80
8 Obtain trade licence from the, Ministry of Trade and Industry; or obtain a trading license from the Council
4 weeks Fees for licences are dependent on type of trade licence required
9 Register for Income Tax and VAT with the Botswana United Revenue Services, (BURS) and obtain the approval from the BURS for the appointment of a public officer who is in charge of tax return
10 days No charge
10 Register employees for work injury insurance 7 days No charge
Industry Sectors
Agriculture
Agriculture meets only a small portion of food needs and contributes a very small amount of GDP (1.9%). However, despite
its low significance to GDP, agriculture remains an important part of the economy as a large portion of the population lives
in rural areas and is dependent on subsistence crop and livestock farming.
Investment Guide 2015 - Botswana
11
Banking and Financial Services
Botswana’s competitive banking system is one of Africa’s most advanced and it contributes to 7.4% of the GDP. The
commercial banks in Botswana are small by international standards. Currently, there are eleven commercial banks, namely,
African Banking Corporation of Botswana Limited (trading as “Banc ABC”), Bank Gaborone Limited, Bank of Baroda
(Botswana) Limited, Bank of India (Botswana) Limited, Barclays Bank of Botswana Limited, Capital Bank Limited, First
National Bank of Botswana Limited, Kingdom Bank Africa Limited, Stanbic Bank Botswana Limited, Standard Chartered
Bank Botswana Limited and State Bank of India (Botswana) Limited.
The Government is involved in banking through state-owned financial institutions such as the NDB, Botswana Building
Society, Botswana Savings Bank, addressing the main needs of citizens. In addition, the International Services Centre
was set up in 2003 to establish and develop the country as a centre for cross border financial and business services into
Africa, and aimed at increasing Botswana’s status as a financial hub. The majority of financial services are in the areas of
international banking, funds administration, corporate treasury management, captive insurance operations, venture and
private equity investment and investment holding companies. In addition, credit is allocated on market terms, although
the Government also provides subsidised loans. Global standards in the transparency of financial policies and banking
supervision are generally adhered to in Botswana.
Energy
The state-owned power company, Botswana Power Corporation, imports approximately 75% of the country’s energy needs
from South Africa. Expansion of Botswana’s single power station, Morupule Power Station, is currently ongoing and aimed
at reducing Botswana’s dependence on power from South Africa.
Manufacturing
Mining
The manufacturing sector accounts for an estimated 4.2% of GDP. As most of Botswana’s exports are in unprocessed form,
the Government has sought to encourage the establishment of processing and manufacturing companies and has setup
agencies such as BITC to encourage the export of goods manufactured within the country. The BDC promotes industrial
development through project identification, joint venture partnerships and site developments for small manufacturers.
Diamond mining accounts for approximately one-third of Botswana’s GDP and approximately 70% of its export earnings
and 34.7% of the country’s GDP. However, the industry is capital intensive and accounts for less than 5% of private sector
employment. Mining activities, although not as extensive, are also conducted in respect of coal, copper, gold, nickel and
soda ash. Coal-bed methane gas has been discovered in the north-eastern part of the country; however, development of
these gas fields has been slow.
Telecommunications
The Department of Telecommunications was established to develop and implement infrastructure development strategies
for the telecommunications. A major role is to develop the national fibre backbone infrastructure and establish international
connectivity with the rest of the world through projects such as the West Africa Festoon Fibre System and the East Africa
Sea Cable System.
Investment Guide 2015 - Botswana
12
Water
The Water Utilities Corporation, a corporate body wholly owned by the Government, was established in terms of the Water
Utilities Act with a mandate to provide potable water and waste water resources country wide and for developing the
nation’s water resources.
Botswana does not have a formal policy framework for Trans-boundary natural resource management. However, the
country has shown its commitment to promote equitable and beneficial use of international watercourses; Botswana has
ratified the Revised Protocol on Share Water courses in the SADC and the International United Nations Convention on the
Non-navigational Uses of International Watercourses (SADC2003).
Intellectual Property
Botswana is a member of the World Intellectual Property Organisation and party to the Berne and Paris conventions,
the Hague Agreement, the Madrid Protocol, Patent Cooperation Treaty and the African Regional Intellectual Property
Organisation. Protection of intellectual property rights in Botswana has improved significantly. Botswana is ranked 31st out
of 97 countries in the 2014 International Property Rights Index, second only to South Africa among sub-Saharan Africa
countries. The Registrar of Companies and Intellectual Property, is responsible for the protection of intellectual property
rights.
Dispute Settlement
The Botswana legal system is largely based on Roman-Dutch law. The Constitution provides for an independent judiciary
and the legal system is sufficient to enforce secure commercial dealings. During the past two years, the judiciary has brought
down the average time to conclude civil cases from more than 20 months to fewer than 11 months and improvements
continue to be made. Furthermore, residents and non-residents have equal access to the judicial system.
Botswana is also a member of the International Centre for the Settlement of Investment Disputes and the Multilateral
Investment Guarantee Agency. It consequently accepts binding international arbitration of investment disputes. As a
member of the New York Convention (Convention on the Recognition of Foreign Arbitral Awards), Botswana recognises
and enforces foreign arbitral awards given in countries which are signatories to the Convention.
Collins Newman & Co.
A: Dinatla Court, Plot 4863
P: P.O. Box 882, Gaborone, Botswana
T: +267 395 2702
F: +267 391 4230
ALN Head Office
A: 5th floor, The Oval
Corner of Ring Rd.,Parklands and Jalaram Roads, Westlands, Nairobi
P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T: +254 20 364 0000, +254 703 032 000
W: www.africalegalnetwork.com
Investment Guide - Burundi
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
TABLE OF CONTENTSGeneral Overview _________________________________________________________________________________4
Political Overview __________________________________________________________________________________5
Economic Overview ________________________________________________________________________________5
Regulatory Environment ____________________________________________________________________________5
Bilateral and Multilateral Treaties _____________________________________________________________________6
Investment Promotion ______________________________________________________________________________6
Institutions Governing Investment Promotion 6
Investment Incentives 7
Tax ______________________________________________________________________________________________7
Personal Income Tax 7
Withholding Tax 8
Capital Gains Tax 8
Other Tax 8
Transfer Pricing and Thin Capitalisation 8
Stamp and Transfer Duty 8
Double Tax Treaty with Mauritius 8
Exchange Control _________________________________________________________________________________8
Imports and Exports________________________________________________________________________________9
Accounting Principles ______________________________________________________________________________9
Industrial Relations_________________________________________________________________________________9
Real Property _____________________________________________________________________________________9
Corruption _______________________________________________________________________________________10
Competition ______________________________________________________________________________________10
Legal Forms of Incorporation in Burundi _______________________________________________________________10
Industry Sectors ___________________________________________________________________________________11
Agriculture 11
Banking and Financial Services 11
Energy 11
Manufacturing 12
Mining 12
Telecommunications 12
Intellectual Property ________________________________________________________________________________12
Dispute Settlement ________________________________________________________________________________12
Investment Guide 2015 - Burundi
4
Capital City: Bujumbura
Currency: Burundi franc (BIF)
Languages: Kirundi, French and English
Government: Presidential representative democratic republic
President: Pierre Nkurunziza
Population: 10.48 million (2014 estimate)
Timezone: GMT + 2
GDP: US$ 2.715 million (2013 estimate)
General Overview
Investment Guide 2015 - Burundi
5
Political Overview
Regulatory Environment
Economic Overview
Burundi is a presidential representative democratic republic based on a multi-party state. The President acts as both the
head of state and head of government, and serves for a five-year term. Two vice-presidents assist the President. The
legislative branch in Burundi comprises the National Assembly and Senate. Members of the National Assembly are elected
by popular vote to serve five-year terms and representation in the Assembly must be consistent with 60% Hutu, 40% Tutsi,
and 30% female membership. The next elections are scheduled for May 2015.
Burundi continues to rebuild its economy after a civil war that lasted nearly twelve years. Political stability and the end of the
civil war have improved economic activity and aid flows. The country has made substantial progress in the implementation
of structural reforms in the management of public finance and measures to protect the Central Bank and the Treasury.
These reforms should continue, especially the liberalisation of the coffee sector and the development of the energy sector.
Burundi’s economy is based predominantly on agriculture which contributes over a third of the country’s GDP. Burundi’s
primary exports are coffee and tea, which account for 70% of foreign exchange earnings, though exports are a relatively
small share of GDP. Burundi’s export earnings and its ability to pay for imports rest primarily on weather conditions and
international coffee and tea prices. In terms of 2014 gross domestic product by sector statistics, Burundi’s economy consists
primarily of agriculture (34.4%), industry (18.4%) and services (47.1% - 2013 estimate). The development of economic
relations with new partners has opened up new opportunities that will help Burundi to diversify its markets and sources of
aid. China stands out as the country’s key emerging partner.
Burundi’s general attitude toward foreign investment is increasingly welcoming. Considerable efforts have been made to
create an environment conducive to domestic and foreign private investment. The recently amended Investment Code aims
to attract and reassure investors.
The 2015 Index of Economic Freedom ranked Burundi 27th out of 46 countries in Sub-Saharan Africa. Its overall score is
2.3 points better than last year’s mainly because of notable improvement in 6 of the 10 economic freedoms including the
management of government spending, labour freedom and freedom from corruption.
Burundi has adopted a trade liberalisation policy. The Government has abolished quantitative restrictions to imports and
instituted the freedom of fixing prices. Furthermore, the Government has reserved the right to negotiate with the private
sector on the price structure of select strategic products for the national economy, in line with the World Trade Organisation
(WTO) and Common Market of East and Southern Africa (COMESA) rules and regulations.
Investment Guide 2015 - Burundi
6
Bilateral and Multilateral Treaties
Investment Promotion
Burundi is a member of the African Union (AU), COMESA, the East African Community (EAC), the Economic Community of
the Great Lakes Countries (ECGLC), the Economic Community of Central-African States, the Nile Basin Initiative and WTO.
Burundi has entered into bilateral investment treaties with Belgium and Luxembourg, Germany, Mauritius, UK, Kenya,
Comoros and Netherlands. Double tax treaties with some East African Community countries, Common Market for Eastern
and Southern Africa countries, Egypt and France are in the process of negotiation.
The challenges of Burundi’s business climate means the private sector is small and relatively underdeveloped. However,
tremendous efforts have been devoted to investments promotion. Procedures, time and costs related to business registration
have been significantly reduced for the benefit of the investor as evidenced by the last report thereon produced and made
official on May 29, 2012 and sent to the World Bank and the International Finance Corporation for evaluation in the Doing
Business Report 2013. Another important reform to be highlighted is the establishment of a one stop center for business
registration (guichet unique pour la création d’entreprises), allowing company registration via a single procedure and within
just 24 hours for less than US$40.
The Doing Business Report 2015 ranks Burundi 152nd out of 189 economies assessed in ease of doing business. It is a
very encouraging ranking, which reflects the commitment and determination of the country to always move forward in
improving the business climate.
Under the Investment Code, the Government created the Burundi Investment Promotion Authority (BIPA) in October 2009.
BIPA is professionally and financially independent and its main objectives are to inform and assist potential investors,
to ensure that new laws and regulations created to benefit investors are being upheld, and to promote reforms aimed
at improving the business climate. Three years after its establishment, the new agency had already issued investment
authorisations for 193 projects totaling BIF 824 billion (approximately US$ 528 million) - an unprecedented level of activity.
The main investment areas have been in tourism, agribusiness, transportation, light assembly plants and information and
communication technology.
Institutions Governing Investment Promotion
Further, efforts to create an investor-friendly environment include significantly reducing the paperwork necessary for
creating a business. The Burundian Government has no overall economic or industrial strategies that discriminate against
foreign investors, nor are there any specific limits on foreign ownership or control of enterprises. There are no requirements
that investors purchase from local sources or export a certain percentage of their output, or only have access to foreign
exchange in relation to their exports. There is also no requirement that nationals own shares in foreign investments; that
the share of foreign equity be reduced over time; or that technology be transferred on certain terms. However, significant
challenges, including corruption, persist.
Investment Guide 2015 - Burundi
7
Investment Incentives
The main business incentives are contained in the Investment Code. Amendments adopted in August 2009 offer the
following:
• Any new investment automatically entitles investors to following advantages:
° The acquisition of buildings and land, necessary for the completion of the operation is exempt from transfer duties.
Investors are entitled to deduct as tax credit, a proportion of 37% of the amount of depreciable assets invested in
the business. These assets must be used in the business for at least five years. The investment tax credit is deducted
from the acquisition value of assets invested, and from the basis for depreciation;
° If the assets that gave rise to a tax credit for investment is sold before the end of five years, except as a result of
a natural disaster, the tax credit for investment born, must be repaid to the tax administration. The amount of
the tax credit is paid back plus interest for late payment, applicable for the recovery of taxes from the date of the
attribution of credit to the taxpayer’s tax account until the date of the sale of assets, for new businesses, the tax
credit arises at the time of making the investment;
° For expansion or rehabilitation of existing activities of a company, the tax credit arises in the same manner as for
new enterprises. However, it is limited to the extension or the rehabilitation, provided that these activities are easily
identifiable and leave no doubt as to the mixed uses between existing activities and those of the extension or
rehabilitation; the extensions and rehabilitation activities to produce goods and services qualify for the tax credit;
° Investors also benefit from a reduced tax rate on profits as follows:
* 2%, if he uses a number of Burundian workers between 50 and 200
* 5%, if he employs over 200 Burundian workers in Burundi
The staff considered at this point are the ones receiving remuneration subject to tax on wages.
The recent Investment Code (which has been in forces since 2009) removes the procedure under the old code which
conditioned the granting of benefits to investors with the opinion of the Inter-ministerial Commission of Investments and
a decree issued by the Council for approval of Ministers. In fact this code was the source of delay in processing cases while
the new code devotes a certain level of automaticity in the granting of benefits by significantly reducing the administrative
path of the investor.
Tax
Burundi passed a new law governing income tax on 24 January 2013. The law distinguishes between tax on personal
income and corporate tax, the latter including tax on profits and withholding tax.
Personal Income Tax
This tax applies to all income made by physical persons, including salary, commercial, industrial or services activities as well
as capital gains. The rate of the tax is 30%. However, tax on wages is calculated according to the income bracket and the
rate varies between 0% and 30%. The minimum rate of taxation is 1% of annual turnover, even where losses are made in
the financial year.
Investment Guide 2015 - Burundi
8
Capital Gains Tax
Other Tax
Transfer Pricing and Thin Capitalisation
Capital gains are taxed at a rate of 15%.
Rental income tax is based on a tax schedule with tax brackets ranging from 20% to 60%. Rental income is defined as all
net revenue from the rental of buildings and land in Burundi irrespective of the owner’s residence in Burundi or elsewhere.
The tax is calculated on the annual rental income, less 20% which represents deductible rental charges. Value Added Tax
(VAT) is payable at the rate of 18% and a sales tax of 18% is applicable to purchases made.
Transfer pricing is regulated by the new tax law and applies to “all transactions occurring between linked companies and
relating to sale and purchase of stocks, assets, services and financial transactions”. Methods of determination of the fair
and competitive price have been set out in a Ministerial Ordinance of 31 December 2013. Interests paid to “linked persons/
entities” and exceeding 30% cannot be deducted from taxable income.
Withholding Tax
Withholding tax applies for the following revenues:
i. Salary
ii. Public procurement revenues (4%)
iii. Dividends, payment of interests and income from services rendered by non-resident (15%)
iv. Acquisition of assets from a non-resident (5%)
Stamp and Transfer Duty
Double Tax Treaty with Mauritius
Transfer duty for real estate transactions is 3% of the market value of the sold property and is supported by the seller, in
addition to VAT. It is worth mentioning, that notwithstanding the price declared by parties in the sale contract, an official
valuation of the sold property is carried out in order to determine the market price.
Burundi currently has no double tax treaty with Mauritius.
Exchange Control
The liberalisation of Burundi’s exchange control system was started by the Central Bank in May 1992 and completed in
2010. The Central Bank is responsible for holding and managing foreign exchange reserves and has the power to buy or sell
gold and enact regulations on foreign currency transactions. Access to credit depends on the bank or financial institution.
With the liberalisation of exchange control, banks are now free to fix interest rates.
Investment Guide 2015 - Burundi
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Accounting Principles
Burundi’s accounting principles meet relevant international standards. An independent organisation of accountants has
been created and is fully functional. All enterprises and tax payers are obliged to comply with the national accounting
system and to have their annual tax returns drafted and submitted by certified accountants.
Imports and Exports
Burundi’s primary exports are coffee and tea, which account for 90% of foreign exchange earnings, though exports are
a relatively small share of GDP. The dependence of the export sector on a single commodity has made the economy
vulnerable to upswings in prices on the international market. Burundi has joined the EAC and is lowering its tariffs to bring
them in line with other EAC member countries.
Industrial Relations
Burundi has signed International Labour Organisation (ILO) conventions protecting workers’ rights. Industrial relations are
generally conducted according to international standards that allow for collective bargaining and freedom from reprisal
against employees who engage in union activities. However, existing labour regulations are not always consistently enforced.
Burundi’s Investment Code allows completely free access to foreign exchange for investment remittances. Whilst there
are no regulatory barriers to obtaining foreign exchange, much depends on availability within Burundi’s Central Bank.
Moreover, there is no stated legal limit on the inflow or outflow of funds for remittances in profits, debt service, capital,
capital gains, returns on intellectual property, or imported inputs.
Real Property
A new Land Act was enacted on August 9, 2011. Currently, access to, transfer or mortgage of land is done through a
centralised public office and notary intervention is required for all estate transactions.
Until recently, only land areas situated in urban zones were registered; land areas outside urban zones remained unregistered.
However, the situation has changed and communal land services have been installed in some regions of the country as
pilot projects. The role of such services called land tenure office (guichet foncier in French) is to create a link between the
Investment Guide 2015 - Burundi
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Corruption
Burundi has a number of laws and regulations that prohibit corrupt practices such as bribery, nepotism, embezzlement
and preferential hiring and promotion. Giving or receiving bribes is a criminal act punishable by six months to several years
in prison depending on the scale of the finances involved. In addition, Burundi is a signatory of the UN Anti-Corruption
Convention and the OECD Convention on Combating Bribery. Since joining the EAC in 2007, Burundi has also been a
member of the East African Anti-Corruption Authority. No complaints have been lodged by foreign firms against the
Government of Burundi under any of these agreements to date. However, corruption in Burundi remains pervasive. The
country ranks 159th out of 175 countries in Transparency International’s Corruption Perceptions Index for 2014. The
President has expressed his commitment to lowering corruption. In August 2010, a zero tolerance policy for corruption was
announced and the Ministry of Good Governance is developing a plan to battle corruption at all levels.
The Government of Burundi’s Anti-Corruption Brigade is responsible for enforcing anti-corruption legislation, but has
limited capacity, resources and jurisdiction. There is no evidence of any particular bias for or against foreign investors in the
enforcement of anti-corruption statutes.
cadastre service (remote and expensive), and the lack of legal certainty. The land tenure service is considered a “new”
municipal service, accessible to all, closer to the people and democratic.
The ultimate goal being of course that the rural population registering their land with the land tenure office which issue the
communal “land certificates” farmers are so secure in their rights. According to the Investment Code, free access and use
of land is allowed to foreign investors without any national discrimination.
Competition
Burundi adopted competition legislation in March 2010 but the regulatory authority, the Competition Commission, has yet
to become operational.
Legal Forms of Incorporation in Burundi
Procedures for incorporation of companies in Burundi have recently been significantly reduced and centralised. A new
Company Act was enacted on May 30, 2011.
In previous years, it was required to complete 32 steps or procedures up to 32 days and BIF 500,000 in order to create a
business. Today, within a single day, and with only BIF 42,000, it is possible to create a business. This was possible through
the establishment of a single window/a One Stop Center integrating the Burundi Investment Promotion Agency (API),
the Commercial Court (Office of the Registrar General Unit) and Burundi Revenue Authority services. To register a local
Investment Guide 2015 - Burundi
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Agriculture
Agriculture forms the backbone of the country’s economy and accounts for approximately 34% of GDP. Burundi’s principal
crops are coffee and tea and these contribute nearly 90% of the country’s exports earnings. The Government has attempted
to attract private investment into coffee production and processing. Producers normally receive technical support from
the State but now the coffee sector in Burundi is being privatised, that is to say that the bulk of activities are provided
by the private sector. There are private producers, millers, processors and exporters. The State is concerned solely with
the regulation via the Public Authority for Regulation of the Coffee Sector. Otherwise, the rest is done within INTERCAFE
Burundi - a private entity bringing together the various stakeholders in the coffee sector at the national level. Other crops
such as corn, sorghum, sweet potatoes and bananas are also produced (mainly as subsistence farming).
Industry Sectors
enterprise or a foreign subsidiary, API provides a quick and efficient registration service allowing you to have your business
incorporated within 24 hours. This process involves simultaneously obtaining the certificate of incorporation (business
registration) and a Tax Identification Number (tax registration). It is worth mentioning that a draft new Company Law is
under consideration by the cabinet and is due to be passed shortly
Practically saying, in order to complete company registration, the following was required:
a. Filling and signing standards application forms: This can be made at API, and in just 20 minutes
b. Obtaining the Certificate of company registration: The file is processed within one day by API services upon payment
of BIF 41,000 (approximately US$ 59)
c. Obtaining the Tax Identification number: The request is processed within one day (at the same time that the request
relating to the Certificate of company registration) upon payment of BIF 10,000 (approximately US$ 15)
d. Opening a bank account: This will take a half day at the bank of investor’s choice, and there is no longer a minimum
deposit required for starting a business. The minimum deposit will vary depending on the bank
Banking and Financial Services
Energy
Burundi’s formal banking sector is small in size and remains at an early stage of development. Formal financial services
mainly cater for Burundi’s small elite of wealthy business people and government officials. The majority of Burundians are
unbanked, relying on microcredit and informal lending. Commercial banking is dominated by the state and facilities are
located primarily in urban areas. The central bank is the Bank of the Republic of Burundi (Banque de la République du
Burundi, (BRB). While there are no restrictions on foreign investors’ access to local credit, the resources in the local market
are limited and long-term capital is largely unavailable. However, there have been several initiatives to improve the banking
sector, including opening the economy to foreign banks. The country has experienced an increase in new products and
technology within the financial sector, including telephone and internet banking.
The Ministry of Mines, Directorate of Energy is responsible for the energy sector within the country. Regi des Distribution
d’Eau et d’Electricite (REGIDESO) the national power authority, owns all the country’s power plants, excluding those below
150kW, and is responsible for power distribution in urban areas. The Government is currently promoting peat production
and is fostering the development of renewable energy resources, such as solar electricity and biogas. Also, big project to
build a hydro-electric dam over Jiji and Murembwe rivers is in progress and works are due to start in 2015.
Investment Guide 2015 - Burundi
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Mining
Telecommunications
There is potential wealth in petroleum, nickel, copper and gold, and although the mining and energy sectors have recorded
positive growth in the years following 2009, these resources remain largely under-exploited. It should be noted, however,
that China and Qatar have expressed interest in investing in mining in Burundi. In addition, a UK-based company has also
recently undertaken a seismic study of Lake Tanganyika during oil exploration in Burundi.
There is a lack of a developed telecommunications infrastructure in Burundi. The country’s telephone density is one of the
lowest in the world. The telephone system is a sparse system of open-wire, radiotelephone and low capacity microwave
radio relays. Cellular telephone usage is increasing but uptake and penetration is generally slow. With regard to internet
network, it is important to note that since 2013, the construction work of the fiber optics national backbone has been
launched throughout the country. There are at present at least three main mobile telecoms companies, one of them being
state-owned.
Manufacturing
Most secondary sector operations concern the processing of agricultural products and light consumer goods such as
blankets and other textiles, cigarettes, shoes and soap.
Intellectual Property
Dispute Settlement
Burundi is a signatory to a number of international agreements on patents and intellectual property, including the World
Intellectual Property Organisation, the Paris Convention and the Agreement on Trade-Related Aspects of International Property
Rights. However, given Burundi’s subsistence level economy, the intellectual property regime is largely underdeveloped.
An intellectual property law was enacted in 2007. Although it complies with international standards, on a practical level,
the implementation of this law is still poor and enforcement measures are lagging behind.
The Burundian legal system is largely based on German and Belgian civil codes and customary law. The constitution
guarantees the independence of the judiciary. Judges are appointed by the executive. Commercial and investment disputes
are normally settled by commercial courts, which have original and appellate jurisdiction. Since 2005, the code on judicial
competence has introduced provisions on arbitration. In 2007, the Burundian Government created a centre for arbitration
and mediation to deal with such disputes. It is worth mentioning, that the Investment Code allows the competence of
international arbitration chambers in disputes arising over investments made in Burundi. Burundi is also a member of the
Multilateral Investment Guarantee Agency and the International Centre for Settlement of Investment Disputes.
Mabushi Chambers
A: 1 Place de l’Indépendance, U-COM Building, 2nd Floor
P: B.P. 1972, Bujumbura, Burundi
T: +257 22 217 475
F: +257 22 217 476
ALN Head Office
A: 5th floor, The Oval
Corner of Ring Rd.,Parklands and Jalaram Roads, Westlands, Nairobi
P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T: +254 20 364 0000, +254 703 032 000
W: www.africalegalnetwork.com
Investment Guide - Ethiopia
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
TABLE OF CONTENTSGeneral Overview _________________________________________________________________________________4
Political Overview __________________________________________________________________________________5
Economic Overview ________________________________________________________________________________5
Regulatory Environment ____________________________________________________________________________5
Bilateral and Multilateral Treaties _____________________________________________________________________6
Investment Promotion ______________________________________________________________________________7
Institutions Governing Investment Promotion 7
Investment Incentives 7
Tax ______________________________________________________________________________________________8
Personal Income Tax 8
Withholding Tax 8
Capital Gains Tax 8
Other Tax 8
Transfer Pricing and Thin Capitalisation 8
Stamp and Transfer Duty 9
Double Tax Treaty with Mauritius 9
Exchange Control _________________________________________________________________________________9
Imports and Exports________________________________________________________________________________9
Accounting Principles ______________________________________________________________________________10
Industrial Relations_________________________________________________________________________________10
Real Property _____________________________________________________________________________________11
Corruption _______________________________________________________________________________________11
Competition ______________________________________________________________________________________11
Consumer Protection_______________________________________________________________________________12
Legal Forms of Incorporation in Ethiopia_______________________________________________________________12
Industry Sectors ___________________________________________________________________________________13
Agriculture 13
Banking and Financial Services 13
Energy 14
Manufacturing 14
Mining 14
Telecommunications 15
Tourism 15
Intellectual Property ________________________________________________________________________________15
Dispute Settlement ________________________________________________________________________________16
Investment Guide 2015 - Ethiopia
4
Capital City: Addis Ababa
Currency: Birr (ETB)
Languages: English, Amharic, Oromo, Tigrinya, Somali
Government: Federal Republic
President: Dr Mulatu Teshome
Population: 96.51 million - (2014 estimate)
Timezone: GMT + 3
GDP: US$ 47.53 million (2013 estimate)
General Overview
Investment Guide 2015 - Ethiopia
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Political Overview
Regulatory Environment
Economic Overview
The President of Ethiopia is the head of state. He is elected by the House of People’s Representatives for a six-year term and
may be re-elected for a second term. The Prime Minister is appointed by the party which attains power in the elections. The
Prime Minister appoints the Council of Ministers, which is then approved by the House of People’s Representatives. Under
the 1994 constitution, which became effective on 22nd August 1995, Ethiopia is a federal republic with ethnically-
based regions. Ethiopia is a multi-party state and has approximately 65 political parties, of which the Ethiopian
People’s Revolutionary Democratic Front is dominant.
The agricultural sector constitutes approximately 49.3% of GDP and over 70% of export earnings and accounts for
approximately 85% of total employment. The services sector is the fastest expanding sector and also constitutes close to
40% of GDP. Ethiopia qualified for debt relief from the Highly Indebted Poor Countries (HIPC) initiative in November 2001,
and obtained debt forgiveness from the International Monetary Fund in December 2005. Ethiopia’s GDP has maintained
a steady growth rate of 11.8% over the last five years, largely due to increased agricultural exports. The Government of
Ethiopia has attempted to promote private sector investment by implementing an investor-friendly taxation, trade and
credit system, and by simplifying and clarifying business and administrative procedures for investors. However, major
sectors of the economy continue to be dominated by state-owned and ruling party-owned entities. Foreign entities
are prohibited from participating in certain economic sectors, including banking, insurance and microcredit.
The World Bank’s “Doing Business 2015” data ranks Ethiopia 132nd out of 189 countries in terms of ease of doing business
in Ethiopia.Foreign investors are required to obtain investment permits and business licences from the Ethiopian Investment
Commission (EIC). Trade and business licences for the following activities are issued by other government institutions:
a. prospecting and mining of minerals;
b. various water works services, excluding water works construction services;
c. banking, insurance and microfinance services;
d. air transport services and other aviation services;
e. commercial activities involving the use of radioactive materials and radiation emitting equipment;
f. telecommunication services;
g. the business of generating, transmitting, distributing or selling electricity;
h. repairing and maintaining of arms and firearms and sale of explosives;
i. sea and inland water ways transportation services;
Investment Guide 2015 - Ethiopia
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Bilateral and Multilateral Treaties
Ethiopia commenced its accession to the World Trade Organisation in 2003 and submitted its memorandum of
Foreign Trade Regime in 2006. Ethiopia has also entered bilateral investment and protection agreements with 29 countries,
including South Africa, and has ratified a protection of investment and property acquisition agreement with Djibouti. The
country has also concluded double taxation treaties with Algeria, China, Czech Republic, Iran, Israel, South Africa, Tunisia,
Turkey, the United Kingdom (not yet in force, although signed), Yemen, Russia, Romania, Italy, Kuwait and France. Ethiopia
does not have a double taxation treaty with Mauritius.
Ethiopia is a member of the Multilateral Investment Guarantee Agency, the African Union, the Common Market for Eastern
and Southern Africa (COMESA) and the United Nations (UN).
j. multimodal transport services;
k. the business of warehouse receipt system; and
l. trade in tobacco and tobacco products.
Foreign investors wishing to purchase an existing private enterprise, or shares therein, are required to obtain prior approval
from the Ministry of Trade. The capital entry requirements for joint ventures and consultancy services have been decreased
and capital goods, other than computers and vehicles, may be imported duty-free.
The most popular areas for foreign direct investment have been horticulture, floriculture and leather. Foreign
investment in banking, insurance, finance, broadcasting, air transport, shipping, wholesale trade, resale trade and the
export of coffee, oilseeds, hides and skins is prohibited. Most tenders issued by the Privatisation and Public
Enterprises Supervising Agency are open to foreign participation. The Investment Law provides that the assets of a domestic
or foreign investor cannot be nationalised except when the public interest requires it, when such nationalisation is
in compliance with the law and when sufficient compensation is paid. Assets may only be seized, impounded or disposed
of by court order.
There are no designated foreign trade zones or free ports in Ethiopia. Exports and imports through the Eritrean port of
Assab are prohibited due to the Ethiopian-Eritrean war. Most Ethiopian trade is conducted through the port of Djibouti and,
occasionally, via the Somaliland port of Berbera.
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Investment Promotion
Various government agencies have the mandate to encourage and manage investment in Ethiopia. For instance, the EIC
grants foreigners investment and business licences, while the National Foreign Investment Promotion Advisory Council
promotes investment in the areas of textiles and garments, leather products, fruits and vegetables and agro-processing.
The Privatisation and Public Enterprises Supervising Agency issues government tenders in areas such as infrastructure
development and public sectors.
Incentives are provided to investors under Proclamation No. 769/2012, as amended by Investment (Amendment)
Proclamation No.849/2014 and Investment Incentives and Investment Areas Reserved for Domestic Investors Council
of Ministers Regulation No. 270/2012, as amended by Investment Incentives and Investment Areas Reserved for Domestic
Investors Council of Ministers (Amendment) Regulation No. 312/2014.
There are specific incentives for investments related to development, education and health; reduced capital entry
requirements for technical consultancy services and joint ventures; duty-free entry for capital goods (excluding
vehicles and computers). Investors leasing land for investment purposes are given priority. In addition, foreign
investors who reinvest profits or dividends or export 75% or more of domestic output are exempt from minimum capital
requirements. There is no requirement for participation by local partners in joint ventures. However, where such ventures
are for manufacturing of weapons and ammunition or telecommunication services, investors are allowed to invest as
a joint venture with the Government. There are no specific ownership thresholds set, although, in practice, the Government
would in most cases want to have a stake of more than 50%.
Any investor engaged in the manufacturing industry and who has invested at least US$ 200,000 or the equivalent in ETB at
the prevailing rate of exchange and has created permanent employment opportunity for at least 50 Ethiopian nationals is
entitled to import, at any time, duty free capital goods necessary for his existing enterprise.
On the other hand, investors that have engaged in another area of investment, eligible for customs duty exemption
with US$ 200,000 investment (or the equivalent in ETB at the prevailing rate of exchange), created permanent
employment opportunity for at least 50 Ethiopian nationals, shall be permitted to import duty free capital goods
necessary for the existing enterprise up to 5 years from the date of acquiring a business licence or other appropriate licence.
The law has further re-established Industrial Development Zones which are now defined to mean an area with a distinct
boundary designated by the appropriate organ to develop identical, similar or interrelated industries together or to develop
multifaceted industries, based on a planned fulfillment of infrastructure and various services such as road, electric power
and water, and having special incentive schemes, with a broad view to achieving planned and systematic development of
industries, mitigation of the impacts of environmental pollution and development of urban centres, and includes special
economic zones, industrial parks, technology parks, export processing zones, free trade zones and the likes designated by
the Investment Board. Industrial Development Zones are to be undertaken by the Federal Government or, where deemed
necessary, by joint investment of the Government and a private investor or by private investors.
Foreign exchange accounts, payments and current transfers are subject to controls and restrictions. Few restrictions apply
to the remittal of profits, dividends, principal and interest on foreign loans
Institutions Governing Investment Promotion
Investment Incentives
Investment Guide 2015 - Ethiopia
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Tax
Personal Income Tax
All persons who earn an “income” as defined in the Income Tax Proclamation No. 286/2002 or 286/1994 and the Income Tax
(Amendment) Proclamation No. 608/2008 or 608/2001 are obliged to pay income tax. This includes income from business
activities, from entrepreneurial activities carried on by a non-resident through a permanent establishment and licence
fees (including lease payments and royalties paid by a resident or a non-resident through a permanent establishment). An
individual is regarded as being resident in Ethiopia if that individual has a domicile or habitual abode in Ethiopia; is a citizen
of Ethiopia; or is a consular, diplomatic or similar official of Ethiopia posted abroad. An entity is regarded as resident if it has
its principal office or place of effective management in Ethiopia or is registered in the trade register of the Ministry ofTrade
or of a trade bureau of a regional government.Corporate Income Tax is computed on taxable profits. The statutory tax rate
is 30%. New investors in agricultural, agro-industrial and manufacturing are exempt from income tax for a period of one to
six years depending on the area of investment and the location of their investment in the country.
Withholding Tax
Withholding tax is levied on imported goods at a rate of 3% on the sum of cost, insurance and freight and is levied at a
rate of 2% in the case of business entities, non-governmental organisations, private non-profit institutions and government
agencies. Tax is imposed on dividends at a rate of 10% and 5% on interest and royalties.
Capital Gains Tax
Other Tax
Revisions to the Income Tax Law reduced capital gains tax from 40% to:
a. 15% in respect of a building held for business, factory or office; and
b. 30% in connection with shares of companies.
Any remittance made by a foreign investor in Ethiopia from the proceeds of a sale or transfer of shares or assets upon the
liquidation or winding up of an enterprise is exempted from the payment of capital gains.
Turnover tax is levied at a rate of 2% on the supply of goods to the local market and on construction, grain, mill, tractor
and combine harvesting services.
Value Added Tax (VAT) is levied at a rate of 15% on businesses whose turnover exceeds ETB 500 000 (US$24,702) per year.
All exported goods and basic services are exempted from VAT.
Transfer Pricing and Thin Capitalisation
There are no regulations regarding transfer pricing or thin capitalisation in Ethiopia.
Investment Guide 2015 - Ethiopia
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Stamp and Transfer Duty
Double Tax Treaty with Mauritius
In the course of starting a company, stamp duty is charged at a flat rate of ETB 350. In the course of registering property
in Ethiopia, stamp duty is charged at 2% of the property value at the Land Administration Office. In the course of selling of
property, the seller has to obtain tax clearance on the property from the Tax Authorities in respect of transfer tax.
Ethiopia does not currently have a double tax treaty with Mauritius.
Exchange Control
Imports and Exports
Under Ethiopia’s Investment Law, all foreign investors are entitled to remit profits, dividends, principal and interest on foreign
loans, and technology transfer-related fees. Foreign investors may also freely remit proceeds from the sale or liquidation of
assets, from transfer of shares or partial ownership of a business, funds for debt service and other international payments.
Expatriate employees may remit their salaries in accordance with the National Bank of Ethiopia’s (NBE) foreign exchange
regulations.
Repatriation of company profits may be delayed due to low reserves of hard currency held by the NBE. Businesses must
apply for foreign exchange for imports in a minimum of six to nine months in advance of their intended importing needs.
The import and export of prohibited and restricted goods is controlled by the Ethiopian Customs Authority. Banned imports
include goods which are socially or morally harmful such as habit forming drugs, military weapons, explosives, fireworks,
poisons, toxic substances and pornographic materials. Plants, plant products and seeds can only be imported with prior
consent of the Ministry of Agriculture or such other nominated government agency.
The Quality and Standards Authority of Ethiopia is the first quality and standards accreditation and certification authority
in the country. All medicines and medical supplies must be registered, prior to use and distribution, with the Drug
Administration and Control Authority.
Imports and exports are subject to taxes and duties under the Harmonised Commodity Description and Coding System.
They are also subject to the preferential tariff rate where goods are imported from the preferred country and the rates in
force on the day the declaration of goods is presented to, and accepted by the customs office.
High import tariffs are applied to protect certain local industries such as the leather and textile industries. Ad valorem
tariffs range from 0% to 35%. The Ethiopian Government has introduced 10% surtax on certain imported goods, with the
proceeds being attributed to the distribution of subsidised wheat in urban areas.
Investment Guide 2015 - Ethiopia
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Ethiopia is a member of COMESA and goods imported from COMESA countries are afforded a 10% tariff preference.
Importers must obtain import permits and letters of credit for the total amount imported. Tax certification is required for
repatriation of dividends or investment income. Regulations govern the repayment of loans and foreign partner credits.
There are also rules governing import permit issuance by commercial banks and a clearance certificate from the National
Bank of Ethiopia is required to obtain an import permit.
Industrial Relations
There is no national minimum wage in Ethiopia, although some government institutions and public enterprises set their
own minimum wages. The definition of “wages” in the Labour Proclamation does not include allowances, bonuses or
overtime pay.
All eight of the International Labour Organisation’s conventions have been ratified by Ethiopia and most of the Core Labour
Standards have been enacted into law. The Labour Proclamation sets minimum work standards. Employers may not hire
persons under 14 years and are subject to certain restrictions in respect of the hiring of persons aged 14 to 18, although
these restrictions are not often enforced. The maximum number of working hours per week is 48.
The Confederation of Ethiopian Trade Unions focuses on fundamental workers’ concerns, such as job security, pay increases,
severance pay and health and retirement benefits. Grounds for termination of an employment contract are set out in the
Labour Proclamation and include misconduct, incapacity and operational requirements.
Under new legislation promulgated in June 2011, the pension coverage system is open to employees in the private and
public sector. Contributions to funds are made on the basis of 7% of the employee’s salary and 11% contribution from
the employer.
All foreigners entering the country must obtain visas either at the arrival gate, or prior to arriving in the country from an
Ethiopian Embassy, Permanent Mission or Consul General. A work permit is obtained from the Ministry of Labour and
Accounting Principles
Accounting practices in Ethiopia vary among different institutions and differ from the International Financial Reporting
Standards. A draft Bill entitled the “Financial Reporting Proclamation” is currently under revision by the Ministry of Finance
and Economic Development. The Bill aims to ensure that international financial and auditing reporting standards are
complied with. An Institute of Certified Public Accountants of Ethiopia will also be formed if the Bill passes into law.
The Commercial Code, 1960, holds company directors responsible for preparing financial statements and ensuring that
audits are conducted. While the Public Enterprises Proclamation, 1992, requires state-owned enterprises to create financial
statements in accordance with generally accepted accounting principles, the standards are not defined.
Investment Guide 2015 - Ethiopia
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Social Affairs. A business visa may be converted into a work permit. A work permit may also be obtained while travelling
on a business visa. Procedural requirements for the work permit vary according to the type of organisation at which the
expatriate will be working. A residency permit may be obtained from the Ethiopian Immigration Authority. Expatriate
employees may remit their salaries in accordance with the NBE’s foreign exchange regulations provided the NBE is notified
of the expatriate’s employment in Ethiopia.
Real Property
Corruption
No right of private ownership of land exists in Ethiopia. All land is state-owned and may be leased from the state for up to
99 years. The forms and practice of leasehold systems vary according to the various regions.
Transparency International’s 2014 Corruption Perceptions Index ranked Ethiopia 110th out of 175 countries. The country
ratified the United Nations Anti-Corruption Convention in 2007. It is a crime to give or receive bribes in Ethiopia. The
Ministry of Justice and the Federal Ethics and Anti-Corruption Commission are the bodies responsible for combating
corruption. The Proclamation on Prevention and Suppression of Money Laundering and the Financing of Terrorism, through
which a national financial intelligence unit will be established, became effective in December 2009.
Furthermore, following frequent complaints from investors about the lack of transparency in the procurement system, the
Ethiopian Government has established a public procurement and property administration agency which is intended to be
an autonomous government organ, with its own judicial branch, accountable to the Ministry of Finance and Economic
Development.
Competition
The Ethiopian Government repealed the Trade Practice Proclamation announced in 2003 and the Trade Practice and
Consumers’ Protection Proclamation No. 685/2010 and has now enacted the Trade Competition and Consumers Protection
Proclamation No. 813 of 2013 (TCCPP), which establishes the Trade Competition and Consumer Protection Authority.
The Proclamation aims to promote competitive practices in the local market and eliminate or prevent anti-competitive
and unfair trade practices. Amongst other things, the Proclamation regulates anti-competitive practices such as price-
fixing; collusive tendering; market and consumer segregation; refusals to deal, sell or render services; practices intended to
eliminate competitors; and practices regarded as abuse of dominance. Under the TCCPP, a merger is deemed to have
occurred (a) when two or more business organisations previously having independent existence, amalgamate or when
such business organisations pool the whole or part of their resources for the purpose of carrying on a certain commercial
activity or (b) by directly or indirectly acquiring shares, securities or assets of a business organisation or taking control of
the management of the business of another person by a person or group of persons, through purchase or other means.
Investment Guide 2015 - Ethiopia
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The Trade Competition Authority (TCA) does not include any threshold figure in terms of determining whether a merger
is notifiable, as such all mergers (as defined) must be notified to the TCA prior to their implementation, disclosing the
details of the proposed merger. The TCA will then investigate the possible adverse effect of the proposed merger on trade
competition, during which time it may request additional documentation/information and seek comments (through a
notice in a newspaper) from any business person who is likely to be adversely affected by the merger. During the review
period, the merger cannot take effect. Failure to give notice of a merger may expose any business person who participates
in the merger to a fine of 5% up to 10% of his/her annual turnover. However,no filing fee is payable to the TCA for
notifying a merger.
Consumer Protection
The Civil Code regulates contracts and extra-contractual liability while the Commercial Code regulates many other
commercial transactions. Other pieces of legislation such as the Classification of Hotels and Restaurants; Pensions
Regulation and the Licensing and Supervision of Insurance Business Proclamation are also relevant in the area
ofconsumer protection.
The TCCPP also established the Trade Competition and Consumer Protection Authority. Under the TCCPP, consumers
have the right to be provided with accurate information on the quality and type of goods or services being provided and to
claim damages in relation to such transactions. Adjudication of disputes will be in line with the Civil and Criminal Codes.
The Authority is accountable to the Ministry of Trade.
Legal Forms of Incorporation in Ethiopia
The principal business entities are sole proprietorships, partnerships, general partnerships, limited partnerships, share
companies, private limited companies and joint ventures. In addition, a branch office of a foreign company may also be
set up in Ethiopia.
A private limited company must have at least two members and may have a maximum of 50 members. The minimum
capital required for a private limited company is ETB 15 000, and the liability of the company is limited to its assets.
A share company (public company) must have at least five founders. The minimum capital required for a share company
is ETB 50 000. The Commercial Code and the Investment Law govern the incorporation of these business entities. The
said minimum capital of ETB 15,000 and ETB 50,000 apply to local investors as provided in the Commercial Code
while foreign investors are required to meet the minimum capital as stipulated in the Investment Law which is currently
US$200,000 if the investment is wholly foreign owned and US$150,000 if the investment is made by a foreign investor
jointly with a local investor. The table below provides a summary of the procedures and the associated completion time
and cost for setting up a private limited company:
Investment Guide 2015 - Ethiopia
13
Procedure Time to complete Cost to complete
1 Check the company name for uniqueness with the Ministry of Trade
1 day No charge
2 Authentication of the company documents at the Office of Acts and Documents Registration
2 days ETB 390 (ETB 350 stamp duty and service charge of ETB 10 each for four copies of the M.O.A)
3 Register the Company Document at the Commercial Register and obtain the trade licence
1 day ETB 85 approximately (registration fee, licensing fee, forma, cards and stamps vary according to the company’s capital)
4 Register with the Ethiopian Revenue and Customs Authority for Income Tax and VAT (Tax Identification Number and tax certificate are issued upon registration)
2 days No charge
5 Provide a company seal (the law does not specifically require this, although it is required in practice)
3 days ETB 100
Agriculture
The agricultural sector constitutes approximately 50% of GDP and approximately 85% of total employment. Approximately
80% of the labour force is involved in subsistence agriculture as farmers or herders. Consecutive seasons of failed rains,
however, mean the country still faces food insecurity. Ethiopia’s main crops are coffee, pulses, oilseeds, cereals, sugarcane,
potatoes and vegetables. Horticulture and floriculture are popular areas for foreign direct investment. Ethiopia is Africa’s
second largest maize producer and its livestock population is believed to be the largest in Africa.
Since 2009, the Ethiopian Government has been focusing on encouraging investment in large-scale commercial farms.
The Ministry of Agriculture and Rural Development created an Agricultural Investment Support Directorate which aims to
increase production, employment, technology transfer and provide private investment incentives. It is negotiating long-term
leases in respect of approximately seven million hectares of commercial farmland (as mentioned above, land is state-owned,
not privately owned in Ethiopia). The Directorate also offers up to seven years grace on land rentals.
Industry Sectors
Banking and Financial Services
The National Bank of Ethiopia (NBE) is the country’s central bank, and holds a monopoly on all foreign currency transactions.
Amendments to the Monetary and Banking Proclamation of 1994 and the Banking Business Proclamation of 1994
became effective in 2008 and gave the NBE authority to licence and supervise financial institutions more rigorously.
Bank processes concerning exports to China were ordered by the NBE in 2006 to be undertaken exclusively by the state-
owned Commercial Bank of Ethiopia. There is no stock market in Ethiopia.
Investment Guide 2015 - Ethiopia
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The foreign exchange regulations of the NBE allow expatriate employees to remit their salaries.The local currency, the
ETB, is not freely convertible. Since 2004, the NBE has permitted non-resident Ethiopians and non-resident foreign
nationals of Ethiopian origin to establish and maintain foreign currency accounts of up to US$ 50 000.
The Ethiopia Commodity Exchange was initiated in 2008 and the intention is to increase transparency in commodity pricing,
encourage commercialisation of agriculture and alleviate food shortages. It offers trades on commodities such as coffee,
sesame seeds, corn and wheat.
The Government offers 28-day, three-month and six-month treasury bills, but the interest rate thereon is prevented from
exceeding the bank deposit rate. The yields on these bills are low and the market is fairly unattractive to the private sector
with 95% of the bills being held by the Commercial Bank of Ethiopia. The Ethiopian Investment Law prohibits foreign
investment in the banking, insurance, micro-credit and financial sectors.
Energy
Approximately 90% of Ethiopia’s electricity is produced through hydropower. Apart from the use of water and wood in
electricity production, Ethiopia is not well endowed with energy resources, and indeed numerous power outages occurred
during 2009. Consequently, the Ministry of Water, Irrigation and Energy is seeking investment in the energy sector in
order to combat the crisis. The Ministry is particularly interested in renewable energy sources and a draft feed-in tariff Bill,
establishing rates and conditions for private entities to supply power to the national grid, is being finalised. A number of
high profile energy projects are also expected to be completed in 2013/2014 as Ethiopia is looking to export electricity to
Sudan, Kenya and Djibouti.
Petroleum requirements are met through imported refined products. Oil exploration has been ongoing since September
1945 when the Emperor Haile Selassie granted a 50 year concession to SOCONY-Vacuum. There are natural gas reserves of
four trillion cubic feet in the South-Eastern lowlands of the country. Currently, there are oil and gas exploration activities in
the Gambella Region in the country’s South-West, adjacent to the border of Southern Sudan.
Manufacturing
The manufacturing sector constitutes approximately 10% of GDP and employs 5% of the labour force. Growth of the
industrial sector is inhibited by the fact that, with all land being state-owned, entrepreneurs are not able to use land as
security for loans.The Tigray State has created industrial zones supplied with basic infrastructure in nine major towns
(Mekelle, Adigat, Adwa, Axum, Endaslasie, Alamata, Maichew, Wukro, Humera) which allows for lower fixed lease prices
per square metre in these areas for investors. As mentioned above, investors in the manufacturing and agro-industrial
sectors are granted tax exemptions according to the extent which they export their products.The manufacturing
sector is mostly concentrated in Addis Ababa, with the focus being on food processing and beverages, textiles, leather,
chemicals, metal processing and cement.
Mining
Ethiopia has modest reserves of gold, platinum, copper, natural gas and potash, as well as iron ore, gemstones, coal and
kaolin. Salt extraction occurs at the salt beds of the Afar Depression and in the springs of Dire and Afder Woredas.
The proven oil reserve level is 430 000 bbl and the proved natural gas reserves are 24.92 billion cum. Ethiopia continues to
be one of the top tantalum-producing countries.
Investment Guide 2015 - Ethiopia
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Ethiopia’s mining sector is regulated by the Mining Law, the Mining Income Tax Law and Mining Regulations. The mining
legislation provides that private investors are permitted to perform all kinds of mining operations, including exploration,
mining, processing and export. Investors may acquire a one year exclusive prospecting licence and a three year exclusive
exploration licence with renewals of two years each and further extension periods depending on circumstances prevailing
at the time the exploration activities are being undertaken. Investors may acquire a 20 year exclusive mining licence with
unlimited renewal periods of ten years each. The right to sell minerals in Ethiopia and abroad is guaranteed. Minerals not
originally specified may be added to the licence if discovered and there is an exemption from customs duties and taxes on
the importation of equipment, machinery, vehicles and spare parts necessary for mining operations.
The major African cement producer, Messebo Cement, acquires limestone, clay and other inputs from the Mekelle area
of Ethiopia. The demand for cement in Ethiopia is high due to the Government’s housing programme and the building
of dams, roads and irrigation canals. In addition, a number of foreign investors have obtained mining licences for gold
exploration in Western Tigray, although mining operations have yet to begin.
Industrial minerals have been cited as the most promising areas of investment in Ethiopia. There are significant sources of
limestone, granite, marble, slate, silica sand and greenstone, which are yet to be exploited by investors, in the north and
north-west of Mekelle. Saba Dimensional Stone plc (a dimensional stone processing plant) in Adwa Town, north-west of
Mekelle, processes marble, limestone and granite in particular, supplying tiles and slabs locally.
Telecommunications
Tourism
Investors may only enter into the telecommunication services industry in the form of a joint venture with the state. Ethio-
Telecom (ETC) is the state-owned company which has a monopoly in this sector. The telephone system in Ethiopia has
been described as “inadequate” and the combined fixed and mobile-cellular teledensity is estimated at five per 100
persons. ETC has previously estimated that the average rural Ethiopian inhabitant has to walk 30 kilometres to
reach a telephone.There are approximately 360 000 internet users, with 151 internet providers in 2010. There is one public
television broadcast station, one public radio broadcaster, a few commercial radio stations and approximately a dozen
community radio stations.
Tourism constitutes approximately 4.1% of Ethiopia’s GDP, and utilises 3.1% of the labour force. Tourism is said to be a
good area for potential investors due to the moderate dry climate, historical and religious sites and ecological beauty. The
area of ecotourism, in particular, has great potential for growth.
Intellectual Property
In 1998, Ethiopia acceded to the Convention establishing the World Intellectual Property Organization (WIPO). The Ethiopian
Constitution (1995) provides the foundation for intellectual property rights. The Government also recognises the protection
of intellectual property rights as a key factor in economic growth.
Investment Guide 2015 - Ethiopia
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As a result, there is in place:
1. The Inventions, Minor Inventions and Industrial Designs, Proclamation No. 123, 1995;
2. Copyright and Neighbouring Rights Protection Proclamation No. 410/2004; and
3. Trademark Registration and Protection Proclamation No. 501/2006 which regulates acquisition, registration and
protection of trademarks in Ethiopia.
These Proclamations are in accordance with the spirit of the Berne Convention for the Protection of Literary and Artistic
Works, the Agreement on Trade-Related Aspects of Intellectual Property Rights and the WIPO Treaty.
The Ethiopian Intellectual Property Rights Office, established in 2003, is responsible for the administration of
patents, trademarks, copyrights, and other intellectual property policy and legal issues. The Office suffers from a lack of
manpower and weak law enforcement capacity. It has registered three Ethiopian coffee trademarks in overseas
countries.
Patents are protected for 10 to 15 years, with an additional five years if there is proof that it is properly utilised. Industrial
designs are protected for five years, with two possible five year extensions. Copyrights are protected throughout the
lifetime of the author and 50 years after his or her death; 50 years for the producers of sound recordings and performers;
and 20 years for broadcasting entities. Trademarks are protected after the publication of a cautionary notice.
Dispute Settlement
Ethiopia has signed but not ratified the 1965 Convention on the Settlement of Investment Disputes between States and
Nationals of Other States. In terms of the Investment Law, disputes concerning foreign investment may be settled by
mutually agreeable means, failing which the dispute may be referred to a court or international arbitration in terms of
a bilateral or multilateral agreement to which Ethiopia and the investor’s state are parties. However, the award of an
international tribunal is not always enforced in Ethiopia.
ALN Head Office
A: 5th floor, The Oval
Corner of Ring Rd.,Parklands and Jalaram Roads, Westlands, Nairobi
P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T: +254 20 364 0000, +254 703 032 000
W: www.africalegalnetwork.com
Investment Guide - Kenya
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
ANJARWALLA & KHANNA
TABLE OF CONTENTSGeneral Overview _________________________________________________________________________________4
Political Overview __________________________________________________________________________________5
Economic Overview ________________________________________________________________________________5
Regulatory Environment ____________________________________________________________________________7
Bilateral and Multilateral Treaties _____________________________________________________________________8
Investment Promotion ______________________________________________________________________________8
Institutions Governing Investment Promotion 8
Investment Incentives 9
Export Processing Zones (EPZs) 9
Tax ______________________________________________________________________________________________10
Income Tax 10
Withholding Tax (WHT) 10
Capital Gains Tax 11
Value Added Tax 11
Import Duty 12
Transfer Pricing and Thin Capitalisation 13
Stamp and Transfer Duty 13
Accounting Principles ______________________________________________________________________________13
Industrial Relations_________________________________________________________________________________14
Real Property _____________________________________________________________________________________16
Competition ______________________________________________________________________________________16
Consumer Protection_______________________________________________________________________________17
Legal Forms of Incorporation in Kenya ________________________________________________________________17
Industry Sectors ___________________________________________________________________________________18
Agriculture 18
Banking and Financial Services 19
Manufacturing 19
Mining, Oil and Gas 20
Real Estate and Construction 20
Telecommunications 21
Tourism 21
Intellectual Property ________________________________________________________________________________22
Dispute Settlement ________________________________________________________________________________22
Investment Guide 2015 - Kenya
4
Capital City: Nairobi
Currency: Kenya Shilling (KES)
Languages: English and Swahili
Government: Unitary republic with a federal system
President: Uhuru Muigai Kenyatta
Population: 45.55 million (2014 estimate)
Timezone: GMT + 3
GDP: US$ 55.24 billion (2013 estimate)
General Overview
Investment Guide 2015 - Kenya
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Political Overview
Economic Overview
The country has a multi-party political system whose hallmark is constitutional democracy. Kenya adopted a new Constitution
on 27th August, 2010 (the Constitution). The first general elections under the new Constitution were held in March
2013, following which Kenya ushered in a new devolved government structure. Under the new structure, The Republic
of Kenya is a unitary state but with a devolved governance system comprised of the National Government and 47 County
Governments. There are three arms of government:
1. The Executive arm which is headed by the President. The President is both the head of state and the head of government.
2. The President is elected by simple majority and must obtain at least 25% of the vote in each of at least 24 counties. The
law requires the president to appoint between 14 to 22 cabinet secretaries reflecting ethnic and regional diversity; the
current cabinet is made up of 18 cabinet secretaries;
3. The Legislature is comprised of two houses: the National Assembly and the Senate which are vested with law making
powers; and
4. The Judiciary is headed by the Chief Justice; the Supreme Court is the highest court in the land.
Since the implementation of the devolved Government, various laws have been passed by some of the 47 County
Governments. It is therefore important for businesses and investors to adjust to these new institutional arrangements to
ensure that they are in compliance with both national legislation and county government legislation in the counties in which
they seek to operate.
The current national government’s policies create various investment opportunities and encourage the participation of
private sector players through Public Private Partnerships (PPP). These policies include the provision of free maternity
services in public hospitals, free laptops for primary school children, reserving 30% of government contracts for the youth,
developing a standard gauge railway network between Kenya and Uganda and the Lamu Port Southern Sudan-Ethiopia
Transport Corridor.
The Kenyan economy, East Africa’s largest, has experienced considerable growth in the past few years. This growth has
been driven by several key factors. The country enjoys some particular advantages including a reasonably well-educated
labour force, a vital port that serves as an entry point for goods destined for countries in the East African and Central African
interior, abundant wildlife, miles of attractive coastline, increasing discoveries of natural resources and a government that
is committed to implementing business reforms. The World Bank Group’s Doing Business Report, 2015 ranked Kenya
136 out of 189 economies in ease of doing business, 122nd in protecting minority investors and 116th in getting credit.
Kenya is part of the East African Community (EAC). Other members include Tanzania, Uganda, Rwanda and Burundi.
Following its independence, South Sudan submitted an application to join the EAC. Its membership of the EAC is currently
being negotiated and is awaiting confirmation.
The members of the EAC entered into a Common Market Protocol (the Protocol), with effect from July 2010 and steps
Investment Guide 2015 - Kenya
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are being undertaken to realise the full implementation of the Protocol in 2015. In particular, the four freedoms enshrined
in the Protocol demand free movement of people, goods, services and capital within the common market. In this regard,
member states are required to review domestic legislation to ensure their compliance with the Protocol’s objectives. The free
movement of people allows citizens of member states to work freely within the EAC with the intention of providing each
of the member state with a larger pool of skilled labour. However, there has been non-uniform (and in some cases non-
existent) progress in the implementation of the Protocol’s objectives, particularly in relation to the free movement of people
and labour. Rwanda and Kenya have entered into a bilateral agreement which permits the citizens of both countries to
work freely in either country without paying work permit fees. A similar agreement is currently being negotiated between
Kenya and Uganda. In addition, Kenya, Uganda and Rwanda entered into a tripartite agreement in January 2014 whereby
citizens can move freely within the three East African countries using only their identity cards as travel documents.
The EAC is working towards further integration which is likely to have far-reaching, positive consequences for Kenya’s
economy. Notable developments include the implementation of a single tourist visa for Kenya, Uganda and Rwanda
which was launched on 20 February 2014 and the execution of an EAC Monetary Union Protocol, geared to establishing
a single currency area in the EAC, by the EAC Heads of State in November, 2013.
Kenya is also a member of COMESA - the 19 member Common Market for East and Southern Africa, opening up
the way for trade across Eastern and Southern Africa for nearly 400 million people which is about half of Africa’s total
population. Kenya has a vibrant investment environment. As at December, 2014, the Nairobi Stock Exchange (NSE) had 65
listed companies. In January 2013, the NSE launched its Growth Enterprise Market Segment (GEMS) on the NSE; a market
which enables Small and Medium Sized Enterprises (SMEs) to raise initial and ongoing capital. After a slow start, interest in
the GEMS market has picked up and there are currently four (4) companies listed on it.
The Central Depository and Settlement Corporation provides central depository services for securities in Kenya. November
2013, was scheduled as the date for the completion of the dematerialisation of securities. Hitherto, the dematerialisation
process had been implemented in phases targeting particular forms of securities. Moving forward, physical certificates
will no longer be recognised as prima facie evidence of ownership and listed companies will no longer issue paper share
certificates. Investors have been called upon to replace their share certificates, with an electronic record held by the Central
Depository System for the purposes of trading or transferring their shares. The move to dematerialise shares is in keeping
with current global trends and is expected to raise the profile of Kenya’s capital market’s adherence to international best
practice.
The Government is currently pursuing Kenya’s Vision 2030, which is the country’s development blueprint covering the
years 2008 to 2030. Six key sectors have been given priority as key growth drivers in this plan, namely tourism, agriculture,
manufacturing, ICT and business process out-sourcing, wholesale and retail trade and finance.
Kenya’s Gross Domestic Product (GDP) contracted 3.32% in the third quarter of 2014 over the previous quarter. Kenya’s
GDP Growth Rate averaged 1.21% from 2005 until 2014, reaching an all-time high of 4.17% in the second quarter of
2014 and a record low of -3.32% in the third quarter of 2014. Kenya’s GDP growth is reported by the Kenya National
Bureau of Statistics.
On 16 June, 2014, Kenya successfully issued two tranches of a maiden Eurobond (US$ 500 million, 5.875% due 2019
and US$ 1.5 billion, 6.875% due 2024). Investor participation was strong, reflecting robust confidence in the country’s
economic prospects despite heightened security risks. The bond listed on the Irish Stock Exchange. The proceeds of the fund
will be used for infrastructure projects and to pay off a US$ 600 million loan that matured in August 2014. Some major
Investment Guide 2015 - Kenya
7
Regulatory Environment
Much of Kenyan investment law is modeled on English law. One of the most significant changes to take place in Kenya in
the last few years is the enactment of the Constitution. The period following the promulgation of the new Constitution has
seen the enactment of an unprecedented number of new laws in Kenya. In 2011, 35 new statutes were enacted and in
2012 at least 25 new statutes were enacted. 2013 was a similarly busy year as 39 new statutes were enacted. However, in
2014, only 12 new statutes were enacted with many more awaiting confirmations from the Senate. Kenya’s sources of law
are the Constitution; written laws; English statutes of general application in force as at 18th August, 1897; the common
law and doctrines of equity and customary law. In addition, the Constitution provides that the general rules of international
law and treaties or conventions ratified by Kenya form part of the laws of Kenya. The key corporate and investment laws
are the Companies Act (Cap 486) and the Investment Promotion Act, 2004. The Constitution envisions numerous pieces of
legislation to be enacted by Parliament covering a wide range of subjects, including land ownership, consumer protection
and the exploitation of natural resources.
Kenya has taken steps to overhaul several key commercial laws, which are largely based on legislation adopted during the
colonial period, to make them more compatible with current global trends and the investment environment. Consequently,
there is proposed legislation covering company law, insolvency, and banking and payment systems. A new Competition
law which seeks to ensure a more competitive market was brought into effect in 2012. In June 2013, the Capital Markets
(Real Estate Investment Trusts) (Collective Investment Schemes) Regulations (REITS Regulations) and the Capital Markets
(Futures Exchanges) (Licensing Requirements) Regulations came into force.
Over the past few years there have been major efforts to privatise commercial sectors that were previously government
owned or managed in order to encourage foreign investment in these sectors. The stated aim of the Government is to
have minimal interference in business, and the Government is increasingly adopting the role of a regulator rather than an
active market participant.
To promote investment in Kenya, the Government overhauled Kenya’s licensing regime in 2006, reducing the number of
licences required to do business, while making licensing regimes simpler and more transparent. In 2008, the Government
reduced the number of licences required to set up a business from 300 to 11. The Business Regulatory Reform Unit in the
Ministry of Finance continues this streamlining process. In general, foreign and local investors receive equal treatment.
Foreign and local investors can operate in all sectors except where state corporations still enjoy a statutory monopoly
such as in infrastructure, or where there are quotas on minimum local ownership, such as the insurance, banking and
telecommunications sectors. Ownership restrictions also apply to listed companies. Kenya has taken steps towards partial
liberalisation of state monopolies in certain sectors. A number of state corporations have been privatised and essential
sectors such as energy have been opened to private investors. Residents and non-residents are permitted to hold foreign
currency accounts.
infrastructure projects include railway expansion (a new standard gauge railway will be built in 3 phases for a total of US$
13 billion), LAPSSET (with a new port at Lamu, railway, road, oil terminal & pipeline and resort cities at Lamu, Isiolo and Lake
Turkana), 4 dams at a cost of US$ 16.8 billion and the replacement of the Mombasa-Nairobi oil pipeline.
Investment Guide 2015 - Kenya
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The new Public Private Partnerships (PPP) Act, 2013 aims to expand the participation of the private sector in
infrastructure and development projects through concessions or contractual profit sharing arrangements. The Public
Private Partnership Regulations, 2014 were gazetted on the 17th October, 2014 and set out the mechanisms for giving
effect to various provisions of the PPP Act.
Pursuant to these Regulations, the PPP Unit is working on a number of projects. With the evolution of a devolved system of
government, county governments are targeting private investors to collaborate with them through PPPs in order to enable
the county governments to carry out their functions pursuant to Schedule 4 of the Constitution. Potential projects include
administration of county transport and infrastructure (including construction, street lighting, traffic and parking), providing
county health services, fire fighting services, pre-primary education, disaster management and the implementation of other
specific national government policies.
Bilateral and Multilateral Treaties
Kenya is a member of the EAC, COMESA, African, Caribbean and Pacific States and the World Trade Organisation (WTO).
Currently, Kenya has signed double taxation agreements with Canada, Denmark, France, Germany, India, Norway, Sweden,
the United Kingdom and Zambia.
A double taxation agreement between Mauritius and Kenya was scheduled to come into force in January 2015; however,
the Kenyan Government did not issue the requisite notifications to the Mauritius Government to bring the Kenya-Mauritius
treaty into force. It therefore remains ineffective and will not come into force before 1 Jan 2016. Kenya signed a double
taxation agreement with Qatar in 2014 and treaties with the UAE and Iran remain under negotiation. The East African
Community Double Taxation Agreement has been ratified by the Kenyan Government but is yet to enter into force. The
Kenyan Government has also entered into a double taxation agreement with the South Africa, but the agreement is also
ineffective. The treaties will come into force once the requisite notifications are made to the respective foreign governments,
but in any case not earlier than 1 January 2016.
It is noteworthy, that with effect from 1 January 2015, the Income Tax Act limits the relief from double taxation to a person
resident in a country that has a double taxation agreement with Kenya, or a company that is resident in a country that has
a double taxation agreement with Kenya, and where 50% or more of its underlying ownership is held by an individual(s)
resident in that country.
Investment Promotion
Kenya Investment Authority
In a bid to encourage investment in Kenya, the National Assembly enacted the Investment Promotion Act, 2004 (the
IPA). The IPA aims to reduce bureaucratic delays in relation to licensing, immigration and negotiating tax incentives and
exemptions from the relevant authorities. The IPA established a corporate body known as the Kenya Investments Authority
Institutions Governing Investment Promotion
Investment Guide 2015 - Kenya
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An investment certificate granted under the IPA offers investors some important benefits, the principal one being that
KenInvest facilitates the issuance of all necessary licences and permits required for the investor’s operations. Investment
certificate holders are entitled to apply for entry work permits for 3 members of the holder’s management or technical staff
and three co-owners, shareholders or partners.
According to KenInvest, Kenya has entered into Investment Promotion and Protection Agreements with France, Finland,
Germany, Italy, Netherlands, Switzerland, China, Libya, Iran, Burundi and the United Kingdom and is currently negotiating
agreements with other countries.
Both local currency and foreign currency debt is available in Kenya. In addition, there are no restrictions on repatriation of
dividends or on foreign currency. Kenya does not restrict remittances to a foreign recipient. However, the Central Bank
of Kenya has promulgated regulations, under the Central Bank of Kenya Act (Chapter 491), which require that where a
transaction undertaken in Kenya involves the payment of “hard” currency to a foreign recipient, such remittance must
be effected through a bank licensed by the Central Bank of Kenya to conduct banking business in Kenya. Therefore, all
payments in and out of Kenya have to be remitted through an authorised bank in Kenya.
Payments out of Kenya below US$ 10,000 can be made freely. Payments between US$ 10,000 and US$ 499,999 require
evidence of the purpose of the payment being made to be provided to the authorised bank (payments of interest and
principal under a loan agreement would be permitted). Notification of any payment above US$ 500,000 has to be given
by the authorised bank to the Central Bank of Kenya.
Investment Incentives
Kenya has established ‘special economic zones’ under the Export Processing Zones Act (Chapter 517) to promote and
facilitate export oriented investment. The activities eligible to be carried out within EPZs include manufacturing, commercial
and service activities geared towards exportation. Persons may set up an EPZ by obtaining a licence to develop or operate
a zone on land gazetted as an EPZ.
EPZ licensed businesses are granted certain tax exemptions including:
• Exemption from VAT and customs duties on raw materials, machinery and equipment, spare-parts, tools, raw
materials, intermediate goods, construction materials and equipment, office equipment and supplies as well
as transportation equipment;
• Exemption from income tax for the first 10 years from the date of the first sale as an EPZ enterprise, and income tax
shall be limited to 25% for the next 10 years following the expiry of the exemption;
• Exemption from withholding tax on dividends and other payments made to non-residents, during the period that
the EPZ enterprise is exempted from payment of income tax; and
• Exemption from stamp duty on the execution of any instruments relating to the business activities of an EPZ enterprise.
Export Processing Zones (EPZs)
(KenInvest) to implement the goals of the legislation. For a foreign investor to qualify for an investment certificate, the
minimum value of his proposed investment should be US$ 100,000 or the equivalent in another currency. In deciding
whether to issue an investment certificate, KenInvest considers the extent to which the investment will contribute to the
Kenyan economy by increasing the number and quality of jobs in Kenya, training Kenyans in new skills or technology,
encouraging economic development, allowing the transfer of technology, adding to tax revenue or affecting foreign
exchange.
Investment Guide 2015 - Kenya
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Tax
Income Tax
Resident and non-resident corporate entities with a permanent establishment in Kenya are subject to tax on all income
accrued in or derived from Kenya. A company is tax resident if it is incorporated under Kenyan law, if the management
and control of its affairs are exercised in Kenya, or if the Cabinet Secretary in charge of the National Treasury declares the
entity to be tax resident for a particular year of income in a notice published in the Kenya Gazette. An individual is resident
if he or she has a permanent home in Kenya and is present for any time during the year; if he or she is present in Kenya
for at least 183 days in the tax year; or if he or she has been in Kenya for an average of 122 days in the tax year and the
previous two years.
The corporate income tax for a locally incorporated company is 30%. The corporate income tax rate for a non-resident
company having a permanent establishment in Kenya (a foreign branch) is 37.5%. Newly listed companies on the NSE
receive a reduced tax rate for the first 3 to 5 years following the year of listing. The reduced tax rate varies between 20%
and 27% and applies for a period of 3 to 5 years, depending on the percentage of capital listed by the entity on the NSE.
Individual income tax rates are based on a graduated scale based on income brackets with the lowest tax rate being 10%
and the highest tax rate being 30%. It is worth noting that senior officers of corporate bodies may be held personally liable
for tax offences committed by their corporate employer. The Finance Act, 2013 provides that the High Court of Kenya
may order a person to pay the Commissioner of Income Tax the entire amount or such part as remains unpaid, of the tax
assessed by the Commissioner either in addition to, or in substitution of any other penalty.
Withholding Tax (WHT)
For dividends paid to Kenyan residents or on listed shares for citizens of the EAC, the rate of WHT is 5%. A 10% rate applies
for the dividend payments to other non-residents. No WHT is imposed if the recipient is a resident company which controls
12.5% or more of the capital in the paying company. Loan interest paid to residents and non-residents is subject to a 15%
WHT. No WHT is imposed if the recipient is a qualifying Kenyan financial institution. Royalties paid by a resident person to
another resident person are subject to a 5% WHT. Royalties paid by a resident person to a non-resident person are subject
to a 20% WHT.
WHT is chargeable on management and professional fees. Payments of management and professional fees made by a
resident person to another resident person are subject to a 5% WHT. Payments of management and professional fees made
by a resident person to a non-resident person are subject to 20% WHT. Although exempted from taxation in 2012, as of
1 January, 2014, winnings from betting and gaming, whether payable in cash or in kind, are subject to WHT at the rate
of 20% of cash proceeds or the fair market value of the winnings if paid in kind. This rate is applicable to both residents
and non-residents and the tax deducted shall be final.
In June 2014, the Government of Kenya introduced various changes relating to taxation of entities engaged in the extractive
sector. These changes abolished the WHT regime that was applicable on farm-out and share sale transactions and have
attempted to align the provisions of the Income Tax Act to the tax provisions in the Production Sharing Contracts. With
effect from 1 January 2015, farm-out transactions are taxed by including the net gain as part of the taxable income of the
transferor. Farm-out transactions may be taxed at the corporation tax rate in certain circumstances.
Investment Guide 2015 - Kenya
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Capital Gains Tax
Capital Gains Tax (CGT) had been suspended in Kenya since 1985. The Finance Act, 2014 re-introduced CGT at the rate
of 5% on gains arising from transfer of property situated in Kenya. The term ‘property’ is very wide and includes shares in
listed and private companies, land and buildings and other assets. Various exemptions from CGT are available, including
on the transfer of a private residence where certain thresholds have been met and on the transfer of agricultural property
of less than 100 acres.
A transfer of property is deemed to occur when property is sold, exchanged or disposed of in any manner. Gifts, destruction
or loss of property are also deemed to be transfers and CGT will be applicable. There are, however, various instances where
a transfer would not be deemed to have occurred and hence CGT would not be applicable. These instances include the
transfer of property to secure a loan, a debt or the issuance of shares by a company and the transfer of property upon the
beneficiary of a trust becoming entitled to the property.
The Kenya Revenue Authority (KRA) has recently issued guidelines (the Guidelines) on the application of CGT, as well
as the declaration form for payment of CGT (Form CGT-1). As per the Guidelines, taxpayers will be required to undertake
a self-assessment and pay CGT to the KRA by the 20th day of the month following the month in which the transfer was
made. The Guidelines have also confirmed that CGT will be payable by a non-resident transferor provided that the property
is situated in Kenya. Unfortunately, the proposed CGT system makes no allowance for inflation and therefore taxpayers will
be assessed on paper gains. Furthermore, some exemption thresholds are based on the law as it stood in 1985 and are not
comparable to present day valuations.
Other key changes introduced by this regime include the ring fencing of petroleum blocks, indefinite carry forward of tax
losses, tax treatment of the assignment of future work obligations, reporting requirements for changes of more than 10%
in underlying ownership and specific thin capitalisation thresholds. The rate of WHT may be reduced where the recipient
of the income subject to withholding tax is resident in a country which has a double tax treaty with Kenya. For example,
the WHT rate for management and professional fees under the Kenya-United Kingdom double tax treaty is 12.5%.
Value Added Tax
Value Added Tax (VAT) is chargeable on the supply of goods and services in Kenya and on the importation of goods and
services into Kenya. The VAT Act, 2013 (VATA) came into force in September 2013 and brought with it sweeping changes
to the VAT regime in Kenya including making various previously exempt households goods subject to VAT . The VATA
provides for 2 rates of VAT, 0% in the case of zero-rated supply specified in the First Schedule to the Act and 16% in all
other cases. The VATA repeals the lower rate of 12% previously applicable to electricity and fuel.
The supply or importations of goods or services that are designated as exempt are not subject to VAT. Previously exempt
goods, designated in Section B of the First Schedule of the VATA, including fuels and fuel oil, will be exempt for a period
of 3 years and thereafter VAT will be chargeable at the standard rate. Zero-rated VAT is applicable to goods and services
exported from Kenya, goods and services supplied to EPZs and the supply of coffee and tea for export to coffee and tea
auction centres. Exemption also applies to the supply or importation of goods specified in Part A of the First Schedule of
the VATA. These include goods used in agriculture, health and education.
The supply of services which were previously exempt will now attract VAT at the standard rate. The VATA has also clarified
the rules with respect to the place and time of the supply of goods and services. Under the VATA, a supply of services is
made if the supplier’s place of business from which the services are provided, is in Kenya. Where the supplier’s place of
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business is not in Kenya, the place of supply shall be deemed to be Kenya if the recipient of the supply is not a registered
person and:
a. the services are physically performed in Kenya by a person who is in Kenya at the time of supply;
b. the services are directly related to immovable property in Kenya;
c. the services are radio or television broadcasting services received at an address in Kenya; and
d. the services are electronic services delivered to a person in Kenya at the time of supply or the supply is a transfer or
assignment of, or grant of a right to use, copyright, patent, trademark or similar right in Kenya.
With respect to goods, a supply of goods occurs in Kenya if:
a. the goods are delivered or made available in Kenya by the supplier;
b. the supply of the goods involves their installation or assembly at a place in Kenya; and
c. the goods are delivered outside Kenya and were in Kenya when their transportation commenced.
Applicants will be required to apply for tax refunds of tax paid in error within 3 months from the date the tax was due and
payable. Previously, the applicable time frame was 12 months. The VATA has made commendable effort to promote the
use of information technology with respect to registering applications, filing returns or statements, making payments and
refunds and issuing notices and other documents provided by the Commissioner.
One of the key changes introduced by the VATA and which has hitherto received negative reception from the
public is making VAT applicable to the sale of commercial buildings. Pursuant to the Third Schedule of the repealed VAT
Act (Chapter 476), the sale of buildings was specifically exempt from the tax. Part II of the First Schedule to the VATA
specifically exempts “supply by way of sale, renting, leasing, hiring, letting of land or residential premises” provided that
the exemption shall not apply where such services are with respect to a car park, conference or exhibition except where
such services are provided to educational institutions as part of learning.
The implication of this amendment is that the VAT exemption for the sale of real property now only applies to the sale
of land and residential premises. Consequently, the sale, renting, leasing, hiring or letting of commercial buildings will be
deemed to be a taxable supply and subject to VAT at the current rate of 16%. Furthermore, the renting of car park spaces
which form part of residential premises or the renting of residential premises used as commercial premises will also be
subject to VAT.
The withholding VAT system which had been abolished in 2011 was re-introduced in 2014. Government ministries,
departments and agencies will be required to withhold 6% of the tax payable at the time of paying for the supplies and
remit the same directly to the KRA.
Import Duty
Kenya is a member of the EAC’s Customs Union. Accordingly, import duty is charged under the East African Community
Customs Management Act, 2004 (the EACCMA). Import duty under the EACCMA is charged on the importation of goods
depending on their nature and value. The value for purposes of the import duty assessment is based on the cost, insurance
and freight value of the goods imported. The import duty rate is dependent on the nature and description of the goods in
the East African Custom External Tariff Code.
The EAC’s Customs Union member states have agreed on a three band Common External Tariff at the following rates: 0%
for raw materials, capital goods, agricultural inputs, certain medicines and medical equipment, 10% for half finished goods
which are to be used for further production and 25% for finished products. A list of the relevant rates for specific goods is
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Transfer Pricing and Thin Capitalisation
Transfer pricing regulations require pricing arrangements in cross border transactions concerning the sale of goods, provision
of services, and transfer of intangible assets and lending or borrowing of money between related entities to be considered
at arm’s length. It is noteworthy to point out that transactions between a branch and its head office are also subject to the
transfer pricing regulations.
Thin capitalisation rules also apply in Kenya, these rules limit the deductibility of loan interest payments to the extent that
the highest amount of all loans held by the company at any time during the year of income exceeds the greater of three
times the sum of the revenue reserves and the issued and paid up capital of all classes of shares of the company. The thin
capitalisation rules only apply where the company is in control of a non-resident entity alone or together with four or fewer
other persons and where the company is not a bank or a financial institution licensed under the Banking Act.
Kenya has recently enacted “deemed interest” provisions which apply with respect to interest-free loans from non-resident
shareholders. Where a non-resident shareholder has extended a loan to a resident company on an interest-free basis, the
resident company is required to compute a deemed-interest charge based on the prevailing Treasury Bill rates and remit it
to the KRA along with a withholding tax on the notional (deemed) interest.
set out in Annex I to the Protocol on the Establishment of the EAC’s Customs Union (referred to as the Common External
Tariff code).
Import duty is payable by the importer. Although the EACCMA sets out exempted goods under the Fifth Schedule to the
Act, exemptions only apply to specific goods in relation to certain donor or aid funded organisations.
In order to fund the construction of a standard gauge railway network between Kenya and Uganda, all goods imported
into the country and intended for home use are subject to a levy of 1.5% of the customs value of the goods. The levy,
known as the Railway Development Levy is payable by the importer at the port of entry. In March 2014, the Kenya Revenue
Authority suspended RDL on imports to Kenya from the East African Community.
Pursuant to Articles 209(3) and (4) of the Constitution, which grants county governments the power to impose property
rates, entertainment taxes and any other tax as authorized by an Act of Parliament, a number of county governments have
implemented County Finance Acts which increase the rates and charges for public services.
Stamp and Transfer Duty
Stamp duty is charged at nominal or ad valorem (according to value) rates on certain financial instruments and transactions.
Stamp duty of 1% is payable upon the transfer of shares. A stamp duty of 4% of the value of land is payable on the transfer
of land in municipal areas. In rural areas, the stamp duty is 2% of the value of land. There is no stamp duty on the transfer
of shares in a listed company. Other agreements and documents attract stamp duty at varying rates specified in the Stamp
Duty Act
Accounting Principles
Kenya has adopted and applies International Financial Reporting Standards.
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Industrial Relations
Below is a summary of the laws governing employment and labour matters in Kenya. Kenya is party to various International
Labour Organisation (ILO) conventions which form part of its labour legislation through operation of Articles 2(5) and (6)
of the Constitution. Article 2(5) of the Constitution provides that the general rules of International Law shall form part of
the law of Kenya. Article 2 (6) provides that any treaty or convention ratified by Kenya shall form part of the law of Kenya
under the Constitution. The primary statutes that govern employment and labour matters in Kenya are:
1. The Constitution – provides for a number of employment rights, including the right to fair labour practices, the right
to fair remuneration, the right to reasonable working conditions and the right to join a union, amongst others;
2. The Employment Act (Act No. 11 of 2007) the Employment Act - declares and defines the fundamental rights of
employees, provides for basic conditions of employment of children and matters connected thereto;
3. The Labour Institutions Act (Act No. 12 of 2007) (the Labour Institutions Act) - establishes labour institutions,
provides for their functions, powers and duties and for other matters connected thereto;
4. The Industrial Court Act (Act No. 20 of 2011) now amended to the Employment and Labour Relations Act (the
Employment and Labour Relations Act) - establishes the Industrial Court, now the Employment and Labour Relations
Court (the ELRC) as a superior court of record and confers jurisdiction with respect to employment and labour
relations;
5. The Labour Relations Act (Act No. 14 of 2007) (the Labour Relations Act) - consolidates the law relating to trade
unions and trade disputes, promotes sound labour relations through the protection of freedom of association, the
encouragement of effective collective bargaining and the fostering of orderly and expeditious dispute settlement,
conducive to social justice and economic development;
6. The Occupational Safety and Health Act, 2007 (Act No. 15 of 2007) (the OSHA) - provides for the safety, health
and welfare of workers and all persons lawfully present at workplaces and for the establishment of the National
Council for Occupational Safety and Health; and
7. The Work Injury Benefits Act (Act No. 12 of 2007) (the WIBA) - provides for compensation to employees for work
related injuries and diseases contracted in the course of their employment or due to connected purposes.
The legislative framework covers wages, leave, housing, health and welfare, local and foreign contracts of service,
employment of women and youth, industrial relations and occupational safety and health.
Wage councils are responsible for formulating wage orders. The wage orders constitute the minimum rates of
remuneration and terms of conditions of employment and may not be varied by agreement. The quantum of the minimum
wage depends on the industry in which the employee is engaged.
Normal working hours consist of not more than 52 hours of work per week. No person under the age of 16 may be required
to work for more than six hours a day. Employees are also entitled to annual leave with full pay of not less than 21 working
days after every year of continuous service and not less than 1.75 days per month when employment is terminated after
two or more months of continuous service. The annual leave is in addition to all public holidays, weekly rest days and sick
leave as fixed by law or by written agreement.
Pursuant to the Industrial Training Act (Chapter 237), an employer is required to pay a training levy to the Industrial Training
Levy Fund with respect to each of its employees (currently KES 50 (approximately US$ 0.6) per employee per month).
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In January 2014, the National Social Security Fund Act, 2013 (NSSFA) came into force repealing the previous National
Social Security Fund Act (Chapter 258, Laws of Kenya) (Cap 258). Every employer is required to register with the Pension
Fund and to register its employees as members of the Pension Fund. Under the NSSFA the social security contributions
payable by both employer and employee were set to increase to up to KES 2160 per employee (approximately US$ 24),
50% payable by the employer and 50% by the employee. Contributions payable by both employee and employer were set
to progressively increase over the course of the next 5 years.
Pursuant to a public notice dated 21st January, 2014, the Cabinet Secretary for Labour, Social Security and Services deferred
the commencement of section 20, amongst others, which provides for the contribution obligations of the employer and
employee. The move is to ensure a smooth and orderly transition from the operations of the previous fund created under
Cap 258 to the NSSFA. No further action has been taken to date with regard to employee and employer contributions,
which continue to be KES 400 per month (approximately US$ 4.50).
The Employment (General Rules), 2014 (the General Rules) as per section 91 (1) of the Employment Act provide for the
following:
1. Rights of employees – provisions under the General Rules provide for the complete prohibition against forced labour;
policy statements in relation to sexual harassment and employee rights to be displayed openly at the work place; and
entitlement to an itemised pay statement.
2. Employment of children – the employment of children under the age of 16 years is strictly prohibited without the prior
written permission of an authorised officer unless the child is an apprentice or indentured learner; any contravention of
the provisions would result in an offence.
3. Sanitation – this portion of the rules relates to the adequate provision of latrines, dustbins, drainage and general
sanitation at the place of work.
4. Medical treatment – any medical expenses or treatment are to be provided by the employer during the course of
employment; medicine including malaria treatment, Epsom Salts and antiseptic solution as well as a First Aid kit must
be made available at the place of work. Any non-compliance with these provisions shall result in an offence.
5. Foreign Contracts – all contracts of service shall be set out in prescribed form and shall be subject to the provision of a
medical certificate to the Labour Officer.
Disputes and Enforcement:
In situations where:
• an employer or employee neglects or refuses to fulfill a contract of service; or
• any question, difference or dispute arises as to the rights or liabilities of either party; or
• any misconduct, neglect, ill treatment or an injury to the person or property of either party under a contract of service
occurs;
The aggrieved party can complain to the labour officer or lodge a complaint or suit in the ELRC, which has the status of the
High Court and exclusive original jurisdiction over labour disputes.
The primary mechanisms for enforcement of the various provisions of the employment laws in Kenya are fines and penalties
imposed by the ELRC. Where an employee has been dismissed, a Labour Officer can recommend that the employer
reinstate the employee, however, the ELRC may order reinstatement or compensation to an employee who has been
dismissed unfairly or whose labour rights have otherwise been breached.
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Real Property
Land in Kenya remains a very emotive and sensitive issue. Due to complex historical, political, economic and social reasons
that have led to an inequitable distribution of land, conflicts over land issues continue and debates about the
redistribution of land draw strong opinions. Fuelling this problem is the fact that land laws in Kenya have remained very
fragmented, with over twenty different statutes governing land ownership and interests relating to land.
In 2010, the then newly promulgated constitution paved the way for an overhaul of the land law systems in Kenya. In 2012,
the Kenyan legislature enacted new land laws, being the Land Act, 2012, the Land Registration Act, 2012 and the National
Land Commission Act, 2012. The new statutes repealed and made amendments to some of the old land laws such as The
Indian Transfer of Property Act of 1882, the Registered Land Act, 1963 and The Registration of Titles Act, 1920.
Under the current laws, land in Kenya may be held under freehold title or leasehold title. Article 65 of the Constitution
regulates land holding by non-citizens. Non-citizens cannot own land under a freehold title but can have leasehold interests
of up to 99 years. The Constitution protects the sanctity of private property and the state cannot compulsorily acquire one’s
property without paying sufficient compensation.
In 2013, the Capital Markets Authority (CMA) introduced the much awaited Capital Markets REIT Regulations. The
REIT Regulations provide for the legal framework for REITS and establishes 2 classes of REITS, being the development
and construction real estate investment trust schemes (which provides for investment in development and construction
projects) and income real estate investment trust schemes (which provide for investment in existing income generating
real estate projects).
The REIT Regulations regulate the offers and listing of REITS, management of REITs, specific requirements of each type of
REITS and also provide for the establishment of Islamic REITS. The REIT Regulations entrench the growing interest in REITS
as a flexible and tax-beneficial method of financing urban and commercial real estate projects in Kenya.
Competition
The Competition Act, 2010 was enacted into law and became effective in August, 2011 and was operationalised in
2012. The Competition Act regulates mergers, provides strong guidance for consumer welfare, prevents restrictive trade
practices and unwarranted concentrations of economic power and also strengthens the mechanisms for the hearing of
appeals. In 2014, the Competition Authority launched a leniency programme which encourages voluntary disclosure of the
existence of an agreement or practice that is prohibited under the Competition Act. Merger notification filings with the
Competition Authority attract graduated filing fees of between KES 500,000 (approximately US$ 5447) and KES 2,000,000
(approximately US$ 21,785). The Competition Authority may grant exemptions in certain economic sectors or transactions
below certain turnover thresholds.
In January 2013, the COMESA Competition Commission (CCC) announced that the COMESA competition regime had
come into force. The CCC regulates competition and mergers touching on 2 or more COMESA countries provided that each
undertaking’s annual turnover exceeds US$ 5 million, the target operates in a member state and each of the merging parties
does not achieve more than two thirds of its profits within one and the same member state. Stakeholders have, however,
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Consumer Protection
Consumer rights are protected under Article 46 of the Constitution and the Consumer Protection Act (Act No 46 of 2012)
and apply to goods and services offered by private and public entities. Consumer rights have also been provided for in the
Competition Act.
Legal Forms of Incorporation in Kenya
In Kenya, there are a number of types of corporate entities including sole proprietorships, partnerships, cooperative
societies and companies. The main vehicles utilised by investors are limited liability companies which can be incorporated
either as private companies or as public companies. The law also allows for branches of foreign companies to be set up
in Kenya maintaining the same legal personality as the foreign company.
The principal statute dealing with company law is the Companies Act (Chapter 486) (the Companies Act) which is
based substantively on the 1948 Companies Act of England. The Companies Act sets out provisions dealing with
the incorporation of companies, share capital provisions, shareholder rights, offers to the public, the management and
administration of companies, accounts, directors’ duties, consequences of winding up and the regulation of foreign
companies based in Kenya.
Company registration is undertaken through the Companies Registry. On average, completing the necessary registrations
required for starting a business in Kenya takes between one to two months. The table below provides a summary of the
procedures and the estimated associated completion time and estimated official cost for setting up a private limited liability
company:
Procedure Estimated time to complete (in business days)
Official costs (excluding professional fees, ancillary expenses and vat)
1 Company name search and reservation 3 Days KES 100 per name reservation(approximately US$ 1)
2 Prepare and execute the memorandum and articles of association and ancillary incorporation documents.
3 Days Variable
3 Stamp the memorandum and articles and a statement of the nominal capital
5 Days 1% of nominal capital + KES 2020 stamp duty on Memorandum and Articles of Association
raised questions on the manner in which the COMESA competition regime was operationalised. At the moment, a merger
notification filing with the CCC attracts graduated filing fees of up to US$ 500,000.
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Procedure Estimated time to complete (in business days)
Official costs (excluding professional fees, ancillary expenses and vat)
4 File incorporation documents with the Registrar of Companies and obtain a certificate of incorporation
10 Days KES 2800(approximately US$ 33)
5 Register with the Tax Department for a PIN and VAT online
1 Day No Charge
6 Apply for a business permit 10-20 Days Permit fees depend on certain factors e.g. type of business, size of premises, number of employees etc.
7 Register with the National Social Security Fund (NSSF)
1 Day No Charge
8 Register with the National Hospital Insurance Fund (NHIF)
1 Day No Charge
9 Register for PAYE 1 Day No Charge
10 Make a company seal after a certificate of incorporation has been issued
2 Days Between KES 2500 and KES 3,500(approximately US$ 21 and US$ 41 (respectively)
Agriculture
Agriculture is the mainstay of the Kenyan economy, contributing approximately 30% of the country’s GDP and responsible
for 80% of national employment. In recent years, the areas which have been most heavily invested in are: agro-processing,
livestock, fisheries and horticulture. The latter has been the great success story of the past decade, particularly in floriculture.
There are considerable diversification and expansion possibilities in the agricultural sector including accelerated food crop
production and increasing non-traditional agricultural exports. There are also opportunities for improvement in technology
infrastructure such as packaging, storage and transportation. Intensified irrigation and additional value added
processing are also marketable areas for investments. To this end, the Government, being cognisant of inappropriate
technology, inaccessible farm inputs and over reliance on rain-fed agriculture, committed KES 9.5 billion(approximately
US$ 103.5 million) in the 2014/2015 budget to implement ongoing irrigation projects spread throughout the country.
This allocation includes KES 3.5 billion (approximately US$ 38.2 million) to the Galana Irrigation Project, KES 3 billion
(approximately US$ 32.7 million) for subsidizing inputs including fertilizer, KES 2.7 billion (approximately US$ 29.5 million)
for strategic grain reserves, KES 1 billion (approximately US$ 11 million) for fisheries development and KES 0.7 billion
(approximately US$ 7.7 million) for the revival of the Kenya Meat Commission.
Other initiatives taken by the Government in this sector include the allocation of KES 0.3 billion (approximately US$ 3.3
Industry Sectors
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Banking and Financial Services
There are over forty commercial banks in Kenya and several financial institutions including building societies and mortgage
finance companies. However, the banking industry is dominated by five major banks: Kenya Commercial Bank Limited,
Equity Bank Limited, Co-operative Bank Limited, Standard Chartered Bank Kenya Limited and Barclays Bank of Kenya
Limited. Credit is now more easily accessible from lending institutions. Credit reference information is shared in the financial
sector though credit reference bureaus.
The majority of Kenyans engage in “mobile banking” through the use of mobile payment systems operated by mobile
communication companies such as M-Pesa (Safaricom) and Airtel Money (Bharti Airtel). Mobile phone payment services
are popular due to their simplicity, convenience and accessibility. The joint partnership between Safaricom and Commercial
Bank of Africa Limited, has developed an innovative mobile platform (M-Shwari) for Safaricom’s M-Pesa customers which
enables individuals to access banking services from their phone. Subscribers can save and borrow money as well as earn
interest on the money saved using their mobile phones.
In addition, Kenya has a vibrant micro-finance sector and the Islamic banking market is growing.
The banking industry is governed by the Banking Act (Cap 488) and the Central Bank of Kenya Act (Cap 491) and regulated
by the Central Bank of Kenya. The Central Bank has taken steps to regulate previously unregulated areas of the banking
sectors, including micro-finance and mobile payment services. Kenya has a small but growing number of investment
banks and venture capital funds. These businesses are licensed and regulated by the CMA.
million) for the revival of the Pyrethrum sector and another KES 0.3 billion for eradication of diseases affecting plants. To
combat the challenge of floods and drought, the Government has prioritised flood control and water harvesting in the
2014/2015 budget. It has allocated KES 8.2 billion (approximately US$ 89.4 million) for water pan and dam construction,
KES 4.1 billion (approximately US$ 44.7 million) for water supply and sanitation, KES 1.5 billion (approximately US$ 16.4
million) for environmental conservation and management and KES 0.5 billion (approximately US$ 5.5 million) for completion
of multi-purpose dams that were started under the economic stimulus programme.
Manufacturing
Although Kenya is the most industrially developed country in East Africa, the World Bank estimates that manufacturing
only accounts for approximately 19% of GDP. Nevertheless, manufacturing is Kenya’s third largest sector following
Wholesale and Retail Trade and Transport and Communication. Opportunities in Kenya’s manufacturing industries are
expansive, ranging from vehicle assembly and spare-parts manufacturing in the automotive sector, to pharmaceuticals,
paper products and edible oils.
According to statistics published by the Kenya National Bureau of Standards, the quantity of cement produced in September
2014 went up to 465,483 MT from 414,807 MT in September 2013. In a move to grow the motorcycle manufacturing
industry, a tax waiver on imported motorbike parts was reinstated by the EAC Council of Ministers from June 2014 to June
2015 meaning that motorcycle assemblers are no longer subject to the 15% tax on parts imported from outside the EAC
member states.
With Mombasa operating as a free trade zone and the various infrastructure projects planned by the Government (including
the Standard Gauge Railway and LAPPSET Corridor), the manufacturing industry is set to grow significantly in the coming
years.
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Mining, Oil and Gas
Kenya’s mining and extractive industry is undergoing a seismic shift from a minor to a major area of investment
and growth. Kenya’s mining map is comprised of four belts. The under-exploited, gold-rich Greenstone belt in Western
Kenya is linked to the lucrative mining belts currently under heavy exploitation in Tanzania. The Mozambique belt, which
passes through Central Kenya, is a source of gemstones. The Rift belt is the best known and its resources include soda
ash, fluorspar, diatomite and Kenya’s considerable geothermal resources. The Coastal belt encompasses existing titanium
investments as well as ongoing offshore oil exploration efforts. The country also boasts one of Africa’s richest coal deposits
and plans to commercially exploit coal are currently underway.
The significant enthusiasm for the economic potential in Kenya’s mining sector is demonstrated by its inclusion in Kenya’s
Vision 2030 programme as a strategic sector and the creation of a new Ministry of Mining (formerly under the Ministry
of Environment and Natural Resources) dedicated to the formulation of mining legislation and policies to expand the
mining industry. The Ministry of Mining has introduced a Mining Bill which is currently under review. If passed, the Mining
Bill would repeal, amongst other legislation, the Mining Act (Cap 306) which has been in force since October 1940. The
changes proposed under the Mining Bill would set up a new National Mining Corporation as the investment arm of the
Government, increase government revenue, allocate specific proportions of the mining benefits to locals and county
governments and impose environmental and rehabilitation obligations on licensees. The cancellation of 31 mining licences
by the Cabinet Secretary for Mining in August 2013, has led to expectations that a transparent licensing process will be
entrenched in the new legislation.
Kenya is benefitting from recent discoveries of oil reserves (the commercial viability of which was confirmed by Tullow Plc in
Northern Kenya in July 2013). The discovery of oil has also resulted in significant interest in many on-shore and off-shore
blocks offered to exploration companies by the Ministry of Energy. There has also been an increase in secondary sales of
interests in exploration blocks between investors.
With the changing fortunes in the oil sectors, the laws governing this sector have come under scrutiny. The petroleum
exploration activities in Kenya are primarily governed by a 1968 statute which is seen as outdated and in need of review.
To this end, the Government aims to replace it with new laws and regulations dealing with upstream and downstream
activities and local content. When enacted, the local content regulations will require the participation of locals in all aspects
of petroleum operations including equity participation, employment and training opportunities and an obligation to prefer
the use of local goods and services.
Real Estate and Construction
The real estate market and the building and construction sector have seen immense growth over the past ten years. Due to
a steadily growing middle class, there has been increased demand for housing in urban centres. The demand for office and
commercial space has also increased greatly in recent years.
There has been a marked increase in apartment blocks and gated estates as developers act to meet the growing demand.
According to a 2011 survey by Hass Consult (a local property consulting firm), property values have increased in Kenya
by 302% since the year 2000. Kenya currently delivers greater real estate price stability than other leading international
markets such as the US, UK, UAE, India and South Africa. The growing market demand, coupled with the high rates of
return make real estate development and building and construction two of the most lucrative investment opportunities
in Kenya.
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Telecommunications
The telecommunications sector is one of the fastest growing sectors in Kenya fuelled by a growing market and developments
in fibre-optics. There are currently 4 fibre optic cables which have landed on the Kenyan coast linking Kenya to the rest of
the world. According to a quarterly sector statistics report published by the Communications Authority of Kenya (CAK),
at the end of June 2014, there were 32.2 million mobile phone subscribers in Kenya, an increase from 31.3 million in
December 2013. This growth is attributed to, amongst other things, demand for mobile services and value added services
such as mobile banking services.
Mobile internet users grew to 22.3 million as at June 2014 compared to 19.6 million users in the same period in 2013.
The ICT sector in Kenya is set to receive a significant boost from ICT business parks currently under development as part of
Vision 2030. The Kenya Government has plans to develop a US$ 10 billion ICT business park which will house IT centres,
business process outsourcing centres and hotels. Kenya currently has an existing 5,000 seat business process outsourcing
centre in the Sameer Industrial Park.
The telecommunications sector in Kenya is primarily governed by the Kenya Information and Communications Act,
1998 (KICA) and the various regulations promulgated thereunder. Specific provisions in KICA were amended with the
passing of the Kenya Information and Communication (Amendment) Act, 2013 (KICA Amendment Act) which came
into effect on 2nd January, 2014. The CAK regulates the telecommunications sector and is an independent institution free
from any governmental, commercial or political interests.
Following the exit of Yu Mobile from the Kenyan market in 2014, there are currently three mobile telecommunications
providers in Kenya: Safaricom, partially owned by the Kenyan Government; French-owned Orange and Indian owned
Bharti Airtel.
In comparison to other East African Countries, Kenya’s migration from analogue to digital broadcasting has been protracted
and subject to various judicial processes. Nonetheless, it is expected that the Country will meet the worldwide deadline of
17th June, 2015. The move is expected to increase the number of television broadcasters and broadcasting licences issued
as a result of the increase in television channels that can be hosted on a digital platform.
Tourism
The tourism sector saw a decline in the year 2014 due to insecurity concerns in the coastal region of the country. This led
to foreign governments imposing travel advisories against Kenya. The West African Ebola outbreak also resulted in reduced
visitor numbers to Kenya due to Kenya’s position as a regional hub.
However, the sector is picking up and the end of 2014 saw an upward surge in visitor numbers and the tourism sector
remains a lucrative field for consideration by any person wishing to invest in Kenya. The Government has pledged to combat
incidents of insecurity and it is likely that the sector will pick up further in 2015.
Kenya has substantial natural assets attracting tourism, ranging from well-known areas such as the Maasai Mara,
Mombasa and the Kenyan Coast, to relatively unexploited areas like Lake Victoria. Kenya’s tourism infrastructure is
well developed and expanding, especially in the aviation arena, where there are an increasing number of budget airlines,
direct flights from many tourist source countries and frequent internal connections. It is worth noting that talks between
the Ministry of Tourism and Transport and the Ministry of Infrastructure are underway to increase the number of airlines
operating scheduled international flights to Mombasa.
Investment Guide 2015 - Kenya
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The tourism industry is primarily regulated by the Tourist Act (Cap 383). The Kenya Tourism Regulatory Authority is
tasked with developing the tourism sectors though policy development and measures which promote sustainable tourism
throughout the country.
Intellectual Property
Article 40(5) of the Constitution requires the state to support, promote and protect the intellectual property rights of
the people of Kenya. Kenya’s legislation protecting intellectual property includes the Trademarks Act (Chapter 506), the
Copyright Act (Chapter 130) and the Industrial Property Act, 2001, which relates to patents, industrial designs and utility
models.
Regionally, Kenya is a member of the African Regional Intellectual Property Organisation. At the international level, Kenya
is a member of the World Intellectual Property Organisation, and is a contracting party to various treaties recognising
intellectual property rights such as the WTO Marrakech Agreement, 1994, the Madrid System on the international
registration of trademarks and the Patent Cooperation Treaty on the international registration of patents.
Steps have been taken towards controlling the importation and trade of counterfeit goods. In 2008, Parliament passed the
Anti-Counterfeit Act, 2008, which established an agency and legal framework to police counterfeit goods.
All locally manufactured goods must have a standardisation mark issued by the Kenya Bureau of Standards and several
categories of imported wares must have an import standardisation mark known as an ISM.
Dispute Settlement
The judicial system, as provided for under the Constitution consists of a hierarchy of various courts. These include the
Magistrate courts and Kadhi’s courts; the High Court; the Court of Appeal; and the newly established Supreme Court.
There are also matter specific courts created by the Constitution, such as the Land and Environment Court which is
responsible for adjudicating disputes related to land and environment matters and the Industrial Relations and Employment
Court which is responsible for all matters relating to employment.
Below is a list of the principal laws governing and regulating the court system in Kenya:
1. The Constitution of Kenya, 2010
2. The Judicature Act, Chapter 8 – sets out provisions concerning the jurisdiction of the High Court, the Court of Appeal,
subordinate courts or regarding judges and officers of courts;
3. The Appellate Jurisdiction Act, Chapter 9, (the Appellate Jurisdiction Act) – confers on the Court of Appeal jurisdiction
to hear appeals from the High Court and for any incidental purposes;
4. The Magistrates’ Court Act, Chapter 10 – establishes magistrates’ courts, states the jurisdiction and provides for the
procedure of such courts. In addition, it also provides for appeals in certain cases and for any incidental and connected
purposes;
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5. The Kadhis’ Court Act, Chapter 11 - establishes the Kadhis’ court, having and exercising jurisdiction over the
determination of questions of Muslim law relating to personal status, marriage, divorce or inheritance in proceedings
in which all the parties profess the Muslim religion. Nevertheless, nothing in this legislation limits the jurisdiction of the
High Court or any subordinate court in any proceeding which comes before it.
6. The Environmental and Land Court Act, Chapter 12A - gives effect to Article 162(2)(b) of the Constitution establishing
a superior court to hear and determine disputes relating to the environment, the use and occupation of and title to land
and also makes provision for its jurisdiction, functions and powers;
7. The Industrial Court Act, Chapter 234, amended to the Employment and Labour Relations Act, (the Employment and
Labour Relations Act) – establishes the Industrial Court as a superior court of record, confers jurisdiction on the Court
with respect to employment and labour relations.
Under the Limitation of Action Act, Chapter 22, Laws of Kenya, (the Limitation of Action Act), time limits for bringing
claims for court action or arbitration are set out as follows:
1. actions concerning land must be brought within twelve years from the date of the cause of action;
2. actions concerning contracts must be brought within six years from the date of the cause of action; and
3. actions concerning any tort must be brought within three years from the date of the cause of action.
Kenyan law recognises alternative dispute resolution mechanisms. In particular, the Constitution provides that
alternative forms of dispute resolution including reconciliation, mediation, arbitration and traditional dispute resolution
mechanisms shall be promoted. Indeed, the Government’s enthusiasm for arbitration is demonstrated by the passing
of the Nairobi Centre for Arbitration Act, 2012 which came into force in January 2013 and establishes the Nairobi
Centre for International Arbitration (NCIA). Together with Rwanda’s Kigali International Arbitration Centre, there are now
two international arbitration centres in East Africa. It is hoped that the NCIA will provide a cheaper alternative for foreign
investors who opt to resolve their disputes in the London or Mauritius arbitration centres and also provide an alternative to
the lengthy court processes in Kenya. Notwithstanding these aims, the NCIA has a long way to go before becoming fully
operational. It is to be noted that the Board of Trustees charged with the administration of NCIA was inaugurated in
November, 2013.
Arbitration is widely embraced in commercial dispute resolution settlement. Kenya is a party to the New York Convention
on the Recognition and Enforcement of Foreign Arbitral Awards and New York Convention awards would be recognised in
Kenya under the Arbitration Act. Kenya is also a signatory to the International Convention for the Settlement of Investment
Disputes.
Foreign judgments from superior courts in certain reciprocating countries can be enforced in Kenya under the Foreign
Judgments (Reciprocal Enforcement) Act (Chapter 43) (FJEA). The countries specified to be reciprocating countries under
the FJEA are Australia, Malawi, Seychelles, Tanzania, Uganda, Zambia, the United Kingdom and the Republic of
Rwanda
Following promulgation of the Constitution in August 2010, Kenya began to implement significant structural changes to
its judicial system. The Supreme Court was established as the highest court in the land. In addition, many new judges have
been appointed to ease the workload of the courts. Further, the new constitutional requirement for the vetting of judges
and magistrates has already resulted in some judges and magistrates having been found unfit to continue serving. The
process is expected to restore integrity to a judiciary that has been generally perceived to be slow in delivering justice,
corrupt and insufficiently independent.
It is also worth noting that the Tax Appeals Tribunal Act, 2013 (TATA) was signed into law on 27th November, 2013 but
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will enter into force by notice. The TATA establishes a single tax appeals body which has the power to hear appeals against
any decision made by the Commissioner on any tax matter. It is expected that the Tribunal will streamline the tax dispute
resolution process and make it more efficient.
Anjarwalla & Khanna
Nairobi
A: 3rd Floor, The Oval, Junction of Ring Rd Parklands & Jalaram Rd, Westlands
P: P.O. Box 200-00606, Nairobi, Kenya
T: +254 20 364 0000
F: +254 20 364 0201
Mombasa
A: SKA House, Dedan Kimathi Avenue
P: P.O. Box 83156-80100, Mombasa, Kenya
T: +254 41 231 2848
F: +254 41 222 4996
ALN Head Office
A: 5th floor, The Oval
Corner of Ring Rd.,Parklands and Jalaram Roads, Westlands, Nairobi
P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T: +254 20 364 0000, +254 703 032 000
W: www.africalegalnetwork.com
Investment Guide - Malawi
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
TABLE OF CONTENTSGeneral Overview _________________________________________________________________________________4
Political Overview __________________________________________________________________________________5
Economic Overview ________________________________________________________________________________5
Regulatory Environment ____________________________________________________________________________5
Bilateral and Multilateral Treaties _____________________________________________________________________7
Investment Promotion ______________________________________________________________________________7
Institutions Governing Investment Promotion 7
Investment Incentives 7
Tax ______________________________________________________________________________________________8
Income Tax 8
Capital Gains Tax 9
Other Tax 9
Transfer Pricing and Thin Capitalisation 10
Stamp and Transfer Duty 10
Exchange Control _________________________________________________________________________________10
Imports and Exports________________________________________________________________________________10
Accounting Principles ______________________________________________________________________________10
Industrial Relations_________________________________________________________________________________11
Real Property _____________________________________________________________________________________11
Corruption _______________________________________________________________________________________12
Competition ______________________________________________________________________________________12
Consumer Protection_______________________________________________________________________________13
Legal Forms of Incorporation in Malawi _______________________________________________________________13
Industry Sectors ___________________________________________________________________________________14
Agriculture 14
Banking and Financial Services 14
Energy 14
Manufacturing 14
Mining 15
Telecommunications 15
Tourism 15
Intellectual Property ________________________________________________________________________________16
Dispute Settlement ________________________________________________________________________________16
Investment Guide 2015 - Malawi
4
Capital City: Lilongwe
Currency: Malawian Kwacha (MWK)
Languages: English and Chichewa
Government: Multi-party democracy
President: Peter Mutharika
Population: 16.83 million (2014 estimate)
Timezone: GMT + 2
GDP: US$ 3.705 billion (2013 estimate)
General Overview
Investment Guide 2015 - Malawi
5
Political Overview
Regulatory Environment
Economic Overview
Malawi is a democratic, multi-party government consisting of executive, legislative and judicial branches. The executive
branch includes the President who is both head of state and head of government and is elected every five years. The
members of the cabinet are appointed by the President and can be from either inside or outside the legislature. The
legislative branch consists of a unicameral National Assembly of 193 members who are elected every five years. The
independent judicial branch is based upon the English model and consists of a Supreme Court of Appeal, a High Court, and
subordinate Magistrate Courts. In constitutional matters, the High Court sits as a Constitutional Court with three judges
presiding. An appeal from the Constitutional Court lies to the Supreme Court of Appeal with five judges presiding. The High
Court also has a Commercial Division. There is also an Industrial Relations Court which is subordinate to the High Court.
There are currently about 40 registered political parties. The Democratic Progressive Party (to which President Peter Mutharika
belongs) is the governing party and the People’s Party, the Malawi Congress Party and the United Democratic Front act as
the main opposition parties in the National Assembly. Suffrage is universal at 18 years of age.
Malawi is among the world’s least developed and most densely populated countries. The economy is heavily agriculture-
based, with around 80% of the population living in rural areas. More than one-third of Malawi’s GDP and 90% of export
revenues come from agriculture. The economy of Malawi has in the past been dependent on substantial economic aid from
the World Bank, the International Monetary Fund and individual nations.
The Government faces challenges in developing a market economy, improving environmental protection, dealing with the
rapidly growing HIV/AIDS problem, improving the education system and satisfying its foreign donors that it is working to
become financially independent.
Investment fell 23% in 2009 and continued to decline in 2010 largely due to the many investment barriers in Malawi,
including high service costs and poor power infrastructure, water and telecommunications. While challenges remain, Malawi
has made great progress over the past year in upgrading conditions for doing business. The Government has introduced an
economic recovery plan and has identified sectors in which it wishes to encourage investment, including energy, tourism,
mining, agriculture, transport, infrastructure and ICT.
The Government encourages both domestic and foreign investment in most sectors of the economy without restrictions
on ownership, size of investment, source of funds and destination of final product. Apart from the privatisation program,
the Government’s overall economic and industrial policy does not have discriminatory effects on foreign investors. While
Investment Guide 2015 - Malawi
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not discriminatory to foreign investors, investments in Malawi require multiple bureaucratic processes, which may include
licensing and land use permission that can be time consuming and may constitute an impediment to investment. Other
impediments to investment include high transportation costs, unreliable power and water supplies, cumbersome bureaucracy
(especially for imports and exports), difficulty in accessing foreign exchange, lack of skilled labour and government market
interventions.
Malawi has so far privatised over 70 formerly state-owned enterprises. All investors, irrespective of ethnic group or source
of capital (foreign or local) may participate in the privatisation program.
In accordance with the Business Licensing Act (BLA), where a business licence holder sells its business premises and wishes
to transfer the business licence to the buyer, the buyer is required to make application to the relevant licensing authority
under the BLA. It follows that if a Malawian subsidiary of a foreign holding company is the holder of a business licence,
and it seeks to transfer its business pursuant to any restructuring of the foreign group of companies under which it falls it
will be required to make application to the relevant licensing authority under the BLA. If a Malawian subsidiary will remain
the holder of the licence in Malawi pursuant to a restructuring of the foreign group of companies under which it falls, a
change of control in the shareholding of the foreign holding company of the Malawian subsidiary will not affect the licence.
Under the BLA, no business licence shall be issued to a “non-Malawian” unless he holds a valid permit under laws relating
to immigration, citizenship or refugees and otherwise satisfies the requirements of the said Act. A “non-Malawian” must
also provide evidence showing that he/she is investing in Malawi capital of not less than US$250,000 brought from outside
Malawi.
Although “non-Malawian” is not defined in the BLA, we assume that this refers to a person who is not a citizen of Malawi.
“Capital” for the purposes of this requirement means all cash contribution, plant, machinery, equipment, buildings, spare
parts, and other business assets other than goodwill which are not consumed in the regular operations of the business and
have a life of more than twelve months. Where applicable, on application or renewal of a business licence, the applicant is
required to file a statement in addition to any other documents, describing the participation in the management or finances
of the business of a Malawian partner. It should be noted that the Act is not clear as to the situation or circumstances in
which such participation is required.
Any person who knowingly or recklessly contravenes any of the above requirements in relation to businesses by non-
Malawians commits an offence and shall be liable to a fine of five million kwacha (MWK 5 million – approximately US$
10,903) and to imprisonment for five years.
Malawi’s industrial and trade reform program, including rationalisation of the tax system, liberalisation of the foreign
exchange regime, and elimination of trade and industrial licences on several items and businesses, has produced written
guidelines intended to increase government use of transparent and effective policies to foster competition.
Malawi has legislation that offers adequate protection for property and contractual rights. Malawi’s constitution guarantees
the protection of assets of both local and foreign investors. Malawi is a member of the Multilateral Investment Guarantee
Agency (MIGA) and the Africa Trade Insurance Agency of the Common Market for Eastern and Southern Africa (COMESA).
Malawi is also a signatory to the International Centre for Settlement of Investment Disputes. Malawi has written commercial
laws, which codify common law. The Sale of Goods Act, the Hire-Purchase Act, the CFTA and Companies Act cover
commercial practices. There is also a written and consistently applied bankruptcy law based on the Common Law. Under
the Bankruptcy Act, secured creditors have first priority in recovering money.
Investment Guide 2015 - Malawi
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Bilateral and Multilateral Treaties
Malawi is a member of many multi-lateral organisations and a signatory to many trade agreements. These include:
• COMESA,
• The Southern African Development Community (SADC),
• The World Trade Organisation (WTO),
• The New Partnership for Africa’s Development,
• The World Customs Organisation,
• The African Caribbean Pacific – European Union Partnership Agreement,
• MIGA, and
• International Centre for the Settlement of Investment Disputes.
Malawi is also a beneficiary of the EU’s Everything But Arms Initiative and USA’s African Growth Opportunity Act initiative.
Investment Promotion
In 2012, the Government passed an Investment and Export Promotion Act, which provides tax benefits to investors and
pioneer industries in agriculture, agro-processing, manufacturing, tourism, fisheries, forestry, mining, etc. Moreover, the
Malawi Investment and Trade Centre Limited was incorporated on 2nd December, 2010 to promote and facilitate both
domestic and foreign investment.
Malawi offers a wide range of tax incentives aimed to encourage development, enhanced output, foreign exchange earnings
and expansion of employment opportunities. Malawi has introduced some Sectoral Investment Incentives in the mining,
energy, tourism and agricultural sectors. Investors may qualify for Export Processing Zones (EPZ) privileges by operating
at an approved location and acquiring a licence to manufacture goods under bond. This requires approval by an appraisal
committee. Incentives for establishing operations in an EPZ include:
• no withholding tax on dividends;
• no duty on capital equipment and raw materials;
• no excise tax on the purchases of raw materials and packaging materials made in Malawi; and
• no Value Added Tax (VAT).
Tax measures are reviewed annually in Malawi. In June 2011, Malawi announced new tax measures. Previously, incentives
for establishing operations in an EPZ included zero corporate tax, however, companies will now be subject to standard
corporate tax of 30%. Previous tax breaks for industrial buildings, plants and machinery granted to companies under a free
trade zone would be reduced to 40% from 100%.
Incentives for Manufacturing in Bond include:
• export allowance of 12% revenue for non-traditional exports;
Institutions Governing Investment Promotion
Investment Incentives
Investment Guide 2015 - Malawi
8
Tax
Income Tax
Only income from a source within or deemed to be within Malawi is subject to tax. Non-residents are only taxed on the
portion of their income which arises or is deemed to arise in Malawi. Non-residents are subject to 15% withholding tax on
income arising in Malawi.
Trading losses may be carried forward for six years, unless derived from manufacturing, mining or agriculture, in which
case they may be carried forward without restriction. Capital losses of assets that attracted capital allowances are fully
deductible. Other capital losses may be deducted only against capital gains realised in the same or future years.
New investors in agricultural, agro-industrial and manufacturing are exempt from income tax for a period of one to six years
depending on the area of investment and location of their investment in the country.
Income tax is levied on residents as follows:
Corporate tax 30%
Fringe benefits tax 30%
Capital gains Taxed as ordinary income
Dividends 10% (tax withheld at source and is final)
Interest30% of which 20% is withheld (gross at source in many cases)
Royalties30% of which 20% is withheld (gross at source in many cases)
• transport tax allowance equal to 25% of international transport costs, excluding traditional exports;
• no duties on imports of capital equipment used in the manufacture of exports;
• no surtaxes;
• no excise tax or duty on the purchase of raw materials and packaging materials; and
• a timely refund of all duties (duty drawback) on imports of raw materials and packaging materials used in the production
of exports.
Companies operating in priority industries so designated by the Minister of Trade and Industry, are eligible for a tax
holiday of either: 10% for such period not exceeding 10 years; or 15% throughout the period of operation. (However, it is
pertinent to note that no industry has yet been designated as a priority and as such, no tax holidays are operational to date.)
Investment Guide 2015 - Malawi
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Capital Gains Tax
Other Tax
Capital gains are treated as ordinary income and subject to income tax at the applicable rate. There are a number of
exemptions relating mainly to group restructurings, principal residence, transfers between spouses and shares listed on the
stock exchange, provided it had been held for more than one year as well as personal and domestic assets. Non-residents
pay border tax at the rate of 15%, if not engaged in trade or business in Malawi through a permanent establishment
situated in Malawi.
VAT is payable at the rate of 16.5% of the value of the goods or services supplied or imported. A 1% tax-deductible levy of
payroll costs is payable annually to the Technical, Entrepreneurial and Vocational Education and Training Authority. Property
taxes are assessed by the local authorities, based on land valuations conducted every five years. Mineral rights duties are
charged as royalties on the sale of minerals.
Effective from 1st July 2009, a turnover tax, at a rate of 2%, is payable on business income where the annual turnover exceeds
MWK 2 million (approximately US$ 4400) but does not exceed MWK 6 million (approximately US$ 13,100). Turnover tax
does not apply in respect of rental income, management or training fees, the income of incorporated companies and
income subject to withholding tax. A person that qualifies to pay turnover tax may elect, by writing to the Commissioner,
not to be subject to the tax, in which case the normal provisions of the Taxation Act would apply.
Fees30% of which 20% is withheld (gross at source in many cases)
Rents30% of which 20% is withheld (gross at source in many cases)
Foreign companies 35% (or a rate 5% higher than normal)
Income tax is levied on non-residents as follows:
Border tax 15% on gross income (tax is withheld at source)
Capital gains Taxed as ordinary income
Dividends 10% (Tax is withheld at source and is final)
Interest 15% (Tax is withheld at source and is final)
Royalties 15% (Tax is withheld at source and is final)
Fees 15% (Tax is withheld at source and is final)
Rents 15% (Tax is withheld at source and is final)
Investment Guide 2015 - Malawi
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Transfer Pricing and Thin Capitalisation
Transfer pricing rules were introduced as from 1st July 2009 and the tax authorities have the power to deem profits to
have accrued in situations where non-arm’s length transfer pricing is believed to exist. While there is no thin capitalisation
legislation in Malawi, a deemed dividend will be imposed where the debt-to-equity ratio exceeds 3:1.
Stamp and Transfer Duty
Stamp duty is charged at nominal or ad valorem rates on a variety of financial instruments and transactions. Registration
fees are payable based on the authorised share capital of a company upon incorporation. The fees are MWK 25,000
(approximately US$ 55) plus MWK 500 (approximately US$ 1) on the first MWK 1,000 (approximately US$ 2) of the
authorised capital and MWK 20.00 (approximately US$ 0.04) for every MWK 2,000 (approximately US$ 4.5) of the
authorised capital or any part thereof. Fees for registration of a notice of increase of share capital are 1% of the amount
by which the share capital is increased. Stamp duty of 1.5% is chargeable on the transfer of real and personal property.
Exchange Control
The Reserve Bank of Malawi administers exchange controls in terms of the Exchange Control Act and the Regulations
and directives made thereunder. Authorisation is required for all remittances of profits, dividends, interest, royalties and
fees. The mandatory conversion requirement for proceeds of exports is 60% though a lower ratio may be permitted on
legitimate grounds. Most goods can be freely imported under the open general licence system.
Imports and Exports
The Malawian economy’s demand for processed products, machinery, vehicles and other manufactured products has
resulted in the country’s imports surpassing the value of its exports. Malawi’s total value of imports increased by 26% from
2010 to 2011 and increased by 74% from 2011 to 2012. The top three countries from which Malawi imports merchandise
are South Africa, China and India.
Tobacco is Malawi’s major export product, in 2011 tobacco contributed 30% of the total exports, and uranium was the
second largest contributor with 12.3% and was followed by sugar with 11.6%. Malawi’s total exports increased by 31%
from 2011 to 2012. Malawi’s major export destinations are South Africa, Egypt and Zimbabwe. However, in 2011 Canada
was its major export destination.
Accounting Principles
Malawi has adopted the International Financial Reporting Standards. Furthermore, all company annual financial statements
require audits.
Investment Guide 2015 - Malawi
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Industrial Relations
The Labour Relations Act of Malawi promotes sound labour relations through the protection and promotion of freedom
of association, the encouragement of effective collective bargaining and the promotion of orderly and expeditious dispute
settlement, conducive to social justice and economic development.
The Employment Act establishes, reinforces, and regulates minimum standards of employment with the purpose of ensuring
equity necessary for enhancing industrial peace, accelerate economic growth and social justice and for matters connected
therewith and incidental thereto.
The Workers’ Compensation Act, provides for compensation for injuries suffered or diseases contracted by workers in
the course of their employment or for death resulting from such injuries or diseases; it provides for the establishment and
administration of a Workers’ Compensation Fund; and it provides for matters connected therewith or incidental thereto.
Expatriate employees (of both domestic and foreign businesses) who reside and work in Malawi must obtain temporary
employment permits. Government policy on expatriates is set out in the “Policy Statement and New Guidelines for the
Issuance and Renewal of Expatriate Employment Permits” issued in November 1998, which provides that investors may only
employ expatriate personnel in areas where there is a shortage of “suitable and qualified” Malawians. The policy provides
for two types of temporary work permits:
i. those for “key posts” (defined as positions of “strategic importance” in business operations) which are granted for the
lifespan of the organisation; and
ii. those for “time posts” (defined as positions with contracts of two year duration or less) which are granted for three
year periods and renewable once.
It must be noted that this policy is followed very loosely and is not always adhered to. The Government issues Business
Residence Permits to foreign nationals who own/operate businesses in Malawi. These permits are issued for five year
periods and are renewable. Permanent Residence Permits are issued to foreign spouses who reside permanently in Malawi,
and to owners/operators of businesses who reside in Malawi for periods in excess of ten years. The maximum number of
resident permits per organisation is five, with the actual number allowed depending on the amount of investment.
Real Property
Under Malawi law, citizens, as well as non-citizens and foreign companies, can lease land from the Government or directly
from private landowners for investment purposes in accordance with their residential and investment objectives. Citizens
and non-citizens can also purchase land, though in the case of a sale to a non-citizen, the intention to sell has to be
advertised in daily newspapers to give citizens the first option to purchase. A process to reform land law is currently in
progress.
Investment Guide 2015 - Malawi
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Corruption
Malawi has been highly affected by corruption. Major instances of corruption often involve public procurement, and the
offering of lucrative public contracts bends to patronage systems. The World Bank and International Finance Corporation
(IFC) Enterprise Surveys 2006 have reported that 47% of companies consider corruption in Malawi to be a major constraint
for operating a business and another 35% had to pay bribes to ‘get things done’. However, a change in perception of
corruption in Malawi has occurred, in accordance with the World Bank and IFC Enterprise Surveys 2009 only 12.8% of the
companies surveyed perceive corruption as a major constraint for doing business and 10.8% indicate that they expect to
pay bribes to ‘get things done’. This change in perception might be influenced by the establishment of the Business Action
Against Corruption (BAAC) initiative and the drafting of a Business Code of Conduct in 2006. BAAC was established in
Malawi as a joint initiative between the business community and representatives of government, civil society and donor
agencies as well as the media.
Apart from the ratification of the United Nations Convention against Corruption and the African Union Convention on
Preventing and Combating Corruption in 2007, the Malawian Government also passed the Corrupt Practices Act in 1995.
The Act established the Anti-Corruption Bureau in 1995. Malawi’s Penal Code prohibits bribery. Giving or receiving a bribe,
whether to or from a Malawian or foreign official, is a crime under section 90 of Malawi’s Penal Code.
The Government in an attempt to fight corruption established a National Anti-Corruption Strategy in January 2009. The
strategy has a holistic approach to the fight against corruption in Malawi and its main focus is the development of a
National Integrity System. The 2006 Money Laundering, Proceeds of Serious Crime and Terrorist Financing Act established
an autonomous Financial Intelligence Unit (FIU) to combat money laundering and terrorist financing. The FIU is responsible
for analysing disclosures from financial institutions and referring actionable cases to competent authorities. It is also
mandated to monitor compliance by reporting institutions.
Competition
Mergers are required to be notified to the Competition and Fair Trading Commission (the Commission) prior to
implementation if they are likely to substantially lessen competition. The applicable filing fee as contained in the 4th
Schedule of the Act is 0.05% of combined turnover or total assets, whichever is the higher, of the enterprises proposing to
effect the merger or takeover.
The Competition and Fair Trading Act (CFTA) requires that “any person who, whether as a principal or agent” participates
in effecting a merger or takeover should apply to the Commission for approval before effecting the proposed merger or
takeover where such merger or takeover is likely to result in substantial lessening of competition in any market.
The CFTA appears to require parties to seek approval of the Commission only where such merger or takeover is likely to
result in substantial lessening of competition in any market. If a merger is not notified to the Commission and it is found
that such merger is likely to result in substantial lessening of competition, the consequences are extremely severe. Such
merger shall have no legal effect and the rights and obligations imposed on the parties to the agreement shall not be legally
enforceable. In addition, a principal or agent who carries out a merger without the Commission’s authorisation commits an
Investment Guide 2015 - Malawi
13
Legal Forms of Incorporation in Malawi
Consumer Protection
The Consumer Protection Act and the CFTA provide protection for consumers.
offence and may be imprisoned for a period of up to five years. Alternatively, this principal or agent may be liable for a fine
of MWK 10 million (approx. US$26, 550), or an amount equivalent to the financial gain generated by the offence, if such
amount is greater. Such a person is also liable to imprisonment for a period of five years.
The practical application of the CFTA is that it is advisable for all parties wishing to effect a merger or takeover to seek the
Commission’s prior approval.
The principal business entities are:
i. a company limited by shares where the liability of members is limited to the unpaid amount on shares,
ii. a company limited by guarantee where the liability of members is limited to the amount undertaken to be contributed,
and
iii. an unlimited company where there is no limit on the liability of the members.
A company may either be private or public. In a private company the number of shareholders is limited to 50, the right of
the shareholders to transfer shares is restricted, and the company is prohibited from making invitations to the public for the
acquisition of its shares and debentures. A public company can issue shares to the public and has no limit on the number
of shareholders it may have. In both types of companies, the minimum amount of shareholders is two.
The registration of a foreign company may be more tedious than registering a local company in terms of information
required. However, after incorporation, neither entity has any significant advantage over the other. There are no regulations
in Malawi regulating joint ventures, other than compliance with company law and other applicable law.
A company may be incorporated within one week. The following information is required to register and incorporate a
company: name of company, authorised share capital, registered office, location of books of accounts, address of the
company secretary and names of directors and shareholders. There are no nationality requirements for directors but the
majority of the directors must be resident in Malawi. There are no nationality requirements for shareholders; however,
exchange control approval must be obtained before shares can be issued to non-resident shareholders (regardless of
nationality). There are also no minimum capitalisation requirements but the practice is MWK 10,000 (approximately US$
22).
Investment Guide 2015 - Malawi
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Agriculture
A lush climate and rich soil make Malawi well suited for agriculture, which is central to the country’s economy and national
life, occupying 87% of its workforce, and making up 34.7% of its GDP and represents about 80% of all exports. The main
staple crop is maize, grown by smallholder farmers mostly at the subsistence level. Production varies, and depending on
climate conditions, maize may be imported or exported. Sorghum, millet, pulses, root crops, and fruit are also grown. The
fishing industry in respect of Lake Malawi accounts for about 200 000 jobs, but problems with pollution and over-fishing
threaten to reduce yields.
Malawi’s commercial farming sector is concentrated on large estates in the south and around Lilongwe. Its main product
is tobacco, which typically accounts for between 50% and 70% of Malawi’s export earnings. Formerly held back by
government price controls and grower regulations, the liberalisation of the industry in the 1990s has caused a steady
increase in profits for growers and a sharp rise in smallholder tobacco production, making Malawi one of the leading
tobacco producers in the world. Nevertheless, the industry as a whole has been hard hit by the drop in world tobacco prices,
which has cut tobacco export revenues from US$ 332 million in 1998 to US$ 218 million in 2000 In 2014, the tobacco
export revenue was at US$ 361.5 million. Tea is Malawi’s second most important cash crop, and Malawi is Africa’s second
largest tea producer of it. In 2010 tea accounted for about US$ 65.8 million. Sugar is also a large export product.
Industry Sectors
Banking and Financial Services
Malawi has a sound banking sector, overseen and well regulated by the Reserve Bank of Malawi. There are 10 full service
commercial banks with the three largest banks commanding 60% of the market. The Malawi Stock Exchange is governed
by the Companies Act, the Financial Services Act, 2010 and Securities Act, 2010. The CFTA does not cover the day-to-
day trading of the stock exchange but does regulate mergers, acquisitions and takeovers that are of national interest.
Stockbrokers Malawi Limited (SML) is the major registered stockbroker in Malawi. SML runs a secondary market in
government securities and both local and foreign investors have equal access to the purchase of these securities.
Energy
The state-owned Petroleum Control Commission relinquished its monopoly on petroleum imports in May 2000, allowing the
private sector to import Malawi’s entire fuel requirements. Regulatory functions within the petroleum sector are performed
by Malawi Energy Regulatory Authority. Fuel prices are not controlled.
Electricity generation comes mostly from the 4 hydro-electric power stations on the Shire River. But irregular water flow
on the river, especially in the dry season, and problems with silting often make power supplies unreliable, a problem
particularly damaging to industry. Coal is imported to supplement local production, which because of under-investment, is
mined below capacity.
Manufacturing
The majority of Malawi’s industrial activity (85%) comes from manufacturing. Malawian manufacturing is carried out
by about 100 companies involved in agricultural processing, textiles, clothing and footwear production. Manufacturing
accounts for about 12% of Malawi’s GDP. The economic review by National Statistical Office placed Canada as the top
Investment Guide 2015 - Malawi
15
Mining
Mining remains small-scale and Malawi has no precious metals or oil, but ruby mining began in the mid-1990s, with Malawi
being the only source of rubies in Africa. Malawi also has deposits of bauxite, asbestos, graphite and uranium. Most of
the mining and mineral processing operations in Malawi are privately owned, including the cement plants, the Kayelekera
uranium mine, the Mchenga coal mine and the Nyala ruby and sapphire mine. Small-scale and artisanal miners produced
aggregates, brick clay, gemstones and lime.
In 2012, sulfuric acid production increased by an estimated 28.6%, ornamental stone by 62.4%, coal by 28.5%, lime by
2.13%, limestone for use in the cement industry by 22% and gemstones by 32.6%.
After the establishment in 1985 of a government mines department and a national mining agency to explore the feasibility
of exploiting various minerals; bauxite and titanium reserves in the south were singled out for development. Although the
supporting infrastructure is weak, some foreign investment has “poured” in ever since.
market for Malawi’s exports in 2013 followed by South Africa. Some of Malawi’s export markets allow firms to import duty
free or quota free if a certain percentage of the local content in the finished product is reached, however, this requirement
is rarely satisfied by the manufacturers.
The EU was the major destination for Malawi’s exports for period July - December, 2012. The total exports to the EU region
during this period amounted to MWK 42.8 billion (approximately US$ 93.4 million). SADC came second with an amount
of MWK 36.6 billion (approximately US$ 79.9 million) and COMESA was third with MWK 22.7 billion (approximately US$
49.5 million).
Malawi imported most of her goods from SADC for the period July - December, 2012. The total imports from SADC region
amounted to MWK 151.7 billion (approximately US$ 331 million). Far East, EU and COMESA came second, third and fourth
with MWK 67.0 billion (approximately US$ 146.1 million), MWK 43.3 billion (approximately US$ 94.4 million) and MWK
26 billion (approximately US$ 56.7 million) respectively.
Telecommunications
Telecommunications is an underdeveloped sector, with a mere 45,000 landlines, or one for every 230 Malawians. Malawi
has several Internet service providers. The Government has established the Malawi Communication Regulatory Authority,
which has licensed four cellular phone service providers, two of which are operating namely, Telekom Networks Malawi
and Airtel and the splitting of the former parastatal Malawi Posts and Telecommunication Corporation into the Malawi
Posts Corporation and Malawi Telecommunications Limited as separate entities. Malawi Telecommunications Limited has
been privatised.
Tourism
Malawi’s tropical climate and scenic landscape have seen rapid gains in the industry, with visitor numbers climbing to
215,000 in 1999, a 20% increase from 1995. The country had 767,000 arrivals in 2011. Efforts are being made to expand
facilities and boost numbers.
Investment Guide 2015 - Malawi
16
Intellectual Property
Rights to property, both real and intellectual, are legally protected. The Copyright Society of Malawi, established in 1992,
administers the Copyright Act, 1989, which protects copyrights and “neighbouring” rights in Malawi. The Registrar
General administers the Patent and Trademarks Act, which protects industrial intellectual property rights in Malawi. A
public registry of patents and patent licences is kept. Patents are registered through an agent. Trademarks are registered
publicly following advertisement and a period of no objection. WTO rules allow Malawi (as a less developed country) to
delay full implementation of the Trade-Related Aspects of Intellectual Property Rights - (TRIPs) agreement until 2016. The
Ministry of Trade and Industry (MTI) is the coordinator of WTO issues in Malawi, but unfortunately has limited capacity
to effectively track WTO developments. The MTI is working with COSOMA and the Registrar General to align relevant
domestic legislation with the WTO TRIPs agreement with technical assistance from the Africa Regional Intellectual Property
Organisation.
The Government has signed and adheres to bilateral and multilateral investment guarantee treaties and key agreements
on intellectual property rights. Malawi is a member of the convention establishing the Multilateral Investment Guarantee
Agency, the World Intellectual Property Organisation, the Berne Convention and the Universal Copyright Convention.
Dispute Settlement
Malawi has an independent judiciary, which derives its procedures from English Common Law. The commercial courts
generally work efficiently and there is a fully established mediation process to promote agreements between parties in
disputes before court proceedings start.
Although the processing of commercial cases has improved significantly, the enforcement of judgments continues to be a
problem. The Commercial Court has no dedicated enforcement sheriffs. Sheriffs assigned to the High Court, do not accord
priority to commercial enforcements.
The court system in Malawi accepts and enforces foreign court judgments that are registered in accordance with established
legal procedure. There are reciprocal agreements among Commonwealth countries to enforce judgments without this
registration obligation.
Monetary judgments are usually made in the investor’s currency. However, the immediate availability of foreign exchange is
dependent upon supply, which varies on a seasonal basis and was chronically low throughout 2011. Malawi is a member of
the International Centre for Settlement of Investment Disputes, and accepts binding international arbitration of investment
disputes between foreign investors and the state if specified in written contract.
Savjani & Co.
A: Hannover House
P: P.O. Box 2790, Blantyre, Malawi
T: +265 182 4555
F: +265 182 1064
ALN Head Office
A: 5th floor, The Oval
Corner of Ring Rd.,Parklands and Jalaram Roads, Westlands, Nairobi
P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T: +254 20 364 0000, +254 703 032 000
W: www.africalegalnetwork.com
Investment Guide - Mauritius
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
TABLE OF CONTENTSGeneral Overview _________________________________________________________________________________4
Political Overview __________________________________________________________________________________5
Economic Overview ________________________________________________________________________________5
Regulatory Environment ____________________________________________________________________________5
Bilateral and Multilateral Treaties _____________________________________________________________________6
Investment Promotion ______________________________________________________________________________6
Institutions Governing Investment Promotion 6
Investment Incentives 7
Tax ______________________________________________________________________________________________7
Personal Income Tax 7
Withholding Tax 8
Capital Gains Tax 8
Other Tax 8
Transfer Pricing and Thin Capitalisation 8
Stamp and Transfer Duty 8
Exchange Control _________________________________________________________________________________9
Imports and Exports________________________________________________________________________________9
Accounting Principles ______________________________________________________________________________9
Industrial Relations_________________________________________________________________________________9
Real Property _____________________________________________________________________________________10
Commercial Property 10
Residential Property 10
Acquisition of Property by a Non-Citizen 11
Corruption _______________________________________________________________________________________12
Competition ______________________________________________________________________________________12
Consumer Protection_______________________________________________________________________________13
Legal Forms of Incorporation in Mauritius _____________________________________________________________13
Public Company / Private Company 14
Limited Life Company 14
Global Business Licences (GBL) Companies 14
Foreign Company 15
Société 15
Limited Partnership 15
Foundation 15
Industry Sectors ___________________________________________________________________________________16
Agriculture 16
Banking and Financial Services 16
Energy 17
Manufacturing 17
Mining 17
Telecommunications 17
Tourism 17
Intellectual Property ________________________________________________________________________________17
Dispute Settlement ________________________________________________________________________________18
International Arbitration 18
Investment Guide 2015 - Mauritius
4
Capital City: Port Louis
Currency: Mauritian Rupee (MUR)
Languages: English, French, Creole, Bhojpuri
Government: Parliamentary republic
President: Rajkeswur Purryag GCSK GOSK
Population: 1.3 million (2014 estimate)
Timezone: GMT+4
GDP: US$ 11.93 billion (2013 estimate)
General Overview
Investment Guide 2015 - Mauritius
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Political Overview
Regulatory Environment
Economic Overview
Mauritius is a parliamentary representative, democratic republic. The President is the head of state and the Prime Minister
is the head of government. Legislative power is vested in both the Government and a unicameral parliament. The Supreme
Court is the highest judicial authority. The Mauritian Government is elected on a five-year basis. The most recent elections
took place on 10th May 2014. Mauritius has a long tradition of political and social stability and is internationally
recognised for its well-established democracy. According to the 2014 Ibrahim Index of African Governance, which measures
governance using a number of different variables, Mauritius’ Government earned the highest rankings among African
nations for “sustainable economic opportunity” and “Business Environment” as well as earning the highest score in the
index overall for the eighth consecutive time.
Mauritius has one of the most successful, competitive and diversified economies in Africa. The country’s success has been
built on a free market economy. The economy is based on tourism, textiles, sugar and financial services. With the 4th highest
Gross Domestic Product (GDP) per capita in Africa, Mauritius is one of only four African nations with a “high” Human
Development Index rating. Mauritius also has a per capita income of US$ 9,924, one of the highest in Africa. According
to the 2015 Index of Economic Freedom of the U.S. based Heritage Foundation, Mauritius leads Sub-Saharan Africa in
economic freedom and is ranked 10th worldwide with an overall score of 76.4.
During the last five years, the Government has significantly reformed trade, investment, tariff and income tax regulations,
simplifying the framework for doing business. Mauritius has a long-standing tradition of government and private
sector dialogue which allows the private sector to effectively voice its views on the development strategy of the
country. The Joint Economic Council, the coordinating body of the Mauritian private sector, is a key vehicle in this regard.
A Central Procurement Board, established under the Public Procurement Act, 2006, oversees all forms of procurement by
public bodies. The World Economic Forum’s 2014-2015 Global Competitiveness Report places Mauritius 1st in Africa
and 39th in the world in terms of competitiveness.
Investment Guide 2015 - Mauritius
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Bilateral and Multilateral Treaties
Mauritius is a member of the African Union, Commonwealth of Nations, La Francophonie, the World Trade
Organisation (WTO), the African Caribbean Pacific-European Union Cotonou Agreement, the Common Market for Eastern
and Southern Africa (COMESA), the Southern African Development Community (SADC), the Indian Ocean Rim - Association
for Regional Cooperation and the Indian Ocean Commission.
Bilateral trade agreements have been entered into with Central African Republic, Egypt, Hungary, Madagascar, Pakistan
and Zimbabwe, Turkey and India. Mauritius has 24 Investment Promotion and Protection Agreements (IPPAs) in force with
Barbados, Belgium/Luxembourg Economic Union, Burundi, China, Czech Republic, Finland, France, Germany, India,
Indonesia, Kuwait, Madagascar, Mozambique, Pakistan, Portugal, Republic of Korea, Romania, Senegal, Singapore, South
Africa, Sweden, Switzerland, Tanzania, U.K. and Northern Ireland, which are currently in force. IPPAs with the following
countries are awaiting ratification: Benin, Cameroon, Chad, Comoros, Egypt, Gabon, Ghana, Guinea Republic, Kenya,
Mauritania, Nepal, Republic of Congo, Rwanda, Swaziland, Turkey and Zimbabwe. These IPPAs provide for free repatriation
of investment capital and returns and guarantee against expropriation. They also provide for a most favoured nation
rule with respect to treatment of investors, and compensation for losses in case of war and armed conflict. They also include
arrangements for the settlement of disputes between investors and the contracting states.
Mauritius has concluded 41 double taxation avoidance treaties and is party to a series of treaties under negotiation.
The 41 treaties currently in force are with the following countries: Australia, Barbados, Belgium, Botswana, Croatia,
Cyprus, Sri Lanka, France, Germany, Guernsey, India, Italy, Kuwait, Lesotho, Luxembourg, Madagascar, Malaysia, Monaco,
Mozambique, Namibia, Nepal, Oman, Pakistan, Bangladesh, China, Rwanda, Senegal, Seychelles, Singapore, South Africa,
Qatar, Swaziland, Sweden, Thailand, Tunisia, Uganda, United Arab Emirates, United Kingdom, Zambia, Zimbabwe and
Congo. Seven tax treaties with Egypt, Gabon, Kenya, Nigeria, Malta, Russia and South Africa (new) are awaiting ratification;
4 treaties with Burkina Faso, Cape Verde, Ghana and Morocco are awaiting signature; and 15 treaties are being
negotiated with Algeria, Canada, Czech Republic, Greece, Hong Kong, Lesotho (new), Montenegro, Portugal, Iran, Malawi,
Saudi Arabia, St. Kitts & Nevis, Tanzania, Vietnam and Yemen
Investment Promotion
A transparent and well-defined investment code and legal system have made the foreign investment climate in
Mauritius one of the best in the region. The foreign direct investment for the first half of 2014 was at US$256 million.
Investment in Mauritius is governed by the Investment Promotion Act, 2000 (Investment Act). Investment regulations are
consistent with the WTO’s Agreement on Trade Related Investment Measures. The Mauritius Board of Investment
(MBOI) is a government agency which aims to promote and facilitate investment in Mauritius. The MBOI acts as a one-stop
agency for business registration, acts as the facilitator for all forms of investment in Mauritius and guides investors through
the necessary processes for doing business in the country.
Institutions Governing Investment Promotion
Investment Guide 2015 - Mauritius
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Tax
Personal Income Tax
Resident companies and businesses are taxed on worldwide income. Non-residents are taxed only on Mauritius-source
income. A company is resident if it is incorporated in Mauritius or its central management and control is in Mauritius. An
individual is resident if domiciled in Mauritius, spends more than six months of the tax year in Mauritius or has a combined
presence of at least 270 days in that tax year and the two preceding tax years.Losses may be carried forward for five years,
except for losses arising from annual allowances on capital expenditure incurred after 1st July 2006. The carry-back of losses
is not permitted.
Income Tax is levied on resident companies as follows:
Corporate Tax• General• Tax incentive companies
15%15%
DividendsDividends paid by a Mauritian-resident company are ex-empt from income tax. Foreign dividends are taxable
Interest Taxed as ordinary income
Royalties Taxed as ordinary income
Fees Taxed as ordinary income
Investment incentives are applied uniformly to both domestic and foreign investors. Mauritius offers the following incentives
to investors:
• a flat corporate and income tax rate of 15%;
• tax free dividends;
• no capital gains tax;
• up to 100% foreign ownership;
• exemption from customs duty on equipment;
• free repatriation of profits, dividends, and capital;
• no minimum foreign capital required;
• 50% annual allowance on declining balance for the purchase of electronic and computer equipment; and
• an extensive tax treaty network with several countries.
Investors can obtain freeport licences under the Investment Act, under which persons may be exempt from income tax or
subject to tax at 15% under specified conditions.The Real Estate Scheme (RES) introduced in 2007 allows non-citizens to
acquire a residence with no minimum price set. Investors, their spouses and dependants are granted resident permits to live
in Mauritius when a residential property is acquired for a price exceeding US$ 500,000.
Investment Incentives
Investment Guide 2015 - Mauritius
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Capital Gains Tax
Withholding Tax
Other Tax
No capital gains tax is levied in Mauritius.
Interest and royalties are taxed as ordinary income, withheld at the source.
The basic rate of Value Added Tax (VAT) is 15%. Certain goods and services are subject to VAT at zero rate and certain are
exempt from VAT. The registration threshold is MUR 4 million (US$ 124,000).Employers are required to make pay-related
social security contributions.
Income tax is levied on non-residents as follows:
Corporate tax 15%
Category 1 global business licence (GBL) companies 3% maximum
DividendsDividends paid by a Mauritian-resident company are ex-empt from income tax
InterestTaxed as ordinary income, subject to available exemptions and tax credits
RoyaltiesTaxed as ordinary income, subject to available exemptions and tax credits. A 0% rate applies to specified non-resi-dents
Fees• directors’ fees• consultancy fees
15% (Tax is withheld at source and is final)
Transfer Pricing and Thin Capitalisation
Mauritius does not have transfer pricing regulations. However, the Income Tax Act, 1995 (ITA), provides that
transactions between related parties should be at market value.Similarly, Mauritius does not have thin capitalisation rules.
However, the ITA provides that the Director-General may disallow interest expense payable to shareholders under certain
conditions.
Stamp and Transfer Duty
Stamp duty of MUR 200 is levied on each document presented for registration to the Registrar General or Conservator of
Mortgages. A duty of 5% is levied on share transfers of a company which includes in its assets any freehold or leasehold
property while 20% is charged when a company has leasehold rights on state land. No duty is payable on the transfer of
shares quoted on the Stock Exchange of Mauritius and on the shares of a Category 1 GBL company. Transfer duty of 5%
and land transfer tax of 5% is payable on the sale or transfer of immovable property.
Investment Guide 2015 - Mauritius
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Exchange Control
Exchange controls were suspended by the Finance Act, 1994. Consequently, no approval is required for the repatriation
of profits, dividends and capital gains earned by a foreign investor in Mauritius.
Imports and Exports
From 1st July 2009, all permits relating to imports and exports, except those considered essential, have been suspended.
The Mauritius Freeport (free-trade zone) was established in 1992 as a customs-free zone for goods destined for re-export
Accounting Principles
Mauritius applies International Accounting Standards and International Financing Reporting Standards.
Industrial Relations
The Constitution and the law of Mauritius provide for the right of workers to form and join unions of their choice without
prior authorisation or excessive requirements and workers exercise this right in practice. Under the Industrial Relations Act,
1973, workers have the right to strike, but with some limitations. The National Remuneration Board (NRB) sets minimum
wages for non-managerial workers, although most unions negotiate wages higher than those set by the NRB. In February
2009, the Employment Rights Act and the Employment Relations Act came into force. The new legislation provides for a
Workfare Program under which workers who have been laid off will benefit from government financial assistance for up to
twelve months and opportunities for training to increase their employability.
Mauritius participates actively in the annual International Labour Organisation (ILO) conference in Geneva, and
adheres to ILO conventions protecting workers’ rights.
Work permits are required for expatriates seeking employment in Mauritius. In general, work permits are granted provided
that a contract of employment is in place and local citizens do not possess the necessary expertise. An occupation permit
giving a right to a three year residence period can be granted to an investor setting up business with an annual turnover
exceeding MUR 4 million (US$ 124,000). Investors investing a minimum of US$ 500,000 (approximately MUR 15 million) in
a qualifying business activity are entitled to a permanent residence permit valid for a period of ten years.
Investment Guide 2015 - Mauritius
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Real Property
The real estate market in Mauritius has emerged as a sector with competitive opportunities for investors, small
landowners and non-citizens wishing to reside in the country. The legal environment guarantees protection of the rights of
sellers and purchasers. Effective administration has simplified and facilitated the ease of business transactions related
to residence permits and acquisition of property. Coupled with a low tax regime, political and financial stability, the country
provides investors with a secure platform for property development.The real estate sector in Mauritius provides an array of
opportunities for both commercial and residential purposes.
Commercial Property
The commercial property market in Mauritius allows for the development of different property types such as:
• Hotels
• Shopping malls and duty free shops
• Office buildings
• Business and industrial parks
When acquiring property for business purposes or for the lease of immovable property for a period exceeding 20 years for
business purposes, the investor needs to apply for approval from the MBOI. A business purpose is considered to be the
acquisition of property for:
• Development of active commercial buildings,
• Residential properties developed under the Integrated Resorts Scheme (IRS) and the Real Estate Scheme (RES),
• Any activity carried out with the purpose of profit excluding residential properties not developed under the IRS or RES
and the acquisition for lease, resale or rental of a bare or serviced land.
Residential Property
The residential real estate market is also expanding through the development of luxury residential properties. In Mauritius,
this market has been developed under two schemes.
The IRS.
The IRS involves the construction and sale of luxurious residential property to foreigners with a high purchasing power. The
IRS also includes high class leisure facilities for instance, golf courses, shopping malls, wellness centres and sport facilities.
Furthermore, contribution to the community is guaranteed. With the grant of a residence permit to foreigners on the
purchase of a residence under the scheme, the IRS is an upcoming market. The IRS requires only a short investment period
and has no minimum restrictions on the selling price as well as a possibility for tax residency in Mauritius and is, therefore,
considered to be a competitive investment opportunity.
The RES
The RES allows development of residence property in Mauritius but on a smaller scale than the IRS. This scheme is aimed at
investors and professionals who wish to reside and work in Mauritius or to acquire a luxury second home.
Moreover, commercial and leisure facilities are also tied up to the residences. The fact that there is no minimum price for a
residence is a facilitator for ownership and an opportunity for considerable profits.
Investment Guide 2015 - Mauritius
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The Invest Hotel Scheme (IHS)
The IHS allows hotel developers to finance the development of a hotel project by allowing them to sell villas, suites, rooms
or other components that form part of the hotel to individual buyers.
The IHS provides:
• For the development of a hotel on either freehold or leasehold land of more than 1 hectare where units, villas, suites
or other parts of the hotel can be sold;
• That the buyer of a unit enters into a lease agreement by which the property is leased back to the seller; and
• That the unit leased to the seller may be used and occupied by the unit owner or any person on his behalf for a total
of not more than 45 days in any period of 12 months.
There is no minimum amount of investment that is required for the acquisition of a room, suite or other part of the hotel,
however, a minimum of US$ 500,000 is required for a stand-alone villa
Acquisition of Property by a Non-Citizen
Any foreigner who wishes to hold or acquire freehold or leasehold immovable property in Mauritius must obtain authorisation
from either the Prime Minister’s Office or the MBOI. Non-citizens must obtain authorisation from the Prime Minister’s office
in respect of:
• Acquisition of shares in a company holding freehold or leasehold immovable property;
• Acquisition of immovable property by a person not registered as an investor with BOI;
• Lease of immovable property for more than 20 years by a person not registered as Investor with BOI; or
• Lease of immovable property for residence for a period exceeding 4 years.
The non-citizen shall first make a written application to the Prime Minister’s office to be delivered with a certificate authorising
him to acquire the property. Such approval is also required in respect of an acquisition of shares in a Mauritian entity which
has amongst its assets any freehold or leasehold property in Mauritius. Under the Non-Citizen Property Restriction Act, such
approval would also be required where a non-citizen acquires shares in a company which in turn holds shares in a subsidiary
whose assets include freehold or leasehold property in Mauritius. However, no certificate is required where a non-citizen
acquires shares in a Mauritian entity that holds any leasehold property, if such property is the subject of a lease agreement
for industrial or commercial purposes for a term not exceeding 20 years.
The Prime Minister’s approval is not required, when the property is held or acquired in the following instances:
• Acquisition of immovable property for business purposes;
• Acquisition of residential property by holders of permanent resident permit;
• Acquisition of residential units under Integrated Resort Scheme, Real Estate Scheme or Invest Hotel Scheme; or
• Lease of immovable property for more than 20 years for business purposes.
In the above circumstances, non-citizens must obtain authorisation from the MBOI. No authorisation is required in case of
a non-citizen who:
• Holds immovable property for commercial purposes under a lease agreement not exceeding 20 years;
• Holds shares in companies which do not own immovable property;
• Holds immovable property by inheritance or effect of marriage;
• Holds shares in companies listed on the stock exchange; or
• Invests through a unit trust scheme or any collective investment vehicle.
Investment Guide 2015 - Mauritius
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All non-citizens who have acquired a property under the IRS or RES where the value of the residential property is not less
than US$ 500,000 or its equivalent in any other freely convertible foreign currency in Mauritius are granted a residence
permits for themselves and any spouses or dependents. The permits remain valid so long as the non-citizen still possesses
the residence or until the company terminates the residency
Corruption
Mauritius ranks 47th worldwide, and 4th in Africa as per Transparency International’s Corruption Perceptions Index for
2014 behind Botswana, Cape Verde and Seychelles. The principal anti-corruption legislation in Mauritius is the Financial
Intelligence and Anti-Money Laundering Regulations, 2003, Financial Intelligence and Anti-Money Laundering Act, 2002
and the Prevention of Corruption Act, 2002.
The Mauritian Financial Intelligence Unit (the FIU) was established under the Financial Intelligence and Anti-Money
Laundering Act, 2002. It is the central Mauritian agency for the request, receipt, analysis and dissemination of financial
information regarding suspected proceeds of crime and alleged money laundering offences as well as the financing of any
activities or transactions related to terrorism to relevant authorities.
The FIU also plays an integral part in the investigation and detection of financial crimes. It collects, processes, analyses
and interprets all information disclosed to and obtained by it in the process of combating money laundering and
terrorist financing. The FIU became a member of the Egmont Group in July 2003 and has since been frequently elected as
the regional representative of African FIUs on the Egmont Committee.
In 2002, the Government adopted the Prevention of Corruption Act, which led to the setting up of an Independent
Commission Against Corruption (ICAC). ICAC consists of an anti-corruption unit, an anti-money laundering unit and a
corruption prevention and education division. It has the power to investigate any act of corruption and any matter that
may involve the laundering of money or suspicious transaction referred to it by the FIU and can confiscate the
proceeds of corruption and money laundering.
Competition
The Mauritius Competition Act, 2007, regulates competition law in Mauritius, and is aimed at preventing monopolistic
pricing and restricting collusion in consumer markets. The Competition Commission (the Commission) reviews
mergers in three instances:
• where all the parties to the merger, supply or acquire goods or services of any description, and will following the
merger, together supply or acquire 30% or more of all those goods or services in the market;
• where one of the parties to the merger alone supplies or acquires, prior to the merger, 30% or more of goods or
services of any description in the market; or
• where the Commission has reasonable grounds to believe that the creation of the merger situation has resulted in, or
is likely to result in, a substantial lessening of competition within any market for goods or services.
Investment Guide 2015 - Mauritius
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Where the merger falls within the above categories, parties should apply to the Commission for guidance. There are no
filing fees.
Consumer Protection
Consumer protection in Mauritius is regulated by the Consumer Protection (Price and Supplies Control) Act and the Consumer
Protection Act. The Fair Trading Act also makes provisions in respect to measures to ensure fair trading in Mauritius and
the prevention of practices that mislead or confuse consumers. The Consumer Protection Unit (CPU) is a specialised section
within the Ministry of Commerce and Consumer Protection of Mauritius which caters for the protection of consumers.The
CPU enforces Mauritius’ various consumer protection laws, and aims to provide overall consumer satisfaction and security,
through:
• educating consumers of their rights and responsibilities through print media, public discussions, etc;
• settling disputes between traders and consumers by mutual agreement or through the court process; and
• amending existing legislation and preparing new legislation where necessary.
Legal Forms of Incorporation in Mauritius
Businesses can be conducted in Mauritius in several forms, such as:
• a private limited liability company;
• a public limited liability company;
• a sole-proprietorship;
• a branch of a foreign company;
• a société; or
• a limited partnership; or
• a foundation
The Companies Act, 2001 (the Act), governs incorporation of companies. The Act incorporates international best practices
and promotes accountability, openness and fairness. The Business Facilitation Act, 2006, simplified the business licensing
process for business start-ups and allows businesses to start operations within three days of incorporation.The Act
creates several types and categories of companies, such as domestic companies, companies holding a Category 1 GBL and
companies holding a Category 2 GBL.
These companies may be in the form of:
a. a company limited by guarantee;
A company limited by guarantee limits the liability of its members to such amounts as the members may
respectively undertake to contribute to the assets of the company in the event of it being wound up.
b. a company limited by shares;
A company limited by shares limits the liability of its members to any amount unpaid on the shares respectively held
by the shareholder.
Investment Guide 2015 - Mauritius
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c. a company limited by shares and by guarantee;
A company limited by shares and by guarantee means a company formed on the principle of having the liability of its
members:
i. who are shareholders, limited to the amount unpaid, if any, on the shares respectively held by them; and
ii. who have given a guarantee, limited, to the respective amount they have undertaken to contribute, from time to
time, and in the event of it being wound up.
d. an unlimited company
An unlimited company imposes no limit on the liability of its shareholders.
Public Company / Private Company
Limited Life Company
Global Business Licences (GBL) Companies
A company incorporated under the Companies Act may be a public company or a private company. If it is not
specified that the company is a private company, it will be deemed to be a public company.
A private company is one which specifically states in its application for incorporation or its constitution that it is a private
company. The private company may restrict the transfer of its shares, which cannot be offered to the public. A private
company must have a minimum of 1 and a maximum of 25 shareholders. Where the number of shareholders exceeds 25,
it will be deemed to be a public company.
A company of any of the types of companies referred to in (a – d) above may be registered as a limited life company where
its constitution limits its life to a period not exceeding 50 years from the date of its incorporation. However, this company
may by resolution alter its constitution extending the duration of the company to a maximum period of 150 years from the
date of incorporation of the company
A public or private company set up under the Companies Act, 2001 may apply to the Financial Services Commission (FSC)
for a licence to carry on global business. The FSC issues two types of licences namely GBL 1 and 2.
A GBL 1 company is a company registered in Mauritius and considered as resident in Mauritius for tax purposes. A GBL 1
company can conduct business both within and outside Mauritius and deal with a person resident in Mauritius. The central
management and control of a GBL 1 company must be vested in Mauritius. A GBL 1 company will also benefit from Double
Tax Avoidance (DTA) treaties between Mauritius and other states, subject to possession of a Tax Residency Certificate. It
will also have to file audited financial statements with the FSC. A GBL 1 Company is taxed at a flat rate of 15%, although
foreign tax credits will be allowed for taxes suffered at source where this can be evidenced. A system of deemed foreign tax
credits of 80% effectively reduces the income tax rate to 3% on the qualifying income of the company. The tax payable in
Mauritius can be less than 3%, where the actual foreign taxes are more than 12%.
A GBL 2 company is tax exempt in Mauritius and does not need to have audited financial statements nor have a
company secretary. It, however, does not have access to the tax treaties network. The FSC provides certain restrictions on
the business activities that may be conducted by a GBL 2 company. No application for a GBL 2 company shall be
made by a company registered in Mauritius, unless it is a private company and proposes to conduct business activity other
than the following:
i. banking;
Investment Guide 2015 - Mauritius
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ii. financial services;
iii. carrying out business of holding or managing or otherwise dealing with a collective investment fund or scheme as a
professional functionary;
iv. provision of registered office facilities, nominee services, directorship services, secretarial services or other services
for corporations; or
v. providing trusteeship services by way of business.
The Companies Act contains specific provisions applicable to both GBL 1 and GBL 2 companies. The Act also contains
specific exemptions for each type of company.
Foreign Company
Société
The Companies Act enables the registration of a foreign company if it has a place of business or is carrying on business in
Mauritius. It also provides for the migration of companies registered under the Companies Act to other jurisdictions.
Before starting operations, businesses must register with the Registrar of Companies. After receiving a certificate of
incorporation from the Registrar of Companies, all companies must register their business activities with the MBOI.
Registration with the MBOI enables companies to apply for an occupation permit and other facilities offered to investors.
For a limited number of regulated activities in such sectors as tourism, sugar and broadcasting, an application for the
appropriate permit or licence must be made to the competent authorities prior to start of operations. It is worthwhile to
note that Mauritius ranked 28th out of 189 countries in the World Bank Group’s Ease of Doing Business Report 2015.
A société can be set up under the provision of the Civil Code or Commercial Code. The participants’ interests are referred
to as “parts sociales”. A société is fiscally transparent and the liability of the “limited partners” can be limited. A “société
commerciale” needs to be registered with the Registrar of Companies.
Limited Partnership
Since 2011, with the enactment of the Limited Partnerships Act, limited partnerships can now be used to structure
investments. A limited partnership can elect to have a legal personality and is required to have at least one general partner
who is liable for all the debts and obligations of the limited partnership, and one limited partner who is liable only up to the
maximum amount of its commitment.
A limited partnership may elect to have a separate legal personality. Irrespective of whether a limited partnership has
elected for legal personality, it retains its pass-through attribute such that the partners are liable for debts of the partnership
(general partners having unlimited liability whereas limited partners are liable to the extent of their contribution or as they
have agreed). Further, limited partnerships are fiscally transparent and in effect, a limited partnership will not be liable to
tax (irrespective of whether or not it elects to have legal personality) but each partner will be liable to tax with its share of
the income of the partnership. However, a limited partnership which holds a GBL may opt to be fiscally opaque
Foundation
Foundations are set up to benefit persons, a class of persons or to carry out a purpose which can be charitable,
non-charitable or both. It is an ideal vehicle for succession planning and private wealth management. A foundation is
Investment Guide 2015 - Mauritius
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Agriculture
Since independence in 1968, Mauritius has moved away from being an agriculture-based economy. At one stage, sugar
production was the backbone of the Mauritian economy; however, the economy has since diversified significantly.
Agriculture as at 2013 made up 3% of GDP of Mauritius. Sugarcane remains the dominant crop, extending over
90% of the cultivated land surface of the country. 15% of export earnings come from sugarcane. Other crops include tea,
tobacco, vegetables, fruits, flowers, cattle and fishing.
Industry Sectors
Banking and Financial Services
Mauritius has a well-developed and modern banking system, with 21 banks currently licensed to undertake banking
business. The Banking Act, 2004, provides for banking business to be conducted under a single banking licence regime.
Accordingly, all banks are free to conduct business in all currencies, including the MUR. There are also several non-bank
financial institutions which are authorised to conduct deposit-taking business. Financial services account for 23% of GDP.
The Bank of Mauritius - the Central Bank, carries out the supervision and regulation of banks as well as non-bank financial
institutions authorised to accept deposits.The Central Bank has endorsed the Core Principles for Effective Banking
Supervision, as set out by the Basel Committee on Banking Supervision. The financial system has not been involved in sub-
prime lending or any activity deriving directly or indirectly from that asset class. The sector is well regulated and has proven
to be quite solid and highly profitable.
As at December 2014, the Stock Exchange of Mauritius (SEM) had 47 companies listed on the Official Market and
48 companies on the Development and Enterprise Market (which is designed for small and medium enterprises). The SEM
is a member of the World Federation of Exchanges, which reports that the SEM adheres to industry business standards. In
November 2007, the SEM was included in the new Morgan Stanley Capital International Frontier Markets Indices, which is
designed to track the performance of a range of equity markets that are now more accessible to global investors. Mauritius
was among four countries in Africa to be included in the new indices. The SEM has also been included in the DOW Jones
SAFE 100 Index which was launched in March 2009 by the South Asian Federation of Exchanges. The SEM was opened
to foreign investors following the lifting of the foreign exchange controls in 1994. No approval is required for the trading
of shares by foreign investors unless the investment will result in the foreign investors holding15% or more of the voting
capital in a sugar company.
managed by a council which carries out the objectives and purposes of the foundation. It must have at least one
member ordinarily resident in Mauritius. Similar to Trustees, a Council may have the power to appoint new beneficiaries
and determine the extent and nature of beneficial rights. There is no requirement for that member to be a licensed trust
company. It requires a secretary in Mauritius who needs to be licensed and needs to have their registered office
in Mauritius. Foundations are governed by the Foundations Act, 2012.
Investment Guide 2015 - Mauritius
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Energy
Mauritius is dependent on imported fossil fuels to meet its energy needs. The Central Electricity Board is a parastatal body
wholly owned by the Government of Mauritius, reporting to the Ministry of Renewable Energy and Public Utilities.
It produces around 40% of the country’s total power requirements, the remaining 60% being purchased from independent
power producers. Besides the traditional forms of energy production, the Government is also encouraging more
environmental friendly energy such as solar farms and wind farms.
Mining
There are few mineral resources in Mauritius. Historically, mineral output consists of basalt construction stone, coral sand,
lime for coral and solar-evaporated sea salt.
Telecommunications
Mauritius has a small telecommunications system with good service. There were 567,800 internet users and
1,485,800 mobile phone subscriptions (surpassing 100%) in 2012. The main mobile operators in Mauritius are
Orange, Emtel and Mahanager Telephone Mauritius Limited.There is a strong legislative framework governing theMauritian
telecommunication sector. The Information Communication Technology Authority regulates the sector.
Manufacturing
Manufacturing accounts for 17% of GDP in Mauritius. Most goods are manufactured for the export market. The sector
primarily incorporates the manufacture of labour-intensive goods including: textiles and clothing; light engineering goods;
watches and clocks; jewellery; optical goods; toys and games and cut flowers.
Tourism
Tourism is a big foreign exchange earner for Mauritius. The sector accounts for 10% of GDP and revenues for the year
2013 amounted to Rs40.6bn (US$ 130 million). Most of the visitors come from Europe, South Africa and Reunion Island.
The Government has also been encouraging for new emerging markets such as China, Russia, India, Australia and UAE.
Intellectual Property
Mauritius is a member of the World Intellectual Property Organisation and party to the Paris and Berne conventions for the
protection of industrial property and the Universal Copyright Convention. Intellectual property rights are protected by the
Copyrights Act, 1997 and the Patents, Industrial Designs and Trade Marks Act, 2002, which are both in line with
international norms and comply with the WTO’s Trade Related Aspects of Intellectual Property Rights Agreement.
Trademark protection is available in Mauritius for both goods and services. A trademark is initially registered for 10 years
and may be renewed for successive periods of 10 years. This protection may be cancelled if the trademark protection is
not used for a period of three years or more from the date it is granted. On the sale of a business in Mauritius, trademark
protection is assignable, but to the extent of goodwill only. Well-known international trademarks are protected, regardless
of whether they are registered in Mauritius. As far as patents go, a patent is granted for 20 years and cannot be renewed.
Investment Guide 2015 - Mauritius
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Dispute Settlement
The Mauritian legal system is largely based on English common law and French civil law. The domestic legal system is
generally non-discriminatory and transparent. Members of the judiciary are independent of the legislature and the
Government. The highest court of appeal is the judicial committee of the Privy Council of England. Mauritius is a member
of the International Court of Justice. The country is also a member of the International Centre for the Settlement
of Investment Disputes. A Commercial Court was set up in early 2009 to expedite the settlement of commercial
disputes.
International Arbitration
The International Arbitration Act came into force in January 2009 and sets out the rules applicable to an international
arbitration based on the UNCITRAL Model Law on International Commercial Arbitration. The regime brought about under
the International Arbitration Act is distinct from that of domestic arbitration which is primarily governed by the Mauritian
Code on Civil Procedure. The main objective of the International Arbitration Act is to promote Mauritius as an arbitration
forum endowed with a comprehensive modern legal framework in international arbitration. This Act gives an important
role to the Permanent Court of Arbitration of The Hague and also allows the parties to be represented by foreign
law practitioners.
In line with the international consumer protection standards, the International Arbitration Act provides for specific consumer
consent to arbitration agreements. The New York Convention, 1958 implemented in Mauritian laws by the Convention on
Recognition and Enforcement of Foreign Arbitral Awards Act, 2001 (proclaimed in 2004), will apply to any award delivered
under the Act. Given the role of Mauritius as an offshore regional business hub, the International Arbitration Act also makes
specific allowances to global business companies and their shareholders.
BLC Chambers
A: 2nd Floor, The AXIS, 26 Cybercity, 72201, Mauritius
T: +230 403 2400
F: +230 403 2401
ALN Head Office
A: 5th floor, The Oval
Corner of Ring Rd.,Parklands and Jalaram Roads, Westlands, Nairobi
P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T: +254 20 364 0000, +254 703 032 000
W: www.africalegalnetwork.com
Investment Guide - Nigeria
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
TABLE OF CONTENTSGeneral Overview _________________________________________________________________________________4
Political Overview __________________________________________________________________________________5
Economic Overview ________________________________________________________________________________5
Regulatory Environment ____________________________________________________________________________6
Bilateral and Multilateral Treaties _____________________________________________________________________6
Investment Promotion ______________________________________________________________________________7
Institutions Governing Investment Promotion 7
Investment Incentives 7
Tax ______________________________________________________________________________________________7
Companies Income Tax 7
Personal Income Tax 8
Companies’ Income Tax 8
Value Added Tax 8
Capital Gains Tax 9
Stamp and Transfer Duty 9
Transfer Pricing and Thin Capitalisation 9
Imports and Exports________________________________________________________________________________9
Accounting Principles ______________________________________________________________________________10
Industrial Relations_________________________________________________________________________________10
Corruption _______________________________________________________________________________________11
Competition ______________________________________________________________________________________12
Legal Forms of Incorporation in Nigeria _______________________________________________________________12
Vehicles 12
Procedure and Cost 13
Industry Sectors ___________________________________________________________________________________13
Agriculture 13
Energy and Natural Resources 13
Telecommunications 14
Intellectual Property ________________________________________________________________________________15
Dispute Settlement ________________________________________________________________________________15
Investment Guide 2015 - Nigeria
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Capital City: Abuja
Currency: Nigerian Naira (NGN)
Languages: English
Government: Presidential system, Federal Republic
President: Muhammadu Buhari (President elect)
Population: 178.5 million (2014 estimate)
Timezone: GMT + 1
GDP: US$ 521. 8 billion (2013 estimate)
General Overview
Investment Guide 2015 - Nigeria
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Political Overview
Economic Overview
Nigeria has a multi-party political system with an executive presidency and a federal system of government. Nigeria returned
to democratic rule in 1999 after more than 15 years of military rule. Nigeria has 36 states. Abuja is the nation’s federal
capital territory. Each of the 36 States has its own state capital with their respective governors as the heads of the state
governments. Muhammadu Buhari won the just concluded presidential election in Nigeria. He became the first opposition
candidate to win a presidential election in Nigeria. The election has been hailed to have been largely peaceful and credible.
The inauguration slated for May 29, 2015 and the concession by the incumbent President Goodluck Jonathan who was
defeated at the March 2015 polls is symbolic of the level of political maturity that has evolved in Nigeria since the end of
the military era in 1999.
Nigeria has a bicameral legislature at the federal level and unicameral legislatures at the states’ level. The federal legislature
comprises the Senate with 109 members and the House of Representative with 360 members. Each state has 3 members at
the Senate with a member from Abuja. Every state is represented at the House of Representatives based on its population
and geographical size. Members of each house serve four-year terms.
The People’s Democratic Party (PDP) is Nigeria’s ruling party. However, following the merger of three pre-existing political
parties (Action Congress of Nigeria, All Nigeria Peoples Party and Congress for Progressive Change) to form All Progressive
Congress (APC), the federal legislative houses are roughly equally divided between the PDP and APC.
The Nigerian Government is largely dependent on oil exports. Oil revenues account for over 70% of Nigeria’s total
government revenue. With a population of over 160 million people, Nigeria is the biggest African economy and also the
biggest oil exporter in Africa, and has the largest natural gas reserves in the continent.
Nigeria’s financial sector has been strengthened by the reform in the banking sector spearheaded by the Central Bank of
Nigeria (CBN). In 2005, the CBN increased the minimum capital requirement of every commercial bank to NGN 25 billion
(equivalent of about US$148.8 million) leading to the consolidation of many banks and the strengthening of the Nigerian
banking and finance sectors. In 2009, the CBN (in conjunction with the Nigeria Deposit Insurance Corporation (NDIC) and
the Asset Management Corporation of Nigeria (government’s restructuring company) (AMCON)) bailed out nine failing
banks with three of these banks eventually liquidated to establish three bridge banks. AMCON has divested its interests in
two out of the three bridge banks. These reforms have established a reliable and efficient banking sector that guarantees
the safety of the depositors’ and shareholder’s funds.
Nigeria is currently reforming its power sector with the privatisation of power generating and distribution companies
previously owned by the Government. These reforms are aimed at increasing power supply in Nigeria and have opened the
doors to private investment and if successful will address some of the issues hampering economic development in Nigeria.
Nigeria recently rebased its GDP to better reflect the country’s changing economic configuration over the years. Nigeria’s
GDP was last recalculated in 1990. The new rebased data show that the size of the Nigerian economy is now estimated at
NGN 80.3 trillion (about US$ 510 billion) for 2013 which is an 89% rise in the estimated size of its economy.
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Regulatory Environment
Nigeria is one of the gateways to investments in Africa due to its enormous human and natural resources, the large
population and a ready market for goods and services alike. The Nigerian economic climate is investment-friendly and the
government has been proactive in its bid to attract foreign direct investments. For example, in principle, companies can
now be registered within three business days at the Corporate Affairs Commission (CAC) (the Nigerian Companies registry).
Also, the One-Stop-Investment Centre (OSIC) was set up by the Nigerian Investment Promotion Council (NIPC) to ease the
processes of applying for tax holidays and immigration permits for foreigners who intend to do business in Nigeria. There
is also the assurance of unconditional repatriation of the proceeds of investments for foreigners who invest in Nigeria. The
significant reforms in most sectors of the Nigerian economy in the last 10 years have led to a large inflow of foreign direct
investment into Nigeria, particularly in the telecommunications, oil and gas, and, more recently, the electric power sector as
a result of which Nigeria is now ranked as Africa’s largest economy with a GDP of over US$500 billion.
In spite of the established processes, the regulatory climate is still faced with a myriad of challenges. According to the World
Bank Doing Business Report for 2015, Nigeria jumped 73 places to stand at 52 on the ease of obtaining credit in Nigeria.
Efforts are being made to improve this situation.
Bilateral and Multilateral Treaties
Nigeria is a member of the World Trade Organisation and the Economic Community of West African States. Nigeria has
concluded negotiations on, and signed bilateral investment treaties with China, France, Germany, Italy, Algeria, Korea,
Egypt, Spain, Serbia, Netherlands, Finland, Russia, Turkey, Jamaica, Uganda, Switzerland, Bulgaria, Ethiopia and the United
Kingdom amongst other countries. The investment treaties with Jamaica, Algeria, Uganda, Ethiopia, Russia, Turkey, Bulgaria
are yet to be ratified in Nigeria. These investment treaties ensure that citizens of the contracting states have rights against
expropriation, repatriation of investment and returns thereon, compensation for losses occasioned by wars, riots and
related causes to the same extent that the states would compensate their own citizens.
Nigeria has double taxation treaties with Canada, Pakistan, Belgium, France, Romania, the Netherlands, the United Kingdom,
China, South Africa, Slovak Republic, Philippines and a limited taxation treaty in respect of air and water transportation with
Italy. Nigeria has ratified the Convention on Settlement of International Disputes (ICSID Convention) and the New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Nigeria has signed tax treaties with some other countries (notably Mauritius in 2012) although these treaties are yet to be
fully ratified under Nigerian law.
Investment Guide 2015 - Nigeria
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Investment Promotion
The main institution responsible for foreign investment promotion in Nigeria is the NIPC. The NIPC is a Federal Government
agency that provides a one-stop-shop for immigration and income-tax holiday applications (see Investment Incentives
below).
Nigeria has an investor-friendly legal and regulatory regime and policies aimed at encouraging foreign investment. These
investment incentives are mostly fiscal in nature such as grant of relief against double taxation, waiver of income tax on loan
interest for loans with a tenor of at least 7 years and a moratorium of at least 2 years, and the rule that withholding tax is
the final tax on investment income for non-resident foreigners.
Companies with at least 25% of their equity capital paid in from abroad are exempt from the alternative minimum tax
requirement. Bonds issued by corporate bodies are exempt from the tax imposed under the Companies Income Tax Act for
a period of 10 years from December 9, 2011. Investors in so-called pioneer tax status industries get a tax holiday period of
5 to 7 years. Companies that are involved in local raw material development, local value added, labour-intensive processing,
export-oriented activities and in-plant training also qualify for additional income tax concessionary rates ranging from
2-20% up to 5 years.
In addition, foreign investment in Nigeria is protected from expropriation (except on payment of adequate compensation)
under each of the 1999 Nigerian Constitution, the Nigerian Investment Promotion Commission Act, 1995 and the ICSID
Convention.
Institutions Governing Investment Promotion
Investment Incentives
Tax
Companies Income Tax
Companies in Nigeria are liable to pay income tax at the rate of 30% on yearly income. Also, every company is required to
pay education tax of 2% on income. However, companies in free trade zones are exempt from payment of income tax in
respect of business activities carried out with the zone.
The income of non-resident companies will be taxed by Nigeria if:
a. the non-resident has a fixed base of business in Nigeria,
b. the non-resident has a dependent agent in Nigeria, or
c. the non-resident operates a turnkey project in Nigeria. Only the net income of the non-resident attributable to its
Nigerian operations is taxed.
Investment Guide 2015 - Nigeria
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Personal Income Tax
Every individual (including employees) must pay tax on income (whether earned in cash or in kind)
a. accruing to him when he is resident in Nigeria; or
b. accruing to him from a source inside or outside Nigeria.
An individual is resident in Nigeria where:
a. he lives in Nigeria for a total of 183 days or more (inclusive of annual leave or temporary period of absence) in a
12-month period within the same or 2 consecutive years of assessment;
b. the individual is in Nigeria, unless the duties are wholly performed outside Nigeria and the remuneration is paid in the
other country; and
c. the income is not subject to tax in another country under the provisions of a double taxation treaty with that other
country.
The rates for personal income tax are progressive. The effective rates are:
• 1st NGN300,000 (about US$ 1,785.71) taxed at 7%;
• next NGN300,000 taxed at 11%;
• next NGN500,000 (about US$ 2,976.19) taxed at 15%;
• next NGN500,000 taxed at 19%;
• next NGN1,600,000 (about US$ 9,523.81) taxed at 21%;
• and above NGN3,200,000 (about US$ 19,047.62) taxed at 24%.
Companies’ Income Tax
Value Added Tax
Withholding Tax (WHT) is payable by both individuals (at the rate of 5%) and companies (at the rate of 10%) on interest,
dividends, rent, royalty, management fees, consultancy and technical services and commission. WHT is deductible at source
from the person making the payment. All WHT deducted on payments to foreigners is the final income tax chargeable
on such payments. The law provides for WHT relief to foreign companies incorporated in any of the countries with which
Nigeria has a double taxation treaty (they pay WHT at the rate of 7.5% rather than 10%).
Value added tax is charged on the supply of goods and provisions of services at the rate of 5%. The goods and services
that have been exempted from the tax are as follows:
a. medical and pharmaceutical products;
b. basic food items;
c. books and educational materials;
d. baby products;
e. fertiliser, locally produced agricultural and veterinary medicine, farming machinery and farming transportation
equipment;
f. all exports and all exported services;
g. plant and machinery imported for use in the Export Processing Zone;
h. plant, machinery and equipment purchased for utilisation of gas in down-stream petroleum operations;
i. tractors, plough and agricultural equipment and implements purchased for agricultural purposes;
j. medical services;
k. services rendered by microfinance banks and mortgage institutions;
l. plays and performances conducted by educational institutions as part of learning; and
m. all exported services.
Investment Guide 2015 - Nigeria
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Capital Gains Tax
Capital gains tax is levied at the rate of 10%. There is no capital gains tax on:
a. the sale of financial instruments, and
b. mergers for consideration other than cash.
Also, non-oil exports, goods and services purchased by diplomats and goods purchased for use in humanitarian donor-
funded projects are not taxed.
Stamp and Transfer Duty
Rates of stamp duty payable may be nominal or ad valorem depending on the nature of instruments. For example, a charge
on corporate assets is charged at the ad valorem rate of 0.375%, but only nominal stamp duty is payable on a facility
agreement where the agreement creating the charge has been stamped ad valorem.
Transfer Pricing and Thin Capitalisation
There are transfer-pricing regulations. These regulations give the tax authorities the power to strike down artificial
transactions and to compel companies to make adjustments to reflect the real value of transactions for tax assessment.
These regulations are broadly applied in a manner consistent with Article 9 of the UN and Organisation for Economic
Cooperation and Development Model Tax Conventions on Income and Capital that is presently in force. However, the
regulations prevail over any inconsistent provision in the UN Practice Manual on Transfer Pricing.
There is a minimum tax applicable to companies up to their fourth year after incorporation. The minimum tax is levied on
companies with an annual turnover of NGN 500,000 (about US$2,976.19) or below. The minimum tax rate is either 0.5%
of the gross profit or 0.5% of the net assets or 0.25% of the paid-up capital or 0.25% per cent of the company’s turnover,
whichever is highest.
Imports and Exports
Nigeria’s main exports include crude petroleum, petroleum gas, cocoa beans, timber and rubber. Major imports include
refined petroleum, industrial supplies, transport equipment and parts, food and beverages, machinery, heavy equipment,
consumer goods and cars. Under the Pre-Shipment (Inspection of Exports) Act CAP P25 Laws of the Federation of Nigeria,
2004, the FOREX Manual of the CBN issued in September 2006, and the Export Manual issued by the Federal Ministry of
Finance on February 1, 2007, every exporter (whether oil, gas or non-oil) are required to repatriate and credit all export
proceeds into its domiciliary account opened with a bank in Nigeria within 90 days from the date of export. Exporters are
allowed to freely use or repatriate funds in their domiciliary accounts.
Not all goods and products require a licence before import into or export out of Nigeria. Nigerian law specifies the goods,
products and materials requiring a licence to be imported into or exported out of Nigeria. All exporters are required to
register with the Nigerian Export Promotion Council. To bolster exports, the government of Nigeria has set up several export
processing zones in the country with strategic advantages and incentives for companies registered within such zones such
as tax exemptions.
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Accounting Principles
Nigeria has by legislation, adopted International Financial Reporting Standards (IFRS) for all kinds of entities. IFRS applies
to all enterprises including small and medium-sized entities, publicly listed entities and public interest entities. Micro-sized
entities that do not meet the IFRS criteria for small and medium-sized entities report using Small and Medium-Sized Entities
Guidelines on Accounting issued by the United Nations Conference on Trade and Development.
Industrial Relations
The main legislation regulating labour matters in Nigeria is the Labour Act, 1971 (the Act). The Act comprises 92 sections
and covers issues such as protection of wages, contracts of employment, terms and conditions of employment, recruiting,
special classes of workers (apprentices, women, young persons and domestic servants), labour health, forced labour and
settlement of disputes. It is an old statute and applies only to “workers” namely any person who has entered into or works
under a contract with an employer, whether the contract is for manual labour or clerical work or is expressed or implied or
oral or written, and whether it is a contract of service or a contract personally to execute any “work or labour”.
The Act requires that within three months after the beginning of a worker’s period of employment, the employer shall give
the worker a written statement specifying:
a. the name of the employer or group of employers, and where appropriate, of the undertaking by which the worker is
employed;
b. the name and address of the worker and the place and date of his engagement;
c. the nature of the employment;
d. the date when the contract expires (if the contract is for a fixed term);
e. the appropriate period of notice to be given by the party wishing to terminate the contract (subject to section 11 of
the Act);
f. the rates of wages, the method of calculation of wages, and the manner and period of payment of wages; and
g. any terms and conditions relating to hours of work, holidays and holiday pay, incapacity for work due to sickness or
injury, and any special conditions of the contract.
Under the Act, an employment contract shall be terminated by:
a. the expiry of the period for which it was made;
b. the death of the worker before the expiry of that period; or
c. notice in accordance with the Act or in any other way in which a contract is legally terminable or held to be terminated.
The notice periods required to be given by the parties to an employment contract for termination of the contract are:
i. one day, where the contract has continued for a period of three months or less;
ii. one week, where the contract has continued for more than three months but less than two years;
iii. two weeks, where the contract has continued for a period of two years but less than five years; and
iv. one month, where the contract has continued for five years or more.
Other statutes which govern labour relations in Nigeria include:
Investment Guide 2015 - Nigeria
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1. The Employees’ Compensation Act (2010) - which aims to provide for an open and fair system of guaranteed and
adequate compensation for all employees or their dependants for any death, injury, disease or disability arising out of
or in the course of employment, and, provide rehabilitation to employees with work-related disabilities;
2. The Trade Disputes Act (1976) - which sets out procedures for settling trade disputes;
3. The Trade Unions Act (1973) (as amended) - which regulates the formation, registration and organisation of trade
unions, federation of trade unions and the Central Labour Organisation. The major labour unions in Nigeria are the
Nigerian Labour Congress and the Trade Union Congress.
The Pensions Reform Act (2014) repealing the Pension Reform Act, 2004 (the PRA) - requires every employer of
3 or more persons to deduct at source and remit a minimum of 18% (10% contribution by the employee+ 8%
contribution by the employer) of each employee’s monthly emolument to custodians specified by each employee’s
pension fund administrator. The PRA also requires employers to maintain a group life insurance policy in favour of
each employee for a minimum of three times the annual total emolument of the employee. The PRA requirement
includes employees in the informal sector (such as households, shop owners, dress makers, temporary and causal
employees); and
4. The National Industrial Court Act (2007) - which vests the National Industrial Court with exclusive powers to hear
and decide matters relating to, connected with or arising from any Act or Law relating to labour, employment, or
industrial relations.
Any foreigner who intends, on his own account or in partnership with any other person, to practice a profession or
establish or take over any trade or business whatsoever, must obtain the consent of the Minister of the Interior in writing.
No foreigner may accept any employment (not being employment with the federal government or a state Government)
without the written consent of the Director of Immigration.
Nigeria is a signatory to the major International Labour Organisation conventions protecting workers’ rights. However, there
is still a lot to be done regarding the enforcement and practice of these international standards.
Corruption
Nigeria is a founding member of the United Nations Convention Against Corruption and a signatory to the African Union
Convention on Preventing and Combating Corruption. Nigeria’s major anti-corruption statutes are:
a. The Corrupt Practices and other Related Offences Act, 2000;
b. Economic and Financial Crimes Commission (Establishment) Act, 2003 (the EFCC Act); and
c. The Money Laundering (Prohibition) Act, 2011 (as amended).
The EFCC Act established the principal anti-corruption agency in Nigeria, the Economic and Financial Crimes Commission
(EFCC). The EFCC has powers to investigate and prosecute economic and financial crimes and, to enforce other anti-
corruption laws.
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Competition
Nigeria has no general anti-competition statute. Two bills attempting to set up such a statute are currently pending before
the National Assembly. However, there is a merger control statute applicable to business combinations, mergers and
acquisitions in all sectors exceeding approximately US$ 1.6 million in value, and sector-specific competition regulations for
the electricity, banking, telecommunications and aviation industries.
Legal Forms of Incorporation in Nigeria
The Companies and Allied Matters Act, (Cap C.20, Laws of the Federation of Nigeria) 2004 (CAMA) regulates incorporation
of companies in Nigeria. Under CAMA, a foreign company seeking to carry on business in Nigeria must be incorporated as
a separate entity in Nigeria. The foreign company may apply to the President of Nigeria for an exemption from this provision
if the foreign company:
a. is invited to Nigeria with the approval of the Federal Government of Nigeria (FGN) to execute a specified individual
project; or
b. is an engineering consultant and technical expert engaged on any individual specialist project under contract with any
of the governments in Nigeria or any of their agencies or with any other body or person, where such contract has been
approved by the FGN.
The principal forms of business entities commonly used in Nigeria are sole proprietorships, partnerships, unincorporated
joint ventures, public or private limited liability companies, trusts and unlimited liability companies. The limited liability
company is the most common type of company which is usually employed for business purposes.
The CAMA recognises the following forms of companies:
a. limited liability company;
b. company limited by guarantee;
c. unlimited liability company; and
d. incorporated trustees entities.
Any of these companies may be a private company or a public company. These are referred to as incorporated companies.
Incorporated companies have legal personality, perpetual succession and taxable-entity status. The other forms of business
entities (partnerships, trusts) do not have these features.
In a limited liability company, the liabilities of its members are limited while those of unlimited liability companies are not. In
a company limited by guarantee, the liability of its members is limited by the memorandum to such amount that members
have undertaken to contribute to the assets of the company in the event of liquidation.
Vehicles
Investment Guide 2015 - Nigeria
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On the average, completing the necessary registrations required to start a business in Nigeria takes two to three weeks at
the CAC although a company can be incorporated at the CAC in one day under the CAC “fast-track” registration system.
This will however cost an additional sum of NGN 50,000 (about US$350). The table below provides a summary of the
procedures and the associated completion time and cost for setting up a private limited liability company:
Procedure Estimated Time to Complete (Days)
Associated Cost in Naira
1 Availability and Reservation of Name 7 days NGN 500 (about US$2.97)
2 Incorporation Forms NGN 1,000 (about US$5.95)
3 Preparation of the Incorporation documents and completion of Incorporation Forms
Within the scope of the Applicant
4 Stamping of the company’s share capital 4 days NGN 10,000 for every NGN 1,000,000 (about US$59.52 for every US$5,952.38)
5 CAC Registration Fees NGN 10,000 for the first NGN 1,000,000 and NGN 5,000 for the subsequent NGN 1,000,000 or any part thereof share capital or part thereof (about US$ 59.52 and US$ 29.76 for every US$ 5,952.38)
6 Processing and issuance of Certificate of Incorporation
7 days
7 Certified true copies of the Incorporation forms NGN 17,000 (about US$113.1)
Procedure and Cost
Agriculture
The Nigerian agricultural sector accounts for about 22% of Nigeria’s total GDP. Nigeria is the world’s highest producer of
cassava. Currently, the government is diversifying the country’s economy from crude petroleum dependency to an increase
in the production and productivity of the agricultural sector. As a result, the government is targeting the substitution of
importation of agricultural produce by increasing support in value addition to locally produced commodities. This has led
to an increase from basic subsistence farming to more large-scale farming of most farm produce. To encourage agriculture
in Nigeria, the Bank of Agriculture, a development finance institution, provides credit facilities to participants in the sector.
Industry Sectors
Energy and Natural Resources
Nigeria has a situation which is not peculiar to it: an increasing population with an increasing demand for energy not
balanced by an adequate energy development program.
Investment Guide 2015 - Nigeria
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Telecommunications
The introduction of the Global System for Mobile Communications (GSM) 13 years ago, has significantly impacted the
nation’s economy in a variety of ways, including enhancing personal and corporate communication and generally improving
the quality of life across the country. The legislation governing the Nigerian telecommunications industry are the Nigerian
Communications Act (2003) and the Wireless Telegraphy Act (1990). The Nigerian Communications Commission is the
independent regulatory authority for the telecommunications industry in Nigeria.
There are 4 major GSM telecommunications operators in Nigeria with an aggregate of at least 127 million active lines. With
Nigeria’s large population of over 160 million people, the country has become one of the fastest-growing telecoms market
in the world and the number of subscribers is poised to increase in the coming years. Hence, the sector is a very attractive
market for investors wishing to operate and provide private network links employing cable, radio communications, data
services, internet business and satellite communication, payphone services and cellular radio phone services.
The Energy Commission of Nigeria (ECN) is charged with the responsibility of coordinating general surveillance over the
systematic development of the various energy resources of Nigeria. The Department of Petroleum Resources is the regulator
for the oil and gas industry and is charged with the responsibility of ensuring compliance with petroleum laws, regulations
and guidelines in the oil and gas industry. The Nigerian Electricity Regulatory Commission (NERC) on the other hand
regulates and monitors the electric power sector. NERC was established under the Electric Power Sector Reform Act, 2005
(EPSRA). The EPSRA was enacted to provide for the licensing and regulation of the generation, transmission, distribution
and supply of electricity, to enforce such matters as performance standards, consumer rights and obligations and to provide
for the determination of tariffs.
The oil and gas sector contributes about 16.05% of Nigeria’s total GDP, and accounts for over 74% of the national budget
revenue. According to the International Energy Agency in 2011, Nigeria was the 13th highest oil producer, accounting for
2.62% of the world’s oil production. This is not without its attendant consequences such as oil spills, environmental damage
and militancy. Key players in the oil and gas industry include the state-owned Nigerian National Petroleum Corporation, and
other oil companies including oil majors and indigenous oil companies.
There is a Petroleum Industry Bill pending before the National Assembly. Among other aims, it seeks:
a. to have specific regulations on gas,
b. to impose an additional 10% tax on production companies for the benefit of host communities,
c. to create separate regulators for the upstream and downstream sectors,
d. to break the national oil company into three (for gas, upstream and downstream respectively), and
e. to provide for the privatisation of the three companies within six years.
Nigeria has a target of 7% renewable energy by 2025 and is richly-endowed with a variety of minerals ranging from
precious metals to various stones such as barites, gypsum, kaolin and marble. Most of these are yet to be exploited. The
key objective of the new National Policy on Solid Minerals is to ensure the orderly development of the mineral resources of
the country.
Investment Guide 2015 - Nigeria
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Intellectual Property
Nigeria, as a signatory to the Paris Convention for the Protection of Industrial Property, protects intellectual property by two
statutes: The Trademarks Act, 1965 (TMA) and the Patent and Designs Act, 1970 (PDA).
Under the TMA, a trademark can be registered in respect of goods where the proprietor of the trademark intends to use
the trademark in Nigeria. The TMA only refers to goods, but in practice, trademarks may also be registered in respect
of services. There is as yet no subsidiary legislation specifically allowing the protection of service marks. The Minister for
Commerce in 2007 through Regulation 45(1) (b) of the Trademarks Regulation 1967 ordered that the classification of
goods be extended from 34 classes to 45 classes as under the 9th edition of the Nice Classification of Goods. Registration is
granted 7 years from the date of application.
Inventions are patentable under the PDA. They must:
a. be new and result from inventive activity and capable of industrial activity, and
b. constitute an improvement upon a patented invention.
The patent application is only examined as to form as there is no substantive examination done at the Patent Registry. Such
grant is at the risk of the patentee. Registered patents are renewable annually and go into the public domain after 20 years.
As a signatory to the Patent Cooperation Treaty (PCT), PCT applications are filed and granted protection in Nigeria. Plant
and animal varieties, biological processes and inventions contrary to public order or morality are not patentable under the
PDA.
Designs are also protected under the PDA. In order to be protected, the industrial design must be new and not contrary to
public order or morality. Industrial designs protected under the PDA are:
a. three-dimensional or two-dimensional forms, or
b. a combination of any of the afore-mentioned.
Registration is for five years after which it may be renewed further for two consecutive periods of five years.
Copyright is protected under the Copyright Act (1988). Literary, musical and artistic works, cinematographic films, sound
recordings and broadcasts are eligible for protection for 50 years under the Copyright Act. Works are not registrable under
the Copyright Act but the Nigerian Copyright Commission operates a copyright notification system.
Dispute Settlement
Under Nigerian law, disputes can be resolved through the court system or using alternative dispute resolution mechanisms
(such as mediation, conciliation or arbitration) agreed by the parties in the contract between them. Commercial disputes
can be entertained by the Federal High Court, States High Courts or the Investment and Securities Tribunal depending on
the subject-matter from which the disputes have arisen. The decisions of these courts/tribunal are appealable to the Court
of Appeal. Appeals from the Court of Appeal lie to the Supreme Court as the highest court in Nigeria.
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Nigeria has an Arbitration and Conciliation Act (1988) (the Arbitration Act) which provides the legal framework for
the fair and efficient settlement of commercial disputes by arbitration and conciliation. Nigeria is a signatory to the New
York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The New York Convention has been
domesticated in Nigeria and forms part of the Arbitration Act.
Under the Arbitration Act, a court has the power to stay proceedings where a party to an arbitration agreement commences
an action in court with respect to any matter which is the subject of the arbitration agreement. Also, exceptionally courts
have the power to set aside an arbitral award where a party can show that the arbitrator misconducted himself or the
arbitral proceedings/award was improperly procured.
G. Elias & Co.
A: 6 Broad Street, Lagos, Nigeria
T: +234 14 607 890
F: +234 12 806 972
ALN Head Office
A: 5th floor, The Oval
Corner of Ring Rd.,Parklands and Jalaram Roads, Westlands, Nairobi
P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T: +254 20 364 0000, +254 703 032 000
W: www.africalegalnetwork.com
Investment Guide - Rwanda
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
TABLE OF CONTENTSGeneral Overview _________________________________________________________________________________4
Political Overview __________________________________________________________________________________5
Economic Overview ________________________________________________________________________________5
Regulatory Environment ____________________________________________________________________________6
Bilateral and Multilateral Treaties _____________________________________________________________________6
Investment Promotion ______________________________________________________________________________6
Institutions Governing Investment Promotion 6
Investment Incentives 7
Tax ______________________________________________________________________________________________7
Income Tax 7
Withholding Tax 7
Capital Gains Tax 7
Other Tax 7
Stamp and Transfer Duty 8
Transfer Pricing and Thin Capitalisation 8
Double Tax Treaty with Mauritius 8
Exchange Control _________________________________________________________________________________8
Imports and Exports________________________________________________________________________________8
Accounting Principles ______________________________________________________________________________9
Industrial Relations_________________________________________________________________________________9
Real Property _____________________________________________________________________________________10
Corruption _______________________________________________________________________________________10
Consumer Protection_______________________________________________________________________________10
Legal Forms of Incorporation in Rwanda_______________________________________________________________11
Industry Sectors ___________________________________________________________________________________11
Agriculture 11
Banking and Financial Services 11
Energy 12
Manufacturing 12
Mining 12
Retail 13
Telecommunications 13
Tourism 13
Intellectual Property ________________________________________________________________________________13
Dispute Settlement ________________________________________________________________________________13
Investment Guide 2015 - Rwanda
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Capital City: Kigali
Currency: Rwandan franc (RWF)
Languages: Kinyarwanda, English and French
Government: Republic, presidential, multiparty democracy
President: Paul Kagame
Population: 12.10 million (2014 estimate)
Timezone: GMT + 2
GDP: US$ 7.521 billion (2013 estimate)
General Overview
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Political Overview
Economic Overview
Rwanda’s head of state is the President, who is elected directly by the people for a seven-year term renewable once. The
President is also the head of government and the Commander in Chief of the Rwandan Defence Force. Fairly extensive
powers are vested in the President, including the conclusion of international treaties, the declaration of a state of emergency
and the dissolution of the Chamber of Deputies. Legislative power is held by the National Assembly which is bicameral i.e.
the lower house or Chamber of Deputies and the Senate. The former legislative elections (for the lower house i.e. chamber
of deputies) took place in September 2013 and the next presidential elections are due in August 2017.
Rwanda has made substantial progress in stabilising and recovering its economy to levels that existed before the 1994
genocide. Gross Domestic Product (GDP) has displayed average annual growth rates of 7.6% in 2012, 7.4% in 2013
and 7.8% in 2014 according to the Ministry of Finance and Economic Planning. Much of this growth has been based on
strong tea and coffee exports and an increasingly prosperous tourist sector. Investment in real estate and infrastructure also
continues to grow. The mining sector’s significance to the economy is well cemented; in 2014 over 33,000 were employed
in the sector, mineral exports fetched over US$ 164 million.
Agriculture comes second in the Rwandan economy, employing 90% of the workforce and contributing 35.9% of the
GDP. Manufacturing is very limited and focused on food-processing, but the sector offers many opportunities to small
and medium-sized investors. Services also make a significant contribution to GDP (43%) and the sector is dominated by
telecommunications, transport and retail.
The Government of Rwanda, through its ‘Vision 2020’ and the Economic Development and Poverty Reduction Strategy and
the National Investment Strategy, recognises that the commercial private sector will have to lead the process of economic
development and wealth creation. In order to achieve the Vision 2020 goals, the Government estimates that the economy
should grow by 8% per year. This would require domestic investment to increase to 30% of GDP by 2020. Privatisation is
one of the key elements in the Government’s economic reform and reconstruction efforts and draws on the experiences of
a number of African countries which indicate that the private sector must be the engine of growth.
The broad objectives of Rwanda’s privatisation plans are:
• relieving the financial and administrative burden on the Government,
• improving the efficiency and productivity of the enterprises privatised and thereby augmenting the sources of
government revenue,
• reducing the size of the public sector in the economy, and
• broadening the ownership base of Rwandan enterprises.
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Regulatory Environment
In recognition of the private sector as a key engine of growth and development, the Government has implemented impressive
regulatory reforms since 2008. These include a new intellectual property law, a law on arbitration and conciliation in
commercial matters (2008), a law establishing the Kigali International Arbitration Centre (2010) and a new company law
adopted in 2009. Consequently, bureaucratic hurdles have been reduced creating an investor-friendly environment.
As a result of these reforms, the World Bank Group ranked Rwanda amongst the world’s top business climate reformers in
2011 and 2012. Currently, Rwanda is ranked 46th out of 189 economies in the World Bank’s Doing Business Report 2015
in terms of the ease of doing business, and the 3rd in sub-Saharan Africa. Similarly, Rwanda has made notable annual
improvements in the 2014 Economic Freedom Index: it is currently ranked 4th out of 46 countries in sub-Saharan Africa.
Rwanda made improvements in three of the 10 economic freedoms: business freedom, labour freedom and government
spending. In addition, foreign investment is invited in all sectors with no restrictions on equity or ownership.
Bilateral and Multilateral Treaties
Rwanda is a member of the East African Community (EAC), the Common Market for Eastern and Southern Africa
(COMESA), the African Union (AU), African Trade and Insurance Agency (ATI) and the World Trade Organisation (WTO).
Rwanda has bilateral investment treaties with Belgium, Germany and the United States. Tax treaties (for avoidance of
double taxation) have been ratified with Mauritius and Belgium. Rwanda is also party to the World Intellectual Property
Organisation (WIPO), the Paris Convention on Intellectual Property, the Universal Copyright Convention and the Berne
Copyright Convention. Trade agreements have been concluded with USA, Germany, Netherlands and Switzerland.
Investment Promotion
As a result of the investment law of 2006, the Rwandan Development Board (RDB) was established in 2008 to facilitate
and fast track new investment projects. RDB consolidates several government agencies previously involved in promoting
investment including the Rwanda Investment and Export Promotions Agency, the Rwanda Commercial Registration Service
Agency, the Human Resource and Institutional Capacity Development Agency, the Rwanda Information and Technology
Agency and the Rwanda Office of Tourism and National Parks. RDB acts as a ‘one stop centre’ for investors and provides
assistance in obtaining all required approvals, certificates, land, work permits, and tax incentives. Business plans for potential
investors are evaluated by the RDB in order to better allocate investment incentives and record incoming investment. RDB
has chosen energy, agriculture, tourism and ICT as priority sectors in which to target investment.
Institutions Governing Investment Promotion
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Investors registered with the RDB can obtain certificates that make them eligible for certain benefits, including reductions
in corporate income tax payable, Value Added Tax (VAT) exemptions on all imported raw materials and imported vehicles
for investors and their foreign employees, and duty exemption on plant, machinery and equipment.
The Rwandan Government also offers an investment allowance of 40% of the amount invested in new or used assets,
provided the amount invested is at least RWF 30 million (US$ 44,000) and business assets are held for at least 3 tax periods.
Investors who demonstrate capacity to add value and invest in priority sectors enjoy greater incentives. The Government
also offers grants and special access to credit to investors promoting rural areas.
Investment Incentives
Tax
Income Tax
Residents are taxed on worldwide income, whereas non-resident corporations are subject to tax on their Rwandan
sourced income. A corporation is generally considered to be resident ,if it is established according to Rwandan law or if its
headquarters are in Rwanda. Branches of foreign companies and permanent establishments are also considered resident.
Foreign-sourced income derived by residents is subject to corporation tax in the same way as Rwanda-sourced income.
Corporate tax is imposed on a company’s total income after deduction of normal business expenses. The corporate tax
rate is 30%, with some discounts for registered investors based on the number of employees and the amount of income
derived from the export of goods and services. Losses may be carried forward for 5 tax periods. The carry-back of losses is
not permitted.
Withholding Tax
Dividends received between Rwandan-resident companies are not subject to withholding tax and are exempt from tax,
in the hands of the recipient. Dividends and the distribution of profits to a non-resident company are subject to a 15%
withholding tax unless the rate is reduced under a tax treaty. Interest paid to a non-resident is generally subject to a 15%
withholding tax. The withholding tax on royalties is 15%. These rates may be reduced under a tax treaty.
Capital Gains Tax
In general, capital gains are taxed as ordinary income at the standard rate of corporate tax. However, capital gains derived
from the sale or cession of commercial immovable property is separately taxed at a rate of 30% while capital gains on
secondary market transactions on listed securities are exempt.
Other Tax
Value Added Tax is imposed on the sale of goods and the provision of services. The standard VAT rate is 18%, with
exemptions and zero-rating available in certain cases. The registration threshold for VAT purposes an annual turnover of
RWF 20 million (US$ 34,500). Voluntary registration is available for taxpayers whose turnover does not meet this threshold.
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Stamp and Transfer Duty
Double Tax Treaty with Mauritius
No stamp duty or transfer duty regulations are in place. With regards to customs taxes, the general tariff (for goods not
originating from East Africa) under the East African Union stipulates import duty rates of 0% for raw materials, 10% for
semi-finished goods and 25% for finished goods.
Rwanda has a double tax treaty with Mauritius, South Africa and Belgium which means companies operating in Rwanda
and the above listed countries are not subject to double taxation.
Transfer Pricing and Thin Capitalisation
When independent parties deal with one another, the terms of trade are determined by market forces and may be presumed
to be at arm’s length. However, for related party transactions, determination of the arm’s length price requires a comparison
of the conditions in a “controlled transaction” against the conditions in an unrelated party or controlled transaction.
Interest on a loan from a related party that exceeds 4 times the amount of equity may not be deducted from taxable income
unless the taxpayer is an individual. This provision does not apply to commercial banks or insurance companies.
Exchange Control
There are no exchange control restrictions in Rwanda but some restrictions are imposed on the import and export of
capital. There is no limit on the inflow of funds, but the central bank requires justification for all transfers over US$ 20,000
to monitor potential money laundering. There are also some restrictions on the outflow of export earnings. For example,
restrictions apply to the transfer of earnings by expatriation requirements for exporters with transactions exceeding US$
10,000. In addition, investors can remit payments only through authorised commercial banks. Both residents and non-
residents can hold bank accounts in any currency. The Banque Nationale du Rwanda (National Bank of Rwanda) governs
matters relating to the management of foreign exchange.
Imports and Exports
Coffee, tea and minerals make up Rwanda’s major exports, whilst imports comprise mostly of machinery and equipment,
steel, petroleum products, cement and construction materials and foodstuffs. The Rwanda Bureau of Standards is the only
body with powers to define and possess national standards. Imports are subject to taxes but some imports are exempted from
tax. Regional integration strategies also affect Rwanda’s trade regime. The EAC customs union facilitates the movement of
goods produced in the region. COMESA countries have a free trade agreement that permits goods originating in member
countries and that comply with certain rules of origin to enter other member markets duty free.
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The implementation of the East African Customs Union Protocol started on 1 January 2005, and provides for the following:
• A Common External Tariff
• Elimination of Internal Tariffs
• A Common Customs Law (EAC Customs Management Act)
• Common Export Promotion Schemes
• Anti-dumping Measures.
Accounting Principles
After the enactment of the new Companies Act in April 2009, companies were given two years from the date of enactment
to comply with the provisions of the law relating to companies. The Institute of Certified Public Accountants of Rwanda
was established under law n°06/05/2008. The International Financing Reporting Standards are also generally applied by
subsidiaries of international companies, banks and financial institutions. For a company that has one or more subsidiaries,
the Companies Act, requires that a consolidated balance sheet is prepared within six months of the end of the financial
year.
Industrial Relations
Labour in Rwanda is readily available, however, highly skilled professionals are limited owing to the country’s recent tragic
past. Huge investments have been made in the education sector in order to tackle this problem. The recent Integrated
Household Living Conditions Survey 3 disclosed an increment of Rwandans that were able to read from 65.3 to 69.7 % for
those aged 15 years and above, this is an indicator that the literacy rate has increased especially amongst the youth. It rose
to 76.9% to those aged between 15 and 24 years.
Rwanda has been successful in the empowerment of women who form 55.2% of the population; especially in positions of
power. It is important to note that out of 3 State Ministers votes 3 (67%) are women, and out of 16 Ministers 8 are women.
Their presence in decision making organs assists women to discuss with their male counterparts on issues that positively
impact the ordinary woman who is often marginalized in society.
With regards to Youth Employment, several achievements can be earmarked for instance the Workforce Development
Authority has introduced a series of professional schools to strengthen the youth’s technical capacity. These include the
Technical Vocational Educational and Training and the Integrated Polytechnic Regional Centres. In addition, the RDB has
initiated the Rwanda Youth Internship Program; this initiative aims at improving youth skills’ development and practical
experience.
Rwanda has also made effort to adhere to the International Labour Organisation conventions, protecting worker rights.
However, enforcement continues to be an issue. Trade unions in Rwanda are not yet contributing fully to the economy,
although, collective bargaining agreements are in force in a few companies. Another factor that continues to affect the
employment rate, is the fast growth of the population; Rwanda is a small nation with an ever increasing population, and
rural-urban migration has impacted the agricultural sector and increased the rate of unemployment especially in urban
areas.
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Real Property
Although the land is owned by the State, both foreign and local investors can acquire land through leasehold agreements
that extend from 20 to 99 years.
Corruption
The Government of Rwanda maintains a high-profile, anti-corruption message; institutions including the Ombudsman’s
office, the Anti-Corruption Unit of Rwanda Revenue Authority, and the Auditor General’s Office identify corruption cases.
Rwanda has signed and ratified the UN Anti-corruption Convention. It is a signatory of the Organisation for Economic Co-
operation and Development Convention on Bribery. It is also a signatory of the African Union Anti-corruption Convention.
Giving and accepting a bribe is a criminal act under law, and penalties depend upon the details of each specific case. The
Government is implementing these laws with increasing effectiveness and enforcement is the same for both foreign and
local investors.
According to the World Bank Governance Indicator, Rwanda continues to rank 5th least corrupt country out of 53 countries
in Africa and 55 out of 175 countries worldwide. Rwanda comes after Botswana 79.9%, Cape Verde 74.6% and Mauritius
at 73.2%. Rwanda ranks 55th out of 175 countries in Transparency International’s Corruption Perception Index for 2014.
Consumer Protection
The Law n°36/2012 of 21/09/2012 relating to competition and consumer protection was passed and published and a
Competition and Consumer Protection Policy has been adopted by the Rwandan Government. This policy guarantees
various consumers’ rights; the right to a guarantee, the right to be shown the prices of all products and services, the right
to a valid invoice, the right to customer service and care, the right to safety, protection against unsanitary products on
the market, and to curtail malpractices in the trade and supply of essential commodities. The Ministry of Commerce, The
National Standards Inspectorate, Competition and Consumer Protection Authority, the Rwanda Utility Regulatory Agency
and the Rwanda Bureau of Standards are the main government bodies that are responsible for the enforcement of the
policy.
The Consumer’s Association of Rwanda is an organisation that was formed to ensure the protection and promotion of
consumers’ rights. It has effectively managed to tackle the problem of excessive prices on the market, to protect consumers’
interests in as far as the quality of goods and services, and sensitize consumers in regard to the protection of their rights
and respective duties.
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Legal Forms of Incorporation in Rwanda
The Rwandan Company Act provides for the following types of companies: public company and private company. With
regards to the scope of liability, a company may have its liability limited to its shares, guarantee, to both shares and
guarantee or an unlimited liability. However, it is prohibited for a public company to be limited only by guarantee or an
unlimited company. A company may be a sole proprietorship or a branch/subsidiary of a foreign corporation. The law
relating to companies the Companies Act of 2009 governs the incorporation, management and reporting of these business
entities.
According to the World Bank Doing Business Index, Rwanda is the best performing country in the East African region with
ease of starting a business, as well as the 3rd easiest place to do business in Sub-Saharan Africa. The process involves two
procedures and takes approximately three days to complete. The table below provides a summary of the procedures and
the associated completion time and cost for setting up a private limited company:
Procedure Time to complete Cost to complete
1 Check company name, submit registration application and pay registration fee
1 day RWF 15,000
2 Pick up registration certificate (when the documentation is ready, the Registrar General signs the registration certificate)
2 days No charge
Agriculture
Rwanda’s economy is predominantly agricultural; agriculture contributes over 40% (approximately one third of the total
GDP) and the agricultural population currently stands at a little less than 80% of the total population. The agricultural
sector meets 90% of the national food needs and generates more than 70% of the country’s export revenues. The major
exports are coffee and tea; major markets for coffee exports being the United States and Europe, while the Middle East and
Pakistan are the main buyers of Rwandan tea.
The country’s Economic Development and Poverty Reduction Strategy defines a large number of priority programs in
the agriculture sector including the intensification of sustainable production systems in crop cultivation and animal
husbandry; building the technical and organisational capacity of farmers; promoting commodity chains and agribusiness,
and strengthening the institutional framework of the sector at central and local level.
Industry Sectors
Banking and Financial Services
Rwanda’s financial system is small but growing. Less than 20% of the country’s adult population has a bank account or
access to financial services. The banking sub-sector consists of the Central Bank (Banque Nationale du Rwanda), fifteen
commercial banks and the Development Bankof Rwanda. The Government is gradually reducing its involvement in the
Investment Guide 2015 - Rwanda
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Energy
In Rwanda, over 80% of energy consumed is derived from wood, burnt in its primary state or processed into charcoal.
This form of energy is used mainly by households. However, Rwanda has a deficit in wood, both for energy purposes
and for other economic activities. Rwanda faces substantial problems with electricity. Responsibility for the generation
and distribution of electricity has recently been handed over to the Energy, Water and Sanitation Authority. Only 13% of
Rwanda’s population is currently connected to the electricity network, mainly in the capital Kigali and a number of towns.
Rwanda imports about 13% of its electricity from neighbouring countries, which further raises the cost. The Government
now aims to make better use of existing resources and is actively promoting the following alternatives to the traditional
sources of energy production: establishment of micro-power plants, use of solar and wind energy, geothermal energy, use
of peat or methane gas from Lake Kivu where there are estimated reserves of 55 billion m3.
Rwanda has neither oil resources nor refineries. All petroleum products are imported. The annual consumption of refined
petroleum products is estimated at 100,000 tons, which is imported mainly from Kenya. Around 15 oil companies operate
in Rwanda. There are five main storage facilities in Gatsatsa and Butare with a total capacity of almost 30,000 m3; smaller
facilities are located in Kigali and Gisenyi.
banking sector. Limited access to credit continues to be a hurdle for investors. Interest rates are relatively high and loans
are usually only short-term. In an effort to expand financial services coverage for more of the population, the Private Credit
Bureau has been operating since 2009.
Over 50 micro-finance institutions operate in Rwanda. Specific rules apply to micro-financing institutions. They need to
receive the Central Bank’s approval before starting operations. Foreign nationals who propose to manage a micro-credit
institution are immediately operational.Capital markets are at an early stage of development, with a small stock exchange.
The Rwanda Stock Exchange opened on 31st January 2011.
Manufacturing
Mining
Rwanda’s key industries include agricultural products, small-scale beverages, soap, furniture, shoes, plastic goods and
textiles. There are opportunities across the board in manufacturing in Rwanda, first for the domestic market, which would
be of interest especially to small and medium enterprises, and then for the regional market. The high cost of imports
in this landlocked country offers opportunities for import-substitution activities that enjoy a certain natural protection.
Rwanda’s small industrial sector contributes to 14% of Rwanda’s GDP and employs less than 3% of the population. The
manufacturing sector is mostly concentrated in Kigali and is focused on food processing.
The key minerals that are mined and traded are tinstone, tantalite (coltan), wolfram and small reserves of gold. The mining
sector is governed by the Law on Mining and Quarry Exploitation, 2008. Investment in the mining sector has recently
increased and export earnings reached US$225 million in 2014. The main players in the industry are private investors and
small scale artisanal miners. Through the Government’s decision to privatise mineral concessions, a number of large players
have entered the market in both exploration and exploitation. These large players are mostly international companies, some
of which have joint ventures with local investors. In order to obtain a 30-year permit to develop industrial mining, investors
must determine potential mineral deposits in a large scale concession.
Investment Guide 2015 - Rwanda
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Retail
The main players in the retail sector are local small scale private investors. However, some large regional investors, mainly
from EAC countries have recently entered the retail market; some of these investors include (Nakumatt and Deacons etc.).
Telecommunications
Tourism
Rwanda’s telecommunication sector is dominated by MTN Rwandacell (MTN) and (Tigo) Rwanda. MTN acquired the first
mobile telecommunication licence in 1998. A third telecommunication licence was recently granted to Bharti Airtel. The
involvement of foreign investors such as MTN and Tigo Rwanda in the ICT sector has been instrumental in the Government’s
strategy to develop a knowledge economy and has facilitated business in general. Government investment in setting up
a fibre-optic network will help interconnect Rwanda’s regions, promote e-governance and provide fast and efficient ICT
infrastructure throughout the country. The Government of Rwanda has made ICT a high priority sector and is in the process
of developing a Techno Park near Kigali to facilitate investment in this area. Telecommunications are regulated by Law 44
of 2001, which also created RURA.
With regards to tourism, the Government of Rwanda has developed a strategy that focuses on high-end eco-tourism and
invites private investment, into developing the sector. As part of the Rwanda National Innovation and Competitiveness
Program, a group of 40 Private Sector, Public Sector and NGO leaders forming Rwanda’s Tourism Working Group have
focused on creating high-value and low environmental impact experiences, for eco-travelers, explorers and business travelers.
Intellectual Property
Rwanda is a member of the World Intellectual Property Organisation and party to the Paris, Brussels and Berne conventions
and the Hague agreement. Rwanda is also a member of African Regional Intellectual Property Organisation. A law on the
protection of intellectual property was enacted in 2009. This law protects patents, utility models, industrial designs or
models, layout-designs of integrated circuits, marks, geographical indications, copyrights and related rights.
The Ministry of Commerce, Rwanda Revenue Authority and Rwanda Bureau of Standards work together to address issues
involving counterfeit products on the Rwandan market. Despite adherence to key international agreements on intellectual
property rights, the sale of counterfeit goods and violations of pharmaceutical patents continue. A dedicated department
within RDB (the Office of the Registrar General - the ORG) has been created to improve IPR by registering all commercial
entities and facilitating business identification and branding.
Dispute Settlement
Most disputes in Rwanda are resolved through litigation in court. In 1998, the Government established an arbitration
centre. However, arbitration and alternative methods of dispute resolution remain underdeveloped despite the fact that
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the Code of Civil, Commercial, Labour and Administrative Procedures provide for arbitration. Rwanda is a member of the
International Centre for the Settlement of Investment Disputes and African Trade Insurance Agency.
Rwanda also signed and ratified the Multilateral Investment Guarantee Agency Convention. Further, an international
arbitration centre was established (Kigali International Arbitration Centre) on 31st January 2012. The Centre operates as
the forum for settlement of most business-related disputes on both national and international levels and deals with matters
also involving the Government of Rwanda and entrepreneurs or investors. It is also a forum for mediation on both national
and international levels.
K-Solutions & Partners
A. KN50 Street No.1, C-Nyarugenge District
P: P.O Box 4062 Kigali City, Republic of Rwanda
T: +250 78 830 0926
ALN Head Office
A: 5th floor, The Oval
Corner of Ring Rd.,Parklands and Jalaram Roads, Westlands, Nairobi
P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T: +254 20 364 0000, +254 703 032 000
W: www.africalegalnetwork.com
Investment Guide - Sudan
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
TABLE OF CONTENTSGeneral Overview _________________________________________________________________________________4
Political Overview __________________________________________________________________________________5
Economic Overview ________________________________________________________________________________5
Regulatory Environment ____________________________________________________________________________5
Bilateral and Multilateral Treaties _____________________________________________________________________6
Investment Promotion ______________________________________________________________________________6
Institutions Governing Investment Promotion 6
Investment Incentives 7
Tax ______________________________________________________________________________________________9
Income Tax 9
Personal Income Tax 10
Withholding Tax 10
Capital Gains Tax 10
Value Added Tax 10
Stamp and Transfer Duty 11
Transfer Pricing and Thin Capitalisation 11
Double Tax Treaty with Mauritius 11
Exchange Control _________________________________________________________________________________11
Imports and Exports________________________________________________________________________________12
Accounting Principles ______________________________________________________________________________12
Industrial Relations_________________________________________________________________________________12
Real Property _____________________________________________________________________________________14
Corruption _______________________________________________________________________________________14
Competition ______________________________________________________________________________________15
Legal Forms of Incorporation in Sudan ________________________________________________________________16
Industry Sectors ___________________________________________________________________________________17
Agriculture 17
Banking and Financial Services 17
Energy and Natural Resources 17
Telecommunications 17
Intellectual Property ________________________________________________________________________________18
Dispute Settlement ________________________________________________________________________________18
Investment Guide 2015 - Sudan
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Capital City: Khartoum
Currency: Sudan Pound (SDG)
Languages: Arabic and English
Government: Presidential democratic republic
President: Omar al-Bashir
Population: 38.76 million (2014 estimate)
Timezone: UTC + 3
GDP: US$ 66.57 billion (2013 estimate)
General Overview
Investment Guide 2015 - Sudan
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Political Overview
Economic Overview
Sudan is a presidential democratic republic based upon a multi-party state. The current head of state is President Omar al-
Bashir. Al-Bashir took office following a 1989 military coup and was subsequently sworn in as president in October 1993.
He was most recently re-elected in April 2010 and the next elections are due in April 2015. The legislative branch of Sudan
is comprised of a 450-member National Assembly and a 50-member Council of States. Members of both houses serve six-
year terms.
The Sudanese Government is currently dominated by the National Congress Party. Until the secession of South Sudan in July
2011, the Government was mandated by the North/South Comprehensive Peace Agreement and a percentage of leadership
posts were allocated to South Sudan’s Sudan People’s Liberation Movement. This coalition has since been dissolved. The
Government of Sudan is currently in the process of drafting a new constitution to replace the Interim National Constitution
ratified in July 2005.
Sudan’s economy has suffered from decades of prolonged civil war and was fundamentally altered after the secession of
South Sudan in July 2011. South Sudan accounted for over 75% of the former Sudan’s total oil production, which in turn
represented over 35% of the Government of Sudan’s revenues. Following South Sudan’s secession and the dramatic fall in
oil earnings, Sudan has struggled to maintain economic stability. The Government has announced plans to generate new
revenue streams by expanding existing oil and gas production, mining operations, such as gold mining, and agricultural
production. Austerity measures have also been introduced to counter the effect of the loss of revenue. Agriculture currently
employs 80% of the Sudanese workforce and accounts for 32% of GDP. Industry accounts for 25% of GDP, and the
remaining 43% is attributed to the service sector. Sudan’s real GDP is expected to grow by 2.8% in 2013, with the rate
expected to improve to 5.3% in 2017.
Regulatory Environment
In order to achieve economic diversification, the Government of Sudan has stressed the need for foreign direct investment.
However, Sudan’s business environment continues to present significant challenges to those seeking to invest in the country.
The World Bank Doing Business Report 2015 ranks Sudan at position 160 out of 189 countries. Transparency International
ranks Sudan in the bottom five countries in the world in its 2014 Corruption Perception Index. The situation is further
complicated by comprehensive sanctions placed on Sudan by the US Government. However, foreign direct investment is
evident in the country, particularly in the natural resources and agricultural sectors. China, Malaysia and India have invested
in the oil sector, and countries including the Gulf States, Turkey, Indonesia and South Africa have made steps to expand
their commercial engagement with Sudan. Efforts are being made to foster a more favourable investment climate. The High
Investment Guide 2015 - Sudan
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Council in Investment has been entrusted with the task of establishing mechanisms for coordination among investment
related governmental agencies for the sake of simplifying investment procedures and removal of barriers.
Bilateral and Multilateral Treaties
Sudan is a member of the Common Market for Eastern and Southern Africa, the Arab League and the Intergovernmental
Authority on Development. Sudan is also an observer of the World Trade Organisation. Further, Sudan has bilateral investment
agreements with Germany, Netherlands, Switzerland, Egypt, France, Romania, China, Indonesia, Malaysia, Qatar, Iran,
Morocco, Oman, Turkey, Yemen, Bahrain, Ethiopia, Jordan, Syrian Arab Republic, United Arab Emirates, Switzerland, Egypt,
Libya, Tunisia, Algeria, Kuwait, United Arab Emirates, Lebanon, Chad, Djibouti, India, Vietnam, Bulgaria and Italy. It also has
bilateral taxation treaties with Egypt, United Kingdom, Malaysia, South Africa, Turkey and Syria.
Investment Promotion
There is a new law that came into force in 2013; the National Investment Encouragement Act, 2013 (the Act), which aims
to encourage investment in projects that achieve the national strategy development plans and investment initiatives of
Sudanese and non-Sudanese private sector, as well as co-operative, mixed and public sector, as well as rehabilitation and
expansion in investment projects. The Act provides that there shall be no discrimination between the investors as being
Sudanese or non-Sudanese, or as being public, private, co-operative or mixed sector, and that no discrimination shall be
between similar projects in similar locations in respect of granting incentives and guarantees.
Under the Act, a Council called ‘The Higher Council for Investment (the Council) was established by a decision of the
President, and headed by him. Beside the Council, the Act provides for the establishment of an authority; The National
Authority for Investment, (the Authority); the Chairman of the Authority is a member and secretary of the Council.
The Council is the highest authority in charge of investment and has the power to:
i. approve the general policies, strategies, plans and programs required to achieve investment targets and follow up of
execution;
ii. create an attractive investment environment, eliminate obstacles and facilitate business process;
iii. determine the scopes and priorities of investment and set up the general guidelines in accordance with the general
policies and investment plan;
iv. set up technical committees;
v. review laws related directly or indirectly to investment;
vi. determine under-developed areas;
Institutions Governing Investment Promotion
Investment Guide 2015 - Sudan
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vii. co-ordinate among the authorities concerned with investment at national and state level;
viii. supervise over good practices, review reports submitted by the Authority and issue appropriate directions;
ix. approve the Authority’s budget and its organisational structure; and
x. consider complaints and appeals from investors.
The Authority has executive powers for implementation of the Act, including:
i. preparation of proposals of investment priorities and submission to the Council;
ii. preparation of investment plans according to government’s policies and sector-wise plans made by the competent
ministries, and submission to the Council;
iii. granting preferential privileges for the projects satisfying the conditions as set by the regulations;
iv. make available basic data and demonstrations of policies to the investors;
v. preparation of primary indicators for the investment projects and promotion thereof;
vi. licensing investment applications and process review all transactions of the projects, granting licenses and incentives,
issuing decisions in co-ordination with concerned authorities according to the general policies;
vii. dispossession of national lands allotted to investors which has not been invested within the period prescribed by the
regulations;
viii. co-ordination with the authorities having relation with investment at national and state level.
The Authority has a General Secretary appointed by the President upon the recommendation of the Chairman of the
Authority. The Secretary is accountable to the Chairman of the Authority. All the proceedings related to services for
the investor are handled through a one-stop window system established at the Authority, with membership of the
Commissioners representing the ministries that have a relationship with investment. The Commissioners shall have full
authority of the ministries and departments each represent. Each state shall set up a one-stop window regarding investment
projects within the state.
Tax Exemption
Projects capital imports approved by the Authority shall be exempted from Value Added Tax (VAT).
Exemption from Customs Duty
The Authority may grant the project exemption from:
a. Customs duty on capital imports which are not enrolled in custom tariff;
b. Customs duty of transport conveyances, excluding administrative vehicles.
Production inputs of investment projects, not enrolled in customs duty tariff shall be subject to the same rate imposed on
production inputs provided for in customs duty tariff as determined by the regulations.
Land Allocation
The Authority may allot the land required for establishing national or strategic investment in coordination with the states’
authorities. It may also renew the term of the leasehold of the land where the project is established.
The concerned authorities at states shall register lands for industrial and services projects as well as agricultural lands, and
shall carryout the detailed technical planning and surveys as well as preparation of the required maps and deposit them
with the Authority for allotment.
Investment Incentives
Investment Guide 2015 - Sudan
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Time Scales
The Authority issues its tentative approval of an application satisfying the required conditions within one week, and issue a
licence within one week from receiving the business name for the project. Complaints against the decisions of the Authority
are resolved within one month by the Council.
The investor may, with the approval of the Authority upon the recommendation of the concerned ministry:
i. change or amend the size of the project, the object for which the licence is granted or the location of the project;
ii. use or sell any of the machinery, equipment or specialised transport means, regarding which incentives are granted to
an object other than the licensed one provided any legal requirement is satisfied;
iii. change the use of land allocated for the project, sell, mortgage or lease it wholly or partially;
iv. charge the project, machinery, equipment or transport means for which incentives are granted. However, land allocated
for the project may not be sold or mortgaged unless wholly or partially utilised.
Obligations of the Investor
i. to execute the project within one year or as extended by the Authority;
ii. to fully utilise the allocated land in accordance with approved object and plans;
iii. to submit to the Authority and the concerned ministry a quarterly report during lifetime of the incentives regarding
progress of the project;
iv. to keep proper records of the assets and imported materials exempted from customs duty;
v. to submit to the Authority and the concerned ministry annual audited accounts during the lifetime of the incentives;
vi. to inform the Authority and concerned ministry within three months of final cease of operations.
Guarantees and Facilities of the Investment
i. The assets and properties of the project shall not be subject to nationalisation, seizure, confiscation or appropriation
either wholly or partially, except for public interest against fair and immediate compensation.
ii. The Funds of the project shall not be subject to seizure, confiscation, appropriation, freezing, attachment or receivership,
except with judicial decree or order from the competent prosecution.
iii. Re-transmission of invested capital in case of non-execution, liquidation or disposition of the project by any manner of
disposition with the approval of the Authority, provided that all legally due obligations are met.
iv. Re-export, sale or assigning machineries, equipment, goods, apparatus, transport conveyances or other ancillaries
imported on the account of the project in case of non-execution of the project wholly or partially whenever all legally
due obligations are met.
v. Transfer of profits and financing cost of foreign capital or loans in the currency by which Central Bank of Sudan deals
or the loan on maturity date, after payment of all legally due obligations of the project.
vi. Import raw materials which the project and its products need.
Invested capital in foreign currency shall be determined and elements of capital in kind shall be evaluated by the Authority
in co-ordination with the concerned authorities.
Other matters enjoyed by the investor are:
i. recruitment of licensed labour according to the terms and conditions stipulated by the relevant laws and regulations;
ii. the foreign investor shall obtain work and residence permits for himself and his family throughout the term of execution
and operation of the project according to the relevant laws;
iii. wages and allowances of non-Sudanese labourers of the project shall not be subject to social insurance.
Investment Guide 2015 - Sudan
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Investment Dispute Resolution
The Chief Justices and the Minister of Justice shall constitute specialised courts and prosecution offices to consider suits
or violations related to investment. In case of a dispute regarding an investment, such dispute shall be referred to the
specialised court unless the parties agree to refer it to arbitration or reconciliation, except disputes governed by one of the
following treaties to which Sudan is signatory. These are:
i. the Unified Agreement for the Investment of Arab Capital in Arab States 1980;
ii. the Agreement for Settlements of Investment Disputes among Arab States 1974;
iii. the Agreement for Settlement of Investment Disputes between States and Nationals of other States 1965; or
iv. the General Agreement for Economic, Technical and Commercial Co-operation among Member Sates of Islamic
Conference 1977, and any other agreement to which Sudan is party.
Tax
Income Tax
A company is deemed to be tax resident in Sudan if it is incorporated in Sudan under the Companies Act, 1925 or if the
management and control of its affairs are exercised in Sudan in the relevant tax year. Resident companies are liable to tax
on their worldwide income, whilst non-resident companies pay tax on profits derived from a Sudanese source only.
Corporate tax rates in Sudan are dependent on the specific activity of each entity. Corporate tax is charged at the following
rates:
Item Tax
Agriculture 0%
Manufacturing and real estate 10%
Commercial and services activities 15%
Oil & gas services 35%
Oil & gas distribution 15%
Telecommunications 30%
Banks 15%
Mining 15%
Investment Guide 2015 - Sudan
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Personal Income Tax
Individual income tax rates are based on amount of gross salary and are subject to 15% taxation after deducting the
exempted salary.
Withholding Tax
Sudan does not levy withholding tax on dividends. Dividends are subject to stamp duty at the rate of 1%. Loan interest
paid to non-residents is subject to 15% withholding tax. Royalties paid to a non-resident company are subject to a 15%
withholding tax. Management consultant fees paid to a non-resident subcontractor are subject to a 15% withholding
tax. Payments from resident companies to non-resident subcontractors for interest and other services are subject to a 7%
withholding tax. Imports of goods paid for by a resident company are subject to a 2% creditable withholding tax. Payments
from resident companies to entities registered in Sudan as a branch of a foreign company are subject to a 5% creditable
withholding tax.
Item Tax
Cigarettes and tobacco companies 2%
Capital gains from sale of shares and bonds and capital assets
15%
Withholding tax royalties 15%
Management fee 15%
Interest rate on the loans and other transfers outside Sudan 15%
Final tax for the non resident companies doing services in Sudan 7%
Value Added Tax
VAT is levied at a standard rate of 17%. A special rate of 30% applies to telecommunications services. VAT applies to the
supply of most goods and the provision of services, including importation of goods and services into Sudan.
The following activities are exempted from VAT:
• All types of local agricultural products which are sold in their natural form;
• Livestock, poultry and animal products, fish, milk and its products;
• Fertilisers;
• Agricultural seeds;
Capital Gains Tax
Capital gains tax is charged at 2% on gains from the sale of land and buildings, sale of vehicles, and sale of securities, shares
and bonds.
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Stamp and Transfer Duty
Stamp duty rates vary in Sudan and are dependent on the type of instrument. Its overall rate is very nominal.
Transfer Pricing and Thin Capitalisation
Transfer pricing is not applicable in Sudan.
Double Tax Treaty with Mauritius
Sudan currently does not have a double tax treaty with Mauritius.
• Medicines for human and animal uses;
• Locally produced wheat flour;
• Bread;
• Imported goods which are exempted from the tax and customs according to provisions of the Immunities and Privileges
of 1956, Act;
• Goods imported under the treaty exemption agreement with Sudan Government.
Exempted Services:
• Financial services, which include financial services for banks and money operating companies, financial funds and sale
of share and securities and bonds;
• Insurance services;
• Education services;
• Medical services;
• Rentals and sale of real estate for residential purpose;
• All goods and services which are exempted by the Minister of Finance and Economics according to the recommendations
of the taxation secretary.
Exchange Control
Since the secession of South Sudan and the loss of crucial oil revenue streams, Sudan has faced a severe shortage of
foreign exchange reserves and there are stricter exchange controls have been enforced. While Sudanese (and expatriates)
are permitted to hold foreign currency accounts in commercial banks, access to the currencies can be delayed or limited
without prior warning. Foreign companies operating in Sudan must have the permission of the Central Bank of Sudan to
repatriate profits and foreign currency.
Investment Guide 2015 - Sudan
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Accounting Principles
Sudan has adopted International Accounting Standards and International Financial Reporting Standards as well.
Industrial Relations
The main legislation regulating labour matters in Sudan is the Labour Act, 1997 (the Act). Under the Act the Federal
Minister of Labour may issue regulations, orders and rules necessary for the implementation of the Act. In addition to the
Act, the Organisation of Employment of Non-Sudanese Act, 2001 provides for the rules regarding employment of foreigners
in Sudan, the Minimum Wages Act, 1974 provides for the rules regarding minimum wages and the Social Insurance Act,
1990 provides for the rules regarding social security.
The Act comprises 127 sections, divided into 14 chapters, including Manpower, Organisation of Employment, Employment
of Women and Minors, Contracts of Employment, Wages, Advances and Other Payments, Hours of Work and Leave,
Termination of Contract of Employment, Severance Pay, General Provisions, Industrial Safety and Labour Disputes and
Stages of Settlement.
According the Act, a probationary period shall not exceed three months, excluding any training period. In case a contract
of employment is not for a definite term and where the probationary period expires without termination of the contract by
one of the parties, the contract shall be deemed to be for an indefinite term.
Any employment contract exceeding three months shall be made in writing by the employer, however, in case there is
no written contract, the employee may prove his rights by any means of evidence. An employment contract may be for
a limited or unlimited term. A contract for a limited term shall not exceed two years and shall not be renewed more than
once with the same employer. The period of renewal shall be considered as continuation of the preceding service. Where
the employee continues in service beyond the renewed term, the contract shall be deemed for indefinite term. Any written
contract which does not indicate that it is for a definite term or for the performance of a specific job or for the replacement
of another employee shall be deemed to be for an indefinite term.
Rules regarding termination of contract of employment are as follows:
1. An employment contract may be terminated with notice for:
Imports and Exports
Sudan’s main exports include gold, oil and petroleum products, cotton, sesame, livestock, groundnuts, gum arabic and sugar.
Principal imports include foodstuffs, manufactured goods, refinery and transport equipment, medicines and chemicals,
textiles and wheat. Under the Exporters and Importers Registration Act, 2008 no person may engage in export or import
business unless registered in the Exporters and Importers Register and obtains a certificate of such registration.
Investment Guide 2015 - Sudan
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i. inability of the employee to perform or becoming sick after prescribed periods has expired and upon medical
certificate;
ii. cessation of the job or the expiry of a definite term contract;
iii. total destruction of the establishment;
iv. attainment of the age of sixty unless the two parties agree otherwise;
v. the dismissal of the employee during the probationary period or his leaving the workplace during that period;
vi. agreement between the two parties in writing to terminate;
vii. dissolution or liquidation of the establishment provided that such dissolution or liquidation is certified by the
competent authority;
viii. resignation of the employee;
ix. death of the employee.
In case of failure to give notice as appropriate, the non-defaulting party shall be entitled to compensation equivalent
to the wage payable for the period of notice.
2. In case an employee commits repeated violations and receives a notice of dismissal after all or the maximum fines
were exhausted, the employer may, in case of any further violation, terminate an indefinite term contract by giving
a notice. In case of unfair dismissal (i.e. not falling within one of the above cases) a compensation equivalent to the
employee’s wage for six months would be payable by the employer.
3. The employer may terminate employment without any notice in the following cases:
i. Use of fraudulent identity or presentation of forged certificates or documents;
ii. Employee’s fault causing serious material loss for the employer;
iii. Failure to observe safety instructions posted in the workplace;
iv. Failure to fulfill contractual obligations;
v. Disclosure of industrial or commercial secrets;
vi. Conviction by an offence negatively affecting honour, honesty or public morals or commitment of an offence
against morals in the work place;
vii. Assault on the employer, his representative, the supervisor or another fellow employee at the workplace or for a
reason related to work; or
viii. If the employee is found in a state of inebriation or under the effect of a drug during working hours, provided
that such a state is certified by a doctor.
4. An employee may terminate his contract of employment without prior notice to the employer in the following cases:
i. If the employee is misled as to the contract of employment;
ii. Failure by the employer regarding his legal or contractual obligations;
iii. Assault by employer or his representative on the employee;
iv. Serious threat to the safety or health of the employee provided the employer is aware of the said threat and has
not taken the necessary measures to remove the threat.
5. The employer may apply to the competent authority for reduction of the number of its employees or to close the
workplace for economic or technical reasons. The competent authority shall establish tripartite committees which shall
be formed of equal representatives of the Government, employees and employers; the committee shall examine the
applications for closure of workplaces and reduction of employees and give their advice.
Official hours of work are 48 hours per week or 8 hours per day. Working hours shall be reduced by one hour during the
month of Ramadan for fasting employees and for breastfeeding women for two years as from the date of birth of the
Investment Guide 2015 - Sudan
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Real Property
The law allows for the purchase of privately or publicly held land in Sudan. The Government has provided land without
transferring ownership to foreign companies as an investment inducement. Land may be leased in Sudan without restrictions
on the amount or the duration. The lease may not be transferred without permission.
Registering property requires six steps and takes an average nine days. The cost of registering property totals approximately
2.5% of the value of the property, plus SDG 672. The World Bank’s Doing Business Report 2015 ranks Sudan 46th out
of 189 countries in terms of the ease of registering property. Land registration is regulated by the Land Settlement and
Registration Act, 1925 under which the land registry is set up.
child. Under the Organisation of Employment of Non-Sudanese Act, 2001 an employer, with no special or normal residence
permit, who employs non-Sudanese shall train Sudanese and submit a training and Sudanisation plan for the Minister’s
approval.
Insurance with the National Social Insurance Fund is compulsory; each employer must be registered, and register its
employees, with the Fund. Basically, the law requires every employer to deduct 8% of each employee’s wage, add to it
17% of such wage and pay the total of 25% as social insurance contribution to the National Social Insurance Fund. In case
the employer fails to deduct the 8% from the employee’s wage for the relevant month, the law prohibits it from making the
deduction; however, its liability to pay the 25% of the wage to the Social Insurance Fund remains. The legal minimum wage
in Sudan is SDG 200 per month. Moreover, Sudan has signed and ratified all major International Labour Organisation’s
conventions’ protecting workers’ rights. However, labour regulations are not consistently enforced and fall short in practice
of international standards. Furthermore, expatriate workers must have valid residency and work permits or face deportation
and imprisonment.
Corruption
As previously mentioned, Transparency International ranks Sudan in the bottom five countries in the world in its 2015
Corruption Perception Index. Sudan signed the UN Anticorruption Convention in 2005 and the African Union Convention
on Preventing and Combating Corruption, but has yet to ratify either agreement. The Illegal and Suspicious Enrichment
Act, 1989 provides for a department within the Ministry of Justice to receive reports and investigation regarding corrupt
practices especially regarding public money.
Investment Guide 2015 - Sudan
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Competition
In regard to Competition, the following pieces of legislations have been passed recently:
Organisation of Competition and Prevention of Monopoly Act, 2009.
This Act applies to all commercial agreements and transactions regarding goods or services, and it provides for the following:
1. Prevention of monopoly, by outlawing any agreement, contract, transaction, conduct and/or arrangement regarding
the following:
i. reduction, increase or control of sale or purchase prices of goods or services;
ii. restrictions on production, manufacture, distribution or marketing of goods or limitation of services;
iii. dissection or division of any existing or potential market on geographical, consumer, importers, time or other basis
with the aim of control;
iv. coordination regarding bids or other offers for supply of goods or services or non-participation therein and share
the proceeds;
v. agreements, whether among competitors or non-competitors, with the aim of pressurising consumers or importers;
vi. taking any action or conduct restricting freedom of participation in production, development, or distribution of
goods or services.
2. Misuse of controlling/dominating position in a specific market, such misuse is prohibited. Examples of such misuse are:
i. granting exceptional rights regarding distribution of goods or services exclusively whether such rights are with
respect to geographical area, consumers, time or other basis;
ii. binding a competitor not to produce, manufacture, use, develop, distribute or market a specific good or provide
specific services;
iii. determining the price or conditions for the sale of goods or provision of services by a competitor;
iv. sale of goods or services if such sale is conditional that the buyer shall buy other goods or services from the seller
or from another entity or not to buy certain goods or services from another entity;
v. sale of products for a price lower than the price fixed by the competent authority; and
vi. discrimination in prices by entering into special or preferring deals.
3. Consumer protection, which includes:
i. prevention of consumer misleading/fraud, including making misleading information about the sale, prices, basic
elements, the origin or source of goods or services;
ii. concealment of lack of goods of legal or customary requirements;
iii. provision of incorrect information regarding the sale or distribution of goods which affect consumers’ decision
making;
iv. practices which restrict the consumers freedom in selecting the goods or services, including making objective
pricing of goods or services or objective comparison with similar goods or services more difficult; and
v. entering into undisclosed transactions.
4. Injurious merger, which includes anti-competition mergers. Any merger may be made only after obtaining the approval
of the Council for Competition and Prevention of Monopolies.
External Trade Organisation Act, 2009 (ETOA)
Under the ETOA, trade means export, import, transit and border trade. The ETOA’s objective is to achieve freedom of trade
and free competition, open markets to reduce or eliminate non-technical restrictions and create free access to markets,
and to encourage movement of goods in a fair manner. This short Act directs the Ministry of External Trade to take actions
and policies to facilitate flow of goods and services, provision of data and information regarding commercial laws and
Investment Guide 2015 - Sudan
16
Legal Forms of Incorporation in Sudan
The principal forms of business entities commonly used in Sudan are sole traders, partnerships, public or private limited
liability companies, and branches of foreign registered companies. The World Bank’s Doing Business Report 2015 ranks
Sudan 133rd out of 189 countries in ease of starting a business. This is a seven-rank drop from the previous year.
On average, completing the necessary registrations required to start a business in Sudan takes 36 business days. The table
below provides a summary of the procedures and the associated completion time and cost for setting up a private limited
liability company:
Procedure Time to complete Cost to Complete in SDG
1Submit application for preliminary approval to Registrar and reserve company name
3 200
2 Notarize memorandum and articles of association 2 350
3 Notify tax chambers 1 55
4 Register with commercial registry 4Stamp duty and other application/administration fees
5 Apply for tax identification number 1 - 2 5
6 Register for VAT2 (simultaneous with previous procedure)
No charge
7 Register with labour authorities 14 192
8 Enrol employees for social security 3 - 7 25
9 Make a company seal 2 40
regulations, organisation of export and import and border trade and export promotion.
Anti-Dumping Act, 2009 (ADA)
The ADA is applicable to any transaction which causes damage to local industries. An Anti-Dumping Committee set up
pursuant to the ADA is in charge of receiving complaints, conducting investigations and taking actions regarding any
alleged dumping practice.
Investment Guide 2015 - Sudan
17
Agriculture
Agriculture is the mainstay of the Sudanese economy. The country’s prominent agricultural products include cotton,
groundnuts, sorghum, millet, wheat, gum arabic, sugarcane, cassava, mangoes, papaya, bananas, sweet potatoes, sesame
and livestock.
Industry Sectors
Banking and Financial Services
Sudan’s financial system is relatively small by regional standards. The banking sector comprises of 32 banks, including
five foreign and four state-owned banks. Sudan remains under-banked, with banking and other financial institutions
concentrated around Khartoum. The African Economic Outlook 2011 reported that while private sector loans and deposits
doubled between 2005 and 2009, their ratios to GDP remain low. The financial and banking sector is regulated by the Bank
of Sudan (under the Sudan Central Bank Act, 2002), the Khartoum Stock Exchange (under the Khartoum Stock Exchange
Act, 1994) and the Insurance Supervisory Authority (under the Insurance Control Act, 2001).
The Companies Act, 1925 regulates the incorporation of companies in Sudan by way of registration. Under this Act a
foreign investor may either, incorporate a company registered in Sudan as a Sudanese company, or, set up a branch of a
foreign company. The Act recognises the following forms of companies:
a. private companies with limited liability;
b. public companies (also with limited liability) but with the right to offer its shares to the public at large; and
c. state owned companies (100% owned by the state).
Energy and Natural Resources
The gold mining industry has become a key focus of the Government of Sudan in an attempt to generate new revenue
streams. National and foreign companies are being encouraged to invest in the Sudanese gold sector and this has led to a
significant increase in gold production and exploration activity in the country. In an attempt to foster further investment,
the Khartoum Stock Exchange is planning to significantly expand its activities by trading in gold and other commodities.
Sudan’s other mineral resources include iron ore, copper, chromium ore, zinc, tungsten, mica and silver.
Telecommunications
In Sudan the main legislation regarding regulation of telecommunication business is the Telecommunications Act,
2001 (the Act) and the General Regulations of Telecommunications 2002 (the Regulations) which have been issued
pursuant to section 46 (1) of the Act. The Act provides for the establishment of a public corporation named the National
Telecommunications Corporation (NTC) to be accountable in performing its duties to the federal minister in charge of
telecommunications (currently the Minister of Information and Communications).
Under the Act the duties and powers of NTC include, inter alia, licensing to operate in the field of telecommunications
services and other activities. The Act also provides that no person may possess, establish or operate any telecommunications
network, systems or equipment without obtaining a licence issued pursuant to the Act.
Investment Guide 2015 - Sudan
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The Regulations provide that the applicant for a telecommunications licence must be a company registered in Sudan
authorised to operate in the field of telecommunications, or shall undertake to register such a Sudanese company within
30 days from the date of notification that the application has been approved.
The Regulations provide, among other things, that the licence-holder shall inform NTC’s general manager of any amendments
regarding the licence holder’s memorandum of association especially as regards its shareholders. The licence application
form (based on which telecommunications licence is issued) contains information about the shareholders of the applicant
(including their names, nationalities, shareholders’ agreement if any).
As regards expiry of PCT’s licence, the Act provides that once the licence has been cancelled or has expired the licence
holder or the person who is in possession of the licence must deliver the licence to NTC, and the licence holder may not
accept new subscriptions except to the extent necessary for transfer of the subscribers to another party holding licence,
after the written approval of the NTC’s general manager. According to the strict wording of the law, once a licence has
expired, the licence holder may not carry on the business regarding which the licence had been issued.
Intellectual Property
Sudan is a signatory to the World Intellectual Property Organisation. The following legislation has also been promulgated
regarding Intellectual Property law:
i. The Trademark Act, 1969;
ii. The Patents Act,1971; and
iii. The Copyright Act, 1996.
Dispute Settlement
Sudan’s investment law provides for international arbitration, Sudan is also a party to the Convention on the Settlement of
Investment Disputes between States and Nationals of Other States. Sudan has not signed the 1958 New York Convention.
Under the Arbitration Act, 2005, subject to the provisions of any international agreement regarding arbitration to which
Sudan is party, the provisions of the Act shall apply to every arbitration conducted in Sudan or abroad where the parties
thereto have agreed to be subject to the Act, whenever the legal relationship is of a civil nature, whether contractual or
non-contractual. If there is an arbitration agreement regarding the subject matter of a claim before a court, the court shall
dismiss the claim if the defendant asks for it in the first session.
Omer Ali Law Firm
A: 3rd floor, Plot 2/1 Block 9/E Khartoum East, Tower of Arab Authority for
Agricultural Investment & Development
P: P.O. Box 11462, Khartoum, Sudan
T: +249 15 515 5554
F: +249 18 374 1750
ALN Head Office
A: Apollo Centre, 2nd floor, Wing A, Ring Road Parklands.
P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T: +254 20 364 0000, +254 703 032 000
W: www.africalegalnetwork.com
Investment Guide - Tanzania
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
TABLE OF CONTENTSGeneral Overview _________________________________________________________________________________4
Political Overview __________________________________________________________________________________5
Economic Overview ________________________________________________________________________________5
Regulatory Environment ____________________________________________________________________________6
Bilateral and Multilateral Treaties _____________________________________________________________________6
Investment Promotion ______________________________________________________________________________6
Institutions Governing Investment Promotion 6
Investment Incentives 7
Tax ______________________________________________________________________________________________7
Income Tax 7
Withholding Tax 7
Capital Gains Tax 8
Other Tax 8
Transfer Pricing and Thin Capitalisation 8
Stamp and Registration Fees 8
Double Tax Treaty with Mauritius 8
Exchange Control _________________________________________________________________________________9
Imports and Exports________________________________________________________________________________9
Accounting Principles ______________________________________________________________________________9
Industrial Relations_________________________________________________________________________________9
Real Property _____________________________________________________________________________________10
Corruption _______________________________________________________________________________________10
Competition ______________________________________________________________________________________10
Consumer Protection_______________________________________________________________________________11
Legal Forms of Incorporation in Tanzania ______________________________________________________________11
Industry Sectors ___________________________________________________________________________________12
Agriculture 12
Banking and Financial Services 13
Energy 13
Manufacturing 13
Mining 14
Telecommunications 14
Tourism 14
Intellectual Property ________________________________________________________________________________15
Dispute Settlement ________________________________________________________________________________15
Investment Guide 2015 - Tanzania
4
Capital City: Dodoma (political capital); Dar es Salaam (commercial capital)
Currency: Tanzanian shilling (TZS)
Languages: Kiswahili, English
Government: Unitary Republic with multi-party democracy
President: Jakaya Kikwete
Population: 50.76 million (2014 estimate)
Timezone: GMT + 3
GDP: US$33.23 billion (2013 estimate)
General Overview
Investment Guide 2015 - Tanzania
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Political Overview
Economic Overview
Tanzania has a long record of political stability. It has had nearly half a century of political stability as a sovereign country,
including over ten years as a multiparty democracy; there have been no coups or civil wars in Tanzania. According to the
2014 Ibrahim Index of African Governance, which measures governance using a number of different variables, Tanzania’s
Government is ranked 15th out of 52 countries.
The President of Tanzania and Parliament members are elected concurrently by universal adult suffrage every five years.
The President then appoints a prime minister who serves as the Government’s leader in Parliament. Presidential and all
Parliamentary elections were last held in October 2010. The next presidential and parliamentary elections will be held in
2015. For administrative purposes, Tanzania is divided into 30 regions - 25 in the mainland, 3 in Zanzibar, and 2 in Pemba,
Zanzibar’s second isle. The National Assembly, comprising 357 members enacts laws applying to the United Republic of
Tanzania and laws applicable exclusively to the mainland. Zanzibar maintains extensive autonomy within Tanzania, with its
own president, legislature and bureaucracy. Zanzibar’s House of Representatives also legislates on internal matters.
Despite having one of the world’s poorest economies in terms of per capita income, Tanzania’s real GDP growth rate has
consistently averaged over 6.4% in (2012 estimate), 6.9% in (2013 projection) and 7.0% in (2014 projection) for the past
seven years. Much of this growth is attributed to strong performances in gold production and tourism. The economy still
depends heavily on agriculture, which accounts for more than a quarter of GDP, provides 85% of exports, and employs
about 80% of the work force. Tanzania has largely completed its transition to a liberalised market economy, though the
Government retains a presence in sectors such as telecommunications, banking, energy, and mining.
Since 1996, Tanzania has made extensive efforts towards macro-economic stabilisation and structural reforms. Fiscal
stimulus and a loosening of monetary policy have helped ease the impact of the global recession, and Tanzania has been
able to maintain relatively strong growth. The IMF’s most recent Debt Sustainability Analysis indicates that debt relief under
the Heavily Indebted Poor Countries Initiative combined with sound macroeconomic policies place Tanzania at low risk of
debt distress. The World Bank, the IMF, and bilateral donors have provided funds to rehabilitate Tanzania’s aging economic
infrastructure, including rail and port infrastructure, that are important trade links for inland countries.
Recent banking reforms have helped increase private-sector growth and investment, and the Government has increased
spending on agriculture to 7% of its budget. The financial sector in Tanzania has expanded in recent years and foreign -
owned banks account for about 48% of the banking industry’s total assets. Competition among foreign commercial banks
has resulted in significant improvements in the efficiency and quality of financial services.
Investment Guide 2015 - Tanzania
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Bilateral and Multilateral Treaties
Tanzania is a member of the South African Development Community, the East African Community (EAC), the African,
Caribbean and Pacific Group of States, the World Trade Organisation and the African Union.
Tanzania has double taxation agreements with Canada, Denmark, Finland, India, Italy, Norway, South Africa, Sweden and
Zambia. Bilateral investment treaties have been entered into with Denmark, Egypt, Finland, Germany, Italy, the Republic of
Korea, the Netherlands, Sweden, Switzerland and the United Kingdom. Countries with which negotiations are continuing
include Zimbabwe, United Arab Emirates, Russia, Seychelles, Mauritius, Egypt, Yugoslavia and Oman.
Regulatory Environment
The Index of Economic Freedom 2014 ranks Tanzania 15th out of 46 countries in the sub-Saharan Africa region. Tanzania’s
economic freedom score is 57.8, making its economy the 106th freest in the 2014 Index. Its score is 0.1 points lower than
the previous year, with improvements in 3 of the 10 economic freedoms, including trade freedom and investment freedom.
The Tanzanian economy has weathered the impact of the global economic turmoil relatively well, achieving an average
growth rate above 6% over the past five years. Continued economic expansion has been facilitated by open-market policies
related to global commerce. The financial sector and the investment framework are relatively well developed for the region.
In recent years, the Tanzanian Government has made substantial efforts to privatise commercial sectors that were previously
government owned or managed. Consequently regulations concerning foreign investment have been simplified and
streamlined. Foreign and domestic investors receive equal treatment under the law in most sectors. There are no limits on
foreign ownership of enterprises and investment is not screened. Foreign exchange and capital transactions are permitted
with few restrictions and profits, dividends and capital can be repatriated. However, further institutional reforms would
help to lift the burden of the regulatory system. Whilst requirements for launching a business are not time-consuming, the
licensing process can be costly, the legal system is also subject to delays.
Investment Promotion
Whilst foreign investment in Tanzania was not welcome in the socialist era, legislation developed from the early 1990s has
significantly improved the investment climate in the country. Investment is actively promoted and encouraged under the
Tanzania Investment Act, 1997 (TIA) by the Tanzania Investment Centre (TIC). All Government departments and agencies
are required by law to cooperate fully with TIC in facilitating investment. The TIC is regarded as a ‘one stop facilitative centre
for all investors’. Its roles include assisting in the establishment of enterprises; facilitating the acquisition of licences, permits,
Institutions Governing Investment Promotion
Investment Guide 2015 - Tanzania
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To encourage investment, the Government has redrawn tax codes, floated the exchange rate, licensed foreign banks and
created the TIC to cut red tape. Certificates of Incentives are offered to investors under the Tanzania Investment Act, 1997.
Incentives can be broadly categorised into fiscal incentives (import duty and VAT exemption on project/capital goods) and
non-fiscal incentives. For projects of over US$20 million, for locally owned investment and US$50 million, for foreign owned
investment offering specific beneficial impacts to the society or economy, investors can negotiate special incentives from
the Tanzanian Government.
The Special Economic Zones Act (SPEZA) creates special economic zones to promote priority economic activities in key
sectors. These sectors include industry, tourism, commercial activities, forestry, information and communication technology,
and banking and finance.
Companies licensed under the SPEZA enjoy various incentives and exemptions:
a. Exemption from payment of withholding tax on rent, dividends and interest for the first ten years; and
b. Exemption from payment of corporate tax for an initial period of ten years.
Investment Incentives
visas and approvals; helping to address administrative barriers confronting both local and foreign investments; and issuing
Certificates of Incentives.
Tax
Income Tax
Resident companies and businesses are taxed on worldwide income. Non-residents are taxed on Tanzania-sourced income.
A corporation is a resident if it is incorporated under Tanzania’s Companies Act or, at any time during the tax year,
management and control of its affairs are exercised in Tanzania. Individuals are resident if they are domiciled in Tanzania;
spend more than 183 days of the tax year in Tanzania; have a combined presence of at least 122 days in that tax year and
the two preceding tax years; or are employees or officials of the Government of Tanzania posted abroad during the tax year.
Income tax in Tanzania is chargeable pursuant to the provisions of the Income Tax Act (ITA).
In accordance with the ITA, the total income of a corporation is taxed at the rate of 30%. Newly listed companies on the Dar
es Salaam Stock Exchange (DSE) that have issued at least 30% of their share capital to the public are subject to a corporate
income tax rate of 25% for 3 consecutive years from the date of listing. Companies in export processing zones are exempt
from income tax and withholding tax on dividends, interests and rent for the first 10 years.
Withholding Tax
Withholding tax is payable on dividends (10%), interest (10%), royalties (15%), management fees (15%) and directors fees
(15%).
Investment Guide 2015 - Tanzania
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Capital Gains Tax
Under the ITA Capital Gains Tax (CGT) is payable on realisation of any investment asset. Investment assets include shares
and securities in a corporation, beneficial interest in a non-resident trust and interest in land and buildings. The rate varies
depending on the legal nature and residency status of the seller, including whether the investment asset being disposed off
is a Tanzanian asset or an overseas asset.
Hence, a resident Tanzanian individual is required to pay a CGT rate of 10% on the gain made from the disposal of a
Tanzanian asset – and a CGT rate of 30% on the gain made from the disposal of an overseas asset. On the other hand,
a resident Tanzanian corporate entity is obliged to pay a CGT rate of 30% on the gain made from the disposal of either a
Tanzanian or an overseas asset.
Conversely, a non-resident individual is obliged to pay a CGT rate of 20% on the disposal of a Tanzanian asset. No CGT
is applicable in relation to a non-resident individual’s disposal of an overseas asset. A non-resident corporate entity has to
pay a CGT rate of 30% on the disposal of a Tanzanian asset; no CGT is applicable in relation to a non-resident corporate
entity’s disposal of an overseas asset.
Other Tax
Value added tax (VAT) is charged on the supply of goods and services. The basic rate of VAT is 18%. Exports of certain
goods and professional and communications services are subject to VAT at zero rate. The registration threshold is a turnover
of TZS 40 million (approximately US$ 22,420) over a period of 12 consecutive months.
Transfer Pricing and Thin Capitalisation
Tanzanian transfer pricing rules require that transactions between associated persons (both resident and non-resident) be
on arm’s length terms. Definitive transfer pricing guidelines are currently being drafted. A company is said to be thinly
capitalised when its capital is made up of a much greater proportion of debt than equity. Certain interest deductions made
may be disallowed by the Tanzania Revenue Authority (TRA) if the company is thinly capitalised. The total amount of
interest that an entity may deduct under its total income is limited to the interest portion in respect of debt that does not
exceed the 7:3 debt-to-equity ratio.
Stamp and Registration Fees
Stamp duty may be levied either as a specific amount or at progressive rates up to a maximum of 1% of the value of the
consideration on a transfer. Registration fees are also payable on a transfer of land.
Double Tax Treaty with Mauritius
Currently, Tanzania has no double tax treaty with Mauritius.
Investment Guide 2015 - Tanzania
9
Imports and Exports
Under Tanzania’s 2011 trade policy, both internal and foreign trade regimes have been liberalised. Tanzania’s export trade
is dominated by gold and agricultural products such as coffee, cashew nuts, tea and tobacco. Major imports into Tanzania
include machinery and transportation equipment, crude oil, industrial raw materials and consumer goods. India and China
are becoming the country’s leading suppliers. The Customs and Excise Department administers all taxes and duties on
international trade including import duty, excise duty on imports, and VAT on imports.
Exchange Control
There are no exchange controls in Tanzania. Restrictions were eliminated under the Foreign Exchange Act, 1992 in order to
attract investment and simplify international transactions. Residents can hold bank accounts in any currency, subject to the
need to demonstrate reasons for payment before a transfer in foreign currency takes place. Foreign-sourced loans however
must be registered with the Bank of Tanzania (BOT). Repatriation payments can generally be made in any currency subject
to production of appropriate supporting documentation.
Accounting Principles
Tanzania has adopted and applies International Financing Reporting Standards and certain local standards.
Industrial Relations
The Employment and Labour Relations Act, 2004 (the ELRA) regulates, amongst other things, conditions of employment
for employers and employees. The law expressly prohibits the use of forced labour, as well as the employment of a
child under the age of fourteen years. Maximum working hours, compensation, annual leave, maternity leave, complaint
procedures, night and holiday work and medical care are also regulated by the ELRA.
The National Social Security Fund Act (the NSSFA) and the Parastatal Organisation Pensions Scheme Act (the POPSA)
provides for a retirement age of 60 years. Both the NSSFA and the POPSA require every employer, for every contribution
period after the appointed day during which he employs an employee, to pay to the NSSF and the Parastatal Pension Fund
(PPF) a contribution, which consists of the employer’s contribution and the employee’s contribution, at the prescribed
percentage. The employer is required to deduct from an employee’s gross salary the amount of contribution not exceeding
Investment Guide 2015 - Tanzania
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10% of the employee’s salary. The employer adds the remaining balance to make the required contribution rate of 20%.
Expatriates who want to work in Tanzania are required to obtain a residence permit under the Immigration Act (Cap 54).
The policy and practice of the Labour and Immigration authorities is to decline applications for work and residence permits
where local skills are available to meet the requirements. A residence permit may be issued for any period not exceeding
three years and may be renewed for any period not exceeding two years. However, the total period of the validity of the
original permit and its renewals shall not exceed five years.
Real Property
All land in Tanzania is state land, vested in the President of the United Republic of Tanzania as trustee for the nation.
Statutory leases of up to 99, 66 or 33 years may, however, be obtained. These leasehold interests represent title analogous
to ownership and may be sold and encumbered. Foreign nationals and foreign companies cannot own land in Tanzania. A
Tanzanian company wholly owned by foreigners or majority owned by foreigners can hold land through a derivative right
if it holds a Certificate of Incentives issued by the TIC.
Corruption
Tanzania enacted the Prevention and Combating of Corruption Act in 2007 (PCCA). The PCCA makes it an offence for
any person to offer an advantage to a public official as an inducement to, or reward for, or, otherwise on account of such
public official’s giving assistance or using influence in or having given assistance or used influence to assist in the promotion,
execution, or procuring of any contract. Corruption investigation and prosecution is undertaken by the Prevention and
Combating of Corruption Bureau.
Competition
Competition is regulated by the Fair Competition Act, 2003 (FCA). The FCA promotes and protects effective competition
in trade and commerce, it also protects consumers from unfair and misleading market conduct. The main aim of the FCA
is to increase efficiency in the production, distribution and supply of goods and services, promote innovation, maximise the
efficient allocation of resources and protect consumers.
The FCA prohibits anti-competitive agreements and the misuse of market power. It generally and specifically prohibits price
fixing, collective boycotts, output restrictions and collusive bidding. Mergers and acquisitions (direct or indirect) involving
turnover or assets above a prescribed threshold, currently TZS 800,000,000, (approximately US$ 449,112) must be notified
to and may be examined by the Fair Competition Commission. A merger is prohibited if it creates or strengthens a position
of dominance in the market. It is worth noting that the FCA also applies to conduct outside Tanzania relating to the supply
or acquisition of goods or services within Tanzania, or any acquisition leading to a change of control of part of a business
or an asset of a business located in Tanzania.
Investment Guide 2015 - Tanzania
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Consumer Protection
Consumer protection legislation in Tanzania is contained primarily in the FCA and the Law of Contract Act (Cap 345) and
the Sale of Goods Act (Cap.214). The LCA regulates contracts and extra-contractual liability. The FCA defines the standard
of goods permissible for supply and sale and the liability of manufacturers, suppliers, sellers or their agents for product
defects which cause loss or damage to consumers. Misleading conduct in relation to the advertisement or supply of goods
and services is also prohibited, and there are a number of terms implied into consumer contracts for the protection of
consumers.
The FCA implies a number of conditions in contracts for the supply of goods; there is an implied warranty that goods
supplied by description correspond with that description. Goods supplied to consumers in the course of business carry an
implied warranty of merchantability as well.
Legal Forms of Incorporation in Tanzania
The principal forms of business arrangements in Tanzania are sole proprietorships, partnerships, trusts, cooperative
societies, non-governmental organisations and companies. The Companies Act, 2002 recognises three types of companies:
a company limited by shares, a company limited by guarantee, and an unlimited company. Companies may either be
private companies or what are commonly known as “public companies”.
A foreign investor can set up a place of business in Tanzania by either setting up a branch or incorporating a company.
The company can be incorporated as an independent entity or a subsidiary of the parent company which is located in
the foreign investor’s country. Except in certain cases, there are no minimum capital requirements. A company can be
incorporated with any amount as its authorised share capital.
The 2015 World Bank ‘Doing Business Report’ ranks Tanzania 131st out of 189 economies in terms of the ease of conducting
business. The table below provides a summary of the procedures and the associated completion time and cost for setting
up a private limited company:
Procedure Time to complete Cost to Complete
1Apply for clearance of the proposed company name at the Business Registration and Licensing Authority (BRELA)
2 - 3 days No charge
2Apply for a certificate of incorporation from the Registrar of Companies
7 daysTZS 400,000 (dependent on the share capital )
Investment Guide 2015 - Tanzania
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Procedure Time to complete Cost to Complete
3
Apply for taxpayer identification number (TIN) with the Tanzania Revenue AuthorityUnder the new internal policy Tanzania Revenue Authority require at least one director to go to their offices to provide fingerprints and digital pictures
7 - 14 days No charge
4*Income tax officials inspect the office site of the new company
1 day No charge
5*Apply for Pay As You Earn (PAYE) with the Tanzania Revenue Authority
1 day No charge
6Apply for a business licence from the regional trade office (depending on nature of business)
7 - 14 daysDepends on the sector and the nature of the business.
7*Have the land and town-planning officer inspect the premises and obtain signatures
1 day Transport cost, trivial
8Apply for VAT certificate with the Tanzania Revenue Authority
7 - 14 days No charge
9Register for the workmen’s compensation insurance at the National insurance Corporation or other alternative insurance policy
1 dayCost of insurance varies depending on number of employees and coverage
10Obtain registration number at the National Social Security Fund (NSSF) and Parastatal Pension Fund (PPF)
7 days No charge
*Takes place simultaneously with another procedure
Agriculture
Agriculture is the mainstay of the Tanzanian economy, providing livelihood to approximately 60% of the population. Food
and raw materials account for almost half of the GDP. Cash crops, including coffee, cotton, tea, cashew nuts, sisal and
cloves account for the majority of export earnings.
There is considerable scope for diversification and expansion of the agricultural sector through accelerated food crop
production and increase of non-traditional exports. Arable land is underutilised due to outdated production systems in
tillage, storage and processing. It is estimated that only 25% of the arable land is utilised. Tanzania’s climate is ideal for
horticulture, coffee, tobacco, sisal, cashew nuts and sugar. Tanzania has about sixty million hectares of land suitable for
livestock development, of which only approximately 26% is utilised.
There are numerous statutes regulating agricultural investment, depending on the particular agricultural activity the investor
Industry Sectors
Investment Guide 2015 - Tanzania
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Banking and Financial Services
The banking industry is governed by the Banking and Financial institutions Act, 2006 and the Bank of Tanzania Act, 2006.
The banking industry is regulated by BOT, which is responsible for formulating and implementing monetary policy.
Tanzania’s relatively small financial sector is developing rapidly. Thirty four commercial banks are licensed and operating in
Tanzania, and 50% of these are foreign-affiliated. Restrictions on foreign banks are minimal. Credit is increasingly allocated
at market rates and the range of commercial credit instruments available to the private sector is developing.
The Dar es Salaam Stock Exchange (DSE) became operational in 1998. The securities currently being traded are Ordinary
Shares of 21 listed companies, 4 corporate bonds and 8 government bonds. The DSE has two market segments: the Main
Investment Market Segment caters for big companies while the Enterprise Growth Market Segment caters for medium sized
growth oriented companies. There is no limit for foreigner participation in shares of listed companies. Once invested, there
is a lock-in period of six months before a foreign investor is allowed to exit. Foreigners can invest 100% in Corporate Bonds
and those who are residents of a member of the EAC can invest in Government securities. However, the total amount of
securities acquired by residents from the EAC cannot exceed forty percent (40%) of the issued securities.
undertakes. Investment in the coffee sector is regulated by the Coffee Act (Cap 347). Under the Coffee Act, a licence issued
by the Tanzanian Coffee Board is required in order to buy, process, liquor, roast, warehouse, export or otherwise deal in any
business in coffee. A licence or permit is not required if the person is obtaining coffee for personal use. Similar restrictions
apply to cotton, tea, sugar, pyrethrum sisal and wheat production under the relevant Acts of Parliament. There are also
various sectoral statutes that regulate the livestock, dairy and meat marketing industry.
Energy
The electricity sector in Tanzania is dominated by the Tanzania Electric Supply Company Limited in a vertically integrated
market structure carrying out generation, transmission, distribution and supply. In 1992, the National Energy Policy ended
the monopoly held by the public utility and allowed private sector involvement in the electricity industry. This major policy
reform enabled Independent Power Producers to operate in the power generation segment of the market.
Tanzania has abundant untapped energy resources, which could be exploited for electricity generation. Tanzania has coal
reserves of up to 5 billion tonnes, more than thrice its previously stated figure of about 1.5 billion tonnes. Natural gas is
estimated at 43.1 trillion cubic feet of proven reserves. Hydroelectric energy has a potential capacity of 4,700 MWh, of
which only about 10% is developed. Solar, wind and geothermal sources remain relatively untapped.
The energy sector in Tanzania is governed by the Energy and Water Utilities Regulatory Authority Act (Cap 414) (EWURA
Act). The EWURA Act establishes the Energy and Water Utilities Regulatory Authority to regulate the issuance, renewal
and revocation of the relevant licences. EWURA also determines the rates and shares of the services and monitors the
performance of investments, as well as service quality and efficiency.
Manufacturing
The manufacturing industry in Tanzania is relatively underdeveloped. The main industrial activities are dominated by
small and medium sized enterprises mostly concentrated in Dar es Salaam. The sector primarily incorporates animal-feed
processing, beverages, textiles and apparel, leather, plastics, cement and steel. An expanding domestic market and the
regional markets of the SADC and the East EAC provide manufacturers in Tanzania with abundant opportunities.
Investment Guide 2015 - Tanzania
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Mining
Tanzania’s mining sector has been a key contributor to sustained economic growth over the past decade. Available resources
include gold, diamonds, gemstones, base metals and industrial minerals. The principal statute governing mining in Tanzania
is the Mining Act 2010 (the Mining Act) and accompanying Mining (Mineral Rights) Regulations. Under the Mining Act,
no person can undertake any mining operations without a licence; the Commissioner for Minerals regulates the issuance
of licences.
There are a variety of licences issued under the Mining Act including:
a. primary mining licences, which give exclusive rights to the holder to carry on mining operations in a designated mining
area;
b. prospecting licences, which grant permission to carry out prospecting operations;
c. retention licences, which are given to holders of prospecting licences who have identified mineral deposits but cannot
immediately develop the deposits;
d. special mining licences, which permit the mining of minerals other than building materials;
e. gemstone prospecting licences, which permit prospecting for gemstones; and
f. mining licences, which allow the mining of minerals or gemstones.
A corporate entity cannot obtain a primary mining licence unless all of it members and directors are Tanzanian citizens. This
restriction does not apply to prospecting, mining or special mining licences. However, gemstone mining ventures require a
local shareholding participation of 50% for licences to be granted.
Telecommunications
The telecommunication sector was liberalised in 1993, opening the market for both local and foreign investment. The
principal statute governing telecommunications in Tanzania is the Electronic and Postal Communications Act, 2010. The
industry is regulated by the Tanzania Communications Regulatory Authority (TCRA) which licenses operators in each class
of telecommunications.
The TCRA applies a converged licensing framework under which there are four main classes of licences:
a. The Network Facility Licence, which authorises ownership and control of electronic communication infrastructure such
as earth stations, public payphone facilities, radio communication transmitters and links and satellite hubs;
b. The Network Service Licence, which authorises the operation of electronic communication networks for the delivery
of services including bandwidth services, broadcasting distribution services, cellular mobile services, access applications
services and space segment services;
c. The Applications Service Licence, which authorises reselling or procurement of services from network service operators,
but not the ownership or operation of services; and
d. The Content Service Licence, which authorises the provision of content services such as satellite broadcasting or
terrestrial free to air TV and broadcasting.
Tourism
Tourism is a critical industry in Tanzania. Tanzania is the only country in the world to allocate more than 25% of its total
area to wildlife parks and game reserves. There are 12 national parks, 17 game reserves, 50 game-controlled areas, a
conservation area, 2 marine parks and 2 marine reserves.
Tanzania’s wildlife resources are among the finest in the world and have long been widely known. The Northern Circuit
includes the Serengeti plains, the spectacular Ngorongoro crater, Lake Manyara and Africa’s highest mountain, Kilimanjaro.
Investment Guide 2015 - Tanzania
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The Southern Circuit, comprising the Mikumi and Ruaha National Parks and the Selous Game Reserve, remains relatively
underexploited. Additional natural attractions include the sandy beaches north and south of Dar es Salaam, the spice islands
of Zanzibar and deep sea fishing at Mafia and Pemba Islands.
The Tourism Industry in Tanzania is primarily regulated by the following Acts:
a. The Wildlife Conservation Act, 2009 and
b. The Tourism Act, 2008 (Cap 65)
Intellectual Property
Tanzania is a party to the Paris Convention and uses the Nice International Classification of Goods and Services. The
Business Registration and Licensing Agency (BRELA) in Tanzania handles the registration of trademarks and copyrights.
Many international marks are registered in Tanzania. The Fair Competition Commission (established under the FCA) also
handles seizure of counterfeit products.
Dispute Settlement
The Tanzanian legal system is largely based on English common law. Also, the Commercial Court of Tanzania was established
in 1999 as a division of the High Court dealing with disputes of a commercial nature. There is also a Lands Division of the
High Court dealing with land matters. Finally, the Commission for Mediation and Arbitration has been established under
the Labour Institutions Act to handle labour disputes.
Tanzania is a member of several international organisations that help protect investment. Any dispute arising between the
Government and investors may be settled amicably through negotiations or may be submitted for arbitration under the
international agreements listed below:
• The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, which entered into force on
7 June 1959;
• The Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965,
which entered into force on 14 October 1966;
• The Convention establishing the Multilateral Investment Guarantee Agency of 1985, which entered into force on 12
April 1988; and
• The Paris Convention for the Protection of Industrial Property of 1883, revised at various time, amended in 1979 and
signed by Tanzania in 1994.
ATZ Law Chambers
A: Opal Place, 1st Floor, 77 Haile Sellasie Road, Masaki
P: P.O. Box 79651, Dar es Salaam, Tanzania
T: +255 22 2601151/2, +255 75 499 9667
F: +255 22 2601153
ALN Head Office
A: 5th floor, The Oval
Corner of Ring Rd.,Parklands and Jalaram Roads, Westlands, Nairobi
P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T: +254 20 364 0000, +254 703 032 000
W: www.africalegalnetwork.com
Investment Guide - Uganda
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
TABLE OF CONTENTSGeneral Overview _________________________________________________________________________________4
Political Overview __________________________________________________________________________________5
Economic Overview ________________________________________________________________________________5
Regulatory Environment ____________________________________________________________________________6
Bilateral and Multilateral Treaties _____________________________________________________________________6
Investment Promotion ______________________________________________________________________________6
Institutions Governing Investment Promotion 6
Investment Incentives 7
Tax ______________________________________________________________________________________________7
Income Tax 7
Withholding Tax 7
Capital Gains Tax 8
Other Tax 8
Transfer Pricing and Thin Capitalisation 8
Stamp Duty on a Transfer 8
Double Tax Treaty with Mauritius 8
Exchange Control _________________________________________________________________________________9
Imports and Exports________________________________________________________________________________9
Accounting Principles ______________________________________________________________________________9
Industrial Relations_________________________________________________________________________________9
Real Property _____________________________________________________________________________________10
Competition ______________________________________________________________________________________10
Consumer Protection_______________________________________________________________________________10
Legal Forms of Incorporation in Uganda _______________________________________________________________11
Industry Sectors ___________________________________________________________________________________12
Agriculture 12
Banking and Financial Services 12
Energy 13
Manufacturing 13
Oil and Gas 13
Telecommunications 14
Tourism 14
Intellectual Property ________________________________________________________________________________14
Dispute Settlement ________________________________________________________________________________15
Investment Guide 2015 - Uganda
4
Capital City: Kampala
Currency: Uganda shilling (UGX)
Languages: English and Swahili
Government: Unitary
President: Yoweri Kaguta Museveni
Population: 38.85 million (2014 estimate)
Timezone: GMT + 3
GDP: US$ 21.49 billion - (2013 estimate)
General Overview
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The Ugandan President is elected by universal suffrage every five years and acts both as the Head of State and Head of
Government. The President appoints a Vice-President and Prime Minister to assist in the supervision of the cabinet. The
Vice-President deputises the President. The Prime Minister is the leader of the government business in parliament and
is responsible for coordinating and implementing government policies across ministries, departments and other public
institutions. The national legislature is formed by the National Assembly: the majority of members are elected by universal
adult suffrage, whilst the remainder represent special interest groups including youth, women, persons with disability and
the army. The next presidential and parliamentary elections are scheduled for 2016.
Political Overview
The Ugandan Government continues to adopt important policies to ensure economic rehabilitation and promote rapid
economic development, and Uganda has won acclaim for its macroeconomic management in recent years. Uganda was the
first country to be eligible for the Heavily Indebted Poor Countries (HIPC) initiative and had virtually all of its foreign debts
cancelled by the IMF, World Bank and major donors.
For the financial year 2012/2013, the country recorded a 3.2% real GDP growth. The agriculture sector grew by 3.0%,
growth in the services sector slowed by 3.1%, and by 1.1% in the industrial production sector. Despite the slow rate at
which it is growing, the agriculture sector (including forestry and fishing) employs approximately 65.6% of the country’s
workforce. In addition, the Government has developed a Uganda Vision 2040 to operationalise the National Vision of a
transformed Ugandan society from a peasant to a modern and prosperous country within 30 years. Uganda Vision 2040 is
conceptualised around strengthening the fundamentals of the economy to harness the abundant opportunities including
oil and gas, tourism, minerals, ICT business, abundant labour force, geographical location and trade, water resources,
industrialisation and agriculture.
The economy is set to benefit from the planned start of oil production. The Government recently signed a memorandum of
understanding with the oil companies on sustainable development of the discovered petroleum resources in the Albertine
Graben. The MoU provides a framework for achieving a harmonised commercialisation plan for the development of the
country’s oil and gas resources. The plan includes the use of petroleum for power generation, supply of crude oil to the
refinery to be developed in Uganda by Government and export of crude oil through an export pipeline or any other viable
options to be developed by the oil companies. The commercialisation plan is based on the current discovered recoverable
reserves in the country estimated at a range of 1.2 to 1.7 billion barrels of crude oil.
Economic Overview
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Regulatory Environment
Uganda generally provides an open climate for foreign investment. The 2015 Index of Economic Freedom ranks Uganda 9th
out of 46 countries in sub-Saharan Africa with a score below the world average. Uganda has revised a range of laws and
regulations to create greater government accountability, develop infrastructure, and build a more vibrant public sector. The
Government has updated various laws, for example the Mortgage Act, 2009, the Partnership Act, 2010, the Insolvency Act,
2011, the Companies Act, 2012, the Capital Markets Authority (Amendment) Act, 2011, and legislation on e-commerce,
pensions and intellectual property.
Following the oil discoveries, the Government revamped its sector oversight with the passing of two new laws including
the Petroleum (Exploration, Development and Production) Act, 2013 which now effectively provides the framework for the
exploration and production of petroleum. It is also considering passing legislation to govern public private partnerships.
Foreign investment is allowed in all sectors of the economy that are not national security related. Save as stated herein,
companies may be 100% foreign-owned. In the oil and gas sector, where goods and services are required by a licensee or
contractor are not available in Uganda, they must be provided by a company which has entered into a joint venture with a
Ugandan Company which must hold at least 48% of the share capital in the joint venture.
Bilateral and Multilateral Treaties
Uganda is a member of, among others, the East African Community, the Common Market for Eastern and Southern Africa,
the African, Caribbean and Pacific Group of States, the World Trade Organisation and the African Union.
Uganda currently has double taxation tax treaties with fifteen countries including Denmark, Egypt, India, Mauritius,
Netherlands, Norway, UAE (pending), South Africa, United Kingdom, Seychelles (pending) and Zambia. The rate of tax
generally under these treaties is either 10% or 15%. The Uganda tax regime has an automatic tax relief system for income
of a resident person which is sourced outside Uganda and has also already suffered tax in that other country. This ensures
that the individual is not subjected to further taxation in Uganda on income that has already been taxed elsewhere.
Investment Promotion
Institutions Governing Investment Promotion
The Uganda Investment Authority (UIA) was established under the Investment Code Act, (Cap 92) (the ICA) to contribute
to the economic development of Uganda by promoting and facilitating private sector initiatives. It seeks to achieve this by
promoting Uganda as an investment location, easing constraints on investment through its one-stop service and encouraging
inward investment by offering competitive incentives.
Investment Guide 2015 - Uganda
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Investment Incentives
A foreign investor in Uganda is required to obtain an investment licence from the UIA. A foreign investor is defined under
the ICA as a company in which more than 50% of the shares are held by a person who is not a citizen of Uganda. A
foreign investor qualifies for incentives under the ICA where the investor makes a capital investment or an equivalent in
capital goods worth at least US$ 500,000 by way of capital invested. The Second Schedule to the ICA contains the priority
investment areas for which additional benefits may be granted. Although this is provided for under the ICA, it is not done
in practice.
The benefits that can be negotiated by or granted to the holder of an investment certificate are as follows:
• concessional rates of import duty for an investor who is importing any plant, machinery, equipment, vehicles or
construction materials for an investment project;
• exemption from payment of import duty on one motor vehicle for personal uses, personal and household effects which
the person owned and used outside the East African Partner State for at least twelve months. Such person must show
that he is changing residence from a place outside the East African Partner State to a place within the East African
Partner State ;
• incentives available generally for start-up businesses under custom laws, the Income Tax Act (Cap 340) (ITA) and the
Value Added Tax Act (Cap 349); and
• drawback of duties payable on imported inputs used in producing goods for export as provided in the laws imposing
such duties and taxes.
Tax
Income Tax
Resident companies and businesses are taxed on worldwide income. Non-residents are taxed only on Uganda-source
income. A company or similar corporate entity is resident in Uganda if it is incorporated or formed under Ugandan law;
management and control of its affairs are exercised in Uganda; or the majority of its operations are carried out in Uganda
during the year of income. An individual is a tax resident if domiciled in Uganda, spends at least 183 days in any 12-month
period, or is present for an average of at least 122 days during 3 consecutive tax years, or if that individual is an employee
or official of the Government of Uganda posted abroad during that year of income.
Uganda’s corporate tax rate is 30% for resident companies and branches of foreign companies. The rate for mining
companies ranges. It is either 25% or 45% depending on the chargeable income.
Withholding Tax
Withholding tax of 15% is imposed on every non-resident person who derives any dividends, rent, natural resource payment,
interest, royalties and management fees from sources in Uganda.
Withholding tax of 15% is imposed on a resident person deriving dividends and interest in Uganda. Withholding tax on
interest payable to resident persons does not apply to:
a. interest paid by a natural person;
Investment Guide 2015 - Uganda
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b. interest paid by a company to an associated company;
c. interest paid which is exempt from tax in the hands of the recipient; and
d. interest other than interest from governmental securities paid to a financial institution
Capital Gains Tax
Other Tax
Transfer Pricing and Thin Capitalisation
Residents and non-residents in respect of a Ugandan branch are liable to income tax on gains arising from disposal of
their non-depreciable asset (including a sale of shares in a private company). Those gains are included in gross income and
treated as normal business income subject to income tax at the rate of 30%.
Value-added tax (VAT) is chargeable on taxable supplies of goods and services in Uganda and the import of certain goods.
The standard rate of VAT is 18%. However, a zero rate applies to supplies including agricultural produce in an unprocessed
state, financial services and insurance services limited to health insurance services, micro-insurance services, re-insurance
services and life insurance services
The Income Tax (Transfer Pricing) Regulations, 2011, applies to a controlled transaction if a person who is a party to the
transaction is located in and is subject to tax in Uganda and the other person who is part to the transaction is located
in or outside Uganda. “Controlled Transaction” means a transaction between associates. The Regulations require that
transactions between associated persons be conducted in accordance with the arm’s length principle.
The Income Tax Act, (Cap 340) contains provisions on thin capitalisation of foreign controlled resident companies. Thin
capitalisation arises where a company, incorporated in Uganda is controlled by a non-resident person i.e. the foreign
controller and has a foreign debt to foreign equity ratio in excess of 1:1 at any time during a year of income. In this case, a
deduction is disallowed for the interest paid by the company during that year on that part of the debt which exceeds the
1:1 ratio (financial institutions are exempt from this legislation).
Stamp Duty on a Transfer
Double Tax Treaty with Mauritius
Stamp duty on any transfer is charged at a rate of 1% of the total value of the transfer. It is charged at nominal rates on
a variety of financial instruments and transactions, for example, guarantees, loan agreements, deeds of assignment and
novation deeds.
Uganda has a double tax agreement (DTA) with Mauritius. Under the DTA, dividends, interest and royalties paid to a person
resident in Uganda by a Mauritian company are taxed at a rate of 10%.
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Exchange Control
Foreign exchange repatriations from Uganda are not restricted. The Governor of Bank of Uganda may, however, impose
such restrictions when he deems fit (there are no restrictions currently in place). All payments in foreign currency to, or,
from Uganda between residents and non-residents or between residents are required to be made through a bank.
Imports and Exports
There are restrictions on importation and exportation of a number of commodities in Uganda, for example animal breeds
and genetic material, wildlife species and specimens, importation of coffee into Uganda, petroleum and minerals. A person
dealing in any of these products shall not import or export without obtaining a licence from the prescribed authority. The
Protocol on EAC’s Customs Union commenced in Uganda in January 2005. The Protocol provides for the elimination of
customs duties and other charges on imports within the Customs Union as well as the removal of non-tariff barriers to trade
among Partner States and the establishment and maintenance of a common external tariff in respect of all goods imported
into the Partner States from foreign countries. This has seen growth in total intra-trade, total intra EAC exports and imports,
cross-border investment and foreign direct investment
Accounting Principles
Financial statements of companies must be prepared annually. Uganda applies the International Financial Reporting
Standards.
Industrial Relations
Uganda’s Employment Act, 2006 imposes certain obligations on employers, ranging from tax, insurance and obligations
arising out of specific labour laws. The Employment Act also details regulations regarding employment of children,
discrimination, disciplinary proceedings, contract termination, working hours, severance payment and leave. The Labour
Unions Act, 2006, is intended to regulate the establishment, registration and management of labour unions in Uganda. It
implements the constitutional right of employees to organise themselves into a labour union. The Act prohibits an employer
from interference with the employee’s right of association in such a trade union.
The National Social Security Fund (NSSF) Act, (Cap 222) imposes an obligation on employers to pay a standard monthly
contribution of 15% (10% being the employer’s contribution and 5% being the employee’s contribution) of the total wages
of an employee to the NSSF. The pension’s sector was liberalised in 2011 with the passing of the Uganda Retirements
Investment Guide 2015 - Uganda
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Benefits Regulatory Authority Act, 2011. This law was enacted to remove the monopoly of NSSF as a national provident
fund and allow for licensed retirement benefits schemes to operate and compete for mandatory contributions in an open
market.
A person, who is not a citizen of Uganda intending to work in Uganda, is required under the Uganda Citizenship and
Immigration Control Act, (Cap 66) to obtain a work entry permit, a certificate of permanent residence or special pass. A
special pass is issued while the entry permit is being processed. The work permit once issued is renewed every year at a fee,
with amounts varying depending on the nature of work.
Real Property
There are restrictions on the ownership of land in Uganda by non-Ugandan citizens, under the Constitution and the
Land Act (Cap 227) (LA). The LA prohibits non-citizens from acquiring freehold land and mailo land. They are, however,
permitted to acquire leases not exceeding 99 years. The LA requires a lease obtained by a non-citizen for 3 years or more
to be registered under the provisions of the Registration of Titles Act (Cap 230).
For the purposes of the LA, a “non-citizen” means a person who is not a citizen of Uganda); in the case of a corporate
body, a corporate body in which the controlling interest lies with non-citizens; in the case of bodies where shares are not
applicable, where the body’s decision making lies with non-citizens, a company in which the shares are held in trust for non-
citizens and a company incorporated in Uganda whose articles of association do not contain a provision restricting transfer
or issue of shares to non-citizens. “Controlling interest” means in the case of companies with shares, the majority shares
are held by persons who are not citizens and in the case of companies without shares, a company in which decisions are
arrived at by the majority of members who are not citizens.
Competition
Consumer Protection
There is currently no general law regulating competition. This area is governed by contractual arrangements between
the parties. The COMESA Competition Regulations, 2004 became operational in January 2013 with the establishment
of the COMESA Competition Commission. There is still uncertainty about the jurisdiction of the COMESA Competition
Commission in Uganda.
There are existing sectoral policies, legal and regulatory frameworks in place that have measures on consumer protection. The
existing sectoral policies and laws on consumer protection are under the communications, electricity, dairy, pharmaceuticals,
water, broadcasting, insurance, banking and standards and safety legislation.
Investment Guide 2015 - Uganda
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Legal Forms of Incorporation in Uganda
The principal forms of business arrangements in Uganda are the (public/private) limited liability company, joint venture,
sole proprietorship, partnership, trust and branch of a foreign company. The World Bank Group’s “Ease of Doing Business
Report 2015” ranks Uganda 150th out of 189 economies. On average, starting a business requires 16 different procedures.
The table below provides a summary of the procedures and the associated completion time and cost for setting up a private
limited company:
Procedure Time to complete Cost to complete
1 Reservation of a name at the Companies Registry 2 days UGX 25,000
2 Pay fees at the bank 1 day Included in previous procedure
3 Obtain statutory forms from the Uganda Bookshop (i.e. declaration of compliance (Form A2), particulars of directors and secretary (Form 7), statement of nominal capital (Form A1) and notice of situation of registered office and registered postal address (Form A9))
1 day UGX 5,600 (UGX 500-700 for each form)
4 Obtain requisition for bank pay-in slip and bank payment advice forms from the Uganda Registration Services Bureau
1 day No charge
5 Make payment of registration fees at a given bank 1 day Bank charges (UGX 2,000 – UGX 2,500)
6 File with the Registrar of Companies 1 day Payment is done under No 5
7 File with the local office at the Uganda Revenue Authority (URA) a personal inquiry form for each director, and a corporate preliminary inquiry form; receive a uniform tax identification number (TID)
3 days No charge
8 Obtain corporate Tax Identification Number 7 days No charge
9 Obtain VAT registration 7 days No charge
10 An inspector from URA inspects the business premises
1 day No charge
11 Apply for PAYE 1 day No charge
12 Obtain application forms for trading licence 1 day No charge
13 The licensing officer arranges an inspection of the premises and fills out an assessment form
1 day No charge
Investment Guide 2015 - Uganda
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Industry Sectors
Agriculture
Despite their dwindling contributions to Uganda’s GDP, the agriculture, forestry and fishing sectors provide approximately
65.6% of employment in Uganda. Uganda is Africa’s second-leading producer of coffee, which accounted for about
22% of the country’s total exports in 2014. Exports of non-traditional products, including apparel, hides, skins, vanilla,
vegetables, fruits, cut flowers, and fish, are growing, while traditional exports such as cotton, tea, and tobacco continue
to be mainstays.
Procedure Time to complete Cost to complete
14 Pay the licence fee at the bank 1 day See the following procedure
15 Obtain clearance from the Ministry of Trade in case of companies controlled by non-citizens
2 days No charge
16 Obtain the trading licence 1 day License fees depend on the nature of business and its location
17 File a form with the National Social Security Fund (NSSF)
4 days No charge
18 Make a company seal 2 days UGX 360,000 – UGX 590,000
Banking and Financial Services
Uganda’s small financial system is dominated by banking, which is relatively open to competition and subject to minimal
government influence. The banking sector is highly regulated by the Bank of Uganda. There are currently 25 licensed
commercial banks with more than 496 branches and 714 ATMs. A majority of the banks are foreign-owned, and account
for about three-quarters of total assets. Other financial institutions in Uganda are credit institutions, micro-finance deposit
taking institutions, forex bureaus, money remitters, insurance companies, insurance brokers, leasing companies and
development banks. Bank lending to the private sector has gradually increased. Overall, the banking sector is well capitalised
and has no serious non-performing loan problems. Access to financial services has expanded across the country, and there
is regulation in place for microfinance businesses.
The insurance sector supervised by the Uganda Insurance Regulatory Authority (IRA) remains small with limited market
penetration and uptake of insurance products. There are currently 22 insurance firms, 26 insurance brokers and 17 loss
assessors/adjusters in Uganda. There has also been a recent amendment to the Insurance Act (Cap 213) that prohibits the
carrying out of life insurance business and non-life insurance business as a composite company. This has resulted in the
licensing of 8 new life insurance companies. The required minimum paid up capital for insurance companies carrying out
life business was increased to UGX 3 billion (approximately US$ 1,071,428) while that of insurance companies carrying out
non-life business was increased to UGX 4 billion (approximately US$ 1,428,571). Consequently, the IRA issues different
licences specific to either life of non-life business.
Investment Guide 2015 - Uganda
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Capital markets are regulated by the Capital Markets Authority and remain relatively small and underdeveloped. Companies
cross-listed from the Nairobi Stock Exchange (Kenya), account for the bulk of the market capitalisation on the Uganda
Securities Exchange
Energy
Uganda has a total estimated electrical potential of 5,300 MW (Hydro – 2,000 MW, Mini-hydro – 200MW, Solar – 200
MW, Biomass – 1,650 MW, Geothermal – 450 MW and Peat – 800 MW). There has been an increase in the number of
independent power producers this has led to a 22% increase in hydro-electric generation.
A 250 megawatts power plant at Bujagali falls was commissioned in October 2012. Currently, coverage has significantly
grown to 15% nationally and in rural areas stands at 7%. Electricity consumption per capita has grown from 70 kilowatt-
hour to 150 kilowatt-hour. Government hopes to have increased consumption to 22% by 2022. A number of projects
including the 600MW Karuma HPP, 183 MW Isimba HPP and 600 MW Ayago HPP are aimed at achieving this goal. The
Government of Uganda is also seeking investors for the construction of an additional 1,045 MW of electricity generating
capacity in the next five years.
The Government is promoting small electricity projects as part of the renewable energy framework. 50 mini-hydro power
sites with a combined capacity of 210 MW have so far been identified. The Energy Regulatory Authority (ERA) has published
a list of sites which are available for intending investors on its website: www.era.org
Manufacturing
Uganda’s manufacturing output has also been expanding by more than 10% annually over the last eight years. Opportunities
exist in virtually all areas, ranging from beverages, leather, tobacco based processing, paper, textiles and garments,
pharmaceuticals, fabrication, ceramics, glass, fertilisers, plastic/PVC, assembly of electronic goods, hi-tech and medical
products.
Oil and Gas
Although the hunt for oil in Uganda dates back to the 1920s, the first commercial discovery was made in 2006. Exploration
of oil in Uganda is underway. As at June 2014, 89 deep wells had been drilled in the Albertine Graben region (a region
on the Uganda-DRC border) and 72 of these wells encountered hydrocarbons in subsurface. 69 of the 89 wells have been
drilled by Tullow Oil Plc with an 84% success rate against the global average of 25%.
The Government of Uganda currently has 4 active Production Sharing Agreements in respect of 4 licensed exploration areas,
which are all licensed to Tullow Uganda Limited, CNOOC Uganda Limited and Total E&P (Uganda) B.V. The Government
also issued a production licence to CNOOC in 2013 and is currently considering applications for production licences for
over 8 discoveries in the exploration areas operated by Tullow and another application over an exploration area operated
by Total. In 2013, the Government passed the Petroleum (Exploration, Development and Production) Act, 2013 to regulate
upstream activities and Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act, 2013 to regulate
midstream activities.
Over 17,400 square kilometers of the Albertine Graben remain open and would be available for licensing during a licensing
round which will be announced following the enactment of a new regulatory framework.
Investment Guide 2015 - Uganda
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Telecommunications
After a moratorium on new mobile telephone operator licences was lifted by the Government, the telecom sector has
undergone a boom. There were approximately 19.8 million telecom subscribers by the fourth quarter of 2014. This has
generated expanded coverage and telephone penetration throughout the country and prompted new competition and
lower prices. There are currently 6 telecommunications companies in Uganda: MTN, Airtel, Orange, Uganda Telecom, Smart
Telecom and K2 Telecom. Airtel acquired Warid in the second quarter of 2013.
The Government completed the laying of the fibre optic cable which cost US$ 106 Million. It is hoped that this will facilitate
e-Governance as well as provide access to cheap internet access across the entire country. A new law to regulate the sector
was passed – the Uganda Communications Act, 2013, to consolidate and harmonise the old laws governing the telecoms
and electronic media sector, and to reconstitute one governing body for both sectors.
There have also been key developments in the broadcasting industry such as the migration from analog type television
broadcasting to digital broadcasting. Digital broadcasting is aimed at improving the consumers’ TV experience in terms
of better sound and picture quality. It has been projected that the use of digital broadcasting will free up space in the
frequency spectrum that can be used to provide more TV channels and others ICT services.
Tourism
Uganda’s tourist industry offers many long-term opportunities, with a number of unique tourist attractions. These include
Lake Victoria (the source of the Nile), the Murchison Falls and the Mountains of the Moon, along with a number of national
parks and wildlife reserves hosting, among other fauna and half the world’s mountain gorilla population. Except for
Kampala and a few major towns, however, the tourism infrastructure is underdeveloped, although the number of visitors
to the country has increased sharply in the past decade. In February 2014, the Single Tourist Visa was introduced by the
East African Community. It is now operational in Kenya, Rwanda and Uganda. This will see a significant reduction in the
fees paid by tourists to the East African countries.
Uganda’s laws for the protection of intellectual property rights include the Trademarks Act, 2010 (the TMA), the Copyright
and Neighbouring Rights Act, 2006 (the CNRA) and the Patents Act (Cap 216) (the PA). The authority for protection of
intellectual property rights is the Uganda Registration Services Bureau headed by the Registrar General of Uganda.
The TMA provides for the registration, renewal and protection of trademarks in Uganda. The TMA repealed the Trademarks
Act, (Cap 217). The most significant change under the TMA is the possibility to register service marks. The definition of
sign or mark was expanded to include, any word, symbol, slogan, logo, sound, smell, colour, brand label, name, signature,
letter, numeral or any combination of them.
The CNRA provides for the protection of literary, scientific and artistic intellectual works and their neighbouring rights.
The author of any work shall have the protection of the work, where work is original and is reduced to material form in
whatever method, irrespective of quality of the work or the purpose for which it is created.
The PA provides for the grant, registration and protection of patents in Uganda.
Intellectual Property
Investment Guide 2015 - Uganda
15
Uganda is a signatory to various World Intellectual Property Organisation conventions, including the Paris Convention for
Protection of Industrial Property, the Patent Cooporation Treaty for protection of patents and the WIPO Convention to
promote the protection of intellectual property throughout the world.
Dispute Settlement
The Arbitration and Conciliation Act (Cap 4) (ACA) provides for domestic arbitration, international commercial arbitration,
enforcement of foreign arbitral awards and generally defines the law relating to conciliation of disputes in Uganda. Uganda
is also a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the
Convention). Awards under this Convention are recognised and enforceable in Uganda upon registration in the High Court
of Uganda.
Under the ACA, parties are free to determine the number of arbitrators. If the parties fail to determine the number, there
shall be one arbitrator. An arbitrator may be appointed by the parties or by the appointing authority. The appointing
authority under the ACA is the Centre for Arbitration and Dispute Resolution which facilitates the arbitration and mediation
of commercial and other disputes.
Under the Investment Code Act (Cap 92), where negotiations for an amicable settlement have failed to settle a dispute
between a foreign investor and the UIA or the Government, the dispute maybe submitted to arbitration in accordance with
the following methods as may be mutually agreed between the parties:
a. in accordance with the rules of procedure for arbitration of the International Centre for the Settlement of Investment
Disputes;
b. within the framework of any bilateral or multilateral agreement on investment protection to which the Government
and the country of which the investor is a national are parties; or
c. in accordance with any other international machinery for the settlement of investment disputes.
MMAKS Advocates
A: 3rd floor, DTB Centre Plot 17/19 Kampala Road
P: P.O.Box 7166, Kampala, Uganda
T: +256 41 425 9920
F: +256 41 425 9992
W: www.africalegalnetwork.com
ALN Head Office
A: 5th floor, The Oval
Corner of Ring Rd.,Parklands and Jalaram Roads, Westlands, Nairobi
P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T: +254 20 364 0000, +254 703 032 000
W: www.africalegalnetwork.com
Investment Guide - Zambia
The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
TABLE OF CONTENTSGeneral Overview _________________________________________________________________________________5
Introduction ______________________________________________________________________________________6
The Legal System __________________________________________________________________________________6
Sources of Law 6
The Judiciary of Zambia 7
Commercial Courts 7
Alternative Dispute Resolution _______________________________________________________________________8
Arbitration 8
Mediation 8
Enforcement of Foreign Judgments 8
Promotion and Regulation of Foreign Investment _______________________________________________________9
Overview 9
Investment Under The Zambia Development Agency Act 9
Incentives Available To Foreign Investors 9
Protection From Compulsory Acquisition of Property 10
Foreign Ownership of Land 10
Conversion and Transfer Policies 10
Business Organisations _____________________________________________________________________________10
Sole Proprietorships 10
Partnerships 10
Companies 11
Cooperative Societies 11
Specific Sector Investment __________________________________________________________________________11
Overview 11
Agriculture 12
Banking and Financial Services 12
Energy 13
Mining 13
Real Estate 14
Telecommunications 15
Tourism 16
Water 16
Company Formation and Corporate Governance _______________________________________________________16
Company Law 16
Incorporating a Company 17
Sourcing of Capital for a Limited Liability Company 17
Protection of Minority Shareholders 17
General Business and Investment Environment _________________________________________________________17
Business Regulatory Act, No. 3 of 2014 17
Licensing Regime 18
Taxpayer Personal Identification Number (TPIN) Certificate 18
VAT Registration 18
Trading and Manufacturing Licences 18
Environmental Impact Assessments 18
Other Licences 18
Currency and Exchange Rate 19
Competition ______________________________________________________________________________________19
Special Economic Zones ____________________________________________________________________________19
Tax ______________________________________________________________________________________________20
Income Tax 20
Withholding Tax 20
Property Transfer Tax 20
Double Taxation Arrangements 20
Labour Relations __________________________________________________________________________________20
Labour Supply 20
Labour Laws 21
Immigration ______________________________________________________________________________________22
Conclusion _______________________________________________________________________________________22
Investment Guide 2015 - Zambia
5
Capital City: Lusaka
Currency: Zambian Kwacha (ZMK)
Languages: English
Government: Republic
President: Edgar Lungu
Population: 15.02 million (2013 estimate)
Timezone: GMT + 2
GDP: US$ 26.82 billion (2014 estimate)
General Overview
Investment Guide 2015 - Zambia
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Introduction
Zambia is a landlocked country in south-central Africa with an area of 290,587sq mi (740, 724 sq km) and is strategically
surrounded by eight neighbouring countries; Malawi, Zimbabwe, Tanzania, Botswana, Namibia, Angola, Congo DR,
and Mozambique. It is a sovereign, unitary, multi-party democracy and provides a market oriented liberalised economic
environment. It has a population of approximately 15.02 million and a growth rate of about 1.6% in 2012. The country
is highly endowed with natural resources such as copper, waters, good soils, labour, game and land. Furthermore, it has
experienced continuous political stability since attaining independence in 1964.
Factors such as abolition of control-prices; interest rate; foreign exchange and free repatriation of earnings; security to
investors with statutory rights to full and fair compensation; and repayments provide a suitable environment for investment
in the country. Zambia also provides duty free access to regional, wider African and the USA markets under Southern
African Development Community, Common Market for Eastern and Southern Africa Agreements, the Africa Growth and
Opportunity Act and the Cotonou Agreements respectively. Its attractive sub-tropical climate and vegetation with plenty
of water and electricity as well as friendly people who are mostly English speaking with high literacy rates act as a bonus
to both foreign and local investors.
The Legal System
Zambia has a dual legal system made up of general or statutory law as well as the tribe-specific customary laws. The general
law is based on the English Common law system whilst the customary law is based on the various norms and cultures of
the different tribes in Zambia. The Zambian legal system has developed in such a way that customary law is administered
by special courts called Local Courts and can be set aside if such customs contradict the written law or offends English
principles of justice, good conscience and equity. The importance of the dual legal system is that it creates two standards
of justice applicable side by side with regard to the same population.
The power to make laws is vested in the Parliament of Zambia. The sources of law in Zambia include the following listed in
order of importance to the legal system:
• The Constitution of Zambia
• Acts of Parliament
• Subsidiary legislation
• Judicial decisions
• English Common Law, Equity and Statutes
• Customary law
As mentioned above, the law in Zambia is principally based on the English common law system. The English Law (Extent of
Application) Act as amended by Act, No. 6 of 2011 sets out the extent to which English law is applicable to Zambia. The Act
provides that English principles of common law, equity and English statutes enacted before 1911 as well as the Supreme
Court Practice Rules of England in force until 1999 are all applicable in Zambia provided that they are applied in conformity
Sources of Law
Investment Guide 2015 - Zambia
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with the Zambian written laws. With regards to commercial activities in Zambia, it is the local statutes that take priority.
For instance, there are Zambian statutes governing, among other matters, Companies, Mining, Banking and Insurance
Business, Agriculture, Land Law, Energy, Information and Communication Technology, Capital Markets, Taxation, Local
Government, Shipping, Competition Law and Intellectual Property. Common law principles are only relied upon when there
exists a lacuna (or gap) in the Zambian law.
Zambia does not have a highly developed case law system; as such it is very difficult to be certain as to whether or not
there is a specific Zambian authority on a particular point. Where there is no local judicial authority, the Zambian courts
may consider case law from other jurisdictions, including England and other commonwealth countries which follow the
English common law like Kenya, Uganda, India and Australia. As a matter of practice, English case law and cases from other
commonwealth countries are often cited in court proceedings although they only play a persuasive function and are not
binding on the courts. It must be noted, however, that when dealing with a Zambian law matter, one is advised as much
as possible to obtain Zambian authorities in support of the claim.
Created under the Constitution of Zambia, the Judiciary consists of the Supreme Court of Zambia; the High Court of
Zambia; the Industrial Relations Court; the Subordinate Courts; Small Claims Courts, the Local Courts; and such lower
courts as may be prescribed by an Act of Parliament. The High Court of Zambia has original and unlimited jurisdiction over
all claims except cases specifically reserved for the Industrial Relations Court. It is also an appellate court. The Industrial
Relations Court is specifically reserved for matters arising out of any labour and industrial matter such as trade union actions
or employment law matters. An appeal from the Industrial Relations Court lies with the Supreme Court. The Supreme
Court of Zambia has appellate jurisdiction only (except in matters involving presidential petitions) and is the highest court
in Zambia. Appeals from the decisions of the High Court also lie with the Supreme Court.
The lower courts consist of the Magistrates’ Courts. An appeal from a decision of the magistrate’s court lies to the High
Court with a final appeal to the Supreme Court. There are also various tribunals such as the Lands Tribunal, the Town and
Country Planning Tribunal, Competition and Consumer Protection Tribunal, Information and Communication Technology
ad hoc Tribunal and the Revenue Appeals established under various statutes to deal with specific matters and whose
decisions may or may not be subject to appeal. Judgments of the superior courts of record (the High Court of Zambia and
the Supreme Court) are binding on the subordinate courts.
The Judiciary of Zambia
This court is a division of the High Court which is meant to deal with actions arising out of commercial transactions alone.
Litigation in the Commercial Court is optional, provided the matter is of a commercial nature. All commercial matters are
registered in the Commercial Registry. The Commercial Registry is advantageous as it is a very quick way of dealing with
commercial disputes. Furthermore, the judges dealing with the matters in the Court are experienced in commercial law;
appeals from the Commercial Court lie to the Supreme Court.
Commercial Courts
Investment Guide 2015 - Zambia
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Arbitration in Zambia is governed by the Arbitration Act No 19 of 2000 (The Act) which repealed the 1933 Arbitration
Act. The Act has taken a number of strides towards adopting and incorporating several international legal instruments
into its own municipal laws, on arbitration. The Zambia Centre for Arbitration, Conciliation and Mediation is one of the
organisations that deals with arbitration in Zambia. Zambia is also a member state to the treaties, establishing international
bodies and forums that deal with Alternative Dispute Resolution. One such body in which Zambia is a member state is the
International Centre for the Settlement of Investment Disputes.
In Zambia, parties, or the court in certain instances, may submit a dispute to mediation. Mediation in Zambia involves a
third neutral party, whether one person or more, who acts as a facilitator to assist in resolving a dispute between two or
more parties. The mediator assists the disputing parties in communicating their positions and exploring possible solutions
or settlements.
It is possible to enforce some foreign judgments in Zambia. The Foreign Judgments (Reciprocal Enforcement) Act, Chapter
76 of the Laws of Zambia (FJREA) provides for such enforcement. Certain foreign judgments are enforceable in Zambia
if they originate from countries whose courts are recognised under the FJREA; a superior court of a reciprocating country
(a commonwealth country), a superior court of any other reciprocating country which is specified in an order made under
section 13 of the FJREA or a subordinate court of a reciprocating country which is specified in an order made under the
FJREA. Furthermore, section 3 of the FJREA empowers the President to declare a country to be a reciprocating country
where the President is satisfied that that country has made or will make provisions for the enforcement in that country of
judgments given by superior courts in Zambia. The Act currently recognises the Gilbert and Ellice Islands, and the British
Solomon Islands as the two reciprocating states. For a foreign judgment to be recognised by the Zambian courts under the
FJREA it has to be registered in the High Court of Zambia upon the making of an application to that effect. Section 4 of the
FJREA sets out elaborate rules detailing the application for registration, which should be done within six (6) years from the
date of the judgment save where the judgment is subject to appeal in which case the six (6) year period runs from the date
of the determination of the appeal.
Even after registration of a judgment, such registration can be set-aside on various grounds set out in Section 7 of the
FJREA. However, there are certain instances when the Zambian courts will not consider a matter adjudicated upon in a
foreign judgment as conclusive. These instances include:
• where a foreign court lacked jurisdiction to adjudicate on the matter the subject of its judgment;
• where the merits of the case were not considered by the foreign court;
• where the proceedings in the foreign court were in contravention of the rules of natural justice;
• where the judgment was obtained by fraud; or
• where the judgment sustains a claim founded on a breach of any law in force in Zambia.
It must be noted that aside from the states recognised under the FJEA, it is not possible to enforce a foreign judgment
without commencing a fresh action.
Arbitration
Mediation
Enforcement of Foreign Judgments
Alternative Dispute Resolution
Investment Guide 2015 - Zambia
9
Promotion and Regulation of Foreign Investment
Overview
Investment Under The Zambia Development Agency Act
Zambia has now opened the doors for foreign investment both in terms of foreign direct investment and portfolio
investment. In line with the economic reforms, Zambia is encouraging private investment in all major productive sectors
including agriculture, mining, manufacturing, tourism and energy. It has introduced new economic policy measures,
liberalised open market trade and investment conditions. Export processing zones have been established and applications
for zoning are being encouraged. Zambia also has numerous opportunities for investment in the agro-industry (horticulture
and floriculture, tobacco-processing, cotton-ginning, crop production for the processing industries); in industry (consumer
goods); in tourism (holiday accommodation, managed safaris, licensed hunting safaris and organised holidays).
In a bid to encourage investment in Zambia, the Parliament has enacted a number of statutes that are meant to facilitate
and promote investment within the Zambian economy. The primary legislation for investment in Zambia is the Zambia
Development Agency Act, No. 11 of 2006 (ZDA Act).
The ZDA Act provides for the establishment of the Zambia Development Agency (the Agency). The Agency is pivotal
to the economy in that it functions to foster economic growth and development by promoting trade and investment in
Zambia, through an efficient, effective and coordinated private sector. The ZDA Act also aims at streamlining bureaucratic
procedures and requirements faced by investors. It facilitates industrial infrastructure development and local services as
well as, promotes greenfield investments through joint ventures and partnerships between local and foreign investors.
The Agency also ensures that the private sector takes advantage of the benefits from international and regional trade
agreements.
There is a requirement under the ZDA Act for any person wishing to develop premises as a multi-facility economic zone,
export prescribed goods and services, invest in any business enterprise, register a micro or small business enterprise,
education enterprise, skills training enterprise or rural business enterprise, or operate a business enterprise in a multi-facility
economic zone, to apply in the prescribed manner, to the Agency for approval of such undertaking either by way of licence,
permit or certificate of registration.
Incentives Available To Foreign Investors
In a bid to promote investment in Zambia, the ZDA Act provides for a number of substantial incentives available to both
local and foreign investors. These incentives are valid for a period of five years from the time the licence or permit is granted
by the Agency. The first form of incentive given under the Act involves taxation; an investor who invests not less than US$
500,000 or the equivalent in convertible currency, in a priority sector or product, is entitled to incentives as specified by or
under the Income Tax Act, Cap. 323 or the Customs and Excise Act, Cap. 322. Furthermore, any machinery or equipment
acquired by a business enterprise conducting operations in a priority sector, priority products, or a rural enterprise will be
entitled to exemption from customs duties as specified by the Customs and Excise Act.
Where a major investment occurs, the Finance minister may specify additional incentives for investment in an identified
sector or product of not less than US$10,000,000, or the equivalent in convertible currency, in new assets that qualify for
those incentives.
Investment Guide 2015 - Zambia
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Protection From Compulsory Acquisition of Property
Foreign Ownership of Land
The ZDA Act also contains provisions which seek to not only promote foreign investment, but also protect investors.
This is especially true in matters involving an investor’s property. The Act states that an investor’s interest in or right over
property will not be compulsorily acquired. However, in instances where there is a public purpose related to the acquisition,
compulsory acquisition may be allowed provided that payment of compensation for such acquisition is made to the investor.
This compensation must be made promptly at the market value and shall be fully transferable at the applicable exchange
rate in the currency in which the investment was originally made, without deductions for taxes, levies and other duties,
except where those are due.
All land in Zambia vests in the President absolutely for and on behalf of the people of Zambia. The President may thus
alienate land vested in him to any Zambian. However, the Lands Act, Cap. 184 places a number of restrictions on the
allocation of land to foreigners by the President of the Republic. Under Section 3 (3) (b) holders of investment licenses may
own land. The ZDA Act also makes provision for the ownership of land by investors. The Agency in consultation with the
Ministry of Lands is empowered to assist an investor in identifying suitable land for investment, as well as assist that investor
to apply to the responsible authorities for land, in accordance with established procedures.
Conversion and Transfer Policies
Investors are free to repatriate capital investments as well as dividends, management fees, interest, profit, technical fees, and
royalties. Foreign nationals can also transfer and/or remit wages earned in Zambia without difficulty. There is no exchange
control in Zambia for anyone doing business as either a resident or non-resident. Additionally, there are no restrictions on
non-cash transactions. Over-the-counter cash conversion of the local currency, into foreign currency is restricted to a US$
5,000 maximum per transaction per day for account holders and US$ 1,000 for non-account holders.
Sole Proprietorships
A sole proprietorship is advantageous in Zambia due to a number of reasons including the fact that from a tax point of view,
a sole proprietorship does not pay corporate tax but rather the sole proprietor pays income tax.
Business Organisations
Partnerships
The Zambian law which governs partnerships is the English Partnership Act of 1890 which is applicable to Zambia by
virtue of the English Law (Extent of Application) Act, Cap. 11. The statutory law contained in the Partnerships Act has
been supplemented and interpreted by judicial decisions and general principles of common law. The Companies Act of
Zambia prohibits the formation of an association or partnership consisting of 20 or more persons where such association
or partnership is not a body corporate. This provision however does not apply to a partnership formed for the purpose of
carrying on a prescribed profession or calling.
Investment Guide 2015 - Zambia
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Companies
Companies in Zambia are regulated under the Companies Act, Cap. 388. There are various types of companies that can be
formed in Zambia; this includes a company limited by shares, a company limited by guarantee and an unlimited company.
In practice, however, unlimited companies are rarely formed in Zambia. Furthermore, a company in Zambia can be classified
either as a private company or a public company. A “private company” means a private company limited by shares, a
company limited by guarantee or an unlimited company. On the other hand, a “public company” means a company
incorporated as such, being a company satisfying Section 14 of the Companies Act.
In terms of company incorporation, any two or more persons associated for any purpose may form an incorporated company
by subscribing their names on an application for incorporation that satisfies provisions of the Companies Act and lodging it
with the Registrar of the Patents and Companies Registration Agency, together with the following documents:
• any proposed articles of the company
• a statutory declaration
• a signed consent from each person named in the application as a director or secretary of the company
• a declaration of guarantee by each subscriber, if the company is to be limited guarantee
Cooperative Societies
A cooperative society is a form of business association which is usually undertaken by communities trying to achieve social,
economic and cultural needs while members maintain democratic control. The Cooperative Societies Act, Cap. 397 is the
primary legislation governing cooperative societies in Zambia. The Act does not set out what type of cooperative society
can be registered under it. The Act however, gives the impression that only one type of cooperative could be formed under
the Act, namely; a private cooperative limited. The cooperatives may be limited by shares. A cooperative limited by shares
is one which the liability of the members (shareholders) is limited to the amount unpaid for the shares.
Specific Sector Investment
Overview
The Government actively supports, facilitates and rewards new companies in all sectors of enterprise. This support is equally
available to indigenous and foreign-based companies without any discrimination whatsoever against offshore companies.
Large and small enterprises are equally welcome. The ZDA Act guarantees foreign investment against compulsory acquisition
or nationalization without compensation. Time-wasting procedures that may confront foreign investors elsewhere have been
greatly eliminated in Zambia and legal requirements have been reduced to an absolute minimum. Streamlined processing of
paperwork and rapid decisions, guided by the Agency, greatly facilitate all aspects of importation of equipment and export
of products. Prime growth sectors for investment are manufacturing, agriculture and agro-processing, tourism and mining.
Others offering potential investment opportunities include: construction, transportation, energy, telecommunications and
IT services.
Investment Guide 2015 - Zambia
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Agriculture
In the Fifth National Development Plan, agriculture remains the key priority in the growth and poverty reduction programme
of Zambia. The Government has been implementing institutional reforms aimed at liberalising the agricultural markets and
encouraging the private sector to take the lead in agricultural sector development. Under these institutional reforms, the
Government’s focus is on providing public goods that are needed for efficient sector growth, such as rural infrastructure,
research, extension and pest and disease control. Agri-business is also being encouraged to strengthen linkages with
smallholder farmers through increased private sector participation in agricultural service delivery, such as in input supply,
output marketing and agro-processing. Ownership of agricultural land will depend on the particular land registration
regime.
Ownership of land and dealings in agricultural land are restricted. As discussed above, the Lands Act prohibits ownership
of land by a foreigner unless the foreigner falls within the listed exceptions outlined in the Act. One such exception relates
to foreign investors. Basically, it allows a foreigner to own land if such foreigner is an investor.
Banking and Financial Services
The banking industry is governed by the Banking and Financial Services Act, Cap. 387 and the Bank of Zambia Act, Cap.
360. The banking industry is regulated by the Bank of Zambia. There are several commercial banks in Zambia and other
non-bank financial institutions like building societies. However, the banking industry is dominated by four (4) major banks
being Zambia National Commercial Bank Limited (a local bank which is a listed company), Barclays Bank Zambia Limited,
Standard Chartered Bank Zambia Limited which are subsidiaries of Barclays Bank Plc and Standard Chartered Bank Plc
respectively and Stanbic Bank Zambia Limited. A few international banks have established branches and subsidiaries in
Zambia. Zambia also has various Micro-finance institutions.
Opening and Operating Bank Accounts
There are no restrictions per se in opening or operating a bank account in Zambia other than complying with the relevant
bank’s own account opening requirements which follow international best practices. Documents that will generally be
required in order to open a bank account include incorporation documentation, introduction references, photographs
of authorised signatories, a copy of the Taxpayer Personal Identification Number and board resolutions authorising the
opening of the account.
The banking industry is governed by the Banking and Financial Services Act, Cap. 387 and the Bank of Zambia Act, Cap.
360. The banking industry is regulated by the Bank of Zambia. There are several commercial banks in Zambia and other
non-bank financial institutions like building societies. However, the banking industry is dominated by four (4) major banks
being Zambia National Commercial Bank Limited (a local bank which is a listed company), Barclays Bank Zambia Limited,
Standard Chartered Bank Zambia Limited which are subsidiaries of Barclays Bank Plc and Standard Chartered Bank Plc
respectively and Stanbic Bank Zambia Limited. A few international banks have established branches and subsidiaries in
Zambia. Zambia also has various Micro-finance institutions.
Opening and Operating Bank Accounts
There are no restrictions per se in opening or operating a bank account in Zambia other than complying with the relevant
bank’s own account opening requirements which follow international best practices. Documents that will generally be
required in order to open a bank account include incorporation documentation, introduction references, photographs
of authorised signatories, a copy of the Taxpayer Personal Identification Number and board resolutions authorising the
opening of the account.
Investment Guide 2015 - Zambia
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The Insurance Industry
There are approximately twenty (20) insurance companies and three (3) re-insurance companies operating in Zambia. The
governing statute for insurance matters is the Insurance Act, No. 27 of 1997.
Other Financial Sectors
Zambia has a few investment banks which are licensed and regulated by the Securities and Exchange Commission (SEC).
An example of an investment bank operating in Zambia is the Bank of China.
The Capital Markets
The primary legislation dealing with capital markets is the Securities Act, Chapter 354 of the Laws of Zambia. The SEC is
established under the Securities Act. SEC licenses securities exchanges, dealers, investment advisers and their respective
representatives and persons who are, according to the Securities Act, non-bank custodians or service registrars.
The Lusaka Stock Exchange (LuSE) was formed in 1993 with the help of the World Bank and the International Finance
Corporation and is a member of the African Stock Exchanges Association. The formation of LuSE was part of the Government’s
economic reform programme aimed at developing the financial and capital market in order to support and enhance private
sector initiative. Being the umbrella under which the entire securities market operates in Zambia, the Securities Act creates
and defines a central market in which both unlisted and listed securities can be traded.
Energy
Zambia has an abundance of energy resources. The most important source of energy is electricity, which is generated by
three major hydroelectric power stations. Other endowments in Zambia’s energy sector include coal, woodlands and forests
as well as other renewable energy forms such as solar and wind. Zambia has an estimated hydropower capacity of 6,000MW,
of which only about 1,640 MW has so far been installed. This represents only 30 percent of the total capacity. Hydroelectric
plants account for 92 percent of the total installed capacity and 99 percent of the total electricity generated in the country.
So far there are only two important inter-connectors to Zimbabwe and the Democratic Republic of Congo which are the
key electricity export grids. With the liberalisation of the economy, the Government has amended legislation affecting
generation, transmission, distribution and supply of electricity thus allowing private sector entry. Potential opportunities
identified are Kafue Gorge Lower Hydroelectric Project, Itezhi-tezhi Hydroelectric Project, Zambia-Tanzania Interconnector
and Zambia-Namibia Interconnector. Exploration potential for hydrocarbons (oil and gas) is one area that has not been fully
tapped - hydrocarbon source rocks are proven and are preserved in all basinal areas of Zambia. The Government welcomes
active participation from prospective investors with modern technological expertise.
Mining
Zambia has enormous reserves of copper-cobalt ore and the country is the fourth largest producer of copper metal. Gold,
nickel, lead-zinc, iron and manganese are also mined. In addition, Zambia is endowed with high quality gemstones
- emerald, amethyst, aquamarine, rubies, garnets and diamonds - which are still largely unexploited. With the privatisation
of the mining sector, potential opportunities have become very attractive.
Mining Legislation
The primary law governing the mining sector in Zambia is the Mines and Minerals Development Act, No. 7 of 2008 (Mines
Act). The Mines Act provides for mining rights, mining licences, large scale mining in Zambia, gemstone mining, safety,
health and environmental protection, geological services and analysis, royalties and charges as well as administration of the
mining sector in Zambia. All rights of ownership in, searching for, mining and disposing of, minerals in Zambia are vested
in the President on behalf of the Republic.
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Mining Rights and Licences
There is a strict requirement that a person shall not prospect for minerals or carry on mining operations or mineral processing
operations without the granting of a mining right or mineral processing licence under the Mines Act. Further, two kinds of
non-mining rights may be granted in Zambia: a mineral processing licence and a gemstone sales certificate.
In the case of a company, mining rights cannot be granted to a company which:
a. is in liquidation, other than liquidation which forms part of a scheme for the reconstruction of the company or for its
amalgamation with another company;
b. is not incorporated under the Companies Act; or
c. has not established an office in Zambia.
A prospecting permit, small-scale mining licence, small-scale gemstone licence and an artisan’s mining right cannot be
granted to a person who is not a citizen of Zambia or a company which is not a citizen-owned company.
Preference for Zambian Products
The Mines Act offers preferential treatment to Zambian products, materials and service agencies owned by Zambian citizens
in the conduct of operations under mining rights or mineral processing licences, and in the purchase, construction and
installation of facilities, to the maximum extent possible. Additionally, a licence or right holder is expected to give preference
in employment to citizens of Zambia to the maximum extent possible.
Royalties on Mineral Production
There is a requirement for licence holders to pay royalties under the Mines Act. It states that a holder of a large-scale mining
licence, large-scale gemstone licence, small-scale mining licence, small-scale gemstone licence or an artisan’s mining right
must pay a mineral royalty. There is also a requirement for persons who hold licences under the Mines Act to pay annual
charges to the Government. The amount varies and is calculated in a manner prescribed by a statutory instrument issued
by the Minister of Mines.
Duration and Tenure
Large-scale and small-scale mining licences are granted for a term not exceeding twenty-five years and ten years respectively,
and are renewable for further terms. Holders of mining licences are further required to obtain an operating permit annually
in order to conduct mining operations.
Tax Stability Agreements
Prior to the commencement of the Mines Act, investors were able to enter into development agreements with the
Government under which concessions were provided for generally, in the form of suspension or reduction of all main taxes
and tax stability periods.
Following the enactment of the mining act, however, the development agreements were outlawed and the Minister of
Mines could no longer enter into any agreement relating to the grant of a large scale mining licence or any other mining
right. Furthermore, the Mines Act now provides that existing development agreements ceased to bind the Republic.
Real Estate
There is currently a property boom in Zambia. More and more people are looking to buy or rent property and the demand
for apartments and houses has grown exponentially.
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The system of land registration which Zambia adheres to reflects every piece of land on a diagram (called a survey diagram)
and the ownership recorded in the Deeds Registry at the Ministry of Lands where documents are available for public
viewing. Zambia deeds registration systems are continually improved with investment in technology, an exceptional degree
of accuracy and security of tenure being guaranteed. Property can be owned individually, jointly in both divided and
undivided shares, or by an entity such as a company, close corporation or trust or similar entity registered outside Zambia.
Telecommunications
There have been major developments in the ICT sector in Zambia. The number of subscribers for mobile telephones has
increased remarkably. The number of internet service providers has also greatly increased. However, the telecommunications
sector has potential for more growth. The telecommunications sector in Zambia falls under the Ministry of Information and
Communications. The sector is primarily governed by the Information and Communications Technologies Act, No. 15 of
2009 (ICT Act). The ICT Act is basically intended to regulate the provision of telecommunication services to, from and
within Zambia through the Zambia Information and Communications Technology Authority (ZICTA), formerly called the
Communications Authority. ZICTA is a body corporate with a common seal and capable of suing and being sued. The Act
is intended to provide for the regulation of information and communication technology. It also facilitates the access to
information and communication technologies. The ICT Act further protects the rights and interest of service providers and
consumers. The ICT Act merges the former segments of telecommunications, information and information technology.
The mentioned segments have now become one in terms of both the delivery of infrastructure and consumer gadgets. For
instance, a cellular telephony which used to be a telecommunication device can now be used as a television/radio set as
well as a computer. ZICTA mainly regulates the provision of electronic communication services and products and monitors
the performance of the sector, including the levels of investment and the availability, quality, cost and standards of the
electronic communication services. One important aspect of the ICT Act is that in exercising the powers conferred upon it
under the ICT Act, ZICTA is required to have regard to the provisions of the International Telecommunications Convention
signed in November, 1982, or any other convention on, or relating to, telecommunication, to which Zambia is a party.
Licences
ZICTA is empowered to issue a network licence, to allow the holder to construct, own or make available an electronic
communications network, or to provide a network service; and a service licence, to allow the holder thereof to provide
one or more electronic communications services. Pursuant to the ICT Act, any person may apply for a telecommunications
licence, whether that licence is a service licence or a supplier’s licence. There are two classes of licences that can be issued by
ZICTA: an individual licence and a class licence. The transfer of a licence by a licensee is allowed as long as ZICTA’s consent
is obtained. In 2010, an amendment to the ICT Act was made with regards to tariffs for services offered by the licensee
holding a dominant position in the sector. Basically, the ICT Act states that a licensee that holds a dominant position in a
retail electronic communications market must submit to ZICTA in the prescribed manner and form, the tariffs the licensee
intends to charge, including the justification for such prices, prior to the introduction of the tariffs. ZICTA is then required
to approve or reject such an application within 14 days of the receipt of the application.
Recent Changes in Telecommunications Laws
Electronic Communication and Transaction Act, No. 21 of 2009 (ECT Act)
The Zambian legislature in 2009 enacted the ECT Act in order to develop a safe, secure and effective environment for
consumers, the business sector and the Government to conduct and use electronic communications. More importantly,
the ECT Act creates legal certainty and confidence, and encourages investment and innovation, in the electronic
communications industry by placing a number of legal rules and requirements that must be met in matters that relate to
electronic communications and transactions. It also facilitates the creation of secure communication systems and networks
and establishment of the Central Monitoring and Coordination Centre (CMCC).
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New Services by Mobile Phone Providers
Mobile phone providers are rolling out other services besides the provision of telephone services in order to attract and
retain their customers. Most notable is the provision of mobile banking; where a customer is able to use his SIM card to send
and receive money instantly. The mobile phone companies have also linked the service to some automated teller machines
thereby allowing the mobile users to easily withdraw funds. So popular is the service that some organisations are even using
it to pay utility bills as well as school fees. The transfer of funds using mobile phones remains largely unregulated since
there are no provisions under the existing legal framework dealing with its regulation. However, due to the large volumes
of funds that are being transferred using this method, there is growing concern that this new service needs to be regulated.
Tourism
The tourism sector is one of the most thriving and vibrant sectors in the country. Zambia’s potential as a one-stop
destination offers excellent prospects for advancement of this highly under-developed sector. With 19 national parks,
23 game management areas, the largest water-fall in the world, and 23 million hectares devoted to the conservation of
a spectacular variety of animals, the scope for an integrated quality tourism related investment is very attractive. Wildlife
such as elephants, leopards, lions, cheetahs, rhinoceroses, zebras, giraffes, hippopotamuses, crocodiles, buffaloes, impalas,
antelopes, baboons and a host of smaller creatures as well as over 700 species of birds can be seen. Opportunities to
promote adventure holidays, white-water rafting, canoeing, rock-climbing, hand-gliding, fishing, bungee jumping at
Victoria Falls including its unique walking safaris offer excellent tourism potential.
Tourism Act
The tourism industry in Zambia is regulated by the Tourism and Hospitality Act, No. 23 of 2007 of the laws of Zambia
(Tourism and Hospitality Act). The Tourism and Hospitality Act is intended to provide for the development of the tourism
industry; incentives for investors in the tourism industry; the control and regulation of hotels and the enforcement of
reasonable standards of cleanliness, sanitation and service; the authorisation and licensing of tourism enterprises and the
constitution of the hotel managers registration council.
Water
The major enactment relating to and governing the usage and maintenance of water is the Water Resources Management
Act, No. 12 of 2011. Through this Act, the Water Resources Management Authority was established. Its functions include
the identification, preservation and protection of potential and already existing sources of fresh water and the environment
in general.
Company Formation and Corporate Governance
Company Law
The principal statute dealing with company law is the Companies Act. The Companies Act sets out provisions dealing
with all aspects of company law including the incorporation of companies generally, share capital provisions, shareholders
rights, offers to the public, the management and administration of companies, accounts, directors duties, consequences of
winding up and the regulation of foreign companies based in Zambia. A company incorporated outside Zambia which has
established a place of business in Zambia must apply to be registered as a foreign company pursuant to the Companies Act.
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A foreign investor can set up a place of business in Zambia by setting up a branch or the incorporation of a company. For
purposes of corporate taxation, a company is deemed to be a resident in Zambia if the company is incorporated in Zambia;
or the central management and control of the company during a particular fiscal year was conducted in Zambia.
Further, where a non-resident company has a permanent establishment in Zambia (e.g. a branch or a project office) it will
be taxed on the same rate as resident companies. Therefore, corporate income tax is at a rate of 35% generally, for both
resident and non-resident companies. It is however worth noting that companies involved in agriculture, manufacture of
chemical fertiliser and non-traditional exports pay tax at a rate of 10%. Mining companies are taxed at a rate of 35% while
banks with profits of over ZMW 250, 000, 000.00 (US$ 48,126) are taxed at a rate of 40%.
Incorporating a Company
The alternative to setting up a branch in Zambia is to set up an independent company or a subsidiary which unlike a branch
will be a separate legal entity from its holding company. Generally speaking, both private and public companies are required
to satisfy minimum capital requirements. Private companies are required to have a minimum of ZMW 5,000 as their capital
and this requirement is deemed to have been met upon a director of the company lodging a signed declaration to the
Registrar of Companies (that this statutory requirement had been met). In the case of public companies, the nominal value
of the company’s allotted share capital is required to be not less than the authorised minimum that is ZMW 50,000. A
company can increase or reduce its share capital if authorised by its articles.
Sourcing of Capital for a Limited Liability Company
A company can source for capital either through issuing shares or through debt financing. Share capital is obtained by the
company through issuing shares and receiving payment for those shares. The Companies Act (Amendment) Act, Cap. 388
in section 208 stipulates residential requirements for directors; the Act provides that half of the directors should be resident
in Zambia including a managing director and an executive director (if the company has one).
Protection of Minority Shareholders
Zambian company law has in place mechanisms to protect minority shareholders from being defrauded or oppressed
by the majority/controlling shareholders. While the day to day management of a company is generally delegated to the
board of directors of a company, conduct of the members (shareholders) relationship inter se is governed by provisions of
the Companies Act and more particularly the articles of association of a company. Both case law and statutory provisions
reinforce the rights of minority shareholders.
General Business and Investment Environment
Business Regulatory Act, No. 3 of 2014
The Business Regulatory Act was passed to compliment laws that generally regulate business. Its purpose is to introduce
a licensing system and licensing principles that all regulatory regimes must adhere to. It is further supposed to introduce
regulatory service centres at which all regulators are to have a presence or an affiliation with, for all applications for licences,
permits, certificates and authorisations to be processed. Most importantly, regulators are required to only put in place
regulatory regimes that fulfill legitimate regulatory purposes.
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Licensing Regime
A company is required to register with the Zambia Revenue Authority (ZRA) for income tax purposes and obtain a TPIN.
Upon a TPIN being generated by ZRA, it is presented for collection as a certificate. Various categories of businesses are
required to register for TPIN; these include companies, partnerships, individuals (sole proprietorships), non-governmental
organisations, clubs, associations and other similar organisations registered with the registrar of societies.
Taxpayer Personal Identification Number (TPIN) Certificate
A company is required to register with the Zambia Revenue Authority (ZRA) for income tax purposes and obtain a TPIN.
Upon TPIN being generated by ZRA, it is presented for collection as a certificate. Various categories of businesses are
required to register for TPIN; these include companies, partnerships, individuals (Sole Proprietorships), non-governmental
organisations, clubs, associations and other similar organisations registered with the registrar of societies.
VAT Registration
Limited companies are required to apply for VAT registration if they deal in taxable goods and services and their taxable
turnover exceeds the registration threshold of ZMW 800,000 per annum. This application can only be done following
the TPIN registration. The application is done through the filling in of VAT Form 1 which should be accompanied by the
TPIN, a sketch map of location, the latest bank statement, a copy of the business plan, a certified copy of the certificate
of registration or incorporation and evidence of records such as the cashbook, purchases daybook, sales daybook, invoice
books etc. VAT registration like any other under ZRA is free. A VAT number can be allocated within 7 working days.
Trading and Manufacturing Licences
Environmental Impact Assessments
A company undertaking any trade or manufacturing is required to obtain a licence under the Trades Licensing Act. Section
18 A of the Trades Licensing Act requires that licence holders under the Act should submit to the Licencing Authority details
such as the physical address of the place where the licence holder conducts his business or trade. The information obtained
by the Licensing Authority is forwarded to the Commissioner General of the Zambia Revenue Authority at the time when
the licence expires or is renewed.
Generally speaking, environmental issues are governed by the Environmental Management Act, No. 12 of 2011. This
Act provides for various matters including the granting of licences for the discharge of effluent, emissions and for the
operation of waste disposal sites/plants. Furthermore, the Environmental Impact Assessment Regulations pursuant to this
Act impose an obligation on any person intending to implement any project, to prepare and submit a Project Brief to the
Zambia Environment Management Agency (ZEMA) for approval. ZEMA may on receipt of a Project Brief direct that an
Environmental Impact Statement should be prepared by the developer if ZEMA determines that the project is likely to have
an adverse impact on the environment. Such a statement would be required, even if the developer is undertaking any
project as part of a previously approved project.
Other Licences
Depending on the particular commercial activity a company is engaged in, there may be other industry-specific licences,
approvals or permits that the company would be required to obtain. For instance, in sectors such as telecommunications
and energy.
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Currency and Exchange Rate
Zambia operates a floating exchange rate against foreign currencies. Therefore, the exchange rate between the ZMW
and other countries is determined by market forces, subject of course to interventions from time to time by the Bank of
Zambia (BOZ). BOZ and commercial banks usually publish on a daily basis the selling and buying prices for various leading
currencies.
Zambia’s competition law is governed by the recently enacted Competition and Consumer Protection Act, No. 24 of 2010
(Competition Act). The scope of the Act is wide and as such applies to all economic activity within Zambia. It binds the state
insofar as an enterprise owned by the state engages in trade or business for the production, supply, or distribution of goods
or the provision of any service within a market that is open to participation by other enterprises.
The Competition Act is basically intended to ensure fair trade competition and free flow of truthful information in the
market place. The Competition Act forbids any agreement which has as its object or effect, the prevention, restriction or
distortion of competition to an appreciable extent. Also, an agreement between enterprises is prohibited if the commission
determines the agreement has the effect of preventing, distorting or restricting competition or substantially lessening
competition in a market for any goods or services in Zambia.
Competition
An Export Processing Zone (EPZ) is a “special economic zone” and is established under the Exporting Zones Act (EPZ Act),
No 7 of 2001. The Export Processing Zones Authority (the EPZ Authority) was established under the EPZ Act to develop
export processing zones to facilitate the development of export processing zones by developers and investors; to consider
and determine applications for licences under the Act and to issue such licences, assist applicants for licences under the Act
by providing services for obtaining other relevant licences, permits and facilities; to administer, control and regulate export
processing zones and to ensure compliance with the Act and any other laws relevant to the activities of export processing
zones; and to monitor and evaluate the activities, performance and development of enterprises zones.
The EPZ Authority acts as a “one-stop” centre through which the EPZ enterprises can channel all their applications for
permits and licences. The activities eligible to be carried out within EPZs include manufacturing activities, commercial
activities or service activities. Real estate developers may set up their EPZs by obtaining a licence to develop or operate a
zone on land gazetted as an EPZ.
Special Economic Zones
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Income Tax
Income tax in Zambia is chargeable pursuant to the provisions of the Income Tax Act, Cap. 323 (ITA). Personal income
tax is paid by people resident or deemed to be resident in Zambia. Pay As You Earn is the method for collection of income
tax from persons who are gainfully employed as the employer is required to deduct the tax from the individual’s salary or
wages and remit the same to the ZRA. In addition, income tax is charged directly on profits made by corporate bodies such
as limited liability companies and trusts. Therefore, businesses are subject to corporate income tax on trading profits and
other taxable income such as interest, royalties and rental income.
In general, expenses and losses of a revenue nature that are wholly and exclusively incurred for the purpose of the business
are allowable as deductions. For other sources, to be deductible, expenses must have been incurred wholly and exclusively
in the production of the income from that source. The ITA sets out the matters to be considered in the determination of
taxable income and also sets out the rates of taxation. The rates do not differ between resident and non-resident entities.
The corporate income tax rates are currently at 35%. It is worth noting that a 1 year 2% discount is granted to newly listed
Companies on LuSE.
Tax
Withholding Tax
Withholding tax is payable on dividends, interest, royalties and management fees.
Property Transfer Tax
Double Taxation Arrangements
This is a type of tax imposed by virtue of the Property Transfer Tax Act, Cap. 340. The rate of property transfer tax according
to the Act is charged at ten per cent (10%) of the realised value of the property.
Zambia has double taxation relief agreements with Canada, Denmark, Finland, France, Germany, Holland, Ireland, Italy,
Japan, Kenya, Mauritius, Romania, South Africa, Sweden, Tanzania, Uganda, the United Kingdom, Norway, Zimbabwe and
India (please note that the agreements with the last three states have not yet been ratified).
Labour Supply
Zambia is estimated to have a population of about 15.02 million and the majority of the population constitutes persons of
an employable age. Although the labour supply is high in Zambia, the demand does not match the supply as is indicated
by the high levels of unemployment. Primary schooling is free while tertiary education in government institutions is heavily
subsidised by the Government.
Labour Relations
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Labour Laws
The Employment Act, Cap. 268 (Employment Act).
The Employment Act principally makes provision for the employment of persons; for the engagement of persons on
contracts of service; for the form of and enforcement of contracts of service; for the appointment of officers of the labour
department and for the conferring of powers on such officers and upon medical officers; for the protection of wages of
employees; for the control of employment agencies; and for any matters incidental thereto.
Section 12 of the Employment Act prescribes a minimum contractual age; the employment of any person below the age of
15 is therefore an offence. This provision excludes contracts of apprenticeship entered into with minors that are approved
by the Controller in accordance with the Apprenticeship Act, Cap. 275. Unlike the Employment Act, a minor under the
former Act is any person below the age of 21.
Section 45 of the Act provides for authorised deductions; therefore it is permissible for the employer to make deductions
from the employee’s salary of a specific nature. There is no threshold stated in the Act above which the employer is
proscribed from exceeding. The Employment Act (in section 15A) provides that unless the parties to the employment
contract have agreed otherwise, every female employee who has completed at least two years of continuous service with
her employer from the date of first engagement or since the last maternity leave taken, as the case may be, shall, on
production of a medical certificate as to her pregnancy signed by a registered medical practitioner, be entitled to maternity
leave of twelve weeks with full pay. Maternity leave does not serve to forfeit any other leave such as annual leave, which
such an employee may be entitled to.
The Employment Act offers protection for employees in the case of redundancy. The employer is allowed to terminate the
contract of service on grounds of redundancy in instances where he ceases to carry on business by virtue of which the
employee is employed, or he ceases, or reduces the requirement for the employees to carry out work of a particular kind,
in the place where the employee was engaged and the business remains a viable going concern. The Act requires that the
employer fulfils certain conditions before he can terminate a contract of service on grounds of redundancy. Some of these
conditions include notifying the employee’s trade union.
Interestingly, the provisions relating to redundancy are only to be found in Part IV of the Act. This part of the Act is only
applicable to oral contracts and as such there are no provisions relating to redundancy applicable to written contracts of
service. The Zambian Supreme Court has pronounced its stance on the issue and as such, “the Employment Act does not
provide for redundancy procedures in relation to written contracts of service. Consequently, where a written contract of
service is to be terminated on grounds of redundancy, the parties are to rely on either the provisions relating to redundancy
procedures to be found in a Collective Agreement or in the contract of employment itself.”
Under the Employment Act, an employee’s contract of employment can come to an end upon summary dismissal. In relation
to both oral and written contracts of service, the Act makes provision for summary dismissal. In the former case, Part IV of
the Act provides that wherever an employer dismisses an employee summarily and without due notice or payment of wages
in lieu of notice, such an employer has to deliver a written report of the circumstances leading to and the reasons for such
dismissal to a labour officer within the District the employer was working within 4 days of the dismissal. The Employment
Act further provides that where an employee is summarily dismissed, he shall be paid on dismissal the wages and other
working or other allowances due to him up to the date of such dismissal. It is also worth noting that an employer is not
allowed to terminate the service of an employee on grounds related to his conduct or performance without affording him
an opportunity to be heard on the charges laid against him.
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Immigration is governed by the Immigration and Deportation Act, No. 18 of 2010. It is an Act that regulates the law relating
to immigration and immigration control. It regulates the entry, exit and remaining within Zambia of immigrants and visitors.
It also deals with the issuance and revocation of residence permits to applicants who meet the laid out criteria as prescribed
by the Act.
It is significant to note that under the ZDA Act, any foreign investor who invests a minimum of US$ 250, 000 or its equivalent
and employs a minimum of 200 employees (of certain technical or managerial levels) is entitled to a self-employment permit
or resident permit. The ZDA further assists the qualifying investor to obtain work permits for up to 5 expatriate employers.
An entry permit holder can apply to be granted a dependant’s pass for each of his dependants.
Immigration
Zambia has in the recent past experienced high levels of investment opportunity. With this occurrence, the need for
adequate legal provisions and safeguards has been felt now more than ever. The legislature has reacted to this and as
such has enacted laws which suit the investment climate both in the country and in the region. The law has consequently
undergone a lot of change, keeping abreast with changes in the law is therefore a necessity for any person wishing to enjoy
the full benefits of the investment ‘boom’ currently being experienced in Zambia.
Conclusion
Musa Dudhia & Co.
A: 3rd floor, Mpile Office Park 74 Independence Avenue
P: P.O. Box 31198, Lusaka, Zambia
T: +260 21 125 3822
F: +260 21 125 3827
ALN Head Office
A: 5th floor, The Oval
Corner of Ring Rd.,Parklands and Jalaram Roads, Westlands, Nairobi
P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya
T: +254 20 364 0000, +254 703 032 000
W: www.africalegalnetwork.com