Angola's Consumption Tax: Understanding The Basics

Angola's consumption tax, known as Value Added Tax (VAT), is a modern regime with a general rate of 14%. It came into force on 1 October 2019, replacing the previous consumption tax. The VAT system in Angola has provisions such as the captivation regime and/or refund through tax credit certificates. All entities with a turnover or goods import operations above a certain threshold are liable for the standard VAT regime and must assess VAT on the supplies of goods and services.

Angola's consumption tax was replaced by a Value Added Tax (VAT)

The previous consumption tax was a single-stage tax levied on imports and the production/manufacture of goods. On the other hand, VAT is a multi-stage tax, meaning it is applied at each stage of the supply chain, from production to distribution to consumption. This ensures that taxation occurs at every level of economic activity.

The introduction of VAT brought about significant changes to the taxation system in Angola. One of the most notable differences between the consumption tax and VAT is the range of goods and services subject to taxation. Under the consumption tax regime, only specified services were taxed. However, with the introduction of VAT, all services became subject to taxation, with certain specific exceptions. Additionally, the VAT system allows for the deduction of VAT borne by entities on their acquisitions, which was not possible under the previous consumption tax regime.

The VAT system in Angola also introduced a simplified VAT regime for smaller taxpayers with an annual turnover of up to $544,000. This regime provides a reduced VAT rate of 7% on the turnover amount and allows for the recovery of VAT incurred on acquisitions. The simplified regime aims to reduce the tax burden on smaller businesses and simplify their tax obligations.

The standard VAT regime applies to entities with a turnover or goods import operations higher than a certain threshold, which is currently set at AOA 350,000,000. These taxpayers are required to assess VAT on their supplies of goods and services and can generally deduct the VAT incurred on their purchases. Entities in the manufacturing industry are always subject to the standard VAT regime, regardless of their turnover or import value.

The standard VAT rate is 14%

Angola's consumption tax was replaced by a Value Added Tax (VAT) on October 1, 2019, with a standard VAT rate of 14%. This VAT rate is applied to almost all goods and services sold in the country, with some specific rules and exemptions.

The VAT system in Angola has a broad tax base and includes provisions such as the captivation regime and/or refund through tax credit certificates. The VAT rate of 14% is applied to the taxable value, which includes the cost of the goods or services, as well as any taxes, duties, and ancillary expenses.

Businesses are required to register for VAT in Angola, regardless of the number of sales made in the country. They must obtain a VAT registration number, which tracks their business activities and tax compliance. The registration process involves signing up through a local tax representative.

Once registered, businesses are expected to charge the 14% VAT rate on every sale to Angolan residents. This includes B2B and B2C transactions. To stay compliant, businesses should include specific information on their VAT invoices, such as their business name, address, VAT number, description of goods or services, the VAT rate applied, and the total amount including VAT.

Foreign businesses in Angola are required to file monthly tax returns and pay VAT by the end of the following month for the previous month's transactions. The VAT system in Angola provides clarity in tax calculation and control, with established procedures for returns, payments, assessments, objections, and appeals.

The VAT system has provisions like the captivation regime and tax credit refunds

Angola's consumption tax was replaced by a Value-Added Tax (VAT) system in October 2019, with a tax rate of 14%. The VAT system has provisions for taxpayers with an annual turnover of 350 million kwanzas or less (approximately $544,000), who can benefit from a simplified VAT regime. This regime allows for a reduced VAT rate of 7% on the sale of goods and services, as well as on services acquired from non-resident entities. It also enables taxpayers to recover 7% of the VAT incurred on purchases and to claim refunds of the corresponding VAT credit.

The captivation regime in the VAT system refers to the requirement for businesses to register and keep invoices in order to be eligible for VAT credits. This provides an incentive for businesses to maintain proper records and helps in ensuring compliance with the tax regulations.

The tax credit refunds in the VAT system allow taxpayers to recover input VAT that has been paid on purchases. This is an important feature of the VAT system as it ensures that the tax is only levied on the value added at each stage of the production and distribution chain. Taxpayers can claim refunds for excess input VAT credits, which is critical for a well-functioning VAT system. However, the process of claiming refunds can be complex and burdensome, and there may be delays or non-payment of refunds in some cases. To address these challenges, it is important for tax administrations to have effective strategies, processes, and capabilities in place to identify and prevent VAT refund fraud.

All entities with a turnover above AOA 350,000,000 are liable for the standard VAT regime

Angola's consumption tax was replaced by a Value Added Tax (VAT) on 1 October 2019. The VAT rate is 14% and is applied to large taxpayers (companies) for the first 18 months.

Entities in the manufacturing industry are always obliged to follow the standard VAT regime. However, those with a turnover or import of goods below AOA 10,000,000 may be exempt.

The standard VAT regime requires entities to:

• Assess VAT on invoices issued
• File a monthly VAT return and pay the VAT amount by the last working day of the month following the transactions
• Have organised accounting according to Angolan PGC (Angolan GAAP)

The simplified VAT regime, on the other hand, applies to taxpayers with a turnover or import operations of 350 million kwanzas or less in the previous 12 months. This equates to approximately £287,153.42 or $544,000. Under this regime, taxpayers must pay 7% VAT on non-exempt transactions and on services acquired from non-resident entities.

Foreign businesses must file tax returns monthly and pay VAT by the end of the following month

Angola has a Value-Added Tax (VAT) system with a standard rate of 14%. The VAT system in Angola has some provisions such as the captivation regime and/or refund through tax credit certificates.

Foreign businesses in Angola with a turnover or goods import operations higher than AOA 350,000,000 are liable to the standard VAT regime. These businesses are required to assess VAT on the supplies of goods and services and can deduct the VAT incurred on their purchases.

Businesses under the standard VAT regime must issue invoices, charging VAT for their taxable transactions. They must also maintain proper accounting records according to Angolan PGC (Angolan GAAP).

It is important to note that non-resident entities without a permanent establishment in Angola who carry out transactions liable to VAT are required to register in Angola and appoint a resident legal representative.

Frequently asked questions