Investing In Angola Today: The Usefulness Of A Double Taxation Agreement

Bruno Xavier de Pina PLMJ Africa Desk LMJ works in Angola under an International Cooperation with GLA – Gabinete Legal Angola, member of PLMJ International Legal Network.

1. INVESTING EM ANGOLA TODAY: INTERNATIONAL TAX MANAGEMENT

   At times the interest Portuguese companies have in the Angolan market has lived alongside the fear that there are factors that discourage investment in the country. In contact with businesspeople linked to a wide variety of sectors, we have been able to witness on the one hand, demonstrations of high levels of motivation and, on the other hand, signs of scepticism as to what the virtues of investing in Angola may be.

   Up to this point, there is nothing particularly unusual in this. As in life in general, one man's meat is another man's poison. It is normal that issues related to risk in investment resulting precisely from a certain level of immaturity that is to be expected in emerging economies, might be viewed as positive in terms of competition but, at the same time, seen by others, this immaturity could be viewed with scepticism and even take away the desire to invest.

   The analysis of the tax component associated with investments by Portuguese companies in Angola must take into consideration issues such as the absence, to date, of a double taxation agreement (DTT) between Angola and Portugal, the levels of taxation in Angola and also, whether Portugal - as a country of residence for companies that are internationalising and an emigrant workforce – has the conditions to provide an incentive or, at least, not provide a disincentive to the internationalisation of Portuguese companies, in particular to Angola.

   The experience with foreign investment in Angola, including the Portuguese experience confirms, however, that the tax component is one of growing relevance. But, ultimately, the reason why the lack of a DTT is not strictly and in certain areas a disincentive to investment, is related to the fact that the Republic of Angola has a level of taxation that is governed by some moderation in light of the fact that it is a country that receives investment and also has precarious levels of development in a number of areas.

   The need for income, especially income over and above what comes from oil, could easily lead to a temptation to "inflate", for example, nominal tax rates. However, this is not what we see for the main types of income such as, for example, dividends, interest, royalties, payments for services and works, or even the general rate of tax on profits. The moderation in...