On the 11th of August 2015 entered into force the New Private Investment Law of the Republic of Angola (the “New PIL”) which revokes the last regime set forth by Law n. º 20/11 of the 20th of May.
Aiming to attract foreign investment to Angola, the New PIL establishes the rules for private investments which resulted in some major alterations to the previous legal regime, such as:
- Foreign investments of any amount are now covered by this Law and benefit from the right to repatriate profits, dividends and results from the liquidation of the investment, including capital gains, even if they cannot apply to the tax benefits foreseen in the New PIL;
- The foreign shareholders or partners’ loans contributed to a private foreign investment project cannot exceed a amount equivalent to a maximum limit of 30% of the investment value made cannot be reimbursed before a 3-year period. The majority of indirect investments, including the aforementioned shareholders or partners’ loans together with other indirect investments – for example, other loans, technology transfers or know-how, brands or patents and other similar rights – are equally under a maximum limit of 50% of the foreign private investment total value;
- After the foreign private investment project is implemented providing proof of its full execution, the foreign investor has the right to transfer abroad the distributed dividends or profits, the investment liquidation proceeds, the indemnities received and royalties or other remuneration income from indirect investments associated with, for example, transfers of technology;
- Maintenance of the foreign investment minimum value in USD 1,000,000.00 for foreign investments applying for tax and customs benefits and a greater objectivity of the New PIL rules now outlining the conditions and values for tax and customs benefits and incentives to which the private investors may apply: a minimum of USD 1,000,000.00 (for foreign investments) and USD 500.000, 00 (for domestic investments).
- Clarification of the activity sectors on which foreign investments are only permitted in partnership with Angolan citizens, with state-owned companies or Angolan companies, where Angolan citizens hold a minimum of 35% of the respective share capital and have an effective managerial role: Electricity and Water; Hotel and Tourism; Technology and Logistic; Civil Construction; Telecommunications and Information Technologies; and Mass Media.
- Economic and social development zones of Angola for purposes of grant of tax and customs benefits and incentives for private investments have now been reduced to only two:
- Zone A, comprised by Luanda Province, the capital-municipalities from the Provinces of Benguela, Huíla and Lobito Municipality; and
- Zone B, comprised by the Provinces of Cabinda, Bié, Cunene, Huambo, Cuando Cubango, Luanda-North, Luanda-South, Moxico, Zaire, Bengo, Cuanza-North, Cuanza-South, Malanje, Uíje and other Municipalities from Benguela and Huíla Provinces.
- Creation of an additional progressive rate for withholding tax triggered on the amount in which the profits and dividends distributed to foreign investors exceed the proportion of “own funds” of the company constituted under Angolan law and or acquired as a vehicle for the direct foreign private investment operation, not applicable, however, to those profits or dividends reinvested in Angola (this last operation being qualified as a “direct foreign private reinvestment” operation);
- This additional progressive tax rate might be too heavy for a foreign private investor whose right to the profits or dividends of a company in which has invested in Angola is above the proportion corresponding to his participation in the share capital of the company, since for that difference he may be taxed until 50% on top of the 15% standard withholding tax rate on dividend or profit distributions when no exemption applies under an approved foreign private investment contract;
- ANIP – Agência Nacional do Investimento Privado, an Angolan state institute, is no longer the sole interlocutor and negotiator with private investors, and private investment contract negotiation is now carried out by the Executive Power (Government) and or by direct or indirect administration institutions in charge of the economic sector concerning each private investment project;
- The previous regime of approval for a foreign private investment contract (contractual procedure) remains the same for the foreign private investments applying for tax and customs benefits and of a value equal or superior to USD 1,000,000.00 in Angolan currency;
- For foreign private investments not applying for tax and custom benefits of value less than the above referred amount, a simple registration of the foreign private investment is enough, hence now facilitating much more foreign private investments for small and medium-sized enterprises in Angola;
- The registration of investment through machinery, equipments and other tangible fixed assets is made on the basis of the respective CIF value (cost, insurances and freight) in foreign currency as converted into Angolan currency according to the Angolan Central Bank official reference exchange rate corresponding to the custom declaration presentation date.
In conclusion, the New PIL facilitates in some way foreign private investment projects in Angola for small and medium-size enterprises (“PMEs”) but, in another way, it restricts considerably the concession of tax and customs benefits for large-scale foreign private investments projects without reducing or facilitating the necessary legal formalities for approval of these projects. The New PIL offers bigger advantages to the private investor, foreign and domestic, due to its clarity, certainty on its application and decision-making criteria for the competent Angolan authorities.Hence, the NEW PIL is expected to greatly reduce the doubts and questions raised by the former legislation now revoked and will generally facilitate private investments in Angola.