Given the need to attract private investment, particularly to specific sectors of activity deemed as priority sectors, the Angolan Government passed a new Private Investment Act (Law 14/15, approved on 11 August 2015), followed by the publication of the code of procedures for the Implementation of Private Investments (“Investment Regulation” – Decree 182/15, of 30 September 2015). The NLIP entered into force on the date of its publication, with immediate effect applicable to investment contracts awaiting approval. As for the investment projects approved prior to it, the regulatory conditions remained the same by the laws and investment contracts under which the original investment were authorized and approved.
This new law aims to reduce the bureaucracy surrounding the procedures for the acceptance of eligible investments, as well as to match the incentive and benefit mechanisms with Angola’s current economic framework, thereby increasing the level of attractiveness for investors.
- Scope of the new private investment law
The New Private Investment Law (NPIL) is applicable to both domestic and foreign private investments. However, investments made by private entities owned by the State or other public entities holding a stake of 50% or more, along with private investment related to oil business, minerals, financial institutions and other sectors defined in the law, are excluded from the scope of the current legislation.
- Absence of threshold for foreign investment: the new law is applicable for foreign investments, regardless of their amount, as well as for internal (domestic) investments with a global amount equal to or greater than AOA.50 million Kwanzas. This means that foreign investors are now allowed to submit investment projects below USD 1,000,000.00.
- Status of private investors: when a private investment is made by a legal person, the status of private investor will be granted only this person or entity, contrary to previous establishment where members of the legal person enjoyed the same status of private investor.
- Mandatory partnership with an Angolan counterpart (in specific sectors): Under the new legislation, complemented by the Public-Private Partnerships Act (Law 2/11, of January 2011), foreign investments in the areas listed below, must be done in partnership with national citizens or Angolan private or public companies. The partnership is mandatory and for this purpose, the local partner must hold at least 35% share of the capital and have an effective participation in management of the new venture, if the intended project falls under the following sectors:
- Energy and Water (production and distribution)
- Transport and Logistics (Infrastructure)
- Telecommunications and Information Technology (Infrastructure)
- Construction and Public Works (including social housing)
- Tourism and Hospitality Industry
- Media Services (broadcasting)
For the purposes of the NLIP, the concept of “Angolan company” comprises companies and single owned companies with registered office in Angola having its share capital held by Angolan citizens in at least 51%.
- Investment operations: Under the new law, the creation and expansion of branches or other forms of corporate representation of foreign companies are no longer qualified as foreign investment operations.
- New rules for indirect investment and shareholders’ loans: The new law distinguishes between direct and indirect forms of investments. Among others, indirect investment is defined as the ones made through loans, additional capital contributions (e.g. share premium), intellectual proprietary and franchising. The new law restricts the global amount of indirect investment to 50% of the value of the direct investment, and creates a further special threshold for shareholder loans, with a cap of 30% of the value of the investment made by the local incorporated company. These loans may only be repaid to the investors, 3 years after they have been included in the company’s financial statements (i.e. creation of a new mandatory waiting-period of 3 years, before investors can start receiving repayments). If the investment is made through acquisition of machinery or equipment, the value of the machinery or equipment should be then registered in form of capital goods.
- Repatriation of profits and dividends: the right to transfer dividends and profits and creation of a new supplementary tax on capital investment regarding dividends: Once the investment project has been implemented and upon proof of its execution, foreign investors have the right to repatriate profits, dividends and royalties connected to the investment project, regardless of the amount of the investment. The former mandatory waiting-period of 3 years before investors could start to repatriate dividends is now lifted up. However, dividends and distributed profits shall now be subject to an additional tax on capital investment ranging from 15% to 50% over the part of distributed dividends or profits exceeding the foreign investor’s stake in the company’s equity. Dividends or profits reinvested in Angola are not subject to this surtax.
- Tax incentives: The new private investment law offers a number of fiscal incentives and tax benefits, to attract national and foreign direct investment in all areas. The new law defines the principles and regimes to have access to the code of benefits, especially the fiscal incentives and special reductions on taxes and customs duties. The code of benefits provide for the exemption from corporate tax for periods up to 10 years and the reduction of customs duties on imports of raw materials, equipment and capital goods. These provisions are in place to facilitate the establishment of public-private partnerships, to implement important development projects, mainly the reconstruction, expansion and rehabilitation of basic infrastructure in different sectors.
Although this law apply to domestic investments with minimum overall amount equivalent to AOA.Kz.50m (fifty million Kwanzas) and to foreign investments of any amount, tax incentives are granted based on:
- internal investment, with a total value equivalent to a minimum of USD 500,000.00 (five hundred US dollars) and foreign investments, with a total value equivalent to a minimum of USD 1,000,000.00 (one million US dollars);
- Tax benefits are not automatic and will be granted to investors on a case-to-case basis, depending on different criteria (i.e: the amount, location and duration of the investment, the creation of partnerships between Angolan and foreign entities and the social and economic impact of the investment, jobs creations). It´s also taken into consideration the tax incentives table contained in the present legislation.
- Extension of benefits and/or investment incentives will be determined according to objective criteria included in the Law.
- Extraordinary tax incentives are available for investments that satisfy a threshold amount equal to U.S. $50 million and that result in the creation of jobs for Angolan citizens, in identified zones (either 500 or 200 workers depending on the location).
- Additional incentives and benefits can be granted to companies reinvesting their capital gains into new projects or expansions and modernization of existing projects. These additional benefits are granted by the Department of Finance with referral of the ministerial department in charge of the specific sector or activity.
- Extended facilities for investments contributing to the ‘Angolanisation’ process of the workforce, which is an initiative by the government, where requires companies to hire Angolan nationals, unless there are no qualified nationals available. The required proportion is a split 70/30 (nationals versus foreigners)
Incentives and tax benefits can be awarded for a maximum period of 10 years, depending on the nature and amount of investment, incidence sector, place of implementation of the project, social impact, number of jobs, volume for exports and value added domestic crude.
- Development zones: Tax incentives to investment operations are granted based on the geographical location of the investment project, according to the two following development zones:
Zone A – Luanda province and the cities of Benguela, Lobito and Lubango.
Zone B – the provinces of Cabinda, Zaire, Uige, Lunda Norte, Lunda Sul, Malanje, Bie, Huambo, Moxico, Cuando Cubango, Cunene and Namibe and other municipalities in the provinces of Benguela and Huila.
There are also Special Development Zones and the introduction the concept of Free Trade Zones (FTZ) is expected soon.
- Procedure: Under the regulation, investments of up to USD 10 million are submitted to the Ministerial Department of the respective branch of activity, depending on the sector in which the investment will be made. On the other hand, investments that exceed the threshold of USD 10 million are submitted to the Council of Ministers and ultimately approved by the Head of the Government. For this purpose, the Technical Unit for Private Investment (UTIP – Decree 185/15) was also created to exclusively administrate and coordinate this specific kind of investments proposals.