Cabinda VAT Special Regime/VAT in LNG Project/Reverse charge in Transitory VAT Regime

Angola has now completed its first months under Value Added Tax (VAT) regulations, and the introduction of this new tax has significantly changed not only the regular operations of each company, but also the life of the general population. Value Added Tax has been considered the “word” of 2019 in Angola, and this selection shows how the introduction of VAT had and still has a huge impact on local operations and transactions.

With this in mind, a Special VAT Regime was created for the Cabinda Province, whose geographical location and lack of equipment leads to sales of goods at higher prices than the rest of the country so as to mitigate the impact of VAT on the general population and companies that operate in this province. With this, the VAT tax rate was reduced from 14% to 2%, only applicable to the import and sales of goods, whereas the supply of services is still subject to the normal VAT rate of 14%.

In addition to the above-mentioned Cabinda Special VAT Regime, Angola has also established the VAT Payment and Assessment Regime applicable to the Angola LNG Project. Due to the specificities of the oil sector, and in order to ensure the stability and economic viability, detailed regulations and procedures have been established for project implementing companies and their limitation to deduct input VAT as well as for implementing companies.

Moreover, regarding the input and output VAT on the acquisition of services from non-resident suppliers, the VAT code foresees that a local company, under the standard VAT regime, acquiring services from a non-resident supplier should deduct and assess VAT at the normal rate of 14% under the reverse charge mechanism, assuming that the non-resident supplier has not nominated a legal representative in Angola.

The implementation of VAT still has several challenges ahead, and a few grey areas that need clarification. In parallel, we have observed a more proactive attitude from the VAT authorities as a result of issuing several rulings.