By Lincoln Ford & Sintayehu Abebe | Fri Dec 02 2022
Primer on the Developments in the Investment Ecosystem in East Africa
The Ethiopian Government Comes up with a New Regulation to Govern Immigration Fees
A new regulation titled the “Service Fee for Immigration and Citizenship Service Regulation No. 516/2022” (the “Service Fee Regulation”) which deals with the immigration fees chargeable in Ethiopia was introduced in November 2022. By the provisions of the Service Fee Regulation, there has been a significant increase in the application fees of visa and passport services. In some cases, there has been an increase of about 200% when compared to the previous fees. The extant provisions of the Investment-Proclamation-No-1180/2020 which introduced a 3- and 5-year multi-entry visa category for investors has now been reaffirmed by the Service Fee Regulation. By the Service Fee Regulation, shareholders of companies registered in Ethiopia can apply for a 5-year multi-entry visa, while a general manager, a board member and top management employees of a foreign enterprise can only apply for a 3-year multi-entry visa. The current application fee for a 5-year multi-entry visa is USD 1K and the application fee for a 3-year multi-entry visa is USD 750. This is a welcome development and reduces the number of applications that expatriates and foreign investors need to make to come into Ethiopia. It also has the potential of improving the ease of doing business in Ethiopia. In addition, it is expected that this will streamline the application process and reduce the administrative burden on the immigration authority. The FDRE Immigration and Citizenship Service is expected to work closely with Ethiopian Investment Commission (EIC) to facilitate the issue of the new visa categories to foreign investors.
The Government Expressed its Interest to Privatize Ethio-telecom The Homegrown Reform Economic Agenda: A Pathway to Prosperity states explicitly the government’s interest to privatize the telecom sector. According to the reform agenda liberalization measures will include the issuance of additional telecom service licenses to operators and the partial privatization of the state-owned Ethio-telecom”. As part of this move, Safaricom Ethiopia has joined the Ethiopian telecom sector and is operational. For the second phase, the government expressed its interest to privatize part of Ethio-telecom and issued a request for bids to interested bidders in 2021. However, the Ethiopian government canceled and postponed the proposed privatization plan. This month, the government reinitiated the proposed privatization plan and expressed its interest to privatize 40% of Ethio-telecom. The expression of interest is valid until December 12, 2022 and major telecom companies are expected to participate. This move coupled with other privatization targets of the government is expected to have a positive impact on the overall economic and social development of Ethiopia.
Government suppliers adapt to the new VAT change and its effect on their business
Government suppliers have raised a number of questions with the new amendment to Section 26 of the Value Added Tax Law that permits them (suppliers) to account for VAT on cash basis as a solution to the recurrent challenge of delayed supplier payments from the government. Initially, government suppliers with taxable supplies not exceeding USD 133K (UGX 500M) in annual revenue could make use of the cash method in order to account for VAT regardless of who they supplied and whether payment had been received. This forced suppliers to borrow from banks as an alternative to funding VAT payments to Uganda Revenue Authority (URA) while maintaining considerable cash flow that was adversely affected by the slow government payments.
According to an article in the Monitor Uganda, the questions that arose from the amendment included:
Given that invoices are now issued via URA’s Electronic Fiscal Receipting and Invoicing Solution (EFRIS), how should invoices be declared in the VAT return when payment has not yet been received?
How should a supplier declare VAT incurred on its purchases and expenses when payment has not yet been made?
What criteria should a supplier use to determine if its customer qualifies as “government”?
This amendment means that suppliers should keep record of payments received from government versus invoices issued to ensure an accurate declaration of VAT and avoid interest and penalties arising from late payment of VAT.
The law states that any person who intends to access VAT on a cash basis should claim VAT charged on their purchases and expenses only when they have paid for them. Hence government suppliers would have to track invoices on purchases and expenses and how much they paid in that instance then claim only the input VAT on costs that have been paid.
The Uganda Revenue Authority is yet to clarify on which institutions qualify as “government” for VAT purposes. The VAT law also doesn’t expressly stipulate whether the VAT incurred from government and non-government customers should be claimed on cash or accrual basis.
USD 920K earmarked for online access for legal instruments
Access to the country’s domestic laws, law reports, judgements and even international treaties has been a consistent issue in the Rwandan legal system. Anyone that was interested in acquiring such information would have to acquire it either at the Office of the Prime Minister’s website or in person at the designated court of law. One would also have to keep an eye out for the legal amendments made either in the local newspaper or TV news segment. This significant USD 920K investment in developing a web portal of Rwanda law and cases dubbed (www.amategeko.gov.rw) will facilitate easy access to various legal documentation. Three languages; English, Kinyarwanda and French will be offered on the platform. It so far has over 700 laws available for students and legal practitioners. With the previously reported issue of case backlog in the judicial courts, this platform is a timely remedy to delivering swift justice and upholding rule of law. According to an article in the New Times Rwanda, Faustin Ntezilyayo, the Chief Justice, implored the software engineers working on this platform to update it regularly. He also pointed out evident gaps within the judicial system such as resources and literacy gaps that deter access to justice, adding that the web will address some of them.
The portal was developed with the help of the judiciary, MINIJUST, technical support of the Rwanda Information Society Authority (RISA), and the Justice Sector IT team, engaged by LEXBASE S.A.
1) A Homegrown Reform Economic Agenda: A Pathway to Prosperity, https://www.mofed.gov.et/media/filer_public/38/78/3878265a-1565-4be4-8ac9-dee9ea1f4f1a/a_homegrown_economic_reform_agenda-_a_pathway_to_prosperity_-_public_version_-_march_2020-.pdf,