Tightening Up On Tax In Africa Companies Employing Expats Need To Come Clean
With many African governments tightening up on their labour, tax and immigration policies, companies employing expatriates increasingly need to up their game.
“The days of staff being paid offshore to avoid in-country tax and social security responsibilities are fast drawing to an end. Companies and staff currently involved in these under-the-radar activities should be concerned,” says David White, CEO of Moore Stephens DRG Outsourcing SA Pty Ltd.
Companies are flocking into Africa to tap into new developments, and the demand for expatriates is extremely high. But African governments are becoming more astute about being paid the tax that they are due.
“There is now great demand for foreign companies working in Africa to ensure they meet regulated responsibilities in employment structures in the areas of immigration, labour law, social security and employee tax,” says White.
While many African governments encourage employing expatriates with critical skills, the challenges can be varied and complex.
White says the concept of 'Chain Law' in Europe, which links every company in the service chain, and binds them jointly in terms of meeting minimum in-country employment compliancy requirements, is becoming a norm on the African continent.
Revenue services across the continent have put in measures to ensure compliance.
Jeff Blackbeard, Africa strategist for international auditing and advisory company, Moore Stephens, says companies owe it to themselves and the countries they work in to be compliant.
“What we're seeing is revenue authorities across the continent being far more in tune with businesses on the ground. They're asking for more documentation when you do your tax returns. They are closing loopholes. Improved telecommunications and inter-government communication has helped this to happen,” says Blackbeard.
“We've heard a case where recently, an African revenue authority turned up at a contractor's house and questioned why his bank account only had a thousand dollars in it, yet they discovered he was earning far more offshore and was not paying any local taxes or social securities. He apparently was obliged to pay all the tax he owed, as well as interest, and a huge fine.
Stories like these are not going to be isolated cases in the future.
“As an expatriate, you also can't complain about the roads, the potholes and the infrastructure if you are not paying tax in the country,” says Blackbeard.
Where employment parameters are not in line with in-country policy, internal revenue services will hold foreign companies responsible as their staff members work on the company premises and in their facilities.
White and Blackbeard say they're seeing an increase in the number of companies who want to be compliant. They have been approached by companies operating in several African countries to draw up employment contracts and work permits, as well as assist with immigration documents to ensure that all expatriate employee affairs are in order.
“We need to ensure that the flow of funds is correctly administered and is fully transparent,” says White.
There's also a great need for expert advice on more complex cases, such as companies that operate across borders, where tax and tariff harmonization is key.
White says he's seeing a spike in employing expatriates from companies involved in banking services and retail in Africa, apart from the more obvious industries of oil and gas exploration and extraction.
“Africa is a growing economy and multinationals see this and are moving in fast to ensure they stake their claim. In the next ten years, the world will draw much of its GDP growth from activities in Africa,” says Blackbeard.
With this in mind, Moore Stephens' network of member firms and strategic partners in Africa, is working with Durban-based DRG Outsourcing, which has 18 years of experience in human resources and expatriate management.
“With tremendous opportunity on the continent, which boasts some of the fastest growing economies in the world, Africa is wide open for business and fair and transparent employment contracts that benefit the employee, the company and the country in which they work,” says Blackbeard.