1. Background
In October 2013, the Angolan government enacted a specific Transfer Pricing legislation. Although Presidential Decree 147/13, also known as the Statute for Large Taxpayers, was published on October 1, 2013, its provisions should apply to fiscal years starting from January 1, 2014.
Order No. 472/14, published on February 28, 2014, as amended by Order No. 599/14 of March 24, 2014, provides information on companies operating under the regime of the Statute for Large Taxpayers.
On September 25, 2017, the Ministry of Treasury issued Order No. 678/17, creating the Transfer Pricing Unit to ensure and monitor compliance with the requirement to file Transfer Pricing documents.
2. Arm’s Length Principle
The Arm’s Length Principle is regulated by the Corporate Income Tax Law, No. 1, Article 50, approved by Law No. 26/20.
3. Related Parties
There are special relationships between two entities when one thereof holds the power to exercise, directly or indirectly, a significant influence on the decision-making of the other:
- When the administrators or managers of one company, as well as their spouses, ascendants, and descendants, directly or indirectly hold an equity stake of not less than 10% of the capital or voting rights in the other entity;
- When the majority of the members of the administrative or management body are the same or, if different, are linked to each other by marriage, common-law relationship, or kinship in the direct line;
- When the entities are linked by a subordination contract;
- When they are in a relationship of domination or reciprocal shareholding, as well as linked by a subordination contract, parity group contract, or others;
- When there are business relationships between one and the other representing over 80% of their total volume of transactions;
- When one reports to the other in over 80% of its credit portfolio.
4. Transfer Pricing Methods
Angola’s Transfer Pricing methods follow the basic principles established in the OECD Guidelines. Conversely, only three methods are traditionally used to determine the Arm’s Length transfer price.
The methods accepted by the General Directorate of Taxation to determine and support the economic analysis of a related party transaction are as follows:
- Comparable Uncontrolled Price Method
- Resale Price Method
- Cost Plus Method
5. Transfer Pricing Documentation
Taxpayers with operating revenues exceeding AOA 7 thousand million and classified as large taxpayers must prepare, maintain, and file a Transfer Pricing Study to the Angolan tax authorities within six months after the end of the fiscal year.
6. Penalties
In addition to ensuring and monitoring compliance with the provision of Transfer Pricing documents, the Angolan Transfer Pricing Unit will be responsible for conducting Transfer Pricing audits to monitor compliance of controlled transactions with the offsetting rules for taxpayers covered by the Angolan Transfer Pricing System.
Penalties would be applied as provided for in the general tax legislation. In cases of Transfer Pricing adjustments, the tax authorities can apply penalties ranging from 50% to 200% of the unpaid tax, in addition to late payment penalties of 2.5% per month.
Source: Angolan Tax Administration 14/07/23
