Angola is, nowadays, no longer one of the emerging destinations, but already a real destination of worldwide foreign investment. There are several geographical latitudes where various investment projects come from, with focus on projects in the areas of technology, industry and logistics and also in the development of infrastructure that can support the economic boom that has hit Angola in the last years.

In recent years, the Angolan economy is among those with the most rapid growth, not only on the African continent, but worldwide. Recent data points to an economic growth of 11.1% between 2001 and 2010, putting it ahead of emerging markets and large-scale markets such as China. The current democratic stability prevailing in the country has made a great contribution to this and after a post-colonial war the country has achieved significant social consolidation, essential for economic development of a country that, in the last ten years, has evolved strongly compared to other African countries, with greater levels of development and more favourable economic conditions.

In fact it is clear that the catalyst for this exponential economic growth was Foreign Direct Investment (FDI), which between 2003 and 2011 was about $58 billion.

According to the available data from the ANIP (Angolan National Agency for Private Investment), in 2012 Portuguese FDI was in the top ranking of the countries that develop investment projects in Angola, with an overall investment of around $489 million and ahead of African countries such as South Africa and Nigeria, China or other European investors such as the Netherlands, Belgium, Spain and the United Kingdom.

However, despite the significant and growing foreign investment in Angola, the country continues to finance investment in infrastructure mainly through internal revenue tax. Currently it is estimated that about $4.3 billion is annually allocated to the development of this vital sector, which represents about 15% of its GDP.

In a country where 80% of the tax revenue (and about 45% of GDP) is derived from oil tax, it is expected that the Angolan Tax Reform – an ongoing process started 2011 with no expected conclusion during 2013 – should attempt to balance the revenue from other taxes, forcing them to strive for greater efficiency and creating an – at least apparent – tax justice.

On the other hand, it was local Government's aim for the Reform to have Angola look at other countries' tax solutions, and coordinate the underlying modernisation with the review and the update of the essential Private Investment Law, all of which is directed towards the attraction of foreign investment to the country. We will try to approach the most important points from the entrepreneurial and investor perspective.

The major changes in the Industrial Tax we would highlight include the reduction of the tax rate from 35% to 30% (subject to further reduction in private and licensed investment projects); the possibility given to Great Taxpayers to benefit from a Special Taxation Group Regime; the creation of a tax neutrality regime for mergers; and the introduction of a special accidental non-resident services regime, where the rate for a foreigner is levied at a 6.5% withholding tax.

However, world tax specialists expect the most significant impact in this tax to be the creation of a Transfer Pricing regime, in line with the OECD recommendations in this matter.

As regards the Capital Tax, some changes were introduced in the incidence chapter (interest from bank deposits are subject to a 10% rate, as well as other gains deriving from the transfer of share capital contributions). For some events, the tax rate is reduced (shareholder loan interest) from 15% to a 10% rate. Moreover, profits distributed to entities owned for a year at least at 25% are exempt, as is interest from savings and housing savings accounts.

For Stamp Duty, the comprehensive legislative changes have already generated some clarifications from the tax authorities in the last few months. In fact, the Code was changed to include some tax operations for the first time, such as trespass and house leases, as well as to adapt tax rates for previously taxed events, such as leases, bills of exchange and promissory notes and other securities. The new rules comprise the incidence (e.g. now the tax is due regarding all operations in the Angolan territory, or it is due on the use –not granting – of the credit), the assessment (new forms of payment), the tax burden, the exemptions (e.g. warranties in stock markets), and ancillary obligations (an annual tax return becomes due).

The tax reform has been quite a ride for the Angolan taxpayers, but also for the tax players, as the former may now rely on increased uncertainty on the interpretation from new rules from the tax authorities and the latter thrive to understand new rules and prepare for the upcoming changes.

Also in 2011 amendments were made to the real estate assets tax system, specifically the easing of transfer tax and stamp, reducing costs with fees and charges, the reduction of Urban Property Tax (IPU) on property not leased, the introduction of withholding IPU for leased buildings, simplifying the process of evaluation and registration of real estate and also the reduction of IPU on leased properties.

The result of the above measures is an extension of the scope of the fiscal impact through promoting a dispersion of tax revenues besides oil tax revenues, to include income taxes, duties on imports and taxes on production and trade activities, which currently are below 4.1% of total tax revenue and about 7.5% of GDP.

It will be good to remember that the Angolan fiscal outlook is not encouraging so far, as a result of very outdated legislation, the vast majority still from colonial times, that, despite some changes that have been made over the years, has never managed to achieve the implementation of an effective, unified, simple and non-bureaucratic system and above all, has failed to implement a clear system with defined rules that allow investors, both domestic and foreign, to understand clearly which operations are subject to tax incidence and the terms in which they are processed. Thus, it was extremely difficult for the investors to plan the tax strategies in their investments.

In fact the various attempts to implement changes in tax law never achieved the desired results, as they were being made without a global vision, which resulted in counterproductive and consequently unenforceable legal rules.

It should be noted however that this is a complex and large scale Tax Reform, which is at an early stage and far from over. Still, this tax demarche coupled with the amendment to the Law on Private Investment held in May 2011 – which established the general bases of private investment in Angola (domestic and foreign investment), which define the principles and arrangements for access to incentives and other facilities granted by the State to this type of investment by putting it at the service of the economy and job creation – will meet the expectations of foreign investors.

The consolidation of a tax system to one which is consistent, effective, clear and non-bureaucratic, implementing true advantages to attract foreign investment, will certainly overcome some of the remaining problems arising from geographical location and from the social, political and economic historical context of the country, putting Angola definitely on the route to greater foreign investment and sustained development.