WITH many African governments tightening up on their labour, tax and immigration policies, companies employing expatriates increasingly need to up their game.
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 they are due.
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 worried. More so than ever, foreign companies working in Africa need to ensure they meet regulated responsibilities in employment structures in the areas of immigration, labour law, social security and employee tax.
While many African governments encourage employing expatriates with critical skills, the challenges can be varied and complex. 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 in Africa. Revenue services across the continent have put in measures to ensure compliance. Companies owe it to themselves and the countries in which they work to pay their dues.
What we are seeing is revenue authorities across the continent being far more in tune with businesses on the ground. They are asking for more documentation when you do your tax returns. They are closing loopholes. Improved telecommunications and inter-government communication have helped this happen.
Recently, an African revenue authority turned up at a contractor’s house and questioned why his bank account only had $1,000 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 will not be isolated cases in the future.
As an expatriate, you cannot complain about the roads, the potholes and the infrastructure if you are not paying tax in the country.
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.
In our work on the continent, we are seeing an increase in the number of companies that want to be compliant. We’ve 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.
There is also a great need for expert advice on more complex cases, such as companies that operate across borders, where tax and tariff harmonisation is crucial. Apart from the more obvious industries of oil and gas exploration and extraction, there has been a spike in employing expatriates from companies involved in banking services and retail in Africa.
Africa boasts some of the fastest-growing economies in the world. Multinationals are taking note and moving in fast to ensure they stake their claim. In the next 10 years, the world will draw much of its gross domestic product (GDP) growth from activities in Africa. With tremendous opportunity on the continent, Africa is wide open for business with companies that have fair and transparent employment contracts that benefit the employee, the company and the country in which they work.
• Blackbeard is Africa strategist for international auditing and advisory company Moore Stephens and White is CEO of Moore Stephens DRG Outsourcing SA, based in Durban.