Eastern Africa offers compelling opportunities for investors. The tax questions you ask at the start will shape returns for years — and are much easier to answer before capital is committed.
1. How will you hold the investment?
A local subsidiary, a branch and a holding company in another jurisdiction each have different tax consequences on profits, distributions and exit. The right answer depends on your plans, your home country and the treaties available.
2. Is there a tax treaty?
Double taxation agreements can reduce withholding tax on dividends, interest and royalties and clarify which country has taxing rights. Check whether a treaty exists, whether you qualify for its benefits and what anti-abuse rules apply.
3. How will you fund it?
The mix of equity and debt affects deductibility of interest, withholding tax on interest payments and restrictions on interest deductions. Plan the funding structure with tax in mind.
4. How will you get cash out?
Consider withholding taxes on dividends, management fees and royalties, and any exchange control or regulatory requirements, before you finalise structures.
5. What happens on exit?
Capital gains, stamp duty and indirect transfer rules can all apply when you sell. Thinking about exit at the entry stage avoids unpleasant surprises.
6. What does day-to-day compliance look like?
Registration, VAT, PAYE, transfer pricing and filing obligations start from day one. A clear compliance plan keeps the investment on track.
This article is general information and is not tax advice. Talk to us about your specific circumstances.