Executive summary

Since South Sudan's President assented the Financial Act, 2023/2024 (the Act) into law on 14 August 2023, numerous amendments have been implemented.

This Alert summarizes the key amendments contained in the Act, which took effect on 14 August 2023.

The Act amends various tax laws relating to Business Profit Tax (BPT), Personal Income Tax (PIT), Withholding Tax, Advance Income Tax on Importation, Sales Tax, Excise Tax, Customs Duties and other fees and charges imposed under the various Government of the Republic of South Sudan (GRSS) institutions.

With these changes, the PIT, Withholding Tax, Sales Tax and Excise Tax returns for the month of August 2023 going forward and the Fiscal Year (FY) 2023 BPT return will be prepared and filed based on the provisions of the Financial Act, 2023/2024.

Generally, taxable profit/net profit of any business organization in South Sudan will be chargeable to BPT. Personal income tax brackets and rates have been amended raising the tax-exempt income limit to 20,000 South Sudanese pounds (SSP 20,000) from SSP 5,000. Advance BPT/PIT on imported goods into South Sudan has been repealed. The exchange rate for conversion of merchandise values from US dollar to SSP has been increased to SSP 300 from SSP 90 per US dollar (US$1).

Detailed discussion

Business profit tax (BPT) amendments

• BPT on net profit/accounting profit

The Act seeks to charge BPT on either "taxable profit" or "net profit" of any business organization that generates income/profits in South Sudan. Previously, BPT was only chargeable on "taxable profit," which the Act defines as the difference between gross income earned or received during the tax period and any deductions allowable under the Taxation Act. This amendment could imply that the Tax Authority will have the power to assess a taxpayer's BPT liability based on net profit/accounting profit as shown on the face of financial statements, which could lead to a taxpayer paying higher tax than necessary.

Personal income tax (PIT) amendments

• PIT brackets and rates

The tax bands as amended by Financial Act 2022/2023 have been revised as follows:

As amended by the Financial Act 2022/2023, the above schedule should not be taken as a graduated scale rate when computing PIT but an indication of the applicable tax rate on a specific level of income. For instance, an income of SSP 50,000 is wholly subject to PIT of 10%.

Withholding tax amendments

• Withholding tax as final or advance tax

Section 96 of the Taxation Act has been amended to read: "Tax withheld under section 92 shall not be deemed to be a final payment of tax and shall therefore be subject to refund or credit under this ACT."

Previously withholding tax was either treated as an advance or final tax based on the source. Withholding tax on dividends, interest, rent, technical fees and government contracts was treated as a final tax. Therefore, the change implies that withholding tax payments to both residents and nonresidents, irrespective of the source, will now be deemed to be an advance tax and taxpayers will now utilize it as a tax credit on the income tax returns and, if the taxpayer is in a tax overpayment position as a result, could also apply for a tax refund.

• Withholding tax on government contract payments

The withholding tax rate applicable to government contract payments has been reduced to 5% from 20%.

• Advance payment of income tax on imported goods

The Financial Act has repealed all withholding tax rates of advance BPT/PIT payable on importation of goods into South Sudan. Previously, importation of food and non-food items into South Sudan was subject to advance income tax at the withholding tax rate of 2% and 5%, respectively.

This implies that, going forward, importers of goods into South Sudan will not be required to make any advance payments of income tax at the time of importation. This may reduce import costs, although holistically one must also consider that the dollar exchange rate has significantly increased and all imports are foreign currency denominated.

Sales tax amendments

• Rates for sales tax on imported goods and hotel, restaurant and bar and services

The Financial Act 2023/2024 seeks to increase the sales tax rates for imported goods and hotel, restaurant and bar services to 20% from 18% (as per the Taxation Act 2009 as amended in 2016). However, note that the sales tax rate of 18% has been retained under the revised schedule 1 of the Financial Act 2023/2024, which indicates the amended rates. Currently the Government is applying 18% rate.

Sales tax is applicable on produced goods, imported goods and specified services (e.g., hotel, restaurant and bar services, telecommunication services and financial services).

Excise tax amendments

• Excise tax on hotel and restaurant services

The Act seeks to exclude hotel and restaurant services from the scope of services that are subject to excise tax in South Sudan.

The term "excisable service" has been redefined to exclude hotel and restaurant services as follows: Excisable service "means any service subject to this Chapter and includes air transport services, insurance services, telecommunication services."

The change has now aligned the provisions of the Taxation Act addressing the scope of specific services that are subject to excise tax and the applicable rates thereof. Previously, Section 97 of the Taxation Act 2009 included hotel and restaurant services in the definition of excisable service; however, the Taxation Act did not provide for the excise tax rates for these services under schedule III of the Act.

• Value for excise tax

The Act has amended the basis for determining the value for excise tax on excisable goods and services in South Sudan. The Act has stipulated that the value on which excise tax is assessed shall be: (1) for goods produced in South Sudan, the greater of the selling price or fair market value; (2) fpr imported goods, the customs value; or (3) for services, the greater of the amount paid for the service or fair market value. These guidelines apply provided that the greater of the selling price or fair market value of goods produced in South Sudan does not exceed the customs value of similar goods.

This is intended to provide a level playing field for local manufacturers against importers of similar goods that are subsidized through the exchange rate used for customs valuation.

• Excisable goods and tax rates

The Act has widened the scope of excisable goods to include perfumes, toilet waters, beauty/makeup/skincare/hair products, plastic materials, products containing tobacco, reconstituted tobacco and nicotine.

Further, the Act amends excise tax rates on certain excisable goods as follows:

Customs duties amendments

• US$ conversion rate

Under the Act, the exchange rate for conversion of merchandise values from US$ to SSP has been increased to SSP300 per US$1. Previously the exchange rate was SSP 90 per US$1.

• Customs duties rates

Custom duties on certain items have also been amended by the Act as follows:

Other fees and charges — GRSS institutions

The Financial Act 2023/24 has introduced/amended different fees and charges imposed under the various GRSS institutions. The specified fees and charges have been stipulated in the Financial Act 2023/2024. The fees and charges will be collected by National Revenue Authority (NRA) officers posted at the different GRSS institutions.

Regulations for taxpayers' advisors

The Financial Act 2023/2024 has introduced a provision under Section 28 of the Taxation Act that requires taxpayers' advisors/representatives to sign tax returns that they have assisted taxpayers to prepare. The Minister in charge shall enact regulations for registration and deregistration of taxpayer advisors and how they conduct their activities.

Next steps

The Act indicates that the above new provisions took effect on 14 August 2023, being the date of assent by the President of the Republic of South Sudan. Therefore, it is important that the taxpayers understand the implications of the new laws to their businesses and strive to comply. Taxpayers should also seek direction and clarification on areas that require guidance from the NRA.