The rapid transformation of the economy has turned it into a hot spot for foreign direct investments (FDI) globally, with firms looking to expand their business in sectors such as fintech and energy, to manufacturing and logistics. However, one of the most important–and often underestimated–factors in market entry is understanding the tax and customs environment.
In contrast to the more uniform systems within the European Union, it presents a different and constantly evolving tax system. Each country has its own tax regulations and rates, as well as reporting requirements and incentive programs. For multinational companies, successfully dealing with these issues is vital not just to ensure compliance but also for profit and long-term growth.
The article below will discuss the tax implications for companies that are entering markets and explain how companies such as CLG Plus can provide expert legal advice to ensure a smooth and legal entry into the market.
The Tax Strategy is Important When Expanding into
Tax planning is not just a simple accounting task. It’s an essential element of your strategy for investing. Tax mistakes or omissions in compliance can lead to penalties, delays in operations, and reputational harm. However, tax efficiency could significantly increase your return on investment.
The most significant tax issues foreign companies could confront are:
- Variation in VAT or corporate rate of taxrates in different nations
- Tax withholding on cross-border payments
- Double taxation agreements that are evolving or limited agreements
- Customs and duties are unpredictable, as is the customs value.
- The absence of a digital infrastructure for tax filings in certain areas
Key Tax Themes to Understand
Corporate Income Tax (CIT)
CIT rate varies widely, ranging from 15 percent in Mauritius up to 35% in certain jurisdictions such as Zambia, as well as Chad. It’s crucial to consider the tax burden of a country and how it will impact your profit margins.
Example:
- South has a CIT rate of 27 percent (2025) and has fairly transparent reporting obligations.
- Nigeria is a tiered CIT system based on business turnover, and SMEs benefit from lower rates.
Value Added Tax (VAT) and Sales Tax
The majority of countries have a VAT system that has rates ranging from 5% to 20%. Knowing which goods and services are tax-deductible, and which ones are not, is essential.
Example:
- Kenya has aa16% VAT and exports that are tax-free.
- Ghana has a complicated structure that includes taxation on VAT, National Health Insurance Levy (NHI), and COVID-19 levy.
Withholding Tax (WHT)
Withholding tax is imposed on payments like dividends and interest, royalties, nd service charges to non-residents. It can vary between 5% and 25%, based on local laws as well as applicable treaties.
Countries such as Nigeria, Uganda, and Tanzania are well-known for their strict WHT regulations, and correct planning is crucial to avoid double taxation.
Customs Duties and Import Taxes
Trade across borders can be subject to a variety of levies, customs tariffs, in addition to VAT on imports. Businesses must be prepared for:
- Customs classification and valuation of products
- Origin rules (especially when it comes to trade regionally in the context of AfCFTA)
- Border taxes
For distributors and manufacturers Customs planning that is efficient can dramatically reduce the cost of landing.
Regional Considerations: AfCFTA and Trade Zones
The Continental Free Trade Area (AfCFTA) is changing the way trade takes place across the continent. While not all members have fully embraced the agreement, Businesses can gain from:
- The bloc has preferential tariffs for its members.
- Access to a wider range of regional markets
- Simple trade procedures
In addition, on Additional Economic Zones (SEZs) and Export Processing Zones (EPZs) in countries such as Rwanda, Ethiopia, and Ghana offer tax breaks as well as customs duty exemptions and other incentives to draw FDI.
Common Tax Pitfalls for Foreign Investors
- If US/EU standards are followed: Tax enforcement and resolution of disputes could be more unpredictable.
- Inadequately understanding local regulations: Not being registered for VAT or not submitting WHT may result in fines or even shutdowns.
- Not paying attention to transfer pricing compliance: A lot of taxes have adopted OECD-aligned rules.
- A lack of understanding of tax treaties: Inability to use double tax treaties may cause overpayment.
How CLG Plus Supports Cross-Border Tax and Customs
Compliance Plus supports international companies by providing tailored legal solutions that deal with the tax requirements that are unique to markets. Our legal experts provide:
- Strategic tax planning to prepare for entry into the market
- Examination and implementation of tax treaties
- Assistance with WHT, VAT, and CIT registration
- Clearance of customs and facilitation of trade help
- Legal representation for tax audits or in disputes
- Information on tax holidays, incentives, and SEZ options
If you’re setting up an affiliate in Kenya or importing goods into Ghana or buying the logistics business located in, we help you remain compliant while maximizing your tax situation.
Find Legal Empowerment through CLG Plus
Are you considering businesses in as well as in other countries? Allow CLG Plus to guide you through the legal complexities. Our on-demand legal services are tailored for entrepreneurs, start-ups, and SMEs, ensuring your business is backed by expert legal guidance. From immigration to taxation technology, as well as intellectual property, we cover everything to help you with your multi-cultural business efforts. Get custom-designed legal solutions that go beyond borders. Contact CLG Plus today for a consultation that can get your company on the road to a successful future.