Why This Matters
Taxes are the second-biggest drag on your investment returns after inflation. Understanding Angola’s Imposto sobre Aplicação de Capitais (IAC) — the tax on investment income — can mean the difference between keeping 95% or only 85% of your returns. Legal tax optimization is not avoidance — it is smart investing.
Angola’s Investment Tax Framework
The IAC is Angola’s primary tax on investment income. It applies to interest, dividends, capital gains, and other returns from financial assets. The rates vary by investment type and holding period.
IAC Rates by Investment Type
| Investment Type | IAC Rate | Withheld By |
|---|---|---|
| Bank deposits (≤ 1 year) | 15% | Bank |
| Bank deposits (> 1 year) | 10% | Bank |
| Treasury bonds (≤ 3 years) | 10% | Issuer/Broker |
| Treasury bonds (> 3 years) | 5% | Issuer/Broker |
| Corporate bonds | 10% | Issuer/Broker |
| Stock dividends | 10% | Company |
| Capital gains (stocks) | 10% | Self-reported |
| Capital gains (bonds) | 10% | Self-reported |
Key insight: Longer-term investments receive favorable tax treatment. A 5-year treasury bond is taxed at only 5% on interest — half the rate of a 1-year bond. This is deliberate policy to incentivize long-term capital commitment.
How Withholding Works
For most investments, IAC is withheld at source — meaning the tax is deducted before you receive your income:
- When BAI pays you a Kz 125 per share dividend, they withhold Kz 12.50 (10%) and deposit it with the AGT (Administração Geral Tributária). You receive Kz 112.50.
- When your bank pays interest on a term deposit, the after-tax amount is what appears in your account.
- When a government bond pays its semi-annual coupon, the withholding is applied automatically.
For capital gains (selling securities for more than you paid), you are generally required to self-report and pay IAC in your annual tax return.
Tax-Efficient Investment Strategies
1. Favor Long-Term Bonds
A 5-year OT at 21% with 5% IAC delivers an after-tax yield of 19.95%. A 2-year OT at the same 21% with 10% IAC delivers only 18.9%. The 1.05 percentage point difference compounds significantly over time.
2. Hold Stocks for Income Efficiency
Dividends are taxed at 10% regardless of holding period, but companies can choose to retain earnings and grow (reinvesting profits) rather than paying dividends. If a company reinvests instead of paying dividends, the value accrues to you through share price appreciation — and you only pay capital gains tax when you eventually sell.
3. Reinvest After-Tax Income
When your bond pays a coupon of Kz 200,000 and you receive Kz 190,000 after tax, reinvest the full Kz 190,000. Do not let the after-tax amount sit idle.
4. Use the Annual Tax Filing to Your Advantage
If you have capital losses (sold investments for less than you paid), these may offset capital gains in your annual tax return, reducing your overall IAC liability. Maintain detailed records of all purchase and sale prices.
Understanding Tax Impact on Returns
The difference between pre-tax and post-tax compounding is dramatic over long periods:
Starting with Kz 5,000,000, investing at 21% nominal for 20 years:
| Scenario | Final Value | Effective Return |
|---|---|---|
| No tax (theoretical) | Kz 229,000,000 | 21.0% |
| 5% IAC (long-term bond) | Kz 192,000,000 | 19.95% |
| 10% IAC (short-term bond) | Kz 161,000,000 | 18.9% |
| 15% IAC (short deposit) | Kz 134,000,000 | 17.85% |
The difference between 5% and 15% IAC over 20 years is approximately Kz 58,000,000 — nearly 12 times your original investment. Tax efficiency matters enormously when compounding.
Worked Example: Tax Comparison
Rita receives Kz 3,000,000 in bonus income and evaluates three options:
Option A: 6-month bank deposit at 14%
- Annual interest: Kz 420,000
- IAC (15% on short deposits): Kz 63,000
- After-tax income: Kz 357,000 (11.9% after-tax yield)
Option B: 2-year treasury bond at 20%
- Annual coupon: Kz 600,000
- IAC (10%): Kz 60,000
- After-tax income: Kz 540,000 (18.0% after-tax yield)
Option C: 5-year treasury bond at 21%
- Annual coupon: Kz 630,000
- IAC (5%): Kz 31,500
- After-tax income: Kz 598,500 (19.95% after-tax yield)
Option C delivers 8 percentage points more after-tax return than Option A — a massive difference driven by both higher rates and lower tax. Over 5 years with reinvestment, Option C produces approximately Kz 3,580,000 more in after-tax income than Option A.
Key Takeaways
- The IAC is Angola’s investment income tax — rates range from 5% to 15% depending on asset type and duration
- Longer = cheaper: Bonds over 3 years pay only 5% IAC versus 10% for shorter bonds
- Bank deposits under 1 year face the highest rate: 15%
- Tax is mostly withheld at source — your broker or bank handles it
- Capital gains are generally self-reported via annual tax returns
- Tax-efficient investing can add 2-5 percentage points to your effective annual return
- Always calculate and compare after-tax yields, not pre-tax rates
Common Mistakes
Ignoring tax when comparing investments — A 21% bond at 5% IAC beats a 22% bond at 10% IAC in after-tax terms. Always compare net-of-tax returns.
Not keeping records — If you do not track your purchase prices and dates, you cannot calculate capital gains accurately or claim losses against gains.
Structuring purely for tax minimization — Tax efficiency is important but should not override investment fundamentals. A bad investment with low tax is still a bad investment.
What’s Next
To truly evaluate investment opportunities, especially in stocks, you need to understand the financial health of the companies you are investing in. The next lesson introduces financial statements — the language of business.
Next Lesson: Reading Financial Statements — The Language of Business
Calculate your tax impact with the Tax Calculator. Review Angola’s regulatory framework and learn about the AGT.