Instruction No. 05/96: Exchange Rate Policy - Capital Operations

INSTRUCTION NO. 05/96
Subject: EXCHANGE RATE POLICY - CAPITAL OPERATIONS It is advisable to establish a sufficiently broad set of references regarding the definition of the main capital operations, with a view to standardizing criteria in their assessment, in order to verify the nature and reality of the respective Transactions and Transfers.

In exercise of the competence attributed by Article 42 of the Organic Law of the National Bank of Angola, regarding capital operations, the following are to be submitted to the National Bank of Angola, I DETERMINE

1. DOCUMENTATION OF CAPITAL OPERATIONS
   Regardless of the specific documentation required for certain capital operations, hereinafter referred to in the "Systematization of operations", requests for Transfer relating to capital operations must be submitted to the National Bank of Angola, directly by the interested parties or through authorized financial institutions engaged in foreign exchange trading, under the following terms:
   a) -letter from the interested party mentioning the essential elements of the operation to be carried out, namely, identification of the applicant and beneficiary, indication of the nature and purpose of the operation, amount thereof, settlement currency, and country of destination or origin of the funds; b) -document justifying the value of the operation; c) -any other data that the interested party deems convenient to attach for the complete instruction of the file.
2. REGISTRATION OF OPERATIONS AND ARCHIVING OF RESPECTIVE FILES
   Authorized financial institutions engaged in foreign exchange trading must create a file for archiving the capital operations they carry out and register the operations, by assigning a sequential and annual order number to each file, differentiating capital inflows and outflows in terms of exchange rate flows. The registration may be carried out in a spreadsheet, ledger, or computer medium. Each file must consist of the set of documents that served as the basis for the realization of the exchange settlement of the operation and be archived in numerical order. The retention period for these files shall be, at minimum, five years.

Both the registration and the numbering of the files may correspond to the number of the LIC/LEC (Import/Export License for Capital) issued by the National Bank of Angola, to authorize the capital operations.
3. LICENSING OF CAPITAL OPERATIONS
According to paragraph 3 of Article 5 of Decree No. 16/94, of April 22, capital operations are subject to prior licensing by the National Bank of Angola.
4. EXCHANGE RATE
Capital operations may be subject, according to the decision of the National Bank of Angola, to the official exchange rate, determined in the consultation session of the day or the last held, or to the freely contracted rate between the client and the financial institution.

5. COMMUNICATION TO THE NATIONAL BANK OF ANGOLA OF CAPITAL EXCHANGE OPERATIONS CARRIED OUT BY AUTHORIZED FINANCIAL INSTITUTIONS
   5.1. -Authorized financial institutions engaged in foreign exchange trading must annotate the "B" copy of the LIC/LEC(s) issued by the National Bank of Angola, for each of the capital operations carried out exchange-wise, under the terms and conditions contained in that "B" copy, and remit it to this Central Bank, within a period of five days from the date of the effective implementation of the operation, as determined:
   5.2. -When, under the same L/C/LEC, more than one exchange operation is carried out, the communication to the National Bank of Angola is processed through the foreign exchange use form Mod 301-034, duly filled out.
   5.3. -Models of LIC/LEC and the referred form -Mod. 301-034-are attached for due knowledge.
6. SYSTEMATIZATION OF CAPITAL OPERATIONS
   Given that there appears to be no practical advantage in exhaustively treating the vast range of capital operations in generic terms, operations are grouped into three areas:
   A) -Credit Operations
   B) -Foreign Investment Operations
   C) -Personal Capital Movements
   A) -Credit Operations
   I. Commercial Credit
   The fundamental characteristic of these operations consists in the deferral of payment for goods and/or services, as direct reflections on external indebtedness, whose control falls to the National Bank of Angola.

In practical terms, commercial credit corresponds to what is granted directly by the supplier to the buyer.
It is associated with a Current Transactions operation (goods and/or services) and its settlement takes place beyond one year from the date of customs dispatch, in the case of goods importation, or from the date of the invoice or contract for the provision of services (current invisible services). From the foregoing, it can be concluded that short-term current operations that transform into capital operations after one year for exchange purposes are considered as current transactions of goods or invisible services. That one-year period may be altered at any time, if deemed appropriate by higher authorities. The documentation required for the assessment of this type of operation is the same that justifies the underlying goods and/or invisible services operation, plus the agreement or contract for the concession of credit by the supplier to the buyer.
II. External Financing for the Settlement of Imports

1. This category includes financing granted to national importers by non-resident financial institutions, intended for the settlement of goods and/or services, which have been carried out in accordance with the prevailing legal and regulatory provisions.
2. The contracting of external financing in foreign currency intended for the settlement of imports of goods and/or services, and the carrying out of the exchange operations associated with it, must comply with the following limits and conditions:
   a) its value cannot exceed the amount of the import settlement, minus any payments already made; b) the use of financing must occur on the date expected for the import settlement, that is, the taking of funds must coincide with the date of the contractual settlement of the associated operation; c) the obtained funds can only be applied to the settlement of the associated operation; d) the financing will always be contracted for a defined term, depending on its extension or refinancing, on special higher authorization; e) the repayment of this financing cannot anticipate the term that has been established by the National Bank of Angola. In addition to the documents justifying the value of the goods and/or service and the demonstration of their effective importation, the file must include the loan contract or agreement.
   III. External Financial Credits and Loans
   This category includes the contracting of external financial credits and loans not covered in the previous number.

Authorization requests for operations of this nature, to be submitted via letter, contract, or agreement, must contain the characteristic elements of the operation, namely:
-identification of the borrower
-identification of the lender(s), as well as their agent, if any; -global value and nature of the operation; -scheme of uses and repayments (dates, amounts, and currencies):
-proposed financial conditions (interest rate, commissions, and other charges) -terms and conditions of any possible guarantees or other associated operations; -objective(s) of the operation and application(s) to be given to the funds or credits; -any other elements considered of interest for the assessment of the operation. B) -Foreign Investment Operations

1. Foreign investment operations are considered to be acts and contracts that aim to:
   a) creation and expansion of branches, other forms of social representation of foreign companies, or new companies belonging exclusively to the investor, and full or partial acquisition of existing companies or groups of companies; b) participation or acquisition of shares in the capital of new or existing companies, regardless of the form it takes; c) celebration and alteration of consortium contracts or association of third parties to shares or capital quotas; d) taking over, total or partial, of commercial and industrial establishments, through acquisition of assets or through exploitation transfer contracts; e) taking over, total or partial, of agricultural companies, through lease contracts or any agreements that imply the exercise of possession and exploitation by the investor; f) exploitation of real estate, tourist, or non-tourist complexes, regardless of the legal nature it assumes; g) realization of supplementary capital contributions, advances by partners or shareholders, and, in general, loans linked to profit participation; h) acquisition of real estate located in national territory, when this acquisition is integrated into foreign investment projects.

2. Operations associated with foreign investment
   a) supplies and other external credits without foreign investment character, to national companies with foreign participation; b) provision of internal guarantees to obtain external credit by national companies with foreign participation; c) internal credits to national companies with foreign participation; d) acceptance of external guarantees to grant external credit to national companies with foreign participation; e) financial restructuring operations of national companies with foreign participation (e.g., covering losses)

3. Settlement of Foreign Investment Operations
   3.1. Alienation, total or partial, of foreign participations in the share capital of national companies.
   3.2. Dissolution of companies with foreign participation in the share capital and closure of branches.

4. Settlement of Operations Associated with Foreign Investment
   4.1. Reimbursement of supplies and other external credits without foreign investment character and settlement of their respective interest and other charges.
   4.2. Execution of internal guarantees granted to obtain external credit by national companies with foreign participation.
   4.3. Execution of external guarantees obtained to grant internal credit to national companies with foreign participation.

5. Transfers Abroad from Accumulated Income of Foreign Investment
   This category refers to transfers abroad corresponding to "Reserves", "Carried Forward Results", and "Distributed Profits but Not Withdrawn Until the End of the Year of Their Attribution".

6. Documentation of Foreign Investment Operations
   6.1 In addition to the elements common to all exchange operations, foreign investment operations, associated operations, and investment settlement must proceed in accordance with the Foreign Investment Law, with the authorization granted by the Foreign Investment Office being of paramount importance.
   6.2 In operations of total or partial alienation of foreign participations in the share capital of national companies, the following is required:

-a competent document, according to the legal contract of each type of company, attesting to the authorization or feasibility of the intended alienation; -balance sheets from the last fiscal years and their respective reports -special valuation balance sheet with the definition of the criteria that guided its preparation; -identification of any possible guarantees (pledge, mortgage, etc.,) on active assets and applicable conditions and/or other charges that affect the patrimony.
6.3 Dissolution of companies and closure of branches:
-authenticated copy of the minutes of final approval of liquidation and distribution accounts; -liquidation balance sheet; -document with legal force proving the registration of the company's dissolution; -certificate from the competent tax entity proving the non-existence of any tax obligations of the dissolved company with the State.
6.4 Transfer abroad from accumulated income of foreign investment:
-balance sheet or statement of accounts and demonstration of the net results of the fiscal year; -minutes of the general meeting in which the accounts and profit distribution or dividend attribution were approved (public limited companies)

-copy of the document proving payment of capital tax.
C) -Personal Capital Movements

1. Identification of Operations
   Personal capital operations are considered to be transfers or transactions to and from abroad relating to:
   -donations, dowries, and loans of exclusively civil nature; -payment of installments due by insurance companies resulting from direct life insurance contracts, with the exception of pensions and annuities which are classified as current invisible operations; -inheritances and bequests; -transfers of capital related to the emigration/immigration of national or foreign persons, upon departure or entry into the Country; -transfers of funds blocked in accounts opened in the name of residents abroad.

LICENSING OF PERSONAL CAPITAL OPERATIONS
Prior authorization from the National Bank of Angola is required for the realization of the capital operations identified in the previous numbers and other similar ones, possibly not mentioned, with the exception of the following personal capital movements:
a) -donations from abroad b) -inheritances and bequests, exclusively for individuals domiciled in National Territory.
These operations may be freely carried out by authorized financial institutions engaged in foreign exchange trading, in accordance with the provisions contained in Instruction No. 8, of April 22, regarding current invisible operations.
7. This Instruction enters into force immediately.
Luanda, on June 28, 1995
The Governor
António Gomes Furtado