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REPUBLIC OF CAMEROON: FINANCE LAW 2012-MAJOR FISCAL INNOVATIONS
Following the promulgation of law number 2011/020 of 14 December 2011 relating to the finance law of the Republic of Cameroon for 2012, Centurion Afrique presents with pleasure, the tax highlights
A-DEDUCTION OF EXPENSES FOR CORPORATE TAX
a) NON DEDUCTION FOR ABSENCE OF SUPPLIER'S TAX PAYER ID
Prior to the advent of this law and per articles 105(5) and L101 of the general tax code, failing to mention the tax payer’s ID of the service provider or supplier on the face of the invoice entailed the loss of the right to deduct the VAT amount on the invoice. The 2012 finance law extends this principle to corporate tax. Article 8 bis provides for the non-deduction of expenses justified by invoices that do not mention the tax payer’s number of the service provider or supplier
The draft circular to the finance law provides for retrospective application of this provision to expenses booked in FY 2011. We recommend as a measure of prudence that tax payers try and regularize all invoices booked in 2011 and not specifying the supplier’s tax payer’s number. b) DEDUCTION OF FEES PAID TO LIBERAL PROFESSIONALS The 2012 finance law subjects deduction of fees paid to liberal professionals on the condition that they are compliant with the laws governing their respective professions.
The circular to the finance law recommends that tax inspectors refer to the provisions of the respective laws governing the liberal professions for guidance on the application of this provision. It cites the following examples:
• A tax adviser among others, should be licensed by the council of ministers of CEMAC and also be enrolled with the Institute of Tax Advisers of Cameroon
• A practicing accountant, among others, should be licensed by the council of ministers of CEMAC and enrolled with the Institute of Chartered Accountants of Cameroon
• A real estate agent, among others, should be enrolled in the register of real estate agents held at the Ministry of Habitat and hold a professional card delivered by the ministry
The draft circular provides for retrospective application of this provision to expenses booked in FY 2011 and also contains a non-exhaustive list of regulated professions. c) DEDUCTION OF PAYMENTS TO PERSONS SITUATED IN A TAX HAVEN
Expenses and other costs paid to individuals and companies situated in territories or countries qualifying as a tax haven are not deductible for personal income tax and corporate tax purposes. Article 8 ter (new) defines a tax haven as country or territory where the personal or corporate income tax rates are less than a third of the rate applicable in Cameroon. Guidance provided by the commentary takes the principal of 35% for corporate tax and the marginal tax rate of 35% for personal income tax as the basis for evaluating the 1/3 rule. Hence any country or territory where the personal income tax rate or the corporate tax rate is less than 11.66% qualifies as a tax haven.
Alternatively a country or territory would qualify as a tax haven if it is considered by International financial Institutions as non-cooperative in matters of fiscal transparency and exchange of information.
Note that this provision does not apply to purchases of goods required for operating activities as well as related services provided they are purchased from their country of production and have paid customs duties in Cameroon.
B-CORPORATE TAX PAYMENT
a) Increase in rate of prepayment on sales/purchases
1. For tax payers on the simplified tax regime, the rate of corporate tax prepayment on purchases destined for resale unmodified is henceforth 5% of purchases up from 1%.
2. For tax payers on the real regime, the rate remains unchanged at 1%.
3. For tax payers without a tax payer’s card, the corporate tax prepayment on purchases is henceforth 10% of purchases up from 5%. The 10% rate is also henceforth applicable to tax payers on the flat tax regime engaging in import operations.
This provision is effective from 1st January 2012.
b) Increase in minimum tax rate for tax payer’s on the simplified tax regime
• For non-importing commercial activities, tax payers on the simplified tax regime will henceforth pay 3% of monthly turnover increased by 10% for the local council, a total of 3.3%
• For service providers, importing commercial activities and producers on the simplified tax regime the rate is henceforth 5% of monthly turnover increased by 10% for local council for a total of 5.5%
This is effective 1st January 2012 and companies authorized to withhold VAT and corporate tax advances at source should take particular note. C-INTRODUCTION OF CAPITAL GAINS TAX ON CAPITAL GAINS REALISED BY CORPORATE PERSONS
Currently, Article 42 of the tax code provides for the payment of capital gains tax on disposals of shares and other capital instruments where they are realized by physical persons.This rule is now extended to include capital gains realized on the disposal of shares and capital instruments realized by corporate entities. In addition the capital gains tax rate is increased to 15%, up from 10% before local council taxes. The full rate is 16.5%, up from 11%
Capital gains realized by corporate entities remain taxable to corporate tax. However, Capital gains tax paid at the time of disposal is offset against the corporate tax liability for the period. D-EXTENSION OF PERIOD FOR STOCK EXCHANGE PREFERENTIAL REGIME Article 108 of the finance law for FY 2008 provided some advantages, including a reduced corporate tax rate, for companies that listed on the Douala stock exchange within a 3 year period expiring on 31st December 2010.
The 2012 finance law has extended this regime for another 3 years effective 1st January 2012. This is intended to facilitate effective take off of the Douala stock exchange.
E-GRATIS REGISTRATION OF CERTAIN INSTRUMENTS UNDER THE GROWTH PROJECTS REGIME Article 115 of the tax code is modified to provide for gratis registration of instruments creating a company, extending the life of a company or increasing the capital of a company qualifying as a growth project. Previously, these were registered at a fixed rate of XAF 50 000.
Transfers of property directly linked to the setup of the project will continue to be registered at the fixed rate of XAF 50 000.
F-VALUE ADDED TAX
a) TURNOVER-THE SOLE CRITERIA FOR VAT SUBJECTION
The finance law for 2012 retains turnover as the sole criteria that defines VAT subjects. Henceforth only tax payers on the actual earnings tax regime have a right to invoice VAT. Note the actual earnings tax regime comprises individual businesses and companies with an annual pre-VAT turnover equal to or in excess of XAF 50 000 000.
Tax payers on the simplified and flat tax regime are henceforth treated as final consumers and can neither invoice VAT nor deduct VAT that is invoiced to them. Notwithstanding the exclusion of tax payers on the simplified tax regime from the field of application of VAT, where these companies transact with a public company required to retain VAT at source, their invoice is deemed to include VAT and the public company is required to retain VAT on the invoice.
On the contrary, transactions realized between tax payers of the simplified tax regime and private companies authorized to retain VAT at source are deemed to be effected without taxes. Consequently VAT is not retained on these invoices.
b) INTRODUCTION OF NEW VAT EXEMTIONS
Henceforth the following goods and transactions are exempt from VAT
• Pharmaceuticals, their inputs and material and equipment for the pharmaceutical industry
• Long term lease operations realized by credit establishments for financing the acquisition of equipment destined for agriculture, animal husbandry and fishing
• Material and equipment for solar and wind energy production
c) INTRODUCTION OF WHT ON PAYMENTS FOR INDUSTRIAL PROPERTY RIGHTS RELATING TO SOFTWARE LICENSES
The Franco-Cameroon tax convention exempts author’s rights paid to France from WHT.
The finance law now provides a definition for author’s rights which excludes software and software licenses. It also specifically subjects the use of software to WHT. Henceforth all payments made abroad and relating to software or use of software are subject to WHT at 15%. The prior payment of customs duties is irrelevant.
G-EXTENSION OF THE CORPORATE MERGER REGIME TO CORPORATE SCISSIONS
Instruments documenting the breakup of companies, in line with those documenting the merger of companies are now registered at a fixed rate of XAF 50 000 plus graduated stamp duty. Scissions defined as the operation whereby the net assets of an existing company are split between two or more existing and/or new companies.
H-REINFORCED REGISTRATION OBLIGATIONS
Salary earners of the private and public sectors are henceforth required to register with the tax administration.
Companies are henceforth required to indicate their tax payer’s numbers on all supporting transaction documentation.
In addition to omitting to mention the tax payer’s number, the following are henceforth constitutive of offences punishable by fines of between XAF 100 000 and XAF 1 000 000
• Exercise of an economic activity without prior registration
• Obtaining a tax payer’s number on the basis of a faulty declaration or fraudulently using a tax payer’s number
• Failing to apply for registration within the prescribed timeframe or failing to declare changes to operating activities
• Failing to register with the tax administration within 3 months for salary earners with salary income as sole income
I-TAX PAYER’S OBLIGATIONS DURING TRANSFER PRICING AUDITS
It is now an obligation for tax payers attached to the large tax payer’s unit to systematically, at the start of a general tax audit, provide details of group and associated company relationships where
• 25% or more of its share capital or voting rights is held directly or indirectly by a company situated out of Cameroon
• It holds 25% or more of the share capital or voting rights in a company established out of Cameroon.
In the event of a transfer pricing audit within a general tax audit the duration of the audit could be extended by 6 months. Currently the limit is 3 months
J-REVISION OF TAX REGIMES
Effective 2012, only three tax regimes are in application in Cameroon -the flat tax, the simplified and the actual earnings regime.
Flat tax regime
With the exception of forestry companies, public officers (notary publics for example) and liberal professions, individual enterprises with an annual turnover of less than XAF 10 million
Simplified tax regime
Individual enterprises and corporate entities with annual turnover between XAF 10 million and XAF 50 million with the exception of transporters of persons and gambling entities provided for in Article 93 of the tax code.
Actual Earnings regime
Individual enterprises and corporate bodies with annual turnover equal to or in excess of XAF 50 million
For further information contact
E. Chenwi,
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Tel: +23774064816 or +23794535516
www.chenwicharteredaccountants.com
Disclaimer:
This is not tax advice. Centurion Afrique will not accept liability for decisions based on the contents of this document. Consult a professional for more complete advice tailored to your individual circumstances
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