REPUBLIC OF CAMEROON
Peace - Work - Fatherland
MINISTRY OF FINANCE
DIRECTORATE GENERAL OF TAXATION
LEGISLATION, LITIGATION AND
INTERNATIONAL TAX RELATIONS DIVISION
TAX LEGISLATION UNIT
REPUBLIQUE DU CAMEROUN
Paix - Travail - Patrie
MINISTERE DES FINANCES
DIRECTION GENERALE DES IMPOTS
DIVISION DE LA LEGISLATION, DU CONTENTIEUX
ET DES RELATIONS FISCALES INTERNATIONALES
CELLULE DE LA LEGISLATION FISCALE
CIRCULAR No.001 /MINFI/DGI/LC/L OF 30 Jan 2012
Specifying the modalities for implementing the tax provisions of Law No. 2011/020 of 14 December 2011 bearing on the Finance Law of the Republic of Cameroon for the 2012 financial year.
THE DIRECTOR GENERAL
- The Head of the National Inspectorate of Services ;
- Heads of Divisions ;
- Chiefs of Regional Taxation Centres ;
- Sub-Directors and officials of similar rank ;
- Chiefs of Service and officials of similar rank.
The changes made in the tax law within the framework of the 2012 Finance Law for the most part espouse the main prescriptions of the current tax policy of the Government which include broadening the tax base and enhancing revenue on one hand, and creating an enabling business climate on the other hand.
The following provisions fall in line with the quest for the broadening of the tax base and the enhancement of revenue collection:
- Tax assessment systems, which witness a drop in their number from four to three, with implications on the filing of tax returns, accounting obligations and on liability to VAT;
- The consecration of new means of fighting against international tax evasion and fraud, with guidance on the deductibility of payments made in countries with preferential taxation and the reinforcement of the documentary obligations under the control of transfer pricing;
- Taxpayer’s registration, of which the revision of the legislative framework serves as a harbinger for the putting in place of a secure Single Identifier.
The promotion of an enabling business climate is obtained through the consecration of provisions such as new exemptions on VAT, particularly in the pharmaceutical, agricultural and renewable energy sectors, and the extension for three more years of the tax benefits of the stock exchange sector.
These measures and several others, impact various provisions of the GTC including those relating to CT, PIT, promotion of investment, VAT, SIT, registration duty, the MTP and local taxation.
This circular sets out the procedures and provides useful information for the effective implementation of these changes.
I - PROVISIONS RELATING TO COMPANY TAX
SECTION 8 a: Extension of the scope of non-deductible expenses.
Section 8 a of the General Tax Code carries new restrictions as regards the deductibility of expenses in the determination of taxable income for the assessment of company tax. They include all expenses appearing on invoices not bearing the Taxpayer Identification Number (TIN) on one hand (1) and, those resulting from amounts paid as remuneration to independent professionals practicing in violation of the regulations governing their professions on the other hand, (2).
1) The non-deductibility of expenses appearing on a bill with no Taxpayer identification number (TIN)
The 2012 Finance Law prohibits the deduction of expenses featuring on invoices not bearing the supplier’s TIN.
For the purposes of this new measure, whether the amounts entered on the invoice in question meet the substantive conditions for deductibility is of no importance, since the existence and mention of the TIN on the invoice are the prerequisites to the in-depth examination of the latter.
Henceforth, only expenses entered on an invoice that bears the TIN of the supplier and also meets the standard requirements for deductibility shall be allowed.
However, it should be noted that the requirement to bear the TIN on the invoice, as stated by the Cameroonian law, applies only to suppliers domiciled in Cameroon. It is therefore not applicable to expenses covered by bills issued by foreign suppliers.
Finally, it is worth emphasizing that, this new provision applies only to transactions undertaken and invoiced with effect from 1st January 2012.
2) The non-deductibility of expenses resulting from remuneration paid to independent professionals practicing in violation of the regulations governing their profession
Amounts paid in consideration for services of any kind, rendered by independent professionals practicing in violation of the laws and regulations governing their professions, shall not be deducted in the determination of the taxable income of the paying party.
For the purposes of this measure, two cumulative conditions must be met:
- The expenses concerned must result from amounts paid to persons practicing a profession referred to as liberal;
- The liberal professions, generating the expenses, must be regulated professions.
An “Independent profession" should be understood as any occupation practised on the basis of appropriate qualifications, either individually or as a group, under his own responsibility and in a professionally independent manner, by providing services in the interest of a client.
A "regulated profession", should be understood as any profession regulated by laws or statutes and subject to government regulation or supervision. Examples of regulated professions could be found in Annex 1 to this Circular, subject to further regulations which may be enacted after this circular.
To prove that a profession is practiced in illegality, basis for the non-deductibility of expenses on the part of the person benefiting from the services, it would be helpful to systematically examine the laws and regulations governing the profession in question, such as mentioned above.
As an illustration, for the profession of tax consultancy, and pursuant to the combined provisions of Articles 4 and 15 of Law No. 2011/010 of 6 May 2011, access to the profession and its practice is determined by:
- An authorization to exercise the profession, issued by the Council of Ministers of the Economic Union of Central Africa (UEAC); and
- Being enrolled in the National Order of Tax Consultants of Cameroon (N.O.T.C).
Finally, it should be noted, that this measure, which takes effect from 1st January 2012, shall be applicable to the results of the year 2012 declared by 15 March 2013.
ARTICLE 8 b: Guidance on the deductibility of expenses resulting from transactions with partners located in countries with privileged taxation.
The law institutes the general principle of non-deductibility of expenses resulting from transactions with countries considered to have a preferential tax system or "tax havens" (1), while providing for exceptions (2).
1) The principle of non-deductibility and the concept of "tax haven"
The 2012 Finance Law institutes the non-deductibility of running costs resulting from transactions of any kind realized by a local company (individual or corporate body) with a partner established in a tax haven.
To be non-deductible, the following cumulative conditions must be met:
- The enterprise that registers the expense or that which pays the remuneration should be domiciled in Cameroon, that is to say, should have its headquarters or a permanent establishment subject to CT ;
- The disputed sums must directly or indirectly benefit a company domiciled in a tax haven or non-cooperative State.
It should be recalled that in accordance with the Cameroonian law, a tax haven is construed, alternatively, as:
- Any country whose rate of personal income tax or company tax is less than one third of that prevailing in Cameroon ;
- Or any country considered by international financial organisations as non-cooperative in terms of transparency and exchange of information for tax purposes.
Whatever the case, for the qualification of "tax haven” on which "non-deductibility is based, operational units should refer to the list of countries provided in Appendix 2 to this Circular.
For the determination of one third of the rate of CT or PIT, the rate to be considered is the nominal rate of CT; this implies that the additional council taxes (CAC) should not be taken into account, that is 35% or the highest rate of the personal income tax schedule, 35% equally. As such, a tax haven should be considered, on the basis of the criterion of tax rate, any country whose rate of company tax or personal income tax is less than 11.66%.
It is worth noting that the principle of non-deductibility thus posed shall apply, as from 1st January 2012, and consequently on the STR filed on or before 15 March 2013.
2) Exception to non-deductibility
Notwithstanding the principle thus presented, the purchase of goods and commodities necessary for the operation of a business, as well as the remuneration of services relating thereto are normally deductible once two cumulative conditions are met:
- The property and goods must be purchased in their country of manufacture;
- The disputed property and goods must have paid the customs duties.
Provision of services related to the purchase of goods and commodities required for operations, should be construed here without however being exhaustive, as transport, stevedoring, handling, insurance operations, etc.
The "country of manufacture" refers to the country in which the purchased goods and merchandise were made. If the "tax haven" in the light of Cameroonian law is manufacturing goods that are acquired by a company in Cameroon, the latter may validly deduct from its taxable income the expenses arising from such transactions, once it is proven that the goods in question did pay customs duty upon entry.
It is therefore important to systematically check the origin of goods and merchandise acquired in the tax havens. For the assessment of this origin, you should refer in particular to the inscriptions "Made in" or "fabriqué en" usually placed on product labels. In case of serious doubt on the origin thus mentioned, the expertise of the Directorate General of Customs should be sought.
Moreover, it is important to ensure by any conclusive means and notably customs declarations that the goods in question have actually been subject to customs duties and taxes upon entering into the national territory.
Finally, disbursements from tax havens invoiced to a Cameroonian company via another company domiciled in a tax haven are equally not deductible.
SECTIONS 21 and 22: Raising the rates for instalments, prepayments and minimum tax of taxpayers under the simplified system of assessment.
1) The raising of the instalment rate of persons under the simplified regime (section 21-1)
For persons under the simplified tax regime and subject to company tax, the rate of the instalment depends on whether the taxpayer is not an importer, is an importer a manufacturer or a service provider.
For traders who do not deal in importation, the rate has been increased to 3% of the monthly turnover.
For importers, manufacturers and service providers, it henceforth amounts to 5% of the monthly turnover.
As in the past, these payments remain subject to the 10% additional council taxes, thereby bringing the effective chargeable rate to 3.3% or 5.5% as the case may be.
An import trader should be construed as all taxpayers whose business consists, even partially, in buying goods abroad for sale in Cameroon. Once it is established that the taxpayer habitually imports goods for sale in Cameroon, either directly or through a third party, the 5.5% instalment is due.
Goods purchased from other CEMAC countries are equally considered as imports for the application of this measure.
A non-import trader on the other hand refers to any person who obtains his supplies for resale exclusively in Cameroon.
In any case, it should be noted that this increase only applies to transactions occurring as from 1st January 2012.
- The increase in the rate of prepayment on the purchases of taxpayers under the simplified scheme (Section 21-3)
The rate of prepayments on purchases has been raised to 5% and 3% for taxpayers under the simplified regime. The new rate, which does not include any additional council taxes, applies, as in the past, to:
- Imports by traders, with the exception of those under specialized management units (5%);
- Purchases by traders from industrialists, farmers, importers, wholesalers, semi wholesalers, forest exploiters (3%).
It should be noted that for non-importers, this tax is withheld during local purchases at a rate of 3%, exclusive of additional council taxes. To be eligible for the application of this rate, reference should be made to the business license as issued by the tax authorities.
However, this increase in the rate of prepayment does not apply to operators of filling stations and exporters of basic commodities who are still subject to a 0.5% rate. The same applies to persons of the Actual Regime where the rate of 1% remains in force.
At the same time, the prepayment rate for operations realized with enterprises that do not bear a taxpayer’s card rises from 5 to 10%. This also applies to taxpayers of the discharge (global) tax regime, when they carry out import operations.
As in the case of instalments, this measure takes effect as from 1st January 2012.
Generally, to determine the applicable rate of instalment or prepayment, those expected to withhold these taxes must refer to the activity of their client as stated on his business licence, his certificate of taxation or the certificate of non-indebtedness issued by the tax authorities.
To have a perfect application of this measure, heads of management structures should ensure that the main activity of these persons is clearly written on their business license, e.g. non-importer, importer, service provider.
It is worthwhile noting that companies having been subject to tax deduction on purchases during a month may deduct it from the instalment of the month in question. This also applies with respect to personal income tax (PIT).
3) The increase in the minimum tax for taxpayers subject to the simplified system of assessment (Section 22)
Like in the case of instalments, here also, the law maker distinguishes non-importers from importers, manufacturers and service providers. Thus, the minimum tax for taxpayers under the simplified system varies in accordance with their nature of activity.
For non-importers, it is henceforth 3% of the tax exclusive turnover realized during the financial year.
For importers, manufacturers and service providers, it is increased to 5% of tax exclusive turnover realized during the financial year.
Practically, this minimum tax will be equal to the sum of monthly instalments paid by the company during the tax year.
II - PROVISIONS RELATING TO PERSONAL INCOME TAX (PIT)
SECTIONS 42 and 70: Clarification on the scope of the capital gains tax and harmonization of the rate.
1) The scope is explicitly extended to corporate persons
The Finance Law for the year 2012 extends the scope of the tax on investment income or capital gains tax, by expressly subjecting corporate bodies to this levy with respect to the overall net capital gains they realize in connection with the sale of stocks, bonds and other capital shares. Henceforth, the capital gains realized by corporate bodies, including those domiciled abroad, shall be subject to the capital gains tax from the sale of shares of companies domiciled in Cameroon just as those realized by individuals.
It should be highlighted that the tax is due even if the capital gain is realised only occasionally, either directly by the corporate body benefitting from the said capital gain, or through a financial institution.
It should be noted that the net capital gains from the sale of stocks, bonds and shares, is construed as the difference between the sale price of the securities concerned and their purchase price or the allotted value in case of acquisition of such securities during the incorporation of the company or increase of its capital.
It remains understood that the net capital gains covered by this provision are those realized outside the stock market of Douala (Douala Stock Exchange).
For corporate bodies, the capital gains tax paid is deducted from the company tax (CT) due for the same year, in accordance with section 17 of the General Tax Code.
Finally, for the registration of the deed of conveyance, operational units ought to first of all ensure the effective settlement of the capital gains tax due on the amount of the sale.
2) A unified tax rate
Moreover, the legislator has set the unique rate of 15%, on which should be added 10% for the additional council taxes, for all investment income, whatever the nature of the operation having generated them. As a result, the rate of 10%, previously applied to capital gains on sales of securities of a net total of more than CFA 500 000 francs, is repealed. As such, like other investment income, such capital gains will henceforth be taxed at the standard rate of 16.5%.
It should be noted that the liability of corporate bodies to the capital gains tax, as well as the annulment of the 10% rate for capital gains on sales of securities of a net global amount exceeding CFA 500 000 francs, shall apply to capital gains realized as from 1st January 2012.
SECTIONS 69 and 91: Raising the rate of down payments, prepayments and the minimum tax of PIT taxpayers under the simplified scheme.
1) The increase in the rate of down payments and prepayments
The law maker has instituted within the framework of the 2012 Finance Law, new rates prepayments of the personal income tax for taxpayers under the simplified system of assessment which reflect the business sector of the taxpayers concerned.
a-For manufacturers, service providers and import traders
Manufacturers, service providers and import traders under this regime shall henceforth declare and pay their monthly down payments at 5% of turnover for that month. This down payment is increased by 10% as additional council tax. These taxpayers will thus make a down payment of 5.5% of the monthly turnover, no later than the 15th of the following month.
The rate thus retained for down payments also applies to prepayments withheld on the imports of this category of taxpayers. However, the rate is 3% on all local purchases made by importers.
b- For non importing traders
With regard to non-importers under the simplified system of assessment, they will henceforth declare and pay their monthly instalments at the rate of 3% of the turnover for the month plus 10% additional council tax, bringing the overall rate to 3.3%.
The overall rate of 3.3% is also applicable for the withholding at source of PIT instalments of this category of taxpayers by the authorised persons.
Likewise, a 3% prepayment is retained on the sum of their local purchases.
In general, to determine the rate of instalment or prepayment to be applied, the persons carrying out the deduction must refer to the activity listed on the business licence or certificate of non-indebtedness issued by the tax authorities.
In the specific case of persons carrying out joint activities, they shall apply a single rate which shall be that of the predominant activity. For the determination of this predominance, reference must be made to the proportion of the turnover declared during the previous year.
However, if a tax audit results in the reconstitution of the turnover declared during this reference year, the turnover reconstituted by the tax authorities shall serve as the basis for determining the nature of activity to take into account for the rate of payments. For the application of this provision, tax audits are construed both as onsite audits and desk audits.
2) The increase in the rate of minimum tax
As is the case with instalment payments, the law maker distinguishes non-importers from importers, manufacturers and service providers. Thus, the minimum tax of taxpayers under the simplified regime varies depending on the nature of the activity carried out.
For non-importers, it is henceforth 3% of the tax exclusive turnover realized during the year.
For import traders and service providers, it is raised to 5% of the tax exclusive turnover of the year.
SECTIONS 52, 54, 58, 68, 73, 91, 93 c to 93 h, 125, 132: Reform tax assessment systems
1) General characteristics of the reform (Sections 93 c, 93 d, 93 f, 93 g, and 60 to 65)
Prior to the 2012 Finance Law, there existed 4 systems of assessment under which taxpayers were classified in accordance to their turnover, and their legal status. These included the discharge tax, the basic, simplified and actual systems of assessment.
The 2012 Finance Law has repealed the basic system of assessment. This thereby reduces to three the number of tax regimes, while at the same time consecrates the turnover as the dominant criterion of liability to these regimes. The new regimes are presented as follows:
- The discharge (global) tax regime for sole proprietorships, and whose liability threshold has been reduced to less than 10 million turnover;
- The simplified tax regime for taxpayers making a turnover equal to or more than 10 million and less than 50 million;
- And the actual tax regime, for taxpayers whose turnover is equal to or more than 50 million.
Enterprises whose turnover is below the thresholds of the regime to which they belong should be maintained for two years at least in this same regime, be they individual businesses or corporate bodies. However, corporate bodies previously under the actual regime and whose turnover is less than 50 million will have to be assessed under the simplified regime as from 1st January 2012, just as sole proprietorships realizing a comparable turnover.
For this important reform that takes effect from 1st January 2012, operational structures are thereby urged to update the different tax regimes during the renewal of business licences. Thus, the turnover to be considered for reclassification will be that of the tax returns of the year 2011, subject to new figures that may ensue from subsequent audits.
Moreover, structures charged with the management of taxpayers should reorganize their lists of taxpayers in accordance with the newly configured regimes.
2) Tax obligations attached to the different tax assessment systems
The reorganization of the tax regimes has led to a restructuring of the compliance obligations of taxpayers according to the different regimes.
A-The discharge (global) tax system (DT)
Aside the tax threshold which moves from 15 to 10 million CFA francs, the discharge or global tax regime has not undergone any fundamental changes.
- With regards to IT and VAT:
As before, liability to the discharge tax exempts these taxpayers from payment of income tax and value added tax.
- With regard to the filing and payment obligations:
No significant changes have been introduced. Thus, the persons liable to the discharge tax shall continue to pay their taxes either in full by April 15 or quarterly.
Similarly, the tax returns and payments shall continue to be done according to the terms and procedures in force.
- Options available:
Enterprises under the global tax regime cannot opt for a superior regime, but may be reclassified after the reconstitution of their turnover.
- With regards to the accounting obligations:
In reforming the various tax assessment systems, it was deemed necessary to review the bookkeeping requirements of taxpayers based on the tax regime to which they belong, the guiding criterion being simplification and adaptation to the size of the company.
Thus, as in the past, the law maker exempts taxpayers under the discharge tax system from any bookkeeping requirement.
b-The simplified system of assessment
The simplified system of assessment as reconfigured by the Finance Law for the year 2012 is innovative both in terms of taxes due, and the filing and accounting obligations.
- With regards to the income or company tax:
Since the simplified regime now concerns both individuals and corporate bodies, taxpayers under this regime are subject, as the case may be, to the income or company tax.
Accordingly, they are required to make monthly instalment payments of CT or IT as mentioned above at the stipulated rates
- With regards to VAT:
Taxpayers under the simplified regime are henceforth no longer liable to VAT. They are neither subject nor liable to this tax, that is to say they can neither invoice nor remit the said tax.
- With regards to withholding at source:
In general, this principle also applies with respect to withholding at source. Thus, when a taxpayer under the simplified regime supplies goods or provides services to a person permitted to withhold taxes at source, only the IT or CT instalment shall be retained by the authorised person.
Consequently, the persons permitted to withhold taxes at source, whether public or private, are no longer required to withhold and remit VAT to the Treasury for the operations they perform with taxpayers of the simplified regime.
- With regards to filing and payment obligations:
Taxpayers under the simplified regime are required to declare and pay the IT or CT instalments by the 15th of the month following that in which the operations were performed. It should be noted that from 1 January 2012, they are not required to collect VAT, which exempts them for declaring and remitting this tax.
As such, taxpayers liable to CT and PIT are required to declare and pay only the corresponding instalment at 3.3% or 5.5% of their monthly turnover before the 15th of the subsequent month.
-With regards to the bookkeeping obligations
As for taxpayers under the new simplified regime, the law maker distinguishes depending on whether the annual turnover realized is inferior or not to 30 million, regardless of their legal form, or their liability to CT or PIT. Thus, when a taxpayer under the simplified system makes a turnover equal to or lower than 30 million, he is bound to keep his accounts in accordance with the minimum cash-basis system (MCS) under the OHADA accounting law. When this turnover exceeds 30 million, the accounts must comply with the simplified system as provided by the OHADA law.
It should however be noted that the taxpayers of the simplified regime, who fall in the category of non-commercial and agricultural earnings whose turnover is less than or equal to 30 million, are required in accordance with the provisions of sections 55 and 57 of the GTC, to adopt the simplified system for bookkeeping. In this case, their taxable profit will therefore be determined as provided for in those sections.
It should be pointed out that in determining the applicable accounting system, the turnover to be considered is that realized in the preceding year (year n-1). Thus, to determine in 2012 whether a company is under the actual system or the simplified system, and what will be its bookkeeping obligations, operational services should refer to the turnover of the year 2011, obtainable at the beginning of the financial year from his tax returns for the period.
However, if during the year n-1, a tax audit resulted in the reconstitution of the period’s turnover, it is this latter turnover that should be considered for the determination of the tax regime and obligations attached thereto. For the application of this provision, tax audits include both onsite audits and desk audits.
A sole proprietorship that sells spare parts, and which imports its goods, realized a turnover of CFA 28 million francs in the year 2011 as reflected in its tax returns. What will be its tax regime for the year 2012 and what are the filing and bookkeeping requirements?
Considering the reported turnover of the year 2011, the company will be subject to the simplified regime (TO between 10 and 50 million). It should declare no later than the 15th of each month the PIT instalments of the previous month to his local taxation centre at the rate of 5.5% of the monthly turnover.
Given the turnover of 28 million, inferior to the 30 million FCFA threshold, the taxpayer ought to proceed with his booking in accordance with the minimal cash-basis system (MCS) and submit no later than 15 March 2013 its Statistical and Tax Return of the previous year in accordance with the MCS.
- Options available:
Taxpayers of the simplified regime who show proof of a turnover of at least 30 million may request the option for taxation under the actual regime. The resulting option is irreversible for a period of three years and also carries the option for liability to VAT including the filing and accounting obligations prescribed for taxpayers under the actual regime.
Concerning the terms of the option, operational units ought to note that - unlike the previous regime which permitted the taxpayer to decide for himself the option and simply inform the tax authorities - the taxpayer must henceforth submit a stamped application to the head of the relevant taxation office no later than February 1st of the tax year. The authorisation is notified him by the Chief of Centre within a maximum period of 15 days from the receipt of such request, the date of reception or postmarked being authentic.
In case of no response from the chief of the centre within 15 days, the option shall be deemed accepted by the administration. However, the taxpayer must meet the other requirements relating to the option, notably that of the turnover of at least 30 million.
b-The actual regime
- In terms of IT and CT:
The liable persons remain bound to the declaration and payment of the monthly CT or IT instalments, depending on which tax they are liable for.
- With regards to VAT:
The Finance Law for the year 2012 has redefined the threshold for VAT liability. Are henceforth liable to this tax, only persons under the actual regime, that is to say those realizing a tax exclusive turnover greater than or equal to 50 million and those who have opted for the actual regime.
- With regards to withholding at source:
Taxpayers belonging to the actual regime are subject to the withholding at source of income tax instalments and VAT in the course of their transactions with individual and corporate bodies endowed with this prerogative.
- With regards to the filing and payment obligations;
The Finance Law for the year 2012 makes no changes regarding the filing and payment obligations of taxpayers under the actual regime.
- With regards to the accounting obligations
The bookkeeping obligations of taxpayers under the actual regime remain unchanged. They are required to present their accounts in accordance with the normal accounting system provided by the OHADA accounting law.
3) Specificities in the determination of tax regimes for intercity transporters and operators of games of chance (sections 93 and 93 g)
The Finance Law for the year 2012 provides further precision on the assessment systems of intercity transporters, gaming and entertainment companies including certain professions.
Thus, falling under the simplified regime are individuals and corporate entities performing intercity transportation of passengers by buses and minibuses with less than 50 seats and operating 05 vehicles at most. Those running more than five minibuses and buses with less than 50 seats, or coaches of 50 seats regardless of the number of vehicles are classified under the actual system of assessment.
With regard to gambling and entertainment companies, your attention should be drawn to the annulment of the basic regime and on the amendments related to the number of machines operated ( baby foot, flippers and video games and slot machines) for the taxation of these categories of taxpayers either under the actual or simplified regimes.
It is the same for logging companies, public and ministerial officers and independent professionals who, regardless of their turnover and in accordance with Article 93 c, cannot be subject to the discharge (global) tax regime. These categories of taxpayers are automatically under the simplified regime, even if their turnover is below 10 million and to the actual regime when the figure is above 50 million.
Finally, you will notice that since the tax regimes are henceforth treated in Section 93 c to 93 h, sections 60 to 65 which so far carried them have simply been repealed by the law maker.
4) Some clarifications on the method of determining the taxable profit of taxpayers under the simplified system earning handicraft, industrial, commercial, non-commercial and agricultural profits (Sections 52, 54 and 58)
Taxpayers under the simplified regime and carrying out activities falling within the category of handicrafts, industrial, commercial profits are bound to the keeping of accounts as a basis for determining their taxable income.
To ensure fairness and to adapt their tax and accounting obligations to their size, the law maker distinguishes between companies whose annual turnover is between 50 and 30 million and those whose turnover is below the threshold of 30 million.
The taxable profit of taxpayers in this category whose annual turnover is less than 30 million is constituted by the operating result derived from their accounts in accordance with the minimum cash system (MCS), as specified by the OHADA Uniform Act relating to the accounting law. The operating result for the year is determined by the difference between income and expenditure during the year. When this difference shows a deficit or when the surplus is less than the minimum tax as defined in section 69, the tax payable is equal to that minimum tax.
Where the taxpayer under the simplified regime realizes a turnover of between 30 and 50 million, his income taxable under PIT is constituted by the gross surplus of income over required operating expenses, determined in accordance with the simplified system under the OHADA Uniform Act on the accounting law.
It should be emphasised that the taxable profit of taxpayers in the category of non-commercial and agricultural profits with a turnover of less than 30 million is determined following the same modalities as prescribed in Section 52 of the General Tax Code.
Thus, this category of taxpayers is allowed to keep accounts according to the minimal cash-basis system as provided by the OHADA law and the taxable result determined on the basis of this accounting system. However, they can choose to keep their accounts in accordance with the simplified system, as provided in Sections 55 and 57 of the GTC. In this case, their taxable income is determined according to the modalities provided in the said sections.
Taxpayers of the simplified system earning non-commercial profits, to the exception of independent professionals and agricultural profits, whose turnover is greater than or equal to 30 million, will in turn determine their income taxable under PIT, respectively, according to the modalities provided in sections 55 and 57 of the GTC and will be obliged to keep their accounts in accordance with the simplified system of the OHADA law.
It is worth noting that the STR of the taxpayers concerned, to be submitted no later than 15 March 2013 in respect of the year 2012, are in accordance with the provisions mentioned above.
III - PROVISIONS RELATING TO THE PROMOTION OF INVESTMENTS
SECTION 108 (3): prorogation of the validity of the stock exchange scheme
The tax benefits accorded to the stock exchange scheme, established by the 2007 Finance law, were conditioned by the realisation of certain stock transactions within three (03) years from the 1st of January 2007.
The 2012 Finance Law extends this deadline by three years with effect from the 1st of January 2012.
For the purposes of this new provision, it should be noted that only operations of capital opening or capital increase and issue of bonds on the national stock exchange accomplished between 1st January 2012 and 31 December 2014 may give rise to the application of the particular regime of the stock exchange sector.
It should however be noted that the tax benefits of this regime granted to companies already listed on the stock exchange before 1st January 2012 remain valid until the expiration of the period of three years which runs as from the date of admission.
Finally, it should be noted that with regard to the nature of the operations giving rise to the application of this regime, the content and scope of the tax benefits attached thereto, and their methods of implementation, the terms of Circular No. 0004/MINEFI/DGI/LC/l of 25 January 2007 specifying the modalities of application of the 2007 Finance Law, shall remain in force and are rescheduled mutatis mutandis.
SECTION 115: Clarification of the scope of the tax benefits attached to the special tax regime of developmental projects
The Finance Law for the 2012 has redefined the scope of the tax benefits of the regime of developmental projects. It has confirmed to the benefit of eligible enterprises, the free registration of instruments of incorporation, of continuance of the company and of capital increase, and has also instituted a fixed registration fee of CFA 50,000 francs for real estate transfers related to the project.
1) The free registration of instruments of incorporation, continuance of company, and capital increase
It should be emphasized at the outset that this amendment simply aims to align with the more favourable regime instituted in 2010 for the registration of the abovementioned deeds under the ordinary tax laws.
In fact, instruments of incorporation, continuance of company and capital increase presented by enterprises licensed under the regime of developmental projects are subject to free registration without payment of the graduated stamp duty, but only the fiscal stamp.
2) Liability to the fixed registration fee of CFA 50,000 francs for real estate transfers of authorized companies
Covered by this provision are, all transfer of ownership or possession directly related to the execution of the project. This is the case with the acquisition or lease of land or built property allocated directly and exclusively to the project.
On the contrary shall be excluded from this measure, all real estate transfers made by the project promoter but not directly related to the project, like the leasing of buildings for residential purpose assigned for the housing of staff. The same goes for already existing companies developing new projects, buildings destined concomitantly and indistinctly to all the activities of the approved company as well as buildings previously on rent.
Moreover, it is important to note that only the transfers presented to the registration formality after being admitted to this regime are subject to the fixed fee of CFA 50,000 francs. It is therefore worthwhile to always request the presentation of the order signed by the MINIMIDT granting the abovementioned regime.
However, the application of a fixed fee of CFA 50 000F to the transfers at issue here goes along with payment of the graduated stamp duty, without prejudice to size stamp duties that remain due whatever the case.
IV) PROVISIONS RELATING TO THE VALUE ADDED TAX
Section 128 (6), (7), (17): Broadening of the scope of VAT exemptions
The Finance Law for fiscal year 2012 extends VAT exemptions to:
- Inputs, materials and equipment for the pharmaceutical industry;
- Leasing operations carried out in favour of credit-takers for the acquisition of specialized
agricultural equipment, for agriculture, livestock and fisheries;
- Materials and equipment for the exploitation of solar and wind energy.
- The exemption from VAT of inputs, materials and equipment for the pharmaceutical industry
It applies to companies engaged in the production or manufacture on the Cameroonian territory of drugs and other pharmaceutical products.
Consequently, companies whose business consists simply in commercialising and selling imported pharmaceutical products shall be excluded from the benefit of this exemption.
As for inputs, machinery and equipment exempt from VAT, it is necessary to refer to circular n° 001/CF/MINFI/CAB of 09/1/2012 indicating the modalities of implementing the provisions of section 128 (6) and (1) of the General Tax Code.
2) Exemption of the leasing of agricultural equipment
The 2012 Finance Law exempts from the payment of the value added tax all leasing operations for the purchase of agricultural, livestock and fisheries equipment.
For reminder purposes, leasing should be comprehended as a corporate finance mechanism whereby a credit institution referred to as “financial lessor” rents professional equipment to another company referred to as lessee in return for payment of royalties or rents over a period at the end of which it may acquire full ownership of the property or give it up.
The process defined above can be analyzed both on the side of the financial lessor and that of the lessee. The exemption at issue here pertains exclusively to the royalties or rents paid by the lessee. Similarly, when the lessee decides at the end of the leasing contracts to own the property, and there is a residual value to be paid for the exercise of purchase option, this transaction is equally exempt from VAT.
On the other hand, this exemption does not apply in any case in the operation of acquiring the property by the lessor, which remains normally subject to VAT, unless otherwise provided by law. However, it does not affect the deductible prorata of the lessor.
It’s worth noting that only the rents paid within the context of the lease operations on agricultural, livestock and fishing equipment on the list of exempted agricultural products by virtue of the provisions of Section 128 (6) of the General Tax Code and included in circular n° 001/CF/MINFI/CAB of 09/1/2012 indicating the modalities of implementing the provisions of section 128 (6) and (1) of the General Tax Code are exempted from VAT.
In the bid to modernize its farms in the Kapsiki region, the agricultural enterprise FAY SA signed with the New Leasing Finance Ltd, a leasing agreement on the following equipment:
- A high speed combined harvester with a value of CFA 20 million exclusive of tax imported
- A service car for the CEO of a tax free value of CFA 45 million francs purchased from a local dealer.
The said contract stipulates that FAY SA must pay over a period of two (02) years for the combined harvester and five (05) years for the vehicle, respectively, a monthly rent of CFA 500,000 F and CFA 300,000 FCFA. It is also expected that in the event where FAY SA decides upon the contract maturity (after the abovementioned periods), to acquire ownership of the equipment, it must pay a residual value of CFA two million francs (2 000 000) for the combined harvester and CFA five million francs for the vehicle.
What is the fiscal analysis of this transaction with respect to VAT, cognisant of the fact that FAY SA has decided to exercise its purchase option at the end of the contract?
- Regarding the leasing of the combined harvester:
Since the high speed combined harvester figures on the list of agricultural equipment exempted from VAT as defined by the circular n° 001/CF/MINFI/CAB of 09/1/2012 indicating the modalities of implementing the provisions of section 128 (6) and (1) of the General Tax Code, the CFA F 500 000 rents paid monthly by FAY SA for the harvester are exempt from VAT. The same applies to the residual value of CFA two million francs to be paid upon the lifting of the option. As a result, billings made by New Leasing Finance Ltd to FAY SA must not show VAT.
The importation of this equipment by New Leasing Finance is not covered by the exemption at issue here. However, agricultural materials and equipment enjoy a general exemption from VAT under Section 128 (6) of the GTC. Based on this legal provision, the acquisition of the aforementioned combined harvester shall be acquired tax free.
- With regards to the leasing of the Chief Executive Officer’s vehicle:
Insofar as the equipment at issue here (private vehicle) is not an agricultural equipment as set out by the provisions of Section 128 (6) of the GTC, the CFA 300 000 francs rents paid monthly by FAY SA for renting of the vehicle shall be liable to VAT. The same applies to the residual value of CFA 5 million francs to be paid for the exercise of its purchase option. As a result, billings made by New Leasing Finance Ltd to FAY SA should show VAT at CFA 57 750 francs on the monthly rent and CFA 962 500 francs on the residual value.
As for purchasing of this vehicle by New Leasing Finance from the local dealer, it is not covered by this exemption. Therefore, the invoice must include VAT of CFA 8 662 500 francs.
3) The exemption of materials and equipment for exploiting solar and wind energy
This applies to materials and equipment for the exploitation of solar and wind energy. Featuring under this field therefore are the specific equipments and materials used to capture energy, its conversion into electricity and its exploitation.
However, the marketing of these energies remain liable to VAT.
With regards to solar energy, it covers several realities, including:
- Photovoltaic energy, which involves capturing the sun's rays by means of solar panels to
- Thermal solar energy, which functions from thermal sensors, reactive to light and permitting
the production of heating and / or hot water;
- Concentration of solar energy, based on the principle of big reflective mirrors.
As for wind energy, this covers electric machines powered by wind and whose function is to generate electricity.
For the application of these exemptions, you will refer to the list of materials and equipment determined by circular n° 001/CF/MINFI/CAB of 09/1/2012 indicating the modalities of implementing the provisions of section 128 (6) and (1) of the General Tax Code.
Section 149 (3): Rationalization of the modalities for VAT credit compensation
The Finance Law for 2012 provides additional details on the compensation modalities of VAT credits.
1) The taxes that can be compensated with tax credits
Henceforth, shall be compensated with non-imputable VAT credits, the payment of VAT itself, excise and customs duties.
- As concerns VAT: the compensation may cover both the principal of this tax (17.5%) and
the additional council tax (ACT) added to it;
- As for excise duties: this involves duties paid both internally and those paid at the port;
- With regards to customs duties: they refer to the Common External Tariff (CET) excluding
service charges like the Community integration tax, the computer royalty....
2) The terms of compensation
VAT compensation shall be subject to two cumulative conditions:
- Justification by the applicant of an uninterrupted activity for more than two years at the time of the application: this can be established by any means, including tax returns, receipt for payment of taxes, the administrative tax documents (business licence, tax certificates ...).
- The absence of an ongoing partial or general audit of accounts; this means on the contrary that the taxpayer subject to a desk audit or a spot check may, may subject to the first condition cited above, rely on this provision.
3) The compensation procedure
The compensation cannot be carried out spontaneously by the taxpayer. The latter must obligatorily submit in writing a request to the General Director of Taxation. This must be done after validation by the departments managing the VAT credits to be compensated. Also, this application must be accompanied by the notification of the amount of credits validated as well as supporting elements of an uninterrupted activity for two (02) financial years.
Once the application has been introduced, it is subject to review by the relevant departments of the DGT after which the taxpayer is notified either of an authorization or rejection. It should be noted that only the DGT or the MINFI are empowered to authorize compensation between VAT credits and the above mentioned taxes.
When the compensation is on customs duties or duties payable at the port like customs VAT or excise duties on imports, the compensation authorization must also be brought to the attention of the Director General of Customs.
Practically, the compensation must give rise to the issuance of a receipt justifying the payment of the taxes involved.
4) Compensation at the initiative of the Administration
Finally, it should be noted that compensation between VAT credits and other tax liabilities of a taxpayer stemming from an audit procedure shall also be possible at the initiative of the administration. In this case, it is made before the refund of tax credits to the taxpayer.
V - PROVISIONS RELATING TO THE SPECIAL INCOME TAX
SECTION 225: Clarification of the scope of the Special Tax on Income
The Finance Law for fiscal year 2012 introduces two innovations to the provisions on the Special Income Tax (SIT). On one hand, it defines the term "copyright", and on the other hand extends the scope of this tax to software.
Regarding the definition of copyright, it should henceforth be construed as all works of the literary or artistic domain regardless of the method, the value, type or purpose of the expression, notably:
- literary works;
- musical compositions with or without wordings;
- dramatic works, dramatic-musical, choreographic, pantomimic created for the stage;
- audiovisual works;
- works of drawing, painting, lithography, etching and sharp works on wood and the like; sculptures, reliefs and mosaics of all kinds;
- architectural works, both drawings and models and the building itself;
- tapestries and objects created by the arts and applied arts, including the sketches or model as well as the work itself;
- maps as well as drawings and graphic and plastic reproductions of a scientific or technical nature;
- photographic works to which are assimilated works expressed by a process analogous to photography.
Therefore, the revenue paid abroad as copyright should be subject to the SIT, unless otherwise provided by a tax treaty.
It should be noted here that software do not fall under the category of works considered in taxation as “copy right”. However they are in a specific manner, liable to the special income tax. Software should be understood as all applications and computer programmes necessary for the operations or functioning of the company.
Thus, all amounts paid abroad in exchange for software, whatever the nature thereof and the country of destination shall be subject to a deduction at the unique rate of 15%.
For the purposes of this provision, it is irrelevant whether the software in question have paid customs duties or not, due to the fact that customs duties and the SIT are taxes of a different nature: the first being a levy to gain access to the Cameroonian territory, is a tax on consumption, whereas, the second, a tax on remuneration paid abroad, is an income tax.
VI – PROVISIONS RELATING TO REGISTRATION FEES
SECTIONS 346, 350: Harmonization of the registration duties for instruments linked to corporate restructuring
The 2012 Finance Law expressly extends the fixed registration fees previously reserved for acts of company mergers to those of the division of partnerships or limited liability companies.
Thus, mergers and division instruments realized by the entities mentioned above are subject to the fixed fee, without pre-conditions.
For the application of this provision, it should be construed as a reminder that mergers, under the OHADA Uniform Act on commercial and economic interest group law, is the operation by which two companies come together to form a single one either by creating a new company or by the absorption of one by the other. This operation induces the transmission of all the assets of the company which disappears as a result of the merger, to the absorbing company or the new company.
Corporate division on the other hand, based on the aforementioned legal framework, refers to the process whereby the assets of a company are shared by several existing or new companies. Technically, corporate division is the opposite of a corporate merger.
From a tax perspective, a merger induces the same consequences as a division, in that, it entails the fixed fee of 50 000 FCFA with the graduated stamp duty as specified in the provisions of section 545A (a) of the General Tax Code.
SECTION 560: Extension of limitation period against the administration for the registration of estates
In cases of succession after death, the time beyond which the administration is no longer entitled to claim the fees from the beneficiaries which was ten (10) years is henceforth raised to thirty (30) years as from 1st January 2012.
This period runs from the date of the:
- Filing of the declaration of succession in the territorially competent taxation office for
- Death, for transmissions by unreported deaths;
- Day of registration for the fees for deeds registered on balance due.
This new time-limit for the extinction of rights to the benefit of taxpayers applies to all transfers by death not yet registered as at 31 December 2011, regardless of the date of death of the deceased, the date of filing the declaration or the day of the registration.
This thirty-year prescription is interrupted by the notification of a writ of collection,
payment of a deposit, the filing of a petition for remission of penalty or by any request served in these forms by the Administration. In case of interruption, a new period begins to run from the date of the interrupting event.
However, it should be recalled that under the provisions of Section 276 of the GTC, the subscription period of the declara