Innovations in the 2024 Finance Law of Cameroon

The recently enacted Law N° 2023/019, dated December 19, 2023, marks a significant turning point in the financial landscape of Cameroon. As the cornerstone of the 2024 fiscal year, this Finance Law, promulgated by the President of the Republic, brings about critical modifications to the General Tax Code, reflecting the nation’s evolving economic priorities and strategies. This article delves into these changes, offering a detailed exploration of their implications for businesses and individuals across Cameroon.

I. General Tax Considerations

1. Deductible and Non-Deductible Expenses

• Under the category of actual losses, losses incurred as a result of transferring debts from a dissolved company to the acquiring company during restructuring (with change in activities) shall not be considered a tax-deductible expenses.
• Still under the category of actual losses, only officially verified, non- negligent or reckless losses shall be considered tax-deductible expenses. In addition, these losses must be approved by a tax controller and no longer a tax inspector.
• Cash payments from 100,000 FCFA and above shall not be considered tax-deductible expenses.
• Expenses supported by invoices not issued through the tax authority’s electronic system shall not be tax deductible.
• Remuneration paid to self-employed professionals who are practicing in violation of the applicable regulations in their professions shall not be considered a tax-deductible expense.
• Payments made to inactive taxpayers shall not be considered a tax-deductible expense.

2. Filing Obligations

2.1. application for registration

• To become a registered taxpayer the application file must in addition to a site plan and a valid e-mail address, also include, a subscription references of the public water or electricity distribution service company, and a telephone number.

2.2. Filing Returns

• The deadlines for taxpayers to file their annual tax returns in the incoming year, now depends on their respective tax centers as follows:

–  taxpayers under the large-scale management unit: March 15th

– taxpayers under the small and medium-size and specialized centers :
April 15th

–  taxpayers under divisional centers: May 5th

• The online tax portal is no longer the only means through which companies under the specialized centers are required to file their tax returns and reports.
• Taxpayers who miss filing returns two months (no longer three months) in a row will be automatically removed from the tax database. For non- professional taxpayers, the first failure to file annual returns leads to automatic deletion. Reinsertion is possible only after resolving their tax issues.
• Where a taxpayer misses the deadline to file a return, they’ll get a reminder letter. They have 7 days (no longer 15 days) from receiving the letter (or the postmark or signed mail register for hand delivery) to regularize the situation.
• Business owners are now required to include in their filing of the individual return for each worker, a list of sales for each customer, with their ID number and total amount spent in the past year.

3. Non-professional taxpayers

• A new category of taxpayers call “Non-professional taxpayers” was introduced for individuals who solely receive income from salaries, wages, pensions, life annuities and/or income from movable capital and income from property, and in general any passive income.
• Non-professional taxpayers pay taxes either as personal income tax in the categories of salaries and wages and property income, registration fees, tax on landed property and tax on real estate wealth; or special income tax, and salary deductions.
• Non-professional taxpayers shall be required to file a summary annual return of their income.

4. Tax compliance certificate

• The “tax clearance certificate” was replaced with a “tax compliance certificate” which indicates that the taxpayer is good to go with taxes – no debts at the date of issue.
• A tax compliance certificate is mandatory for the following : professional taxpayers transferring funds abroad; issuing tax exemption certificates and paying taxes and duties; receiving payments from the State, regions, municipalities, public establishments, and certain public and private companies; Export transactions; and Visa applications at diplomatic and consular missions.

5. Capital Gains

• Capital gains from the transfer of shares of the foreign entity to the Cameroonian company’s capital, will now be taken into consideration when determining the taxable income, rather than relying on the transfer price quota associated with the shares of the foreign entity in the Cameroonian company’s capital. The amount to be taken into account as transfer price in order to determine the gain or loss shall, under no circumstance, be below the value of the values transferred.
• Personal income tax levied on capital gains from securities and deducted at source by the person paying the proceeds shall give rise to the issuance of a certificate of deduction at source which must be generated from the online tax portal.

6. Business and Goodwill

• The transfer of business-related instruments and assets, including lease rights, movable or fixed operational items, and goodwill, will now be subject to an intermediate tax rate of 10% (no longer the higher rate of 15%).
• The transfer of use of businesses, including customers, is now subject to an intermediate rate of 10%.
• The transferee and the transferor are now jointly and severally liable to payment of the sums due for transfer abroad of the rights over the business of a company under Cameroonian law.

II- Special Considerations

7. Obligation to issue a withholding tax certificate generated from tax system

• Industrialists, importers, wholesalers, semi-wholesalers, and forestry companies who withhold income tax or purchase taxes are required to issue a withholding tax certificate generated from the online tax portal.

8. Obligation to submit an audit report and inventories

• Taxpayers are now required to spontaneously transmit to their tax center, within fifteen (15) days of the date of submission to the court registries, their auditor report as soon as the company has been notified thereof and inventories duly signed and initialled. Failure to spontaneously transmit the auditor’s report and inventories shall be punished with a fine of 50,000,000 (fifty million) FCFA.

9. Dependent or control companies

• Cameroon companies that are dependent on or control companies in Cameroon or abroad and which are under large-scale management, are required to electronically file no later than March 15 of the following year, an annual transfer pricing declaration, using a model provided by the tax administration, . Failure to file the said declaration as prescribed, or filing an incomplete or non-compliant declaration, shall be punishable with a fixed fine of CFAF 5,000,000 (five million).
• Cameroon companies that are dependent on or control companies in Cameroon or abroad, and that hold, directly or indirectly, at the end of the financial year, more than 25% of the share capital or voting rights of an entity established in Cameroon or abroad whose annual turnover excluding tax or gross assets is greater than or equal to CFA 1,000,000,000 (one billion), are required to electronically provide to the tax authority, at the beginning of an accounting audit, documents enabling them to justify the transfer pricing policy applied to all transactions with affiliated entities established in Cameroon or abroad.
• Starting 2024, some dependent or controlled Cameroonian companies in multinational groups must file a special report each year. This report details the group’s profits in each country, tax and accounting info, and where the company operates. Failure to file or incomplete or inaccurate filing of the special report shall be punished with a fixed fine of CFAF 50 000 000 (fifty million).

10. Personal Income Tax and assessment thereof

• Personal income tax now encompasses the global income of any natural person whose tax residence is in Cameroon.
• The following employee benefits are now taxable: telephone (5%), fuel (10%), security guard (5%), and internet (5%). All other benefits in kind shall be valued at their actual cost.
• Any cash allowance granted in lieu of benefits in kind must be included in the tax base for assessment. The tax is calculated on the actual amount of the allowance, unless exempt by a separate provision.
• The fixed-rate 30% business expense deduction, applied in calculating net taxable income, is now capped at 4,800,000 FCFA per year.
• For taxpayers whose exceptional income exceeds the marginal tax rate threshold, the personal income tax payable shall be calculated on the combined total of their regular taxable income and 75% of their net exceptional income.

11. Special Tax

• No more 15% tax rate applicable on income paid to natural persons or corporate bodies domiciled outside Cameroon by natural persons or corporate bodies located in Cameroon, the State, or regional or local authorities.
• The proceeds referred to above are now taxable in Cameroon when paid by natural persons located in Cameroon to persons not having a permanent establishment in Cameroon, or when they are included as deductible charges in the calculation of the taxpayer’s results.

III- Sector Specific Tax Obligations

12. Financial Institutions and Insurance Companies

• Financial institutions, insurance companies, and related businesses are now required to identify the tax residents of their account holders and controllers of the said accounts.
• Financial institutions, and related businesses must disclose to tax authorities information related to their account holders, controllers of the said accounts, as well as financial information relating to these accounts.
• Starting January 1, 2025, anyone opening a bank account must provide information about their tax residence as well as the tax residence of the controller of the said account.
• Failure to comply with the requirements for identifying and reporting account holders and their tax residency, including late, incomplete, insufficient, or incorrect reports, shall be punishable by a fine of FCFA 5 million per account.
• Failure by natural persons or entities to provide financial institutions with the required self-certification regarding their tax residency shall result in a fine of FCFA 1 million per account holder. The deliberate provision of false or erroneous information in such self-certification by an account holder or a natural person controlling the account holder shall constitute forgery and be punishable by the penalties provided for in the Criminal Code.
• Failure by financial institutions and similar entities to comply with the requirements for keeping and reporting information and documents as stipulated shall be punishable by a fine of FCFA 1 million per year and per account subject to reporting. Additionally, failure to comply with the retention period of five (5) years following the end of the period during which they must provide the required information shall be considered equivalent to failure to keep records.
• The stamp duty on motor vehicles collected by insurance companies during the first payment of the insurance premium, whether partial or total, shall be subject to the issuance of a receipt generated from the online tax portal. Failure by insurance companies to issue a certificate of payment of the said stamp duty generated from the online tax portal shall be punishable with a fixed fine of up to 5,000,000 (five million) FCFA.
• Failure to produce justification of payment of the stamp duty on motor vehicles by presenting a payment certificate generated from the online tax portal to an authorized control official shall be punishable by a fine ranging from 1,400 FCFA to 2,400 FCFA.

13. Digital Assets

• Income from digital assets, such as cryptocurrencies and virtual assets, is now considered capital gains under the category of income from stocks and shares.

14. Digital platforms

• Income generated by individuals on digital platforms from activities such as selling goods, providing services, or exchanging or sharing goods shall be considered and taxed as non-commercial or similar earnings. A 5% tax rate shall apply to income generated from these sources.

15. Real Estate

• Payment of withholding tax on rental income shall give rise to a withholding tax certificate, generated electronically from the tax system. Section 88 of the 2024 Finance Law
• Capital gains realized from the sale of built-on or non-build-on property or acquired free of charge shall now be subject to a 10% tax rate withheld at source by the notary when the transaction is concluded in cash. Section 90 of the 2024 Finance Law
• The registration duty for a long lease may be split into installments corresponding to the number of three-year periods in the lease term. Section 546 (b) of the 2024 Finance Law
• Instruments and transfers relating to buildings used for professional, industrial, and commercial purposes, including leases, subleases, lease transfers, extensions, and verbal or fixed-term leases, as well as rentals granted by companies for their staff and executives, are now subject to an intermediate rate of 10%, excluding leases of buildings in rural areas for business purposes.

16. Transport

• Transportation of goods by air in Cameroon is now subject to a fee of 10,000 FCFA per bill of lading.

17. Agriculture

• Income earned by smallholders shall no longer be considered profit from agricultural activities for the purposes of determining personal income tax liability.

18. Petroleum products

• The rate of the special tax applicable to natural gas for industrial use has been reduced from 70 FCFA to 60 FCFA per cubic meter.

19. Logging

• A temporary ban has been imposed on bidding for logging permits or applying for the issuance of secure consignment notes for timber in the event of failure to pay levies, taxes, and duties following a formal notice.

20. Non-profit organizations (NPOs)

• Taxpayers under the NPO system shall be subject to a 15% withholding tax at source on gross real estate income paid as rent.
• NPOs are required to withhold 5% tax at source on the fees, commissions, and emoluments paid to members of liberal professions, regardless of their legal form or tax system.
• Instruments and transfers of property to associations recognized as being of public utility and duly authorized faith-based bodies are subject to a super- reduced rate of 1%.

21. Succession

• The value used for calculating registration duty in cases of inheritance, division, release from joint ownership, and gifts inter vivos in the direct line and between spouses shall be determined by applying a 50% discount to the value resulting from applying the official price list.

22. Import or Export

• Taxpayers in Cameroon doing import or export need to be active taxpayers and have a tax compliance certificate.

23. Value Added Tax (VAT)

• The following food items are exempted from VAT: Parboiled rice; Perfumed rice; Ornamental fish; Chilled trout; Fresh or chilled salmon; Fish livers and roes; Frozen salmon and trout; Fish offal (frozen); Dried, smoked, or salted fish livers, roes, and salmon and Cod.
• To be able to claim VAT credit on purchases in Cameroon, such VAT must appear on an invoice duly issued from the online tax portal and bearing the single identification number of the supplier who is taxed based on actual earnings and must be a registered and active taxpayer at the time of invoicing. However, these conditions shall not apply for foreign suppliers.
• VAT deductions at source shall only be accepted upon presentation of a valid certificate of deduction issued by the authorized entity and generated from the online tax portal. Certificates generated outside this system will not be accepted.
• VAT deductions arising from initial invoices and credit notes relating to commercial reductions granted to the State, regional and local authorities, administrative public establishments, public and semi-public enterprises, and certain private sector companies shall be subject to the issuance of a certificate of deduction at source generated from the online tax portal.
• For VAT refunds, any certificate of deduction at source generated outside the online tax portal shall not be considered valid for refund purposes.

24. Excise duty

• The taxable base for excise duty on carbonated beverages shall be determined by applying a 10% reduction (no longer 25%). Section 141a (new) of the 2024 Finance Law
• The 10% excise duty reduction previously applied to beer with an alcohol content of 5.5% or less has been abolished.
• The average excise duty shall apply to the following imported items: refined vegetable oils; cocoa beans, including those intended for use as raw materials; imported dog or cat feed; and charcoal. Section 142(6) (a) of the 2024 Finance Law
• The reduced excise duty will be applied to imported cereal products (corn flakes) and food preparations obtained from imported cereal flakes. Section 142(6)(b) of the 2024 Finance Law