Gavin Howe
The sources of tax law in Cameroon include the Universal Declaration of Human Rights, the Constitution of Cameroon, international treaties, tax conventions for the avoidance of double taxation, and the General Tax Code. Cameroon's corporate tax rate is 38.5%, which includes a 10% surcharge on the basic corporate tax rate of 35%. This basic rate is reduced to 30% for companies during their first three years of listing on the national stock exchange. The country also imposes a minimum tax of 2.2% or 5.5% based on turnover and the taxpayer's tax regime. Cameroon's tax laws cover a range of areas, including personal income tax, corporate income tax, capital gains tax, withholding tax, payroll tax, and real property tax.
| Characteristics | Values |
|---|---|
| Sources of Tax Law | The Universal Declaration of Human Rights, the Constitution of Cameroon, international treaties, tax conventions for the avoidance of double taxation, the General Tax Code, and other laws and regulations relating to tax |
| Corporate Tax Rate | 35% (basic rate), 38.5% (including 10% surcharge), 30% (for companies during their first 3 years of listing on the national stock exchange of Cameroon) |
| Minimum Tax | 2.2% or 5.5% based on turnover and tax regime of the taxpayer |
| Advance Payment | 10% for taxpayers not on the register of a tax office; 20% for forestry companies that do not provide evidence of a logging permit |
| Tax on Capital Gains from Sale of Shares | 11% |
| Deductions | Business expenses, social security contributions, professional expenses (30%), real estate deduction (30%) |
| Tax Rates | Progressive rates from 11% to 38.5% |
| Stamp Duty | 1-15% on contractual obligations, transfers or leases of property; fixed rates on motor vehicle licenses, advertising materials, passports, visas, and bills of lading |
| Payroll Tax | 2.5% of total salaries and fringe benefits paid to the Housing Loan and Employment Fund |
| Property Tax | Annual tax on real estate with an ownership certificate or administrative/judicial order |
| Personal Income Tax | Worldwide revenue for residents; only Cameroon-source income for non-residents |
| Tax on Royalties to Non-Residents | 15% withholding tax; may be reduced under a tax treaty |
| Additional Council Tax | 10% local tax on personal income tax, withholding tax on income from stocks and shares, value-added tax, excise duties, special income tax, and registration fees for public contracts |
| Tax Incentive Schemes | Available for new taxpayers, public notaries, and non-profit organizations |
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What You'll Learn
The Constitution of Cameroon
In 1961, when British Southern Cameroons joined French Cameroun, a new constitution was drafted, establishing Cameroon as a federation with East Cameroon and West Cameroon as its constituent states. The country's name was changed to the Federal Republic of Cameroon. This constitution underwent amendments in 1969 and 1970, addressing the selection process for prime ministers and stipulating that the vice president could not hold any other government office.
In 1972, a significantly different constitution was enacted, abolishing the federal system and granting broad political power to the president. This document renamed the country the United Republic of Cameroon and replaced the previous legislative system with a unicameral National Assembly of 120 seats. However, this assembly held little actual power.
The constitution was revised again in 1984 under President Paul Biya, who changed the country's name to the Republic of Cameroon, redrew provincial boundaries, and modified the line of succession to the presidency. The current constitution, adopted in 1996, grants greater autonomy to the provinces (now called regions) and establishes a Senate as the upper house to the National Assembly.
The 1996 constitution affirms Cameroon's commitment to fundamental democratic principles, African unity, and the United Nations Charter. It recognises the country's cultural and linguistic diversity and expresses the desire to form a unitary government. The constitution guarantees equality for all citizens, regardless of gender, and ensures their rights and freedoms, including those outlined in the Universal Declaration of Human Rights, the UNO Charter, and the African Charter on Human and Peoples' Rights.
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International treaties
Cameroon has entered into double tax treaties with other countries, including the UK, to prevent income from being taxed twice in both countries. These treaties outline the tax obligations of individuals and businesses with financial interests in both Cameroon and the treaty country. The specific terms of each treaty can vary, and they may cover a range of tax topics, such as income tax, employment tax, investment tax, capital gains tax, and social security contributions.
The international treaties that Cameroon is a party to, including those related to taxation, are underpinned by the country's commitment to the Universal Declaration of Human Rights. These treaties play a significant role in shaping the country's tax landscape and fostering economic relations with other nations.
In addition to international treaties, Cameroon's tax system is also guided by its domestic laws and regulations, such as the General Tax Code, as well as the Constitution of Cameroon. These sources collectively form the foundation of the country's tax regime, ensuring compliance and facilitating economic activities within and outside the country.
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Tax conventions for the avoidance of double taxation
One of the sources of tax law in Cameroon is the tax conventions for the avoidance of double taxation. These conventions aim to prevent the double taxation of income earned by foreign businesses operating in Cameroon and to prevent tax evasion.
Cameroon has signed tax treaties with several countries to avoid double taxation. These include bilateral treaties with Canada, France, Morocco, South Africa, Tunisia, United Arab Emirates, and the Swiss Confederation. Additionally, Cameroon has multilateral conventions with other CEMAC member states, including Gabon, Equatorial Guinea, Congo, Chad, and the Central African Republic.
The Convention between Cameroon and Canada, signed in 1982, provides that if Cameroon concludes a tax treaty with a third state with lower withholding tax rates on dividends, interest, or royalties, those rates will automatically apply to payments received by a Canadian resident from a Cameroonian resident. This ensures that Canadian residents are not subject to higher withholding taxes than residents of the third state.
In the context of electronic commerce (e-commerce), foreign operators without a head office in Cameroon must register with the Cameroonian tax authorities to continue operating in the country. Failure to do so may result in suspension of their platform within Cameroonian territory. The registration, declaration, and tax payment processes can be completed online through the tax administration's Internet portal.
By adhering to these tax conventions, Cameroon promotes international cooperation, facilitates foreign investment, and ensures equitable taxation practices for both residents and foreigners conducting business activities within its borders.
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The General Tax Code
Section 5 of the code specifies that profits liable to company tax are derived from businesses carried out or transactions made within Cameroon. It defines undertakings operating in Cameroon as those headquartered or with effective management offices in the country, those with a permanent establishment or a dependent representative, and those carrying out activities that form a full business cycle in Cameroon.
Section 6 of the code addresses taxable profits, stating that they are determined by assessing the net profits from all transactions of any kind carried out by the undertaking during the assessment period. This includes the transfer of assets and any other relevant activities.
Section 7 of The General Tax Code focuses on the determination of net taxable profit. It states that this is established after deducting all charges directly related to assessed activities in Cameroon. These charges include overheads, expenses on staff, labour, offices, equipment, furniture, exceptional expenditure, insurance premiums, acts of liberality, gifts, and subsidies. The section also provides guidelines for treating specific expenses, such as sundry remunerations and the provision of services.
Additionally, The General Tax Code includes provisions for special tax regimes, such as Decree N° 2008/2304/PM, which outlines the rules for applying a special tax regime for anchor projects. The code also requires specific information disclosures from companies, such as descriptions of their activities, changes during the financial year, transfer pricing policies, intangible assets, and corporate residency for tax purposes.
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Taxation systems for corporate bodies
Resident vs Non-Resident Corporations
Resident corporations in Cameroon are taxed on their worldwide income, whereas non-resident corporations are taxed only on income derived from sources within Cameroon.
Taxation Systems
Corporate bodies are assessed according to three main taxation systems, determined based on their annual turnover:
- Flat Rate Taxation System: This applies to sole proprietorships with an annual turnover of below XAF 10 million, excluding logging companies, professional officers, and liberal professions.
- Simplified Taxation System: This applies to sole proprietorships and corporate bodies with an annual turnover of XAF 10 million or above but less than XAF 50 million.
- Actual Earnings Taxation System: This applies to sole proprietorships and corporate bodies with an annual turnover of XAF 50 million or higher.
Tax Rates
The Cameroon Corporate Income Tax (CIT) rate is 33% for companies with a turnover above XAF 3 billion. For companies with a turnover below this threshold that meet certain additional criteria, the tax rate is 27.5%. There is also a minimum tax of 2.2% or 5.5% based on turnover and the taxpayer's tax regime.
Advance Payments
Advance payments are required for certain transactions. For example, a 10% advance payment is due from taxpayers not registered with a tax office, and this rate increases to 20% for forestry companies without a valid logging permit.
Capital Gains Tax
Capital gains derived from the sale of shares are taxed at an 11% rate. Capital gains from the disposal of fixed assets in the course of trading may be excluded from income for three years if reinvested in new fixed assets.
Deductions and Allowances
Allowable deductions include business expenses, social security contributions, professional expenses (capped at 30%), and a real estate deduction (also capped at 30%).
Additional Council Tax
A local tax called Additional Council Tax, at a rate of 10%, is levied on certain taxes, including personal income tax, withholding tax on income from stocks and shares, and value-added tax (VAT).
Non-Profit Organisations
Non-profit organisations, including international bodies, NGOs, public establishments, and companies with a public purpose, are subject to a separate taxation system.
Payroll Tax
Employers are required to contribute 2.5% of their employees' salaries and fringe benefits to the Housing Loan and Employment Fund.
Real Property Tax
Property tax is assessed annually on real estate holdings with an ownership certificate or an administrative or judicial order.
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Frequently asked questions
The sources of tax law in Cameroon include the Universal Declaration of Human Rights, the Constitution of Cameroon, international treaties, tax conventions for the avoidance of double taxation, and the General Tax Code.
The corporate tax rate in Cameroon is 35% with a 10% surcharge, amounting to a total of 38.5%.
Yes, under the Finance Law for the fiscal year 2010, new companies are exempt from registration fees and are offered a reduced corporate tax rate of 30% for their first three years of listing on the national stock exchange.
Any taxpayer subject to personal income tax in Cameroon must provide a detailed declaration of their income from the previous tax year by March 5th of each year. This includes income from salaries, wages, indemnities, emoluments, pensions, or life annuities.
Yes, there is an Additional Council Tax of 10% that applies to personal income tax, withholding tax on income from stocks and shares, and value-added tax.
