On December 19, 2023, the President of the Republic of Cameroon issued Law No. 2023/019, which established the Finance Law of the Republic of Cameroon for the fiscal year 2024. This resulted in the enactment of several tax and non-tax modifications. We have examined the modifications that are now important to your business and/or investment below. This article outlines the State’s revenue and expenditures for the current year, which is worth noting. Infrastructure, health, education, and security are just a few of the government initiatives and programs that it finances.
The Finance Act has a significant impact on the national economy and the lives of residents in many ways thanks to its numerous innovations. To give an example, it can affect investment, tax rates, civil servant wages, subsidies, commodities prices, and so forth. The specific terms of the Finance Act and the state of the nation’s economy, however, determine the exact implications.
The implementation of new measures pertaining to the new Finance Act will have an impact on citizens’ daily lives, as well as on how corporations and other structures operate.
Stated differently, the Finance Act for 2024 is yet another example of how several new features and advancements have been added to legislation throughout time, much like its predecessors. These are the main areas of focus for the 2024 Laws: Increasing revenue, expanding the tax base, encouraging good tax citizenship, combating fraud and international tax evasion, raising company taxes, and encouraging import substitution.
- BROADENING THE TAX BASE
In the new Finance Act, the broadening of the tax base has focused on the following:
- Readjustment of the basis of assessment for duty on beverages: This involves in particular the abolition of the 10% allowance on beers with an alcohol content of 5.5% or less and the reduction of this allowance from 25% to 10% for carbonated beverages.
- The abolition of the VAT exemption on certain luxury products (e.g. certain categories of food such as pre-cooked rice, perfumed rice and luxury fish).
- Optimisation of personal taxation : This measure is materialised by the extension of the scope of the tax on non-commercial profits (BNC), in particular the taxation from now on at 5% of the incomes generated through the production of digital content, the sale of goods and services ; the integral taxation of any benefit in kind compensated by the payment of sums of money, the extension of the scale of estimation of these benefits in kind; the capping of the lump-sum allowance at 400. 000 FCFA per month; the imposition of IRPP on the worldwide income of persons whose tax domicile is in Cameroon.
- The extension of stamp duty: the measure applies to air transport and specifically to all applications for approval and authorisation of any kind submitted to the authorities.
- Reducing the threshold for cash payments: from 500,000 CFA francs, cash payments will no longer exceed 100,000 CFA francs in order to be deducted when calculating corporation tax.
- Revision of the IRCM tax base following indirect sales: From now on, the capital gain is determined by the difference between the sale price and the purchase price of the securities; this sale price cannot be less than the value of the securities sold. In addition, joint and several liability for payment is now extended to all transfers of business assets. In the case of property sales, the reduced rate of capital gains tax (5%) will now apply only to property transactions carried out using electronic banking payment methods.
- With regard to the Special Tax on Incomes (SIT), a withholding tax will now be levied on remuneration paid to foreign partners by private individuals.
- SECURING REVENUE
- The Finance Act’s innovations in securing tax revenues are based in particular on:
- Clarification of the procedures for electronically monitoring the production and invoicing of businesses, with a number of administrative and criminal penalties as a result
- Automation of the issue of certificates of deduction at source of VAT, advance payment, withholding tax and IRCCM, via the tax authorities’ IT system.
- The obligation on insurance companies, when collecting motor vehicle stamps, to issue the customer with a payment certificate generated by the tax authorities’ IT system. Failure to comply with this obligation can result in a fine of up to cfaf 5 million
- Authorisation for not-for-profit organisations to deduct property tax at sourc
- Invoices issued outside the tax authorities’ computer system are no longer eligible for VAT deduction.
- Exclusion of the right to deduct VAT withheld at source justified by certificates issued outside the tax authorities’ computer system.
- PROMOTING TAX COMPLIANCE
- Innovations to promote tax compliance include:
- Reform of the tax exemption certificate: This reform involves replacing the ANR with a tax compliance certificate (ACF), requiring the ACF to be produced for import and export operations, obtaining a visa, payment of invoices by the State and decentralised local authorities, and the issue of exemption certificates.
- Reducing the time taken to issue reminders to taxpayers for failure to file a tax return from 15 days to one.
- The introduction of a voluntary disclosure scheme consisting of a tax amnesty for individuals who regularise their foreign-source income situation in 2024.
- Making it compulsory for statutory auditors’ reports and listed inventories to be sent automatically to court registries, on pain of a lump-sum fine of up to €50 million in the event of failure to do so
- The introduction of the pre-filled declaration procedure: here the administration is authorised to note shortcomings in a taxpayer’s declaration and to implement the pre-filled declaration procedure in order to correct the shortcomings in the taxpayer’s declaration.
- COMBATING TAX EVASION AND FRAUD
As part of the fight against tax evasion and fraud, the innovations in the new Finance Act relate to:
- Consolidation of the transfer pricing control system, with the introduction of the automatic exchange of information standard; the introduction of the country-by-country declaration standard to provide the tax authorities with information on the accounting, economic and tax results of multinational enterprises in each jurisdiction in which they operate; Reinforcement of the penalty system (from FCFA 5 million to FCFA 50 million) for failure to file, or incomplete or inaccurate filing of, the annual transfer pricing declaration within the required timeframe.
- IMPROVING THE TAX ENVIRONMENT FOR BUSINESSES
As part of the drive to improve the tax climate for business, the Finance Act introduces the following innovations:
- The introduction of a special tax settlement procedure for debts issued before 31 December 2022 ;
- The following improvements are introduced by the Finance Act as part of the effort to enhance the company tax climate:
- the introduction of a special tax settlement mechanism for debts issued before December 31, 2022;
- Reducing the registration fee for business transfers from 15% to 10
- The extension of the possibility of ex gratia remission by the State, even to companies that are not in difficulty,
- Admissibility of settlement requests, even where they contain a formal defect;
- Reducing the rate of special tax on gas products from CFAF 70 per cubic metre to CFAF 60 per cubic metre;
- The introduction of a 50% allowance on the basis for calculating property transfer duties on inheritances, divisions, releases from joint ownership and gifts inter vivos in direct line and between spouses.
- MEASURES RELATING TO SUBSTITUTE TAX
These measures mainly concern
- A reduction in the rates of state fees: from CFAF 50 to CFAF 4 per m2 for urban land; and from CFAF 25 to CFAF 2 per m2 for rural land.
- The abolition of excise duties on locally produced hair, wigs, wool, beards, eyebrows, eyelashes, locks and other textile materials used in the manufacture of wigs or similar hair products, with a view to protecting the local industrial fabric from foreign competition (Article 142 of the General Tax Code).
- The imposition of excise duty on certain imported products that compete with locally produced products, such as imported refined vegetable oils, imported dog and cat food, imported charcoal, etc.
Conclusion
The objective of this new finance law is to contribute to increasing the State’s capacity to accomplish its policy goals by increasing its own revenue through improving tax and customs efficiency and optimizing non-tax revenues. It applies to tax and customs administrations and to all public administrations.
For more information on investment opportunities in Cameroon, reach out to our team of lawyers and business advisors at Centurion Law Group. We seamlessly guide our clients through Africa’s abundant investment opportunities.
Leon Van der Merwe – leon.vdmerwe@centurionlg.com
Authours: Wilson Sani, Grace Yella, Achare Takor, Centurion Law Group, Cameroon office.
