Africa Investment Guide: Equatorial Guinea in Focus
In Equatorial Guinea, the main business entities recognized under the Commercial Code (OHADA) are:
a. Limited Partnership(S.L): This type of company:
- A minimum of 1.000.000 XAF is required to incorporate S.L. It is divided into shares with a face value of at least 5.000 XAF.
- It is a company which may be set up by only one partner where the partner’s liability is limited to his contributions and his rights represented by shares.
- The transfer of shares has to be written down and the articles of association can state freely the modalities of sharing options. When the share capital is higher than 10.000.000 XAF; the volume of business is higher than 250.000.000 XAF or the workforce is superior to 50 employees, it is necessary to appoint an auditor.
b. Public Limited Company (S.A)
- A minimum of 10,000,000 XAF is required to incorporate and the capital is divided into shares of at least 10.000 XAF
- With less than 3 shareholders there is no obligation to have a board of directors, having to appoint a general administrator. In order to establish a board of directors, the minimum is three members with a maximum of 12.
- The control is handed over to one or more auditors.
- It has no minimum capital requirement.
- The branch must be registered in the notary (500.000 XAF) and Commercial Registry (500.000 XAF) but the amounts may vary depending on the authority’s discretion. The process may take between two and three weeks subject to the availability of the authorities.
- The duration of the branch has a maximum period of two years and could be renewed for another two years.
In order to incorporate a business, companies must obtain:
- Trade Register Certificate.
- Tax Identification Number (NIF).
- Certificates of Commerce and Import License.
- Certificate of Free Concurrence for companies in strategic sectors (Mines, Hydrocarbons, Aviation…)
- Registration at the Ministry of Labour.
- Registration/Authorization in the Ministry tutor.
At the moment it is not possible to do the incorporation process online, all documents must be presented physically.
There are no substantial differences in the registration of the above business entities forms. Except for a subsidiary or branch where the requirements may vary slightly, generally the following must be provided:
- Minutes of the shareholders’ meeting deciding to create the company (for chaos of branches or subsidiaries).
- Articles of incorporation adapted to the OHADA law (for companies in non-strategic sectors there is an official model designed by the One Stop Shop).
- 4 Photographs of the shareholders.
- Criminal records of all foreign partners (only applicable to individuals).
- Copy of the AoA and official translation of all foreign partners (only applicable to legal entities).
- Companies in the oil sector must include three (3) local partners with shares in the company not less than 35%.
- Appointment of legal representative of the company.
There is a one-stop service (Ventanilla Única Empresarial) that simplifies the procedures for the creation, modification and registration of business in the Republic of Equatorial Guinea. Oil companies and those that need special authorization from the Government such as fishing companies or management and exploitation of public services must follow a different incorporation process. Upon the obtention of a special authorization, the aforementioned companies must meet prerequisites such as legalization with the Notary, Commercial Registry as well registration with the tutor ministry.
In order to ascertain the fees to be paid, the structure of the company, its share capital and whether it is a natural person or not is taken into consideration. Once the previous is in place, the One Stop Shop proceeds to issue an entry note to be paid within 72 hours.
The Constitution in its article 26 declares the protection, guarantee and control of foreign capital investment from the State in order to contribute to the national development of the country.
Subject to the approval of foreign investment, the Ministry of Planning, Economic Development and Public Investment will automatically approve all investment projects, unless it is on the negative list reserved activities companies (even though companies can request the modification of the list in their favor). Such approvals or denials will be granted within 60 days after the filing of the application. Applications will describe the project and its promoters, providing sufficient background.
The application shall detail any possible adverse impacts on the environment, worker safety or health arising from the proposed project. Foreign investors must also specify in their applications the forum chosen for international arbitration.
The share capital of foreign companies operating in the oil and gas sector or its subcontractors must have a local participation of at least 35% of the share capital and have at least 1/3 representation on the Board of Directors. However foreign-based companies that settle in the country under a public works contract, must agree with nationals to share between 5 and 10% of the net profits .
Regarding the repatriation of funds on favor of the foreign investors they are authorized to:
- Send abroad at the end of each fiscal year in currency freely convertible, the net profits that periodically generate their investments based on externally audited financial statements and prior the payment of taxes.
- Reinvest profits or keep in the surplus account the non-distributed profits that can be forwarded abroad.
- Capitalize funds with the right to be referred abroad such as the capital and interest on external credits and royalty payments.
- Send abroad the funds generated by the sale, transfers or any other provision as the liquidation of the company or its reduction of, subject to payment of the corresponding taxes
There is a warranty that prevents the application to foreigner investors of less favorable conditions governing the repatriation of their investment or the referral of utilities other than the ones legally in force on the date of registration of the investment.
The distinct modalities of the Work Permit that are granted to foreigners in order to work in Equatorial Guinea are as follows:
- Permit A (PA): Which may be granted to carry out seasonal or limited-duration jobs. It cannot be renewed. Permit A cost 50,000 XAF.
- Initial B Permit (PBI): It is granted for work in a specific profession, activity and geographical area. Its duration may not exceed one year. Initial B Permit cost 75,000 XAF and its renewal 125,000 XAF.
- Renewed B Permit (PBR): It is granted to holders of the PBI Permit at the end of its validity. It allows the development of various professions or activities over a period of two years.
- Permit C (PC): It is granted to the holders of the PBR Permit at the end of its validity for any activity throughout the national territory. It has a maximum duration of three years. Permit C is equivalent to 150,000 XAF.
- Permanent Permit: The fees for the obtention type of permit is 150,000 XAF.
- Expatriate Quota/Business Permit: The EG Labor Code allows foreigners to work in Equatorial Guinea as long as they have a valid work permit. Companies can hire foreign employees only in those positions that the local market does not offer, in any case the law establishes a maximum quota of foreign workers of 10% of the total workforce. This quota can be increased to 30% for the agriculture and oil & gas companies.
- Subject to Regularisation (STR) visa: The law places an obligation on a foreign national to enter EG through legal means, either by a business visa or tourist visa. Upon the obtention of any of the visa, the law confers on the three month of residence after which the resident permit must be applied for.
To obtain a Business visa, the following Requirements must be filed to the embassy of EG
- Letter of invitation
- valid passport
- Travelling Insurance
- Bank Statement
- criminal records of the traveler from his country of origin
- The cost ranges between $100 to $150
On the other hand the requirement for the obtention of a tourist visa are:
- Letter of invitation
- valid passport
- Travelling Insurance
- Bank Statement
- criminal records of the traveler from his country of origin
- The cost ranges between $100 to $150
Combined Expatriate Resident Permit and Aliens Card (CERPAC): For a resident permit application the following documentation is required:
- Criminal Records
- letter of invitation
- copy of a valid passport
- medical report
- Certificate of good conduct obtained from the community president
- bank solvency certificate
- task solvency certificate
- personal tax payment certificate
- 4 passport pictures
- labour contract in case the application is for work purposes
- Initial resident permit cost 200.000 XFA and renewal cost 100.000 XFA
i. Temporary Work Permit (TWP): Refer to PBI, PBR, and PC explained above.
ii. Visa on Arrival: In Equatorial Guinea the employer may apply for a visa on arrival for an employee for the purpose of rendering services in Equatorial Guinea. The process/requirement is highlighted below:
- A letter directed to the minister of National Security( General Director of Immigration and Borders) by the invitee
- A sworn affidavit by the invitee
- A copy of the passport of the traveler
- Criminal records
- Cost of LOY: 10.000 XFA
- Administrative cost: 50.000 XFA
The local content according to Equatorial Guinea Laws is a policy of nationalization of jobs, transfer of technology, training and buying of materials and services from local employees and small companies to companies in the hydrocarbon sector.
All hydrocarbon companies that are incorporated in Equatorial Guinea must have a local partner with a participation in the company of not less than 35%. They also must hire services from local companies or sign joint ventures agreements with them in order to provide some complex services.
Companies are required to comply with the following:
- Integration, Development and Training of equatorial Guinean employees.
- Transfer of technology and know-how.
- Funding and Implementation of Social Projects.
Companies who fail to comply with this regulation will be subject to sanctions and penalties in accordance with the level of fault. The most severe sanctions can include an expulsion from the country or suspension of all signed contracts.
a. Applicable sectors:
- Oil & Gas industry:
- Companies are required to register and enroll in the Registry of Companies of the Ministry of Mines, Industry and Energy before the start of its activities.
- Before hiring any service, operators and/or exploration companies are required to send all requests for services to the Ministry of Mines, Industry and Energy through the General Directorate of National Content.
- All companies operating in the hydrocarbon sector should establish their offices and/or headquarters in Equatorial Guinea within the first six (6) months from the commencement of operations companies must submit a program for the development of National Content which will include but will not be limited to: a training plan for the EG staff, a plan for the nationalization of positions, a local hiring plan, etc. It will also appoint a National Content Representative that will be the point of contact between the Ministry of Mines, Industry and Energy and the company.
- Finance a social project for a value of 1% of the total value of contracts in E.G for contractors in the Mining and Hydrocarbon sector and 0,5 % for subcontractors in the Hydrocarbon sector. For other types of companies in the gas and oil sector, it will depend on the contract.
- All ships, vessels, and maritime companies must be included in the register of ships and maritime companies.
- The national maritime companies may freely export vessels, and naval artifacts owned by them.
- A foreign air services operator will not operate an aircraft in E.G unless authorized to do so by the Equatorial Guinean Aviation Authority and holds authorizations, conditions and limitations issued to it by the same authority.
- Any operator of the air transport service of persons and goods, is obliged to subscribe in advance to the start of its air operations:
- A Mandatory Insurance Policy worth five million U.S. Dollars to cover risks and damages to third parties.
- A Compulsory Insurance Policy worth twenty-five U.S. Dollars, per passenger carried.
- Any foreign air service operator when operating in and from E.G must ensure that comply at all times with the requirements of:
- The operating specifications;
- The air service operator safety program; and
- Safety requirements for aircraft operators working in EG.
4. Real Estate:
- Foreigners can buy property in Equatorial Guinea; for land, all acquisition contracts expire after 100 years and revert to public ownership.
The labor contract may include a probation period of one month. If necessary due to the specialization of the employee or work it could be extended for up to three months.
The worker has the right and obligation to enjoy 30 days as leave which must be paid by the employer. If the worker has been employed for more than 10 years, the leave period is increased by 1 day for each 2 years in service. More also, both the worker and the employer can negotiate the split of the leave for a maximum of two periods.
The Equatorial Guinea Labor Law provided for 3 months for maternity leave, which must be taken 6 weeks prior to delivery or in a major period in case of an in the date of delivery till 6 weeks after delivery.
The Equatorial Guinea Labor Law does not contemplate paternity leave.
An employee is entitled to 3 days off for illness purposes under the remuneration of the employer. However, should the aforementioned period be exceeded, the payment of his remuneration is shifted to Social Security.
Not provided under the law
Employee Compensation Scheme
Employers must register all their employees with the Ministry of Labor and affiliate them with the Social Security Institute. In this regard, the employer has a monthly obligation to contribute 4.5% to the Social Security (INSESO) on behalf of the employee.
Labor Protection Fund
Employers are also required to make a contribution 0.5% on behalf of the employee from his net salary to the Labour Protection Fund.
Per the EG labor law a labor contract can be terminated by:
- Reasons beyond the control of the parties such as the death of the worker or employer ,partial or total incapacity of the worker or employer and in the case of a force majeure.
- The will of both parties under express valid terms in the contract, by expiration of the contracted date, conclusion of the project and by mutual agreement.
- By the will of one the parties, through a dismissal or resignation by giving of prior notice as required under the law.
The Labor law requires seven days prior notice to be given to the employee where the employee has been in service for a month and one month notice will suffice a six month employment period. Notwithstanding, the given prior notice can be omitted through the payment of a compensation proportionate with a seven days or month payments. It can also be omitted where the cause of the layoff is justified under the law.
The main taxes, rates and exemptions.
Any foreign company with a base in Equatorial or whose source of income accrued from the country is subject to tax obligations. Where the company has a base in Equatorial Guinea, the Authorities issue the company with a Tax Identification Number (TIN), which subject it to the following taxes:
A foreign company is subject to tax on profits deemed to be derived from EG where:
- It has an effective residence in the country.
- It’s source of income is said to accrue from Equatorial Guinea.
a. Companies Income Tax (CIT)
Where benefits eventually occur, the company would be subject to corporate tax by applying a rate of 10%- 35%.
Before submitting the Statistical and Fiscal Declaration, all domestic and foreign companies are subject to the payment of a minimum tax rate of 3% of their turnover. It is paid before the end of March of each year.
The amount of the minimum tax rate will be deducted from the fee resulting from the corporate tax and the personal income tax. The minimum to pay is 800,000 XAF (that is about $1,341.71).
Exemptions from CIT:
- Cooperative societies for the production, transformation, conservation and sales of agricultural products and their unions, which operate in accordance with the legal provisions that govern them, except for the operations designated below:
- Operations for the transformation of products or by-products other than those intended for human and animal nutrition, or that may be used as raw material in agriculture or industry.
- Operations carried out by cooperative societies or unions indicated above with non-members.
- The agricultural unions and the supply and purchasing cooperatives that function in accordance with the provisions that govern them.
- Mutual agricultural credit funds.
- Societies and unions of mutual aid societies.
- The benefits made by non-profit associations that organize, with the course of commons or local public bodies.
- Fairs, exhibitions, sports meetings and other public events corresponding to the objects defined by its Statutes with a specific economic and social interest, provided that you have limited time.
- Limited liability companies of an individual or family nature when taxable profits are less than the minimum established.
- Local authorities as well as their public services administrations.
- Recognized public utility companies or bodies in charge of rural development.
- Cooperative school societies recognized as school mutuals.
- Clubs and private recreational or cultural circles, when their activities are not bar or restaurant.
- There are special incentives for the following:
- Companies and individuals that have the headquarters of the management and effective centralization of the management of their activities, the object of the company, in non-coastal districts, including Annobón, will enjoy a discount of 50% of the quota. Extractive activities of forestry raw materials, mining, hydrocarbons, power generators, mineral and non-mineral water arising or drilling and fishing will not be included in this discount.
- The natural and legal persons who, for the exercise of their activity, are subject to the requirements established by the Investment Law, and made manifest before the Tax Administration through certified testimony of the National Investment Commission, may benefit from the tax advantages in the conditions, limits and forms provided by said Law.
- CIT Filing Procedure
- Companies are obliged to present a Statistical and Fiscal Declaration report of their exploitations of the taxable periods within four months of the closing of every fiscal year.
b. Capital Gains Act (CGT)
- Exemptions from CGT:
- Capital gains resulting from the transfer, under operation, of the elements of the fixed asset will not be included in the taxable profit of the financial year, in the course of which they were obtained if the taxpayer puts them in a special account called “return capitalization” and undertakes to reinvest in new freeze in his company before the expiry of a period of three years from the end of that financial year, a sum equal to the amount of those capital gains plus the cost price of the assigned items. However, the reemployment thus envisaged cannot be intended for the purchase or subscription of company shares or participation title.
- Deductions Allowed:
- Capital gains other than those obtained on goods resulting from free attribution such as shares, beneficiary parties, social parties or obligations, as a result of the merger of public limited companies, joint share or limited liability, shall be exempt from the income tax made by those companies, provided that the absorbing or new company is headquartered in Equatorial Guinea.
- The same regime shall apply where a public limited company, in share or limited liability, contributes the fullness of its assets to two or more companies incorporated for this purpose, a case of action, or part of its assets, to a company incorporated in one of these forms, in the event of a partial contribution, provided that:
a) The company or companies benefiting from the contribution have their share transfer in Equatorial Guinea.
b) The contributions resulting from those conventions are made on the same date for the different companies benefiting from them, and which involve, from the moment of their completion in the event of a merger of excision, the immediate dissolution of the contribution company.
c. Value-Added Tax (VAT)
- A rate of 15% is charged on the consumption of goods and services.
- Exemptions from VAT: They are exempt from VAT and Special Duty:
- Raw products obtained by farmers, ranchers, fishermen as well as hunters, as long as said products are sold directly to the final consumer by the same owner.
- The following operations, provided that they are subject to specific taxes exclusively from any Business Volume Tax:
- Sales of products from soil and subsoil extractive activities.
- Real estate transfer operations made by individuals who do not meet the conditions of real estate developers and are subject to the Property Transfer Tax.
- Interest generated by foreign loans,
- Interest generated by deposits in credit or financial establishments by non-professional clients.
- Travelers on a small import regime when the value of goods does not exceed 500,000 XAF.
- Banking operations and insurance and reinsurance benefits, since they are subject to a specific tax.
- Transfers of real estate, real estate rights and changes in goodwill are subject to the Tax on Patrimonial Transmissions or other equivalent tax.
- Medical benefits, including the transport of the injured and sick, and the medical care provided to people by public hospitals, health centers, or by similar organizations, and the medical care provided by members of the medical corps. or paramedical.
- The basic goods that appear in Annex I of this Law, as well as their inputs, the inputs of livestock and fishing products used by producers, with the condition that the same products enjoy an exemption.
- The provision of services carried out in the field of school or university education by public and private establishments or by similar bodies.
- The importation and sale of school or university books.
- The sale of newspapers and periodicals, except advertising revenue.
- The rental of unfurnished homes.
- Operations related to international traffic that concerns:
- Ships or boats used for the exercise of an industrial or commercial activity on the high seas.
- Rescue or assistance boats.
- Aircraft and ships for their inter-State transit operations and services related to said transit, in accordance with the provisions of articles 158 and following of the CEMAC Customs Code.
- The services or operations of a social, educational, sports, cultural, philanthropic or religious nature provided to its members by non-profit organizations whose 88 Management is benevolent and disinterested, provided that such operations can be directly related to the collective defense of the moral or material interests of its members. However, they are taxable when they are in a situation of competition with another from the private sector.
- Imports of capital goods listed in Annex I (bis) of this Law.
- The amounts paid by the Public Treasury to the Central Bank in its capacity as the Issuing Bank, as well as the products of the operations of said bank that generates the banknotes.
- Suspension customs regimes that defer or suspend the imposition may be granted to companies in the mining, oil or forestry sectors. However, the right to such regimes must be solely and exclusively limited to investment goods strictly necessary for the exercise of the activity in the exploration, prospecting or research phases.
- Penalties: The penalties regarding VAT depends per the Tax Code depends on the rectification procedure used, as the case of:
- A contradictory procedure, apart from the 10% late payment interest, the penalty rate is 50% of the committed rights, and this penalty may be raised to 100% if the taxpayer has not demonstrated good faith.
- A unilateral procedure without prejudice to the interest on late payment, the penalty rate is 100%.
The Tax code provides further clarity on the fact that at no time must the interest for late payment be understood as a penalty, whatever the procedure used, since it serves to compensate the financial damage suffered by the Treasury by collecting its debt late.
d. Stamp Duties
- The filing of any official document to the government authorities in EG requires the purchase of Stamp duties which usually varies in price depending on the task intended.
e. Personal Income Tax (PIT)
- Personal income tax ranges between 10%-35%
- Filing and Due Dates
- All taxpayers subject to the Personal Income Tax are obliged to subscribe monthly, a partial declaration of their gross income obtained in the previous month.
- The declaration is established by means of a form that must include all the necessary indications on the civil status, the situation and family obligations of the taxpayer, their income classified by categories, and the normally deductible expenses.
- The declaration duly signed by the taxpayer will be presented to the Tax Administration of the Area of the taxpayer’s residence, within the first ten days of each month, referring to the income of the previous month. The taxpayer may request the acknowledgment of receipt of his return or signature and stamp of his copy.
- Taxpayers are also obliged to present, each year, before the end of March, a detailed global statement of their gross income obtained during the previous year and the corresponding deductible expenses.
- Penalty: the following will be subject to a fine of ONE HUNDRED THOUSAND to FIVE MILLION of F. CFA:
a) Natural or legal persons who, acting as withholding agents, have fraudulently abducted or attempted to subtract from the establishment or payment of the withholding tax.
b) Those who, not being withholding agents, have subtracted or are attempting to subtract the declared tax.
c) Employers or persons who have not paid the figures in the time and form established by law as a tax on wages and salaries.
d) Business agents, accountants, tax advisers and independent consultants who are convicted of having established or helped to establish false balance sheets.
e) People who directly or indirectly obtain income abroad, have not mentioned them separately in their global returns
f) Taxpayers who present false supporting documents to obtain a demotion. g) Individuals or taxpayers who do not file returns within the time limits established for each case of this tax.
Petroleum Profit Tax (PPT)
- Aside the payments of the above general taxes, the hydrocarbon laws foresees the payment of the following taxes by petroleum companies:
- royalties, in the manner stipulated under the terms of the Contract with the minimum being 13%.
- surface rental fee, to be paid annually and in the amounts stipulated in the applicable Contract.
- Royalties are to be paid monthly voluntarily to the Ministry of Hydrocarbons by the contractor or at the request of MMH
- Surface fees are paid annually to the ministry.
g. Withholding Tax (WHT)
i. WHT in the general regime
The gross income obtained in Equatorial Guinea by non-resident entities is subject to 15% and 20% for natural persons.
Dividends and interest paid to non-residents are subject to 25% WHT.
ii. WHT in the oil and gas sector
Payments made to a resident entity within the oil and gas sector are subject to a 6.25% withholding while,
A 10% WHT should be applied to payments made to a non-resident entity within the oil and gas sector, and a 20% WHT for individuals,
A 5% WHT must be applied to payments made for mobilization, demobilization and transportation services.
h. Customs and Excise Tariffs
For the import and export of materials and equipment directly related to the Petroleum Operations, the Client is subject to the Customs Legislation of the Republic of Equatorial Guinea and to that of the CEMAC space which generally established:
- VAT of 15%
- 1% Trade Rate
- The Community integration tax, collected on behalf of CEMAC, of 1% applicable to imports from third countries with respect to CEMAC.
- The Community contribution for the integration of the Economic Community of Central African States (CEEAC), of 0.4%, applicable to imports originating in third countries with respect to the CEEAC.
Equatorial Guinea has not signed any double taxation treaty with any country.
a. Transfer Pricing Legislation
- The tax falls on the true value that the goods and rights have on the day the contract is concluded or the act subject to them occurs. In this sense the tax shall be imposed on onerous transmissions of all kinds of goods and values occurring in national territory, as well as the constitution, increase in capital, modification, transformation and dissolution of companies, between others.
- The concurrence of two or more holders in the taxable fact will make them jointly and severally bound against the Public Treasury, and It will not be considered as deductible expenses, the acquirer’s personal obligation or those that involve only a reduction in the price to be met.
- section V of the Tax law establishes the rates that apply to transfer tax. In this sense, related to companies:
- The constitution, increase in capital, extension, modification and transformation of companies whose share capital is repressed by securities at a rate of 2% on the taxable base. The same acts, when the capital of companies is not represented by securities is 1%
- The dissolution of companies and dismi-nution of their share capital………………..1%
- The transfer of non-involved shares by Exchange Agents or by official trading brokers and that of official holdings or other similar securities will apply a rate of 2%
- The transfer of shares admitted to official trading and their subscription rights intervened by Exchange Agents or by official trading brokers, on the following scale:
Up to 5,000.- XFA 100.- XFA
From 5,001 to 30,000.- XFA 150.- XFA
From …….30,001 to 150,000.- XFA 200.- XFA
of…… 250,001 to 500,000.- XFA 1,000.- XFA
From …..500,001 to 1,000,000.- XFA 1,500.- XFA
Excess of 1,000,000, 20 XFA Every 10, 000 or fraction.
- The transfer of non-officially traded shares and their subscription rights intervened by Exchange agents or by official trading brokers on the following scale:
Up to 5,000.- XFA 100.- XFA
From 5,001 to 30,000.- XFA 150.- XFA
From …….30,001 to 150,000.- XFA 200.- XFA
of…… 250,001 to 500,000.- XFA 1,500.- XFA
From …..500,001 to 1,000,000.- XFA 2,500.- XFA
Excess of 1,000,000, 20 XFA Every 10, 000 or fraction.
The State in consideration of the events occurred by the pandemic COVID came with Law No. 1/2020, dated July 7, establishing Special Tax Incentive Measures, which grants a “tax pardon” of 20% of the debt to resident and non-resident individuals and companies who have not effectively self-earned the following tax concepts: Corporation Tax, Value Added Tax, Personal Income Tax, and Registration and Registration Fees on Rustic and Urban Farms, but it only applies to tax debts recorded during 2015 to 2019 both years included.
a. Contributory Pension Scheme
- Employers must register themselves and their employees at the Institute of Social Security. Employers, on which the obligation falls from trading in the Social Security Scheme, will do so for monthly and within periods of the first 15 days of the month.
- The quotas are set out in Decree No. 13/1.985, dated 8 March.
- Fees entered outside the deadline will have the following late fees:
a) Those entered within one month of the regulatory deadline shall be paid with 10%.
b) Those entered after the month following the regulatory deadline will be abo-na with 20%.
- Foreign workers will be subject to what is established by international treaties, conventions or agreements.
b. Employee Compensation Scheme
- The Social Security Fee quota is set at 26% on Wages for the following concepts:
- Pensions, death and survival
- Temporary Disability and Maternity
- Family Allowance
- Work Accidents and Occupational Diseases
- The employer will contribute with the 21,5% and the employee the 4,5% remaining.
a. Income tax-
Taxes on income and profits are levied by the national government in terms of the Income Tax Act 58 of 1962. The Act is administered by the Commissioner for the South African Revenue Service (SARS).
Income tax is an annual tax and represents a levy imposed on all persons who have a taxable income. Income tax is calculated by applying pre-determined rates to the taxable income of a person. For calculation purposes, a distinction is drawn between natural persons (individuals), juristic persons (such as companies) and trusts.
The Act contains provisions for the levying of different types of tax, namely, normal tax (on income and on capital gains), donations tax; and various withholding taxes, such as dividends tax and interest withholding tax.
In terms of the Act individuals are subject to income tax at a marginal rate of tax between 18% (eighteen percent) and 45% (forty-five percent), which is based on a progressive tax table. Whilst South African companies are subject to income tax at a rate of 28% (twenty-eight percent), special rules apply to gold-mining companies and long-term insurance companies.
South African branches of foreign companies are also subject to income tax at a rate of 28% (twenty-eight percent). However, this applies in respect of years of assessment commencing on or after 1 April 2012.
b. Corporate Income taxes-
Corporate Income Tax (CIT) is a tax imposed on companies resident in the Republic of South Africa that is incorporated under the laws of, or which are effectively managed in, the Republic, and which derive income from within or outside the Republic. Corporate Income Tax is payable at a rate of 28% (twenty-eight percent).
Non-resident companies which operate through a branch or which have a permanent establishment within the Republic are subject to tax on all income from a source within the Republic.
Payment of tax upon an assessment notice issued by SARS must be done within the period specified in such notice.
c. Withholding taxes-
South African Tax law provides that payments made to a non-resident are subject to withholding tax. Such withholding tax is payable to SARS by the South African resident making the payment to a non-resident.
Royalties and know-how payments made to non-residents for the use of, or right to use Intellectual Property rights in South Africa are deemed to be from a South African source. Thus, the payer of the royalty or know-how payment is obligated to deduct a withholding tax of 15% (fifteen percent) of this payment, which is a final tax payable by the recipient of such income.
Fixed Property Acquired From A Non-Resident; Any person who has to pay an amount to a non-resident in respect of the purchase of immovable property situated in South Africa, where the purchase price exceeds ZAR 2,000,000 (two million), must withhold an amount from such payment and pay it to SARS.
The rate of withholding tax was recently increased and as of 22 February 2017, it is 7.5% (seven and a half percent) of the purchase consideration if the seller is a natural person, 10% (ten percent) if the seller is a company and 15% (fifteen percent) if the seller is a trust.
With respect to interest, South Africa has introduced a 15% (fifteen percent) withholding tax on interest payable to non-residents. The withholding tax applies to interest either paid by a South African resident or paid on funds used in South Africa. Interest attributed to a permanent establishment outside South Africa will be exempt from the withholding tax.
Generally, dividends (other than foreign dividends) received by or accrued to any South African resident, whether a company or an individual, are exempt from income tax.
However, with effect from 1 April 2012, the receipt of dividends by a shareholder of a South African company is subject to dividends tax (subject to certain exemptions and the application of a relevant DTA). The dividends tax rate was initially 15% (fifteen percent), but as of 22 February 2017, the rate was increased to 20% (twenty percent). The dividends tax applies to dividends paid by resident companies and certain foreign companies that are listed locally, subject to certain exemptions.
The following are some of the most important exemptions in respect of foreign dividends:
- received by residents holding at least 10% (ten percent) of the equity interest (share capital) and voting rights in that foreign company; and
- in respect of a listed share that does not consist of a distribution of an asset in species.
d. Value Added Tax (VAT)-
VAT is an indirect tax on the consumption of goods and services in the economy. The government raises most of its revenue by requiring certain businesses to register and to charge VAT on the taxable supplies of goods and services. These businesses become vendors that act as the agent for government in collecting the VAT.
VAT is charged at each stage of the production and distribution process and it is proportional to the price charged for the goods and services.
VAT increased from 14% (fourteen percent) to 15% (fifteen percent) from 1 April 2018. VAT is levied on the supply of most goods and services and on the importation of goods. The VAT on the importation of goods is collected by customs. There is a limited range of goods and services which are subject to VAT at the zero percent rate or are exempt from VAT.
A vendor making taxable supplies of more than ZAR 1,000,000 (one million) per annum must register for VAT.
Employers that are corporations are taxed at a flat rate of 28% (twenty-eight percent). A levy is imposed by the Skills Development Levies Act 1999 to contribute towards the cost of skills development. The levy imposed is 1% (one percent) of the total of all remuneration paid or payable or deemed to be paid or payable, by the employer to all employees during any month. The levy must be paid to the education and training authority for the sector to which the employer belongs.
Investment Protection Mecahnisms
The Republic of Equatorial Guinea has proactively undertaken regulatory and statutory reforms that have led to significant influx of foreign investment in different sectors of its economy. The country has put in place different legal safeguards and laws to ensure the protection of national and foreign investments. Some of the legal safeguards can be found in Constitutional provisions, domestic laws and treaties with various States and international organizations.
Foreign investors will have the right to make investments in any proportion and/or establish or participate in any company or sector of the national economy in the same terms and conditions as national investors. They must transfer previously to Nationals banks of EG, the equivalent to 30% of the budget amount investment or bank guarantee corresponding.
In accordance with their obligations under public international law, the State commits to fair and equitable treatment of investors in national territory. Therefore, the State will not expropriate, it will not interfere with enjoyment of their rights, nor will they breach contractual obligations incurred with them, unless I acted in the public interest through the corresponding fair compensation and suitable in a freely convertible currency.
Foreign investors participating in approved projects, will be empowered to convert into foreign currency and transfer abroad the net profits of the company to be paid in the form of Dividends. Once the corresponding taxes have been paid, foreign investors will be able to convert into foreign currency and transfer to the the product of the liquidation of the company, sale or other provision in whole or in part of their investment.
For the promotion of investment the Government created an Investment Promotion Centre as an Autonomous institution company dedicated to the promotion of private investments.
Equatorial Guinea has signed and ratified trade treaties with different countries, which are geared towards maximizing its huge potentials from foreign trade and investments. The objective of the investment treaties is to foster a stable legal environment that encourages foreign direct investments, guarantees their protection and establishes a legal regime for the enforcement of those rights. Some of them are the following:
African Continental Free Trade Agreement: EG became member of the AfCFTA in 2018, which creates a free trade area with a single and liberalised market for goods and services among fifty-four (54) of the African Union nations, aiding with the movement of capital and people, facilitating investment, and creating a continental customs union to streamline trade and attract long-term investment.
EG has bilateral investment treaties (BITs) in force with China, Spain and France. Related to treaties with Investment provisions (TIPs) the following are in force:
- Cotonou Agreement (2000)
- AU Treaty
- CEMAC Convention on Liberalization
- ECCAS Treaty
- CEMAC Investment
EG is also part of different multilateral investment related instruments (IRIs) as the UN Guiding Principles on Business and Human Rights and the ILO Tripartite Declaration on Multinational Enterprises between others.
Real Property Acquisition
The legal framework and policies that affect acquisition of real estate in EG are established under Decree 4/2009 dated 18 of May 2009, on the Regime of Real Property Acquisition in Equatorial Guinea:
Foreigners can buy property in Equatorial Guinea; for land, all acquisition contracts expire after 99 years and revert to public ownership.
Granting free land private property of the state will always be done through an application and at the request of an authorization from the government.
The application referred to above should include, but are noted in others:
a) That the land is free and not occupied by nobody.
b) That, where appropriate, the applicant is an effect who occupies or exploits it.
c) That there is no conflict between the applicant and adjoining or third parties
on the ground in question.
d) That there are no official projects affecting the requested land.
Having obtained the government authorization and upon the purchase of the land, the land holder needs to also proceed with the registration of the property at the Public Notary and Commercial Registry.
With the intention of facilitating the promotion, protection and integration of Intellectual Property, EG acceded on 23 November 2000 to the Bangui Agreement on the Creation of an African Intellectual Property Organization (OAPI). The Council of Scientific and Technological Investigation (CICTE) is the responsible organ for registering Intellectual Property in EG.
- For Patents and Industrial Designs: The applicant must file:
- A request letter for the registration of the patent address to the director in charge of Patent.
- Fill the form.
- Include a merial of description of the invention.
- Attach copies of the inventions.
- Attach summaries of the invention.
- The cost is established subject to the examination of the application by CICTE.
- A general register of intellectual property will be established in the Ministry of Development as well as the Registry of Property in order to enjoy the benefits. The author must submit the application before the authorities. The registration period is one year, and after ten (10) it becomes public domain.
- The authors of the scientific, literary or artistic works will be exempt from any tax for reasons of registration.
There is no special regulating legal framework for tech startups in EG. All companies must follow one of the incorporation procedures to operate, that is either obtain a private authorization or register under the One Stop Shop.
With the aim to address the risks to the fundamental rights and freedoms of individuals may entail in obtaining, collecting, and processing their personal data, with or without consent, the EG law data protection (1/2016 of July 22) seeks to guarantee and ensure the use of the data of registered citizens in any type of support, establishing the means and mechanisms for its defense setting out the conditions and requirements for the files and the processing of such data, and recognizes the citizen not only the need to grant his consent but also the right of information and notice about the processing of their personal data, as well as the right of certification, cancellation and opposition to them.
- Not law on this.
- Lawful processing: Only personal data that are adequate, exact, truthful, pertinent, complete and not excessive in relation to the scope and purposes determined, explicit and legitimate for which they have been obtained may be collected for processing. The Processing of Personal Data will require the clear, undeniable and unquestionable consent of the interested party or affected, expressly or in writing unless is obtained by means of any type of contract between interested parties, provided that their fundamental rights and freedoms are not infringed.
The interested parties from whom personal data is requested must be previously informed expressly, concisely and without any mistake, when their personal data is requested or required, and must be informed about the purpose and consequences of obtaining and collecting data; the destination and the recipients of the information as well of the identity and address of the person responsible for the treatment or their representative.
- Data Security: The person responsible for the file as the processor must take the necessary technical and organizational measures that guarantee the security of the personal data processed, ensuring its preservation and preventing its alteration, loss, treatment or unauthorized access. Personal Data will not be recorded in Files, Treatment Centers, Equipment, Systems, Applications and Programs that do not meet security conditions for the integrity, confidentiality and guarantee thereof.
- Data Subject’s Right of Objection: The consent granted could be revoked where there is a justifiable cause for doing so without retroactive effect. The data subject shall have the right to rectify and request the cancellation of their Personal Data when they are inaccurate and incomplete, leaving the controller in the obligation to make it effective within fifteen (15) days from the date of such request.
- Penalty for Default: Violations that could be committed in the provision of Personal Data Processing services are classified as Minors, Serious and Very Serious and the penalties are:
- For the Commission of Minor Infringements:
- Written warning
- Fine from 200,000 to 500,000 F. Cfas.
- For the Commission of Serious Infringements:
- Fine from 500,001 to 5,000,000 F. Cfas.
- Suspension of the activity of the File and Processing of Personal Data.
- The precinct of the premises or facilities for a period not more than fifteen (15) working days.
- One or more of the following penalties shall be imposed by the Very Serious Infringements Committee:
- Fines from 5,000,001 to 15,000,000 F. Cfas.
- Seizure of equipment and other material.
- The final closure of the premises and facilities.
- Disabling the infringer for the activity of File and Processing of Personal Data for the period of one year, or the final one, as the case may be.
- Cancellation and revocation of the Resolution, Authorization or Administrative Concession for the creation of Files and their seat in the General Data Protection Registry.
- For the Commission of Minor Infringements:
- ADR’s laws and processes
The ADR’s are generally regulated by the OHADA (Organization for the Harmonization of Commercial Law in Africa) Under which are the following Acts:
- Uniform Act of March 11, 1999 regarding arbitration amended in Conakry on November 23, 2017 (used when settling cases through arbitration)
- Common Court of Justice and Arbitration. Arbitration Rules of 1996, revised in 1999 and amended in Conakry on November 23, 2017 (also used in resolving cases through Arbitration).
- Uniform act related to mediation adopted in Conakry on November 23, 2017 in force since February 23, 2018 (applied during mediation)
The Process involves the following:
All processes that include arbitration must result from an arbitration clause signed between the parties. They can also choose the applicable law and jurisdiction.
The main arbitration court is the OHADA Common Court of Justice and Arbitration located in Abidjan.
In Equatorial Guinea, Judgment may be enforced in any one of the ways highlighted below:
Enforcement of Foreign Judgments–
All judicial decisions or arbitration awards issued abroad can be executed in Equatorial Guinea through the exequatur procedure that is initiated and followed before the Supreme Court of Justice whose function is to give the same validity to the ruling or award as if it was issued in Equatorial Guinea and proceed to its execution.