STRUCTURING PROJECTS REGIME

A special tax regime has been instituted for structuring projects implemented by Small and medium-Sized Enterprises (SMEs).

Major enterprises are those whose turnover is more than or equal to 1 billion CFA Francs.
Small and medium-Sized Enterprises (SMEs) are those whose turnover is less than 1 billion CFA Francs.

Scope of Application:

• Agricultural sector
• Industrial sector
• Energy sector
• Tourism sector
• Social Housing sector

Major Enterprises Regime
I.1. Conditions of Eligibility
To be eligible for the specific tax regime of structuring projects, Major Enterprises must fulfil all of the following conditions:

• Be an economic and social development pole
• Be job generating
• Entail investments of at least 5 (five) billion CFA Francs
• Fall within the agriculture, industry, energy, tourism and social housing sectors

The conditions mentioned above shall be specified by regulations.

I.2. Tax Benefits
Major Enterprises eligible for the special structuring projects regime shall be granted the following tax benefits:

• Exemption from payment of the business licence tax during the first two years of operation
• Fixed registration fees of 50,000 CFA Francs for instruments of incorporation, extension and increase of share capital and transfers of real estate which directly concern the establishment of the project
• Exemption from payment of the VAT on local purchases of construction material and on imports intended for the project
• Application of an accelerated depreciation rate of 1.25% of the normal rate for specific fixed assets acquired during the installation phase
• Extension of the carry over period for deficits from 4 to 5 years

II. Small and Medium-Sized Enterprises Regime
All conditions and benefits referred to above equally apply to Small and Medium-Sized Enterprises, except that the amount of investments must be at least 500 million CFA Francs.

TAX REGIME FOR PUBLIC SERVICE CONCESSIONS

In accordance with the provisions of articles 248 and 261 of the General Tax Code, companies authorized to carry out public service benefit from tax arrangements in determining their taxable products and deductible charges.

In fact, the assessment of taxable products and the deduction of operating charges is done in accordance with the accounting plan applicable to public service concessions.

1. Regime for Taxable Products
Taxable products of licensed companies are determined as follows:

• Termination penalty paid by the licensee to the license holder is considered taxable products only in as much as it is not a repayment of expenses or investment
• Deficiency subsidies as well as operating and working capital subsidies are taxable under conditions defined by common law.

2. Rules Peculiar to charges
For public service licensed companies, charges payable may be transferred temporarily into an account for fixed charges to the tune of the surplus where, during the first 3 financial years, they are in excess of production sold.

As from the 4th year, the fixed charges payable may be considered as depreciation over the next six financial years.

The concession holder may, over a period of 10 years or during the concession period, where such duration is less than ten years, pay entry fees, if need be, to the conceding authority.

The concession holder may equally deduct from his taxable profits, a lapse amortization for renewable depreciable property conceded by the concession holder. Such must be returned for free to the conceding authority at the end of the concession.

However, the amortization of temporarily fixed charges may not benefit from the tax regime for deferred amortizations during a deficit period.

Besides, during the concession period, where the concession holder is bound to carry out a new investment or restructuring programme involving huge expenditures, he may benefit from this regime upon presentation of a file to the tax administration including agreements between him and the conceding authority and defining in a detailed manner the nature and amount of investments as well as the expenditures considered in order to be eligible.

Scope of Application

Any individual or corporate body duly established in Cameroon may apply for an Investment Charter regime if it is involved in any of the following activities:

• Processing materials, materials which culminate in the production of a finished or semi-finished good
• Extracting and processing mineral resources
• Processing hydrocarbons
• Logging including timber processing
• Agricultural and agro-industrial production
• The clothing industry
• Stock breeding
• Small-scale and industrial fishing
• Processing of farm, animal and fishery products
• Storage and preservation of foodstuffs
• Manufacturing building and civil engineering equipment
• The construction of buildings and realization of public works
• Maintenance of industrial facilities focusing on the production of spare parts
• Ship repairs
• Technological research and statistical data management
• Hospitals and pharmaceutical laboratories
• Laboratories for the testing, analysis and control of raw materials, finished or semi finished products used or manufactured by industries
• Restaurants catering for tourists when they are part of the tourism establishment or located in a tourist site recognized by the tourism service

Different Schemes, Specific Conditions and Advantages

In order to promote investments, Cameroon's Investment Charter provides for the following schemes:

• The Basic Scheme
• The Small and Medium-Sized Enterprises (SME) Scheme
• Strategic Companies scheme.

These schemes are supplemented by the Free Zone Scheme which is governed by a specific instrument. These schemes are repealed with the advent of Sector Codes provided for by the Law on the investment Charter of Cameroon (Law No. 2002/004 of 19 April 2002).

N.B. : Additional and more beneficial incentives to potential and/or present investors have been provided for by Law N° 2013/004 of 18 April 2013 to lay down private investment incentives in the Republic of Cameroon.

Commercial Benefits

Exemption from all licences and quota restrictions in imports and exports
No prices and profit margin controls
The possibility to sell part of the annual production on the local market subject to the payment of all relevant taxes and custom duties in force

Tax Concessions

Total exemption from taxes and duties for a period of ten years
Flat rate of 15% levied on profits as from the eleventh year of operation, and total exemption from all other existing or future taxes and duties
Carrying over of losses incurred during the ten year tax holiday period.

Other Benefits in Financial Transactions

• The right to open an account in foreign currency (Euros, pounds sterling, etc.)
• No restrictions to the sale and purchase of currencies
• The right to transfer the profit made and the capital invested in Cameroon to foreign banks

Trade Concessions

• Exports and imports are exempted from all current and future taxes and custom duties and from all other direct or indirect taxes, existing and future registration taxes, stamp duties and taxes
• Exemption from the tax verification programme (that is, SGS, VERITAS). Exemption from production and sale taxes on all products purchased on the domestic market

Labour Concessions

• Wages may be paid according to production capacity
• The right to freely negotiate contracts between employers and employees
• The right to automatic grant of work permits to foreign employees (may not exceed 20% of the total workforce of the company after five years of operation)
• The right to replace the National Social Insurance Fund (NSIF) with any private scheme offering equal or better allowances than those of NSIF

Other Advantages and Concessions

• The right to enterprises to install their own electricity generators and telecommunication systems if the need arises
• Preferential electricity and port rates
• Exemption from all rents, occupancy and price control
• Protection of all benefits relating to general guarantees provided for in the Investment Code and the right to seek justice in the court of First Instance and the International Arbitration Association

In accordance with the provisions of articles 105-107 of the General Tax Code, natural or corporate bodies willing to reinvest in Cameroon may be granted 50% reduction in the basic tax for Corporate Taxes or in personal income tax.

In effect, tax reductions are granted at the rate of 50% of the reinvestment approved, and provided they do not exceed half of the profits declared for the fiscal year under consideration. In the event of insufficiency in any financial year, the company may carry forward shall be authorized for no more than three subsequent financial years representing three previous financial years. The following conditions must first be met:

1. Basic Conditions:

In order to be eligible for this scheme, reinvestments must be carried out under any of the following forms:

• The construction and extension of buildings constructed with permanent material for industrial, agricultural, forestry, tourism or mining, technical bureau purposes as well as free buildings meant for salaried employees
• Purchase of industrial, agricultural, mining or tourist equipment sealed in a permanent fund
• Purchase of specialised heavy mechanical equipment for agricultural, forestry and mining use
• Purchase, replacement or installation of production, processing, packaging and preservation equipments in the food sector
• Purchase of heavy machines for industrial, forestry, maritime or air transportation
• Expenditures for soil preparation, sowing in industrial plantations, excluding expenditures for maintenance
• Any social reinvestment (construction of boreholes, wells, schools, village health centres, roads, bridges, etc.)

The amount reinvested should be at least or equal to 25 (twenty five) million francs.

2. Other conditions:

In order to qualify for the tax reduction the mentioned above, the taxpayer shall forward to the General Director of Taxation, at the time of filing the return of trading results for the financial year for which the investments were effected, a file in two copies containing the documents below:

• An application (original stamped at the current rate)
• A summary, descriptive list (with estimates) of the programme realised
• Supporting documents for declared expenditures (invoices, memoirs, plans,, purchase order, supply vouchers)
• A copy of the tax return form and a copy of a table of fixed assets for the financial year

Only companies which keep regular, complete and genuine accounts in accordance with the OHADA Accounting system may benefit from tax reductions on account of reinvestment.