Investing in Africa

Cameroon

This information was last updated in August 2006

For further details and updates please contact:

Edward M Nambouth
Telephone: +237 3425559
Fax: +237 3425569
Investing in Cameroon
Forms of Business Organisation In establishing a business enterprise in
Cameroon, a foreign investor may freely choose from a wide selection of business
forms inherited from the French and British. The most commonly used are the public
limited liability company and the private limited liability company (inherited from the
British) and similar business forms inherited from the French, namely, Société
Anonyme and Société à Responsabilité Limitée. Other forms include sole
proprietorships (établissements), partnerships and branch operations.

A Société Anonyme must have a minimum capital of ten million CFA francs divided
into shares with a nominal value of at least ten thousand CFA francs per share. A
Société à Responsibilité Limitée must have a minimum capital of one million CFA
francs divided into equal parts with a nominal value of at least five thousand CFA
francs.

With the introduction of the uniform business law (OHADA), there is uncertainty as to
whether or not the business forms inherited from the British which apply to former
West Cameroon will survive.

Exchange Controls Cameroon is a member of the African Financial Community

(Communauté Financière Africaine - CFA). Along with the other members of the
CFA, its currency, the CFA franc (FCFA), is linked to the Euro at a fixed exchange
rate. Members of the CFA are required by international agreement to apply
exchange control regulations modelled on those of France. The CFA agreement
guarantees the availability of foreign exchange and the unlimited convertibility of the
CFA franc into Euro at the fixed rate, which is currently 655.957 CFA Francs equal 1
Euro. This provides considerable monetary stability and simplifies multinational
transactions. Transfers within the CFA zone are not restricted, but those exceeding
FCFA 1 000.000 must be declared.

Overall authority for Cameroon’s exchange control system is vested in the

Department of Economic Control and External Finance of the Ministry of Finance and
Budget.

Inward direct investments require prior declaration. The term inward direct
investment means the creation, purchase, or extension of any business entity
(including a branch) but does not include the purchase of less than 30% of the share
capital of a company whose shares are not quoted. Loans obtained by Cameroon
companies from foreign shareholders or from a foreign enterprise within the same
group also require prior authorisation. The reinvestment of undistributed profits is not
subject to prior declaration.

At the time an inward direct investment is declared, confirmation should be obtained

from the Ministry of Finance and Budget that the normal guarantees for the
repatriation of capital and profits will apply. These guarantees are usually granted as
a matter of course, and it is not difficult to move funds out of the country, provided
that the proper forms have been filed and taxes paid.
Transfers of funds outside the CFA zone for settlement of imports should be declared
for statistical purposes; transfer of an amount in excess of 5 million francs CFA must
be lodged with an authorised intermediary, namely, a bank authorised by the central
bank to act as an intermediary. Transfers in settlement of imports in excess of 100
million CFA Francs require producing to the department responsible for exchange
controls an import licence, the related bills of lading and the final invoices.

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Expatriate employees may apply for authorisation to repatriate part of their earnings
on a regular basis. Employees may repatriate 20% of their net salary if they are
single or reside in Cameroon with their family. If their family and dependents live
outside the CFA zone, permission may be obtained to repatriate up to 50% of net
earnings. Any savings made in Cameroon may be repatriated when employees
leave Cameroon.

Local Participation or Management Requirements Local participation in capital is

not required, except in the insurance and banking industries. It is expected that
foreign investors will recruit and train citizens of Cameroon to gradually assume
responsible positions in their enterprises.

Investment Incentives The Investment Code is intended to encourage and

stimulate productive investment in Cameroon. It provides certain general
guarantees, such as non-discrimination between enterprises owned by nationals and
those owned by foreigners and no expropriation or nationalisation without just and
equitable prior compensation as determined by an independent third party. The
Investment Code also provides for specific benefits, which depend on the regime
under which an enterprise is placed. There are five regimes: the basic regime, the
small and medium sized enterprises regime, the strategic enterprises regime, the
industrial free zone regime and the reinvestment regime.

The most important investment incentives are tax based. Of these, the most
significant are import duty concessions, exemption from export duties, tax reductions
and tax holidays.

Other tax incentives include the carry forward of depreciation and losses and the
exclusion of reinvested capital gains from taxable income for a period of three years.
Local industries fulfilling certain conditions are protected to enable them to obtain a
footing in the domestic market.

Taxation of Resident Entities

Resident entities are assessed on income earned from enterprises operating in
Cameroon or from transactions carried out in Cameroon. A commercial entity is
resident in Cameroon if its registered office or centre of activity or management is in
Cameroon or it has resident employees in Cameroon that render services to its
customers.

Company Tax Rates Company tax is currently levied at the rate of 35%. In addition,
a local surcharge of 10% of the company tax is payable, which brings the effective
rate to 38.5%. Special rates can be approved as part of investment incentive
regimes.

A minimum company tax is payable annually equal to 1% of the turnover of the

company. A local surcharge of 10% is also payable, bringing the effective rate to
1.1% of turnover. This tax is payable when the operations of the company result in a
taxable loss, or when 1.1% of turnover is more than 38.5% of taxable profits.

Taxable Income Company tax is a tax on profits made by companies and other
corporate bodies. It also applies to partnerships and financial syndicates that elect to
be assessed on the basis of this tax. Taxable profits are determined after deducting
allowable expenses and charges.

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Inventory Valuation For tax purposes, inventory is valued at cost. If the market
price is lower than the cost price, a company can make a provision for the loss in
value. Work-in-progress is valued at cost.

Dividend Income Dividends received by a resident company from a resident or non-

resident company are subject to company tax; however, the recipient company has
the right to set off any Cameroon tax withheld from the dividend (see “Dividends and
Other Distributions of Profits”) against its company tax liability. In the case of a
dividend received from a non-resident company, foreign tax paid on the dividend is
not creditable against Cameroon company tax unless a double tax treaty provides for
such a credit.

The treatment of dividends received by corporate shareholders differs when the

shareholder owns at least 25% of the shares in the affiliate, the head offices of the
shareholder and its affiliate are located in Cameroon or another Central African
Economic and Monetary Union (Communauté Economique et Monétaire d’Afrique
Centrale-CEMAC) state, and the shares remain registered in the name of the
shareholder for at least two consecutive years. In this situation, only 10% of the net
dividend received is subject to tax. If the dividend paid is disclosed in the financial
statements of the affiliate in the same year that the receipt of the dividend is
disclosed in the financial statements of the shareholder, the withholding tax paid by
the affiliate is set off against the withholding tax payable by the shareholder on any
dividend distributions subsequently made by that shareholder.

Foreign Source Income Income subject to company tax is determined with sole
regard to profits earned or transactions carried out in Cameroon, subject to
international conventions. Thus, income earned outside Cameroon by resident
companies is not generally included in the tax base.

Capital Gains Capital gains are treated as ordinary business income and are taxed
at normal company tax rates. However, a capital gain realised on the disposal of a
fixed asset in the course of trading is excluded from income for a period of three
years if the taxpayer reinvests the gain in new fixed assets for the business.
A capital gain resulting from the gratuitous allocation of shares, founders’ shares, or
debentures on the merger of limited liability companies or limited partnerships with
share capital is also excluded, provided that the company arising from the merger
has its registered office in Cameroon or another CEMAC state.
Moreover, on the assignment, transfer, or cessation of a company within five years
following its creation or purchase, net capital gains will be assessed at only half their
value. If such an event takes place more than five years after the company is formed
or purchased, the net capital gains will be assessed at a third of their value.

Exchange Difference Realised foreign exchange gains are taxable, realised foreign
exchange losses are deductible. Foreign assets and liabilities should be valued in
CFA francs at the prevailing exchange rate at the balance sheet date. The resultant
exchange differences are credited or debited to the profit and loss account as
necessary, but they are neither taxable nor deductible, since unrealised exchange
gains are not taxable and unrealised exchange losses are not deductible.

Deductions Deductions are allowed for reasonable expenditure incurred in

performing activities that produce assessable income. Expenditure considered either
excessive or unnecessary for the reasonable needs of the business will be
disallowed to that extent.

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Depreciation Depreciation is calculated using the straight-line method. Generally,
all tangible fixed assets, new and used, owned by the company for business
purposes and whose value diminishes with time or when in use are depreciable.
Rates depend on the useful life of the asset but may not exceed those allowed by the
General Tax Code. Intangible assets are depreciated at rates varying from 20% to
50%. Goodwill, however, is not depreciable. The rates for tangible fixed assets
range from 1% to 33.33%.
To be deductible, depreciation must be recorded in the books of account.
Depreciation deferred during earlier periods of trading at a loss may be carried
forward indefinitely. For depreciation purposes, an asset’s cost is reduced by the
amount of any investment allowance granted by the Ministry of Finance and Budget
under a reinvestment program.
Royalties Royalties paid to entities within the CEMAC zone are deductible if they
are reasonable. Royalties paid to an entity outside the CEMAC zone that
participates in the management or capital of a Cameroon entity are treated as a
distribution of profits.
Interest Interest on capital borrowed for business purposes is normally deductible.
Interest paid to the members of a company on funds provided by them to the
company in excess of their share capital holding is deductible up to a limit of two
percentage points above the lending rate of the central bank at the time the interest
payments were due.

Management Fees Head office expenses and remuneration for technical, financial,
or accounting assistance are deductible up to 10% of taxable profits before the
deduction of the expenses concerned. For construction companies, the limit is 5% of
turnover and for approved design bureaus (Bureaux d’études) 15 % of turnover.
However, the limit does not apply to technical assistance costs relating to the
erection of factory plant and machinery.
Taxes Taxes such as business licence tax and stamp duties are generally
deductible. Company tax paid is not an allowable deduction. Compromise
payments, fines, confiscations, or penalties imposed as a result of a breach of any
legal, economic, or tax provision are also not deductible.
Start-up Costs Costs connected with the organisation or setting up of a company
may be deducted. They must be written off within the first five years of the
company’s existence.
Bad and Doubtful Debts Bad debts are deductible but only specific provisions for
doubtful debts are deductible. However, if the debt provided for is subsequently
recovered, the provision is added back to the results of the year in which recovery
was made and it is subject to tax.
Rents Rental payments are deductible in full, provided that they are reasonable.
However, any rents paid to a member of a company who owns at least 10% of the
company’s shares and is involved in its management (or any rents paid to such a
member’s spouse or children) may be deducted only if paid for premises rented to
the company for its business use.
Tax Treatment of Losses Losses may be carried forward for up to four years but
may not be carried back. Losses of one entity may not be transferred to another
entity in the case of a corporate reorganisation.

Taxation of Non-Resident Entities

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Non-resident entities are taxable only on income derived from Cameroon. Tax is
levied at the same rate and in accordance with the same rules as apply to residents
(see “Taxation of Resident Entities”). However, non-resident companies that carry
out drilling, exploration, and other work for oil companies and that do not have
permanent establishments in Cameroon may elect to pay a special 15% tax on their
turnover rather than company tax.

A non-resident entity has to appoint a solvent representative in Cameroon for tax

purposes. If a representative is not appointed, the resident taxpayer who entered
into a service contract with the non-resident taxpayer is jointly liable with the latter for
the payment of taxes and the discharge of other tax obligations arising from the
service contract.

Tax Treatment of Groups of Companies

Cameroon tax laws contain no special provisions for groups of companies. A
company is always treated as an independent entity, and it is not possible for
companies, however related, to combine their results for tax purposes. Special rules
do, however, limit the taxable portion for company tax purposes of a dividend paid by
a subsidiary to its parent company to 10% if certain conditions are met (See
“Dividend Income”).

Tax Treatment of Branches and Subsidiaries

The profits of a branch or a subsidiary of a non-resident company are subject to
company tax in the same manner as those of a resident company. Subject to the
provisions of international conventions, profits of branches of non-resident
companies and those that do not have their head office in Cameroon are deemed to
be distributed at the end of each year to non-resident persons. Such profits are
subject to a dividend withholding tax at the rate of 16.5%, the same rate that applies
to dividends paid abroad (see “Dividends and other Distribution of Profits”).
Branches are therefore subject to dividend withholding tax when profits are declared
and not when dividends are distributed.

However, investors tend to prefer subsidiaries to branches because branches have

to be converted into registered companies within two years of their existence unless
exemption is obtained from this requirement.

Corporate Assessments and Payments

The tax year is from 1 January to 31 December. A company’s financial year, for
official purposes, must correspond to the tax year. A return showing the company’s
results for the fiscal year must be filed by 15 March, along with any supporting
documents requested by the tax authorities. The tax authorities may adjust the
results shown in the return. The taxpayer has the right to respond to the adjustments
and may take the matter to court if an agreement cannot be reached.

The 1.1% minimum tax (see “Corporate Income Tax Rates”) is payable each month
on the turnover realised in the preceding month. In addition, a withholding tax
equivalent to 1% of the total customs value of goods imported or 1% of the selling
price of purchases made is levied. Like the minimum tax, this levy is payment on
account of the taxpayer’s ultimate income tax liability. If the tax return shows a tax
liability in excess of the advance tax payments made, the difference is payable in a

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single instalment not later than 15 March of each year. The withholding tax on
purchases is levied at the rate of 5% for non-registered taxpayers. For individuals
realising an annual turnover between 15 and 50 millions, the minimum tax and the
withholding tax on purchases are assessed at the rate of 1.5% plus 10% local
surcharge.

Tax Treatment of Individuals

Individuals resident in Cameroon are taxable on their world-wide income; non-
residents are taxable only on income of Cameroon origin. A person is deemed to be
resident in Cameroon if the individual has a place of abode, a principal place of
residence or a centre of business activity in the country.

Any person who spends more than six months (or 183 days) in any tax year in
Cameroon is expected to file a tax return. A person is considered non-resident if the
individual does not have a principal place of abode or business centre in Cameroon
and has not been physically present in the country for more than 183 days. In most
cases, a non-resident’s tax liability is settled by withholding taxes levied on the
income.

Treatment of Families For couples married under the joint property regime, any
earnings from real estate may be declared by either spouse.

Personal Income Tax Rates With effect from January 1, 2004, proportional tax and
graduated surtax previously used to assess personal income tax were abolished. A
single income tax based on graduated rates applicable to net total income derived
from various income categories, was introduced. The categories are:
• Salaries, wages, pensions and life annuities;
• Income from stocks and shares;
• Income from real estate;
• Profits from handicraft, industrial and commercial activities;
• Profit from agricultural activities;
• Profits from non-commercial and related professions

The basis of assessment is the net total income from the above income categories
less a fixed allowance of 500,000 CFA Francs. The rates applicable to the net total
income are: Rate
From 0 to 2,000,000CFA Francs 10%
From 2,000,001 to 3,000,000 15%
From 3,000,001 to 5,000,000 25%
Above 5,000,000 35%

Additional Council Tax surcharge of 10% of the principal tax is levied on the above
rates.

Dividends are assessed at the rate of 16.5%.

Salaries, Wages, Pensions and Life Annuities This also includes profits earned by
insurance agents and travelling sales representatives as regards activities carried out
in Cameroon. The basis of assessment is the gross amount of salaries, wages,
pensions, life annuities as well as benefits in cash or in kind. Benefits in kind are
estimated using the following rates: Rate
• Housing 15%
• Electricity 4%

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• Water 2%
• Each servant 5%
• Each vehicle 10%
• Food 10%

The net taxable income from this category is determined by deducting from the gross
income a fixed allowance of 30% to cover professional expenses and social security
contributions paid by the employee.

Income From Stocks and Shares

This category includes the following:
• Proceeds from shares, stocks and similar income;
• Income from bonds;
• Income from debts, deposits, guarantees, and current accounts;
• Profit from sale of shares, bonds and other interests in capital

Income from bonds: This includes interest, warrants and all other income from bonds,
government bills and all other interests in negotiable bills issued by Councils and
Cameroon public establishments, associations of every kind, companies and
enterprises of every kind, financial, industrial commercial or civil; redemption
premiums or bonds paid to holders of bonds issued in Cameroon.

Income from debts, deposits and guarantees: This category includes income from
mortgaged, preferential or unsecured debts, excluding those represented by bonds;
time deposits, guarantee deposits and current accounts.

Income From Real Estate This includes rent from developed or undeveloped
property in Cameroon, profit from the sale of developed or undeveloped property and
interest earned on shares in civil real estate companies.

The net taxable income from this category is the gross revenue effectively received
less deductible charges which are fixed at 30% of the gross revenue received, unless
justification for actual costs incurred is produced.

Capital gains made by individuals from built-on or non built on property acquired
against payment or free charge are subject to tax at a final rate of 25%.

Profits From Handicraft, Industrial And Commercial Activities This covers profits
made by individuals from enterprises exploited in Cameroon and carrying out
commercial, industrial handicraft, mining or forestry activities.

Capital Gains (sales of shares) Capital gains accruing to individuals as a result of

company mergers are not subject to personal income tax if the new company has its
registered office in Cameroon or another CEMAC member state. Other capital gains
on the sale of shares are subject to tax at a final rate of 11%.

Deductions & Reliefs The extent to which a deduction from income will be allowed
depends on the category of income. Allowable deductions include business
expenses, social security contributions, fixed deduction of 30% to cover professional
expenses, fixed deduction of 30% as regards income from real estate.

Losses sustained by individuals are deductible if incurred in a business enterprise

such as a sole proprietorship or partnership that has a turnover of more than 100

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million CFA Francs. Individuals may carry business losses forward in the same way
as companies (see “Tax Treatment of Losses”).

Personal Assessments and Payments

Individual taxpayers must file tax returns each year by 15 March for income of the
preceding tax year (same date in the case of industrial and commercial profits and
professional earnings). However, taxpayers who derive income only from
employment and/or from securities and whose taxes are withheld at source are
exempted from the obligation to file a tax return. The procedures for payment of
personal income tax vary with the type of income.

Payment of personal income tax on income from salaries, wages, and pensions and
annuities is made by withholding at source. Income from securities and, in some
cases, income from real estate is also withheld at source. Any excess tax withheld
can be refunded after the annual return is filed.

The taxpayer is directly responsible for paying income tax on the following types of
income: industrial and commercial profits, professional earnings, agricultural profits,
and income from real estate. Payments are made each month to cover minimum tax
on the preceding month’s turnover, similar to the one described for companies (see
“Corporate Assessments and Payments”).

Personal income tax on income other than salaries, wages, and pensions and
annuities is assessed after submission of the return and must be paid within fifteen
days following the issue of the notice of assessment.

Withholding Taxes
Dividends and Other Distributions of Profits All distribution of profits by a
resident company to other residents, including dividends and any payments not
allowed as deductible expenses for company tax purposes, are subject to a 15%
withholding tax plus a 10% local surcharge, bringing the total rate to 16.5%. If the
recipient is another resident company, the tax withheld is credited against its
company tax liability. For resident individuals, tax withheld is set off against the
proportional tax payable.

Distributions made or deemed to be made to non-residents are subject to a

withholding tax of 16.5%, and the tax is usually final. Subject to the provisions of
international conventions, profits of branches of non-resident companies and those
that do not have their head office in Cameroon are deemed to be distributed at the
end of each tax year to non-resident persons.

Interest Interest paid to residents is subject to withholding tax at the rate applicable
to the income bracket concerned. For companies, the tax is credited against the
ultimate company tax liability. For individuals, it is a final tax. Interest paid to non-
residents is not subject to withholding tax.

Royalties Royalties paid by Cameroon entities, by the state, or by local councils to

resident companies or to individuals in Cameroon are subject to tax at the rate
applicable to the income bracket concerned. For companies, the tax can be credited
against the ultimate company tax liability. For individuals, the tax is final. Payments
of royalties to non-residents are subject to a special tax at the final rate of 15%.

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Sums covered by the tax include payments for the exploitation of patents and
trademarks, for right of use of cinema films and television programs, for the supply of
information concerning industrial, commercial, or scientific experiments, for the rental
of industrial, commercial, or scientific equipment and for technical, financial, or
accounting assistance. The payments must have been treated as deductible
charges in the tax return of the payer, otherwise, they will be treated as distributions
of profit and taxed at 16.5%.

Rates Under Double Tax Treaties Cameroon has signed comprehensive income
tax treaties with Canada, France and Tunisia and with countries that are members of
UDEAC (CEMAC). The Canadian treaty limits the rate of tax on dividends, interest
and royalties to 20%. The French treaty limits the rate of tax on such income to 15%
and for technical, financial and administrative assistance to 7.5%. Cameroon has
also signed treaties with various countries dealing with air transport income.

Other Taxes
Value Added Tax (VAT) Cameroon introduced Value Added Tax (VAT) from 1
January 1999. It is, like other VAT regimes, a broadly based tax on consumer
spending which is levied on all commercial transactions and activities except those
that are specifically exempted. All exports of taxable products and similar
transactions are assessed at 0%. All other transactions are assessed at the rate of
19.25%. The following transactions are taxable.

• Deliveries of goods
• Rendering of services
• Importation of goods
• Real estate activities
• Construction and delivery of buildings by real estate professionals
• Sale of second-hand goods and equipment by professionals
• Transfers of non-exempt assets
• Leasing of underdeveloped land and unfurnished premises by real estate
professionals.

Input VAT paid on goods and supply of services from vendors used in the production
of output goods and services delivered to customers is deductible from output VAT
billed on the sale of goods and services and the difference is paid to the Public
Treasury. However, VAT paid on hotel, restaurant, car hire, entertainment and
passenger transport services is not generally deductible as input VAT. Deductible
input VAT paid that cannot be recovered because of inadequate output VAT can be
refunded in cash or through a mechanism of Treasury cheques that can be used to
pay customs duties and taxes.

VAT payers are required to be registered and to file monthly and annual VAT returns.
Non-resident VAT payers are required to appoint solvent resident representatives to
be responsible jointly with them for the payment of VAT and the discharge of other
VAT obligations.

Late payment of VAT attracts interest at the rate of 1.5% per month up to a maximum
of 50% of the principal VAT liability. Fines are levied for various omissions in
discharging VAT obligations.

Tax On the Sale of Petroleum Products Companies distributing gasoline are

subject to a tax on the sale of petroleum products. The tax is passed on to the

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ultimate consumer. Current rates are FCFA 120 per litre for premium grade gasoline
and FCFA 65 per litre for gas oil.

Business Licence Tax Business enterprises must pay an annual business licence
tax, which is calculated according to a graduated scale based on the annual turnover
of each business establishment. In all, there are seven categories with turnovers
ranging from FCFA 5 million to FCFA 15 million in category seven and turnover of
over FCFA 2 billion in category 1. The tax payable is calculated by applying the
stipulated rate applicable to each turnover range. The actual rate of the tax is fixed
by the local authorities in the area where the business is established. The rate must
fall within a range stipulated by the General Tax Code.

Liquor Licence Tax In addition to the business licence tax, enterprises engaged in
the wholesale or retail distribution of alcoholic drinks or in the production of alcoholic
beverages, wines, or fermented drinks are subject to a liquor licence tax, the rate of
which is determined from a graduated scale based on estimated turnover.

Social Insurance and Housing Loan and Employment Fund Contributions

Employers and employees contribute monthly to the National Social Insurance Fund
and the Housing Loan and Employment Fund. For the Housing Loan and
Employment Fund, employees contribute 1% of their gross salaries and employers
contribute 2.5% of the total amount of employees’ salaries and fringe benefits. For
the Social Insurance Fund, employees contribute 2.8% of basic pay, plus allowances
up to FCFA 300.000 per month. Employers contribute 11.2% of basic pay,
allowances, and benefits up to FCFA 300.000 per month per employee in addition to
1.75%, 2.5% or 5% of total salaries depending on the risk category of activities
performed by employees.

Property Tax Property tax is payable annually on real estate for which either an
ownership certificate or an administrative or judicial order has been issued. The tax
payable is assessed at 0.1% of the value of the surface area of the real estate and
the constructions developed on the area, plus a 10% local surcharge.

Registration and Stamp Duties Generally, all legal documents must be stamped
and registered. Acts that record contractual obligations of transfers or leases of
property are usually subject to ad valorem registration duties ranging from 1% to
15%. On the formation of a company and any subsequent capital increase, a
regressive duty between 2% and 0.25% applies, depending on the amount of capital.
Fixed stamp duties are levied on motor vehicle licences, advertising materials,
passports, visas and bills of lading.

Toll Gate Taxes At various points in the national road network, toll gate taxes are
levied at the rate of FCFA 500 each time a toll gate point is passed.

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