Section 7.- Net taxable profit shall be established after deduction of all costs directly necessitated by the exercise of activities subject to assessment in Cameroon, in particular:

A- Overhead expenses

All types of overheads, expenses on staff, labour, offices, equipment and furniture, sundry and exceptional expenditure, insurance premiums, acts of

liberality, gifts and subsidies.

However, the following expenses shall

be treated thus:

(1) Sundry remunerations and provision of services:

a) The remuneration granted to salary

and wage-earners shall be deductible from the results in so far as they are not excessive in comparison to the service rendered, correspond to effective work, and are in conformity with conventional norms.

This provision shall apply to all direct and indirect remuneration, including compensations, allowances, benefits in kind and reimbursement of expenses.

Nevertheless, a deduction to the tune

of 15% shall be made on the basic salary excluding other social welfare contributions representing only employers’ dues paid abroad for the compulsory constitution of the pension of an expatriate.

b) The attendance fees granted to the members of the board of directors shall be deductible only in so far as they represent remuneration for work done.

c) The fixed allowances which a company grants to its managerial or senior staff as entertainment and travelling expenses shall be excluded from such deductible expenses in the assessment of tax, when they include the usual type of expenses reimbursed to the persons concerned.

The sums paid to the managerial or senior staff of a company as employment or service expenses allowance which do not correspond to a real expense on the duty performed shall be reinstated in the operating results.

For the implementation of this provision, managers shall mean active partners and members of partnerships and joint-ventures.

All expenses relating to hunting, angling, the use of pleasure boats, tourist planes and pleasure homes shall

equally be excluded from the deductible expenses whether they be in the form of fixed allowances or reimbursement expenses.

d) Subject to international agreements, the following shall be regarded as expenses on condition that they are not exaggerated:

• Head office overheads for operations carried put in Cameroon and the remuneration of certain effective services (studies; technical, financial or accounting assistance) provided to Cameroonian firms by foreign or Cameroonian natural persons or corporate bodies.

On no account shall there be accepted on this basis any sum exceeding 5% of the taxable profit before deducting the expenses concerned.

In case of a deficit, this provision shall apply to the results of the last financial year not prescribed.

This ceiling shall not apply to expenses relating to technical assistance and studies concerning the assembly of a factory.

The ceiling stipulated above shall be fixed at 2.5% of the turnover for the firms specialized in public works and 7.5% for design firms operating in accordance with the regulations relating to design firms and consulting engineers.

•purchased or sold for firms located in Cameroon within the limit of 5% of the purchase or sales price. This commission must form the subject of a specific bill attached to that of the suppliers or clients.

The amounts paid for the use of valid patents, brands, designs and models within the overall limit of 2.5% taxable profit before the deduction of expenses claimed. This ceiling shall not apply to the amounts paid to firms not participating directly or indirectly in the management or capital of a Cameroonian firm.

• Commission or brokerage on goods When their partners on the payroll of the firm are on leave, companies shall be authorized to deduct from their profits, on condition that the journey was made, the transport expenses to

and fro of the said partners, their spouses and dependent children.

Under no circumstances shall such expenses give rise to a depreciation allowance account.

(2) Rental Expenditure

The amount for rentals granted to a company shall be regarded as part of the expenses on condition that it is not

exaggerated in comparison with the rentals usually paid for similar property or facilities.

Nevertheless, when a partner has at least 10% of the holdings or shares of a company, the proceeds from the rentals other than those from the property granted to such company shall not be considered as expenses of the firm.

For the implementation of this provision, the holdings or shares held as property or as usufruct by the spouse, relatives in the ascending or descending line of the partner, shall be deemed to belong to the partner.

(3) Taxes, charges and fines

Only the professional taxes issued for

collection during the financial year and which are to be borne by the firm

in relation to the operations carried out in Cameroon shall be subject to deduction.

Company tax and personal income tax shall not be considered as deductible expenses for the levying of taxes.

Rebates granted on the deductible taxes shall fall under the revenue of the financial year during which the company shall be notified of the authorization of payment thereof.

Compounding fees, fines, confiscations, any penalty concerning persons who violate the legal, economic and fiscal provisions shall not be deducted from the profits subject to taxation.

(4) Insurance Premiums

The following shall be deducted from

the taxable profits and specifically relating to the share of operations carried out in Cameroon:

-insurance premiums contracted for the company where the very risk covered leads directly to a net reduction of assets;

–insurance premiums which, themselves, represent operating costs;

sickness insurance premiums paid to local insurance companies for members of staff and their spouses and dependent children, where the reimbursement of expenses to the very persons fails to appear under deductible charges;

– Premiums paid by firms to local insurance companies undercontracts relating to career wind-down allowances.

Deduction of such contributions shall only be admitted on condition that it is a general insurance contract, that is, one that concerns the entire staff or one or several specific categories of the staff.

But the sums raised by the company

with a view to taking out its own insurance policy shall not be deductible from taxable profits.

(5) Acts of liberality, gifts and

subsidies

Acts of liberality, gifts and subsidies

shall not represent the charges deductible from profits.

However, payments made to research

and development bodies and to collective philanthropic, educational, sports, scientific, social and family institutions and bodies, on condition that the latter are situated in Cameroon, shall be deductible as soon as there is proof of payment and as long as they do not exceed 0.5% of the turnover for the financial year.

Donations, grants and subsidies awarded to clubs participating in elite national competitions, or to recognized organizations responsible for the organization of official sports competitions are deductible when they are justified and within the limit of 5% of the annual turnover.

However, shall be totally deductible

when justified, the sums granted to;

– the State or Decentralized Territorial Collectivities for the fight against HIV/AIDS;

– authorize research and development bodies located in Cameroon and exercising in the health, agriculture and animal husbandry domains.

Similarly, gifts made on the occasion of a disaster, shall be deducted in the form and conditions determined by order of the Minister of Finance.

B – Financial Costs

Interest on sums of money left or

placed at the disposal of the company by partners in addition to their capital shares, irrespective of the form of the company, within the limit of those calculated at the rate of Central Bank advances increased by two percentage points.

However, such deduction shall possible with respect to partners who directly or indirectly own at least 25%

of the share capital or corporate voting rights only if:

-The sums of money made available

by all the partners do not exceed two and a half times the amount of equity. Otherwise, interest on the excess amount shall not be deductible;

-There interest paid to the said partners does not exceed 25% of profit before corporate tax and before deduction of the said interest and amortizations taken into account in determining such profit. Otherwise, the excess amount of interest shall not be deductible.

C – Losses

The following shall be deductible

from profits:

– Losses on items of fixed or realizable assets, except losses resulting from misappropriation by a partner or manager of the enterprise, or where misappropriation is as a result of negligence on the part of managers.

– the losses relating to bad debts exhausting all the amicable or forced means of recovery provided for by the OHADA Uniform Act on the Organization of Simplified Recovery Procedures and enforcement procedures;

– Losses due to damage duly established and validated in the presence of a taxation officer with at least the rank of an inspector, under the

conditions specified in the Tax Procedures Manual.

D – Depreciation

Depreciation actually computed in consideration of the probable period of usage according to the norms of each operation, including those which might have already been deferred in times of deficit without using rates which may not exceed those fixed as follows:

Small equipment and tools

The threshold for small equipment and tools which should be recorded under assets shall be fixed at five hundred thousand (500, 000) CFA francs.