A withholding tax is an income tax paid by the payer to the government on behalf of the recipient of the income. For instance, the employer usually withholds an amount from the salaries or wages of employees and pays it to the government directly.
In Cameroon, withholding taxes also apply into other jurisdictions other than where it is most practiced – on employment income. An example is the recently modified 2019 Finance Law where Section 12 (3) has seen some changes.
Section 12 (3) lays down some activities that shall not be subject to withholding tax.
“…Local purchases of petroleum products by marketers registered in the active taxpayer logbook of the department in charge of major enterprises.”
This is a new law that has been effective since January 1, 2019. In effect, marketers of petroleum products that are registered in the taxpayers’ register of the Department in Charge of Major Enterprises shall not be subject to a withholding tax. In effect, the marketer must not only buy petroleum products locally, but must be registered in the Department in charge of Major Enterprises for the exemption to be put in place. Failure in which the withholding tax will be applied.
An active taxpayer is one who has been regular in filing the monthly and annual tax returns.
The other activities that fall under this same law include:
– Imports by taxpayers that are under the specialized management units of the Directorate General of Taxation;
– Purchases made by persons residing abroad, councils and the State from industrialists, importers, wholesalers, farmers, semi-wholesalers, logging companies;
– Purchases made by registered industrialists that are under the Actual Earnings System for activities carried out.
In Cameroon, there are many instances where the law requires taxes to be withheld by someone else who in turn pays it to the government and it is accounted into the person or institution’s account. This is to ensure that the tax is paid first and don on time so as not to risk the possibility of the taxpayer defaulting.
In another article, we will be discussing some of those taxes that are withheld and paid on behalf of the taxpayer to the tax authorities by a third party.
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Important Links:
Presidency of the Republic of Cameroon | Prime Minister’s Service | Ministry of Finance, Directorate General of Taxation