The tax administration in Cameroon has many incentives for new businesses in Cameroon, but I doubt if a 2-year tax exemption is one of them. In less than a week, three people have mentioned about the Cameroon government providing a 2-year tax exemption for new businesses. Before now, many of our clients remind us to apply for the 2-year tax-free incentive the government has offered when they contract us for the creation of their businesses in Cameroon.

Is it really a 2-year tax exemption?

The government of Cameroon is doing all it could to promote and support investments. This is why the country’s tax laws have brought about a number of incentive schemes that businesses can benefit from. However, not paying taxes (income taxes) for two years is unbelievable. This is far from being realistic and is a misunderstanding by many taxpayers and would-be taxpayers.

What exemptions do they mean?

In its goals to encourage investments and ease the entry from the informal to the formal sector for enterprises, the tax administration provides for many temporary exemptions for newly registered businesses. Some of these exemptions take 2 years, less or even more. However, in this case, I am sure they are talking about the business license contribution. Let’s see what Section C 12 of the General Tax Code of Cameroon says.

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Section C 12 (1) states “New enterprises shall be exempted from business license contribution for a period of one (1) year.”

This means all new businesses in Cameroon will have to be exempted from business license contribution for 1 year. How come are we talking then of two years? Let’s see what comes after.

Section C 12 (2) states “At their request, a business license instrument labeled “EXEMPTED” shall be issued to new enterprises that benefit from exemption.”

[forgive me for editing the numerous grammatical errors from the original GTC. It will help you for the tax officer doesn’t care about what you understand, but about what the law asks them to implement] 🙂

Now, it becomes a little bit confusing. This means you are not just exempted but you have to request for it. This is to say if you don’t ask for the exemption to be implemented in your case, you will have to pay for it. Take note of this, because the tax officers’ job is to collect as much revenue for the government as they can. If you don’t request for the business licenses contribution exemption, they will take the default case – meaning you will pay for it.

Checkout the penalties for not paying your business license contribution.

But that doesn’t still solve our problem. We talked above of “2-year tax exemption” and we have seen just a 1-year business license contribution exemption. Where then is the “2” coming from. Let’s continue with what Section C 12 got for us. Note that this Section 12 of the general tax code of Cameroon has just 3 sentences in 3 paragraphs, yet taxpayers get confused in its application.

“2-year tax exemption” solved

Section C 12 (3) states “For member companies of approved management centers, the period referred to in paragraph (1) above shall be extended by one year.”

This is now where the “2” that has been bringing this confusion comes in. From what I understand, it’s only for businesses that are under one of the approved management centers. If you are not a member company in these approved management centers, then you wont benefit from the second year exemption from business license contributions.

I am sure you can now make a difference between “tax exemption” and “business license exemption”. I know there are many exemptions from certain taxes that the government has provided as incentives for investment. There is none as of now exempting businesses from paying income tax. To help you understand better, let’s see what a business license in Cameroon is all about.

Business License

It is a permit issued by local councils area or municipalities in Cameroon through the tax office to allow individuals or companies carry out business activities within the local council or municipality’s jurisdiction.

I know some of you will be confused for mentioning the local council or municipality instead of the government. In Cameroon, the business license contribution is a local tax. The government has mandated the contribution to be collected by the tax administration on behalf of the local council where the business is located. This means, the tax office is not collecting the business license contribution to benefit the state, but the local councils.

If after reading this you remain confused, then you will need to relax your mind. There’s nothing I can recommend for your listening and dancing pleasure other than Big G Baba’s “Confusion” featuring General Toxzik. Do so only after sharing this post with others and leaving a comment below if you have any doubts.

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Source(s): General Tax Code of Cameroon