Do Businesses Benefit from a 2-Year Tax Exoneration in Cameroon?
I was in the process of registering my clients new company when he called and talked about a two year tax exemption given to new businesses. He asked me what he needs to do to benefit from such a largess from the tax administration. It took me time to understand. I was still thinking of such a tax exoneration from for businesses in Cameroon that I am still to know.
Since I could give him a clearcut answer, (knowing fully well such doesn’t exist) I just told him there are many tax incentives offered by the tax administration in Cameroon to newly created companies. “But then, I will check about running your business tax-free for two years and let you know.”
Point of Correction
When he dropped, I just kept a cool head and something came to my mind. He should be talking about exoneration from business license. You can checkout this previous post I made about The Business License Tax (Patent) in Cameroon.
Many people take the exoneration from business license to mean freedom from paying income tax. The business license is a local tax collected by the tax authorities on behalf of the local council where the business is operating. This tax is actually assessed on the basis of the business’ or natural person’s declared annual turnover.
Business License Exoneration
Newly created businesses in Cameroon benefit from exoneration for business license for the first two years of activity. Note should be taken that this exoneration does not mean you are also exempted from paying income tax. Every entity or natural persons carrying out activity with the business license does its tax declaration latest the 15th of every month for the previous month.
A newly created business means that which has been registered in the trade register within the year considered and goes to the tax service for its first registration. The chief of the competent tax center issues a business license that carries the indication “EXONERATED”. This document can be used in carrying out various transactions.
Exemptions
There are exemptions to the above situation.
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An enterprise is not considered new and could not benefit from the exoneration in the case where it was previously under the discharge tax system of taxation. That is, the business in question has been reclassified from the discharge tax system to the business license
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Businesses with a single tax identifier that are simply changing the place to file their tax returns
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Those that are registered in the trade register who want to change management
Validity of business license exoneration
When calculating the two year deadline during which exoneration is valid, the beginning of any year counts for a full year. This means if you are issued a business license exoneration on December 30 of that year, it is valid until December 31 of same year.
Other information about the business license tax exoneration in Cameroon
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The taxpayer is obliged to declare the business license two months following the end exoneration for business license. That is, it has to be done before March 1st of every year.
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The business license has to be declared ten days that follow the start of a taxable activity. This includes the case of exoneration
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The business license tax in Cameroon is collected by the tax administration on behalf of the local councils
I am sure you should now understand that the ‘2-year tax exoneration’ some people think is practiced in Cameroon is actually exoneration from business licenses. We will be making subsequent posts on tax exemptions and incentives that businesses or natural persons can benefit from in Cameroon.
Keep watching this space for more tips on tax issues in Cameroon. Don’t hesitate to get in touch with us in case you need any information. Meanwhile, drop your comments below and share with others.
Source: Cameroon General Tax Code, Directorate General of Taxation
Thank you for this insightful write-up. Looks like there are many taxes expected to be paid by a business in Cameroon. What are these taxes and can a business actually make profits even after paying such taxes?
Hello Kwajika,
Yes, the taxes may not be too many as we think. However, the problem may rather lie in the usage of what taxpayers money is used for. If it was used to improve the standard of living of people, then the purchasing power would have also been high.
Keeping that aside, businesses do make profit after paying their taxes.
If you declare your taxes regularly, you won’t have any problem.
The business license tax is paid once in a year. This amount is for the local council where you operate.
Every month, you need to declare an advance tax (2.2% or 5.5%) depending on your tax regime. This advance tax will be deducted at the end of the year from your company tax. Of you’ve overpaid, they will send the balance forward. If you owe, you pay the balance.
What’s company tax? In essence, it’s the government’s share in every business run within Cameroon.
The government and local councils are shareholders in every business.
For example, the government owns 30% share in every business that pays company tax. The local councils own 3% of the 30% the government owns, reason we have the additional council tax. This makes it 33%.
Remember, there are different tax rates available.
This percentage is paid after all expenses have been deducted.
If the business runs on a loss, the government won’t gets it’s 33% share. If it makes profit, the government gets it’s 33% share.