The constant growth of the digital economy has brought about many changes in the economy as well as benefits to its citizens and businesses. That notwithstanding, the growth has come in with its on challenges on the existing tax systems. Cameroon has not been left behind as it imposed a VAT on e-commerce transactions.
If you have been selling or buying online in Cameroon, then you should be aware that goods and services sold on e-commerce platforms as well as commissions received are now taxable. This change came up in the 2020 Finance Law of Cameroon will took effect as from January 1, 2020.
E-commerce is slowly and steadily becoming one of the fastest growing retail sectors in economy of Cameroon. With this growth, there comes the need for the government to make revenue by imposing VAT on e-commerce transactions. Many countries in the European Union are still struggling to cope after they implemented VAT on e-commerce transactions.
These are platforms used to sell products and services online – using the Internet. That is, the purchase and sales of products and services by consumers and businesses through an electronic medium. Sales can take place within and across borders. The products and services are:
There are four main e-commerce sales channels which can be used. These include:
Your website can carry out both passive and active transactions even though it may have been designed as a tool to educate or inform potential buyers. We also have websites that have online shops which can be used to sell their own goods and services or that of a third-party.
Social media platforms are used on a daily basis not only to build a brand or establish a market presence but to make direct sales. We have seen very popular Facebook Groups that have been turned into market places with hundreds of transactions taking place.
There are many third-party distributors that use websites for selling products and services using various marketing networks. This distributors usually earn commissions for each sale made.
These are the big e-commerce platforms that we can find online like Jumia that was closed a few months ago, Sellam Quick, Kerawa, etc.
Value-added also known as VAT is a tax on transactions which applies to goods and services. Traditionally, the goods are tangible and services are anything that is not the supply of goods. The place where the goods or services are sold as well as the VAT rate applied has to be determined.
E-commerce poses a great challenge for VAT as many countries still face a lot of problems in its implementation. To benefit from this sector, the lawmakers in Cameroon imposed VAT on e-commerce transactions. This means e-commerce platforms are liable to collect and pay VAT on online purchases by consumers in Cameroon.
Two major changes were brought up in the 2020 Finance Bill for Cameroon that will affect the e-commerce sector.
VAT will be added on
Implementing VAT on e-commerce transactions will pose a great challenge to tax officials. Many advanced countries are still to effectively implement VAT or sales tax on e-commerce platforms. Below are the modalities for collection and declaration according to the provisions of the 2020 Finance Law of Cameroon:
1. All VAT collected through the sale of goods or services on e-commerce platforms should be calculated, declared and paid into the Treasury by owners or operators of these platforms. This goes the same for all commissions received on sales in Cameroon through ecommerce platforms.
2. For this to be effective, owners of e-commerce platforms are supposed to register with the tax authorities. The law also states that the registration, declaration and payment of the VAT by e-commerce platforms can be done online.
3. For those who do not comply with the modalities, they shall be penalised as provided for in the Manual of Tax Procedures. Defaulters may also see the suspension of access to their various platforms from the Cameroonian territory.
For easy understanding, VAT is collected by the sellers (in this case e-commerce platforms) of goods and services at the different stages of the supply chain. This means, the manufacturer, distributor, retailer and end consumers all pay VAT when they make a purchase.
The standard VAT in Cameroon is 19.25% with a registration threshold at least 50 million francs yearly turnover. In this case, your business must be registered in the Actual Earnings Tax Regime (you can read a preview of the Cameroon tax administration) before you can become VAT liable. That notwithstanding, the tax authority may have to bypass this threshold and apply VAT rules to the following:
The provisions, however, makes mention of an implementing instrument which shall be put in place to lay down the procedures for its implementation.
The closure of Jumia Cameroon has drastically reduced the number of people that purchase online. This must have dwindled the already small percentage of sales made online on e-commerce platforms. Even though the percentage of online sales is small when compared with total retail, there is a stable growth in the purchase of goods and services online.
The government may be preparing itself to not lose a large amount of money for future tax revenues from transactions in these platforms. The growth in digital technology is inevitable hence, governments need to look for ways in which they will get their own share of the profits.
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This content has been prepared for information purposes only. It is not intended to provide, and should not be relied on for, tax, accounting or legal advice. You need to consult your own tax, accounting or legal advisors before engaging in any transaction.