Capital Gains Tax in Cameroon
Capital gain occurs when the sales price of a capital asset is more than the purchase price. To be more precise, it is the profit made when a corporate body or a natural person sells its capital assets. The capital assets may include real estate, bonds, securities or stocks.
Capital gains is usually associated with stocks or funds because of the volatile nature of their price. However, capital gain can be gotten from any security whose sales price is higher than the purchase price.
If capital gains or losses are realized when an asset is sold, it automatically triggers a taxable event. On the contrary, unrealized capital gains or losses don’t trigger a taxable event. It is sometimes referred to as paper gains or losses. The unrealized gains or losses are reflected in the corporate body’s investment value as an increase or a decrease.
In Cameroon, income realized from property which includes capital gains is a taxable income. This means capital gains realized from both built-on and non-build-on property paid for or acquired free of charge are taxable [GTC Section 46 (2)].
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They are included in the category of income from property in the case where they have not been included in the profit of the following activities: handicraft, commercial, industrial, agricultural undertaking or a non-commercial profession.
According to the 2019 Finance Law of Cameroon, the income from movable or capital gains flat-rate tax has been reduced from 10% to 5% [Section 17 (4) of the General Tax Code (GTC)]. It should be noted that the capital gains may be realized both on built or non-build-on property paid for or acquired free of charge [GTC Section 46 (2)].
A notary public is authorized to deduct the 5% flat rate for the vendor of the property and pay prior to the registration formality. A special form for that is given “by the tax authority or through electronic tax return” [GTC Section 90].
The previous finance laws in Cameroon have usually provided for exemptions in capital gains tax on income from movable capital. Such tax exemptions are mostly to provide incentives for entrepreneurship. It could also be used as compensation for the effects of inflation or even to avoid double taxation.
However, the 2019 Finance Law has deleted the flat rate real estate capital gain tax of 5% for transactions on property that are located in enclave zones which was subject to an official price list. This means that the new flat rate of 5% is levied not taking into consideration whether the said property is found in an enclave zone or not.
It should be noted that the new law does not precise the type of assets or property to be taken into consideration. This will cause a technical problem in its application since it doesn’t list the real estate transactions concerned. In a nutshell, it is necessary for the legislator to provide a criteria for determining the property. It doesn’t also provide a criteria for subjecting the transactions with regards to the date the real estate transaction took place and the date the of submission of the deed for registration formalities. The law states that the deed should be registered 15 days after payment or beginning of payment in the case of many installments.
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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.