New Corporate Tax Rate to be Applied in Cameroon
In order to promote growth and investment in Cameroon, a new provision has been added in the General Tax Code which allows domestic companies to pay a lower corporate tax rate of 28%.
The new corporate tax rate is limited to taxpayers with a turnover equal to or less than three billion francs CFA (XAF3 000 000 000). The application of the new 28% corporate tax rate will begin in the 2020 fiscal year that ended on December 31, 2020.
This means taxpayers that fall under this bracket will have to declare their statistics and tax returns for this fiscal year (2020) based on the new corporate tax rate. The deadline for taxpayers to declare their corporate tax returns to Cameroon is March 15 yearly for the previous year.
However, this does not stop the application of the old rate, which is 30%. This rate will only be applied to companies with a turnover above three billion francs CFA.
Corporate tax is a progressive and harmless way in which the government raises revenue for its public expenditure. To simplify this, the government has a share in all businesses entitled to corporate tax in the country. So each year, they participate in the sharing of profit and/or loss of these companies.
As from this 2020 fiscal year, the government will benefit 28% of the corporate profits from businesses with a turnover less than or equal to 3 billion francs CFA and 30% from businesses with more than 3 billion francs CFA turnover.
Higher corporate tax rates reduces the willingness to invest, lowers employment and the tax may even be shifted to workers and consumers in the form of lower wages and higher prices respectively.
The reduction in corporate tax therefore means the government wants to encourage new investment, increase productivity, wages and output. This will also bring about an increase in employment.
Economic studies have shown that corporate taxes are harmful to workers as they bear a part of the burden. However, a reduction will be of benefit to workers as it will boost investments which comes with increase productivity and wage growth.
An additional council tax rate of 10% on the principal will be added to the new corporate tax rate. This takes it to 30.8% including the additional council tax.
In order to boost and attract fresh investment in the information and communication technologies sector, the government has also provided for a reduced corporate tax rate for businesses in this sector subject to specific conditions. You will be getting updates on that in my next post. See Tax Incentives for Innovative Startups.
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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.