The digital economy in Cameroon has a great potential to grow and enhance income, productivity and the social well-being of Cameroonians. In the past year, this sector has directly or indirectly created jobs, new entrepreneurs and opportunities for many, especially youths.
This is enough reason for the government to come in with new incentives to promote the digital economy in the 2021 Finance Law of Cameroon. Promoting the digital economy will foster new economic activities that will help create more jobs.
As one of the measures to improve the business climate in Cameroon, the government has introduced a proactive tax regime in order to promote innovative ICT start-ups. According to the new law, “Innovative start-ups in the field of information and communication technologies, grouped within management structures set up as approved management centers” shall benefit from specific tax advantages.
Below are some tax incentives:
This incubation phase must not exceed 5 years
Three things may happen during this phase:
i. If the start-up is sold, a reduced rate of 10% on the capital gain will be charged on sale;
ii. If it enters the operation phase, it shall benefit the following within a period of five (5) years:
– will be exempted from paying the business license tax;
– will be exempted from paying registration fees on incorporation, capital extension or increase;
– the start-up will be exempted from all tax and employer’s charges on salaries paid to workers. This exemption will exclude social security contributions;
– a reduced corporate tax rate of 15% will be applied – also see New Corporate Tax Rate to be Applied in Cameroon.
– a 50% rebate on the basis of assessment advance tax payment and the minimum company tax collection;
– a 5% income tax rate will be applied on movable capital, dividends paid to shareholders as well as interest paid to investors
– an income tax credit of 30% on research and innovation expenses with a ceiling level of one hundred (100) million francs CFA;
iii. After the fifth year of operation, the business will start paying the ordinary corporate tax. If the business has a turnover of less than or equal to XAF3,000,000,000, the newly included 28% corporate tax rate will be applied. Meanwhile, if it has more than XAF3,000,000,000, the 30% rate will be applied.
For a start-up to be eligible for this, they must be grouped together under in Approved Management Centers dedicated for start-ups. A ministerial circular will be issued to come up with specific obligations of the Approved Management Centers.
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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.