Is it True the Tax Authorities in Cameroon Offer an Income Tax Exoneration for New Businesses?

Not again! After writing so much on business license and it’s exoneration for new enterprises, many still can’t understand. This latest person took the business license contribution for income tax exoneration. He wrote

“I want to move my business from a sole-proprietor[ship] to a limited liability company”(which is very possible and a topic for another day). “Tuesday will make my company one year”, he continued. “I guess I will start declaring my profit next month, right!?”

From there, I knew he has fallen into that trap of taking business license exoneration for tax exemption. Many people still can’t differentiate between the business payment and income tax payment. A previous post Does Cameroon Offer a 2-Year Tax Exemption for New Businesses and also the Business License tax in Cameroon will help clarify you on this.

Business License

In Cameroon, any corporate body or natural person carrying out a lucrative activity within a council area is subject to the business license contribution. In addition to the lucrative nature of the business, it has to be habitual. Habitual in the sense that it’s a repetitive exercise with profit-making goals. It should be noted that the business license contribution is determined by an enterprise’s annual turnover.

Businesses with a turnover of less than 10 million francs CFA are not liable to business license contributions in Cameroon. However, it should be noted that there are some activities carried out that whatever it’s nature or turnover realized, contribute to the business license. You can check out annex II of the law on local taxation in the General Tax Code of Cameroon which obliges those carrying out such activities to have a business license.

Download the 2019 General Tax Code of Cameroon for free

Associations and non-governmental organizations are non-liable

The activities of associations, common interest groups or non-governmental organizations are considered as non-lucrative and hence don’t need a business license to operate. They are considered non-lucrative activities because it is recognized as public utility by decree and also because access to what they offer is free of charge.

Business license exoneration in Cameroon

This is where the problem comes. The tax authorities in Cameroon gives an exoneration to new enterprises from business license contribution for the first two years of activities. This is where many people fall prey. Business license is an annual contribution collected by the tax office on behalf of the local council where the it is located. Even though it is calculated on the basis of the turnover (expected annual turnover in the case of a new enterprise), it is not income tax.

What is considered a “new enterprise”

According to the General Tax Code of Cameroon, a new enterprise means “that which is registered in the trade register during the year considered and who goes to the taxation service for the first registration”. This means if you register your business in the trade register and do not go to the taxation service for first registration the same year, you won’t benefit from the exoneration.

Also, it should be noted that those businesses that were under the discharge tax system and have been reclassified to the business license will not benefit from this exoneration. Businesses under the discharge tax system have turnovers of less than 10 million francs CFA. Same with enterprises that already have a tax identification number and are simply relocating or changing place for filing their tax returns. They are all not considered as “new enterprises”.

Things to note about the business license tax

• Business license has to be declared within ten (10) days following the start of the taxable activity even the case where the business is liable for exoneration
• The business license must be declared within the first two months of the year – before March 1^st. In the case of the temporary exoneration, it should be within the first two months following the end of the two years exoneration.
• To compute the exoneration, any year started counts for a full year. This means if your exoneration is issued on December 30, it expires on December 31 of same year and counts as a full year.

It is worth noting that failure to pay, late payment and non-display of the business license comes with sanctions and penalties. I will be sharing with you soon the penalties involved for not abiding by the law when it concerns the business license contributions.