Are you setting up a business in Cameroon or plan to do so in the nearest future? I will be sharing with you the most common types of business structures you can find in Cameroon and how the tax administration treats them. In a previous post, I shared with you the accounting obligations of a trader in Cameroon. In another, I also explained who a trader is in the context of the OHADA Uniform Act Relating to General Commercial Law.
Who is a trader?
It is a person whose regular occupation is carrying out commercial transactions. It can be a corporate body or natural person. We all know what commercial transactions are. Let’s keep aside the illegal activities and think straight. In Cameroon, under normal circumstances, no one has the right to take trading as a regular activity unless the person has the legal capacity to trade.
How do you get the legal capacity to trade?
You need to register as a trader in the Trade and Personal Property Credit Register (TPPCR). You can register as a natural person or commercial company or other corporate bodies.
Many people are not aware or just ignore the fact that they have to register their business within the first month of carrying out business operations. There are many out there who have been running their business for months, years illegally. You may not see the need now, but surely one day, it will catch-up with you. See 6 reasons why you have to register your business.
Most common business structures in Cameroon
If you plan setting up a business in Cameroon, you will need to have knowledge of the most common business structures that you can find. Below are a list of three most common business structures that you can find in Cameroon.
- Sole-proprietorship with less than 10 million francs turnover per year.
- Sole-proprietorship with more than 10 million francs turnover.
- Limited liability company (public or private)
I have seen people having businesses in the 1st and 2nd call themselves a ‘company’.
Those in the 2nd category have a business license and are registered in the TPPCR. However, that does not give them the status of a company. I am sure you know one of the most important disadvantages of a sole-proprietorship is that their liabilities are not limited. It means the assets of the owner are liable for debts or anything that happens to the business.
The 3rd category is what most business owners out there think they have (even if they are in the first two categories). Everyone says ”my company”. Just like the 2nd, this type of business structure is supposed to be registered in the TPPCR. There two types available – Public Limited Liability Company (Ltd) and Private Limited Liability Company (PLC). The former is what is called in French SARL and the latter is known as SA. Here, the liabilities or debts of the company are limited only to the assets of the business. It doesn’t touch the assets of the owners (shareholders).
How does the tax office treat them?
There are three main tax regimes in Cameroon for various business structures. It is very necessary for anybody who is setting up a business in Cameroon to know such. It includes:
- The flat rate tax regime for sole-proprietorship with a turnover of less than 10 million francs CFA.
- Simplified tax regime for sole-proprietorship and corporate bodies with turnover of above 10 million and below 50 million.
- The actual earnings tax regime for sole-proprietorship and legal persons with turnover of 50 million and above.
For sole-proprietorship with a yearly turnover of less than 10M, they pay what they call the “Discharge Tax” which is a flat rate tax – many call it in the English speaking regions ”Global Tax” and in French ”Impot Liberatoire”. The Internet is now a global market.
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The Discharge Tax
This is the most common business type we can find around. The small quarter shops, hairdressing salons, documentation centers, food hawkers, taxis, commercial bikes, buses, etc fall under this structure. They are divided into 4 categories (A,B,C&D). The category determines what they pay. The discharge tax is paid on a quarterly base with the first being the quarter in which your business commences.
The discharge tax is a local tax collected by the councils or on behalf of them by the tax department. Note that it is paid per establishment and per activity in the case where you have several activities. This case maybe different for hawkers, taxis and commercial bike riders. Your business is not penalized if you show proof of payment to one council area. Failure to display the tax ticket will call for a penalty of up to 5000frs.
Limited liability companies & sole-proprietorship with above 10M turnover
For the second and private limited liability company, they are all treated the same depending on their turnover. They all pay company tax. They are divided into two tax regimes – Simplified tax regime and Actual earnings tax regime. Only those in the latter are allowed to collect VAT.
Some characteristics
– Traders in both the simplified and actual earnings tax regimes are supposed to do a monthly tax declaration on or before the 15th of the month for the previous month.
– They have to file in their statistics and tax return (STR) at the end of the fiscal year. This should be done on the initiative of the taxpayer and not later than the March 15.
– They have to renew their business license on or before February 28 every year.
– Advance tax of 5% for businesses in the simplified tax regime and 2% for actual earnings tax regime is paid monthly on or before the 15th for the previous month. Note that an additional council tax (ACT)of 10% of the principal rate is also added. There are some exceptions though!
– The company tax rate in Cameroon is 30% in addition to the ACT of 10% that gives it 33%. This is calculated on profits.
I think this is enough for today. If you plan setting up a business in Cameroon, we are at you disposal. You can drop any questions in the comment section below or send us a mail. You can also check on https://openhubdigital.com for more tips on business and tax law in Cameroon. It’s free!
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