There is rarely a week that passes without someone asking me about taxes that companies are liable to pay after incorporation. I remember one reader comfortably told me his tax exemption period just expired. He wanted me to help him with a tax guide for limited liability companies, so he will know what to pay and when to pay.
Little did I know he was talking about the business license exemption for newly created companies. In Cameroon, you are exempted from business license contribution for at least one year when you incorporate a limited company or a sole proprietor business.
With such confusion, it is necessary share such information with you. This guide will help those who want to incorporate a company, who already have a company as well as those who come here for research.
The business license or what is commonly called Patente is a direct tax paid by corporate bodies or natural person carrying out economic, commercial or industrial activity within a council area. The business license tax knows not nationality – this means everyone pays it so long as you are carrying out a profitable venture within Cameroon.
It is assessed on the basis of annual turnover declared by the taxpayer. However, for the sale of petroleum products in petrol stations, the tax base is the margin determined by the marketers.
The business license tax is paid yearly before February 28.
In Cameroon, natural or corporate bodies carrying out taxable activities are assessed according to the following systems determined on the basis of their turnover:
Do forget to check out a review of the Cameroon tax system.
Every taxpayer that falls under the simplified and actual earnings tax system are liable to corporate tax. To be under this system, your annual turnover should be at least XAF10 million.
However, there are certain activities (logging companies, liberal professions, etc) that are liable to corporate tax even when they have a turnover lower than the above minimum.
The corporate tax rate of Cameroon is 30% plus an additional council tax of 10% of the principal. What the taxpayer actually pays is 33% of profits made from January 1 to December 31.
An advance payment of the company tax includes a minimum of 5.5% or 2.2% of turnover for natural persons or corporate bodies in the simplified and actual earnings tax system respectively. This amounts are paid latest the 15th of every month. The difference between the monthly payment and the 33% is paid before March 15 annually.
The personal income tax is a direct tax paid by corporate or natural persons that is assessed on the basis of income earned by those they employ. Limited liability companies are liable to income tax on salaries, wages, pensions and life annuities of their employees.
The assessment is based on the gross amount of salaries, wages, allowances, emoluments, life annuities, pensions and all other benefits in cash or kind granted to the employee.
Limited liability companies that have employees are obliged to pay the personal income tax before the 15th of every month.
The value-added tax (VAT) is an indirect tax placed on a product or service whenever value is added at each stage of the supply chain. It is levied on corporate bodies or natural persons, regional and local authorities as well as all government bodies that carry out taxable transactions that falls within the scope of this tax.
In Cameroon, the value-added tax is levied only on natural persons and corporate bodies that are assessed under the actual earnings tax system. It is based on the supply of goods or services within the national territory.
There are two rates for value-added tax in Cameroon – the general rate and zero rate. The general rate is 17.5% while the zero rate is 0%. The rates apply to both imported and locally produced goods or services. See how to calculate the value-added tax.
The additional council tax of 10% is included in the general rate applied on goods and/or services produce locally as well as imports. This brings the VAT rate for Cameroon to 19.25%.
The value-added tax is paid monthly before the 15th.
Just like the value-added tax, an excise duty is an indirect tax. Unlike the VAT, it is a tax levied at the level of production of a good and not at sale. The excise duty rates in Cameroon are:
The rates apply to both imported and locally produced goods or services. The excise duty is also paid monthly before the 15th. The 2020 Finance Law imposed high excise duty on skin bleaching products imported or produced locally.
In order to stay away from trouble with the tax authorities,
– make sure you are up-to-date with your taxes
– ensure your accounting books are in order to protect your business
– take note of your expenses because some are deductible
– ensure you separate your personal expenses from your business expenses
Further reading: How to File Income Taxes for Small Businesses in Cameroon
I will be updating this tax guide for limited liability companies in Cameroon, so make sure you check again soon for updates. You can subscribe for our newsletter so as to get updates on time.
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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.