The Basis of Assessment for Personal Income Tax in Cameroon

In our previous post, we discussed the place of assessment for personal income tax. Now, let’s delve into how the tax itself is calculated, focusing on the basis of assessment.

What Is the Basis of Assessment?

The basis of assessment refers to the total net income that is considered for calculating your personal income tax. According to Section 29 of the tax code, it is the sum of each category of net income earned by the taxpayer within a fiscal year, after specific deductions.

Abatement for Wages and Salaries

For those earning wages or salaries, there’s a standard abatement of CFAF 500,000. This means the first CFAF 500,000 of your wages and salaries is not taxed. For example, if you earn CFAF 5,000,000 in a year, your taxable income would be CFAF 4,500,000 after the abatement.

Categories of Net Income

The personal income tax is assessed based on different categories of income, each with specific rules. Here’s what you need to know:

1. Salaries and Wages

Income from employment, including salaries, wages, allowances, and emoluments, is taxable. For instance, if you earn a monthly salary plus bonuses and allowances, all these components are included in your taxable income after the standard abatement.

2. Pensions and Life Annuities

Pensions and life annuities received are also liable to personal income tax. This includes payments from retirement funds and life insurance policies, and they are considered to be received in Cameroon for tax purposes. For example, if you receive a pension of CFAF 1,000,000 annually, this amount is included in your taxable income.

3. Profits from Agents and Representatives

Profits earned by insurance agents and travelling salesmen-representatives for activities carried out in Cameroon are taxable. For example, if you are a sales representative earning commissions on sales made in Cameroon, these earnings must be declared.

Calculating Taxable Income

To calculate your taxable income, sum up all your net income from the above categories for the fiscal year. Then, apply the fixed abatement of CFAF 500,000 to wages and salaries. Here’s a simple example:

  • Annual Salary: CFAF 4,000,000
  • Pension Income: CFAF 1,000,000
  • Net Income from Sales Commissions: CFAF 500,000

Total Income: CFAF 5,500,000
Taxable Income: CFAF 5,000,000 (after abatement of CFAF 500,000 for salary)

Disclaimer

This content is for informational purposes only and should not be taken as tax advice. For personalized assistance, consult a tax professional.

Next Steps

In our next post, we will cover the types of income that are exempt from personal income tax in Cameroon. Stay tuned!

For professional assistance in company registration, tax declaration, and more, visit OpenHub Consulting. We help start, run, and grow businesses in Cameroon with services like sales and marketing, bookkeeping, and accounting for small businesses.

Have questions? Drop them in the comments or check out our previous post here.


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