The Public Contracts Tax Regime in Cameroon’s 2025 Finance Law

The 2025 Finance Law introduces new provisions to the tax regime for public contracts, especially for those funded through external or joint resources. These changes clarify the responsibilities for paying taxes, particularly the Value Added Tax (VAT), and update the rules for ongoing and new projects. Here’s a breakdown of the key updates, their differences from the 2024 General Tax Code, and their practical implications.

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1. Key Changes Introduced in 2025

Public Contracts with External or Joint Financing

• New in 2025:
  1. Inclusive of all taxes: Public contracts with external or joint financing are to be concluded inclusive of all taxes (Section 115(1)).
  2. VAT responsibility:
     • VAT for such contracts is to be borne by the project owner.
     • If the financing agreement does not cover VAT, it will be paid from the counterpart funds in the project owner’s budget (Section 115(3)).
  3. Intermediate Goods and Services: The successful bidder is required to pay VAT on intermediate goods and services necessary for completing the project (Section 115(4)).
  4. VAT Recovery: VAT paid by the successful bidder is recoverable through deduction, offsetting, or refund based on procedures outlined by the Minister of Finance (Section 115(5)).
• 2024 Comparison:
  • The 2024 General Tax Code stipulated that taxes and duties for such contracts were charged to the budget of the successful bidder, without specific allocation for VAT responsibilities.
  • VAT recovery mechanisms were not explicitly detailed.

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2. Applicability of the New Tax Regime

• 2025 Law: The updated tax regime applies to:
  • All financing agreements entered into starting 1 January 2025 (Section 116(1)).
  • Ongoing projects, where VAT will continue to be governed by the provisions in force at the time the financing agreement was concluded (Section 116(2)).
• 2024 Law: Applied similar rules for projects starting from 1 January 2019, without the updated VAT provisions.

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3. Benefits of the 2025 Updates

1. Clarity on Tax Responsibilities:
   • Clearly defines that VAT is borne by the project owner or counterpart funds, reducing ambiguity for bidders.
   • Establishes recovery mechanisms for VAT, providing financial relief for successful bidders.
2. Encourages Investment:
   • The certainty in VAT allocation and recovery enhances transparency and makes public contracts more attractive for bidders.
3. Flexibility for Ongoing Projects:
   • Existing agreements are safeguarded by continuing under prior rules, ensuring stability in long-term project execution.

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4. Challenges of the 2025 Updates

1. Increased Complexity:
   • New provisions may increase administrative burdens, especially in managing VAT recovery for bidders.
2. Reliance on Counterpart Funds:
   • If counterpart funds are not adequately allocated, project execution could face delays due to VAT payment obligations.
3. Intermediate Goods VAT:
   • Successful bidders must manage cash flow to pay VAT upfront on intermediate goods and services, even if recoverable later.

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5. Practical Example

Scenario: A construction company wins a public contract with external financing of CFAF 1 billion:

• VAT on intermediate goods for project completion totals CFAF 190 million.
• The company pays VAT upfront but recovers it through offsetting after completion.

Under the 2025 provisions:

1. VAT on the project is borne by the project owner.
2. The company can recover the VAT paid on intermediate goods, reducing its financial burden.

Under the 2024 provisions:

• The company would have been liable for all taxes and duties, increasing its upfront costs.

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6. Read Also

• Key Updates in the 2025 Finance Law for Professional Income and Road Transport Operators
• Real Estate Income Tax in Cameroon: Key Updates in the 2025 Finance Law
• How the 2025 Finance Law Impacts Tax for Music Artists in Cameroon

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7. Get Help Navigating These Changes

OpenHub Consulting provides tailored Small Business Tax Management Services to help you navigate complex tax regimes and ensure compliance. Learn more here.

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Stay Updated

Download the 2024 General Tax Code of Cameroon for reference here and keep track of the latest updates.

Let us know if you have any questions or need support with public contract taxation!