Central African Republic: Global Tax Guide
Table of Contents
Legislation
Residence/Territorial Scope
Article 123 of the General Tax Code provides that subject to the subject to the provisions of a double tax treaty, companies are subject to corporation tax on the profits from operating in the Central African Republic.
Entities Within Scope
Article 121 of the General Tax Code provides that the following entities are subject to corporation tax:
• capital companies or similar companies regardless of their purpose, public limited companies, limited liability companies and single-member limited liability companies;
• cooperative societies and their unions;
• limited partnerships and joint ventures.
• public establishments, State bodies enjoying financial autonomy, and all other legal persons engaged in operations or operations of a profit-making nature;
• civil partnerships that engage in a commercial, industrial, artisanal or agricultural operations
• de facto partnerships;
• all other legal persons engaged in operations or operations of a profit-making nature.
The following can optionally choose to be subject to corporation tax:
• general partnerships and limited partnerships;
• joint ventures
• financial syndicates;
• civil partnerships.
Corporate Income Tax Rates
Under Article 133 of the General Tax Code, the rate of corporation tax is 30% (reduced to 20% for agricultural activities).
Minimum Tax
Article 133 Bis of the General Tax Code applies a minimum tax based on the total turnover of entities (rounded down to the nearest thousand francs).
Total turnover is the gross turnover achieved on all operations falling within the scope of the company’s activities. The turnover to be taken into account is determined excluding tax and includes:
• sales of goods;
• miscellaneous products and profits;
• interest and dividends.
However, with respect to:
• intermediaries who receive gross commissions, the rates of which are set by laws and regulations, the total turnover is the amount of commissions received;
• taxpayers who carry out both agricultural and other activities, the turnover achieved for each of the activities will be subject separately to the minimum income tax.
The rates of the minimum corporate income tax are set as follows:
• 0.3% for agricultural activities
• 1.85% for other activities.
In all cases, the minimum amount of corporate income tax payable is:
• 300,000 CFA francs for agricultural activities;
• 1,850,000 CFA francs for the others.
Under Article 133. Bis-1 of the General Tax Code, insurance companies that carry out their activities in a pool with other companies that limit them to co-insurance operations in the branches of maritime or river transport and fire, and that do not achieve an annual turnover of more than 3,000,000 CFA francs, are exempt from the minimum tax.
Taxable Income and Allowances
Article 124 of the General Tax Code provides taxable profit is the net profit determined on the basis of the overall results of operations of all kinds carried out by companies during the accounting period.
Under Article 125 of the General Tax Code net profit is made up of the difference between the values of the net assets at the end and at the beginning of the period the results of which are to be used as a basis for tax, less any additional contributions and increased by the deductions made during this period by the partners.
Article 128 of the General Tax Code provides that stocks is valued at cost. If the value is lower than the cost price, the company can make a provision for the depreciation of stocks.
Raw materials and goods that have been prepaid for but not received are included in the inventory.
Work in progress is valued at cost price excluding costs and financial expenses, under Article128 bis of the General Tax Code.
Capital gains on disposal of fixed assets
Under Article 129 of the General Tax Code, capital gains arising from the sale of fixed assets during the course of operations are not included in the taxable profit for the financial year in which they were realised, if the taxpayer enters them in a special “capital gains to be reused” account and undertakes to reinvest in new fixed assets in his business, before the expiry of a period of three years from the end of that financial year, a sum equal to the amount of these capital gains added to the cost price of the items sold.
Under Article 129 bis 1 of the General Tax Code, in the event of total or partial transfer or cessation net capital gains are taxed:
• at half of their amount when the transfer, transfer or cessation takes place less than five years after the creation or purchase of the business;
• for a third of their amount otherwise.
Article 129 bis 2 of the General Tax Code provides that capital gains other than those realised on goods resulting from the free allocation of shares, profit shares, company shares or bonds following mergers, demergers or partial contributions of assets, are exempt from corporation tax at the time of their realisation, provided that the transactions benefit legal persons liable to corporation tax and having their registered office in a CEMAC State.
Parent/Subsidiary Regime
Under Article 143 of the General Tax Code, when a joint-stock company or limited liability company owns either registered shares in a joint-stock company or shares in a limited liability company, the net income from the shares is only taxed on 10% of the amount of total income from the shares.
This applies providing:
• the shares or interest units owned by the parent company represent at least 50% of the capital of the subsidiary company;
• parent companies and their subsidiaries have their registered office in the CEMAC Community;
• the shares or interest units allocated to the issue have always remained registered in the name of the participating company and that the latter undertakes to keep them for at least two consecutive years in registered form.
Headquarters Regime
Article 144 of the General Tax Code provides for a headquarters regime. Headquarters set up in the form of joint-stock companies or branches, which provide services corresponding to directing, management, coordination or control functions exclusively to companies of the group from which they originate, are subject to corporation tax on the basis of a flat-rate calculation on the basis of all their expenditure according to the rates provided for in the Finance Law.
The sole purpose of the headquarters must be the development and centralization, for the benefit of the companies of the group, the provision of information, advertising, technical, scientific and technological research, the centralization of financial and foreign exchange operations, relations with national and international authorities, as well as any other activities or provision of services, provided that these remain preparatory or auxiliary in nature.
Deductions
Under Article 126 of the General Tax Code, the net taxable profit is determined after the deduction of all expenses directly required by the exercise of the taxable activity in the Central African Republic.
Personnel costs
Article 126 bis1 of the General Tax Code provides that remuneration provided to an employee is allowed as a deduction only to the extent that it corresponds to actual work and is not exaggerated. This provision applies to all direct or indirect remuneration, including allowances, benefits in kind and reimbursement of expenses.
Under Article 126 bis 5 of the General Tax Code compulsory social contributions paid abroad for the purpose of building up a pension are deductible up to a limit of 15% of the basic salary and to the exclusion of other social contributions.
Head office expenses
The General Tax Code provides for a deduction for general head office expenses for the share falling to the operations carried out in a CEMAC State, costs of studies, technical assistance, financial or accounting; commissions and fees; interest, arrears and other proceeds from bonds, receivables, deposits and guarantees.
The deduction is limited to 20% of the taxable profit before deduction of the expenses in question.
Royalties
Royalties for the use of patents, licences, trade marks, designs, manufacturing processes, models and other similar rights are allowed as deductible expenses when paid to a natural or legal person outside the CEMAC Community only if the debtor proves that they correspond to actual transactions, that they are not of an abnormal nature and that they are not exaggerated.
The deduction is limited to 20% of the taxable profit before deduction of the expenses in question.
Under Article 126 bis 12 of the General Tax Code, royalties for the assignment or concession of patents, trademarks, designs and other similar titles are deductible only if the debtor provides proof that they are still valid.
Commissions
Article 126a 13 of the General Tax Code provides that commissions or brokerage payments on goods purchased on behalf of undertakings situated in a CEMAC Member State are allowed as a deduction from taxable profits up to a limit of 5% of the amount of purchases made by central purchasing bodies or intermediaries.
Rental expenses
Article 126 bis 14 of the General Tax Code provides that rental payments on real property leases are deductible providing this does not exceed an arms length rate.
Insurance premiums
Article 126 bis 17 of the General Tax Code provides that the following are deductible from taxable profits:
• Insurance premiums contracted for the benefit of the company to cover the risks of which the realization leads directly and by itself to a decrease in the net assets;
• insurance premiums constituting an operating expense in themselves;
• health insurance premiums paid to local insurance companies for the benefit of staff up to a limit of 5% of the payroll of the staff actually insured, when reimbursements of expenses of this nature for the benefit of the same persons do not appear in the deductible expenses;
• premiums paid by the company to insurance companies in connection with the contracts relating to the supplementary pension of employees;
• premiums ceded in reinsurance in CIMA member states;
• loans paid to local insurance companies and companies in respect of contracts concluded for the provision of end-of-career, death and disability benefits, provided that the said contracts concern all staff or at least all or all categories of staff.
The deduction of these contributions is only allowed on condition that the insurance contract is of a general nature, i.e. concerns all the staff or one or more specific categories of them.
Gifts, donations, subsidies and debt write-offs
Article 126 bis 18 of the General Tax Code provides that in general, gifts and donations do not are not deductible expenses.
However, payments to works or organizations of general interest, of a philanthropic, social or family nature, provided that they are located in the Central African Republic, are allowed as a deduction up to a limit of 0.5% of turnover as long as they are justified.
Under Article 126 bis 19 of the General Tax Code,debt forgiveness and debt write-offs between parent companies and subsidiaries shall be subject to a special regime under the conditions laid down by the Minister of Finance.
Non-deductible expenses
Article 126 bis 20 of the General Tax Code provides that following are excluded from deductible expenses:
• remuneration granted in any capacity whatsoever to the sole director of a public limited company;
• sums paid to the directors or executives of a company by way of allowance for employment or service expenses and which do not correspond to an actual burden of the function performed; For the purposes of this provision, the directors in partnerships and joint ventures are understood to mean the general partners and members of the said companies;
• expenses of any kind relating to the exercise of hunting, sport fishing, the use of pleasure boats, tourist aircraft or pleasure residences, whether in the form of flat-rate allowances or reimbursement of expenses.
Finance expenses
Under Article 126 bis 21 of the General Tax Code, interest, commissions and other bank charges are deductible as long as they correspond to actual expenses and are supported by supporting documents.
Depreciation
Article 126 bis 23 of the General Tax Code provides that depreciation is based on the expected useful economic life of the asset and is given at the rates specified in the General Tax Code.
The depreciation rates are:
Buildings
• Constructions made of sustainable materials: 5%
• Commercial and industrial buildings, garages, sheds, workshops: 5%
• Processing cabins: 5 %
• Waterfall facilities, dam: 5%
• Factories: 5%
• Dwelling houses: 5 % lime kilns, plaster: 10%
• Electric ovens: 10%
• Removable or temporary buildings: 20%
Hardware and Tooling
• Steam boiler: 5%
• Cement tank: 5%
• Paper and cardboard machines: 5%
• Hydraulic presses: 5%
• Petroleum Refining Equipment (Reforming, Visbreking, Distillation Equipment, etc.): 10%
• Presses, compressors: 10%
• Oil tanks: 10%
• Heavy power transformers: 10%
• Turbines and steam engines: 10%
• mechanical mixers: 10%
• mixers: 10%
• Excavators: 10%
• Foudres, brewery, distillation – cafes – restaurants or winemaking vats: 10%
• Purification and sorting equipment: 10%
• Laminating, dewatering devices: 10%
• Light machine tools, lathes, mortising machines, planers, drills: 15%
• Electric power transmission lines 15%/20%
• wood-cutting appliances: 20%
• Factory equipment including machine tools: 20%
• Pneumatic hammers: 20%
• Hole punches: 20%
• wood-cutting appliances: 20%
• Fixed Factory Material: 33.33%
• Small tools (hand tools) and computer software: 100%
Transportation Equipment
• Large cranes: 5%
• transport wagons: 5 %
• Railways: 5%
• Lifting vehicles (port handling equipment): 20%
• Naval and air equipment: 20%
• Transport kegs (beer and wine): 20%
• Metal transport drums: 20%
• containers: 20%
• Light automotive equipment used in cities: 20 %
• Tractors: 20%
• carts: 25%
• tractors used by foresters: 33.33 %
• Light car rental equipment without driver or driving school: 33.33%
• Heavy or bush automotive equipment: 33.33%
Furniture, layout and installation
• Layouts, fittings, installations: 10%
• Office furniture or other: 10%
• Office Equipment: 15%
• Computer equipment: 25%
• Reprographic material: 33.33%
Hotels – café – restaurants
• Cooks: 10%
• Silverware: 20%
• Decorative Fittings: 20%
• Carpets, curtains, drapes: 20%
• Refrigerators, air conditioners: 20%
• Kitchen stoves: 20%
• Lingerie: 33.33%
• Glassware, crockery, kitchen utensils: 50%
Plastics
• Compression presses: 10%
• Transfer presses: 10%
• Preheaters or ovens: 20%
• lozenges: 20%
• Injection moulding machines: 20%
• gelling machines, socking machines: 20%
• vacuum forming machines: 20%
• metallizing machines: 20%
• Welding and cutting machines: 20%
Chemically Affected Equipment
• Washing machines, diffusers: 20%
• Product recovery devices: 20%
• Laundry appliances: 20%
• Cooking appliances: 20%
Special equipment
• Fishing Equipment: 15%
• Fishing vessel: 15%
Under Article 126 bis 26 of the General Tax Code, depreciation duly recorded but deemed to be deferred in a period of loss, is deductible in future periods (with no time limit).
Heavy equipment and tools may be subject to accelerated depreciation under Article 126 bis 27 of the General Tax Code if they meet the following conditions:
• be acquired in new condition for a value equal to an amount to be determined by an order of the Minister in charge of finance;
• be usable for a period of more than three years and be subject to intensive use;
• be intended for industrial manufacturing, processing, transport and handling operations.
Provisions
Article 126 bis 28 of the General Tax Code provides that the following are deductible:
• provisions made to meet either losses or depreciation of an asset or expenses which, if they had occurred during the financial year, would normally have been deductible from taxable profits for that year;
• clearly specified losses or expenses;
• losses or charges that current events make probable.
The deduction is subject to the actual recognition of the provisions in the records of the financial year and their entry in the statement of provisions.
Under Article 126 bis 30 of the General Tax Code provisions for bad debts may normally be deducted from the results of the financial year in which their loss is certain and definitive, or from the financial year in which their default is justified by the debtors’ situation.
Provisions made on outstanding receivables and doubtful commitments by credit institutions are tax deductible if they have been constituted in accordance with their purpose, if they are justified by the debtor’s situation and if the loss is clearly specified.
Tax Losses
Article 130 of the General Tax Code provides that losses not utilised in the current fiscal year can be carried forward for offset for up to 3 years following the loss-making year.
Withholding Tax
Article 166 bis of the General Tax Code provides for a general withholding tax on the income of natural or legal persons in respect of industrial, commercial and non-commercial profits.
The withholding tax is payable on:
• goods imported by taxpayers subject to the profit of the real regime and intended for resale, with the exception of those placed under the suspensive regime of goods manifested in transit and those in transhipment;
• domestic commercial purchases from importers, producers and sellers made for consideration for commercial purposes or presumed to be so by a taxable person under the simplified or normal tax regime;
• all payments made to service providers and suppliers of goods by state agencies, public and semi-public enterprises;
• all payments made to service providers and suppliers of goods by private companies subject to tax under the simplified real tax regime or the normal real tax regime or by Non-Governmental Organizations
• all rent payments.
The rate of withholding tax is 3% applicable to local purchases and services, rents, imports, as well as wholesalers of beverages, tobacco and cigarettes.
However, for income from movable capital, the withholding tax is levied at the rate of 15% of the gross income distributed.
A 15% withholding tax also applies to remuneration for the provision of services abroad.
A withholding tax at the rate of 15% also applies to
• Rental payments
• Specified services including:
o repairs;
o transport of people and goods, transit and handling;
o studies, research and expert assessments;
o the provision of water, electricity, gas and telephone;
o the services of liberal professions.
Certain transactions that involve the transfer of property are considered to be the provision of services, such as:
• supplies of tangible movable property (patents, trademarks, etc.);
• on-trade sales of food or beverages;
• real estate work carried out by the various trades involved in the construction, maintenance and repair of buildings and real estate works, public works, metal construction work, demolition, ancillary or preliminary work to real estate work, including externally financed public contracts;
• contract work;
• leasing and leasing operations.
Certain payments are specifically exempt from withholding tax, under Art. 166 bis 6 of the General Tax Code. This includes:
• water and electricity distribution operations carried out by companies;
• water and electricity sales;
• companies approved by the national investment charter;
• companies in the process of being created;
• rents with a monthly amount of less than 50,000 CFA francs per month;
• the import and sale of hydrocarbons domestically;
• the import and sale of medicines, medical equipment and consumables and veterinary medicines by pharmacists with a valid tax clearance;
• the import and purchase of goods and equipment with an acquisition value of less than or equal to CFA 200,000 CFA francs intended exclusively for the company’s investments;
• imports, purchases and local services made by taxpayers subject to the normal real profit tax regime, who do not owe any tax in respect of previous and previous financial years and who are on a list drawn up half-yearly by order of the Minister in charge of finance.
Transfer Pricing
Article 131 of the General Tax Code provides that for the purposes of establishing corporate income tax payable by companies that are dependent on or have control of companies located outside the Central African Republic, profits indirectly transferred to the latter either by increasing or decreasing purchase or sale prices, or by thin capitalization, or by any other means, are incorporated into taxable profits.
A non-arm’s length is deemed to exist between two entities when:
• one holds, directly or through an intermediary, the majority of the share capital of the other, or in fact exercises the decision-making power;
• they are both placed, under the conditions set out in point a, under the control of the same company.
The condition of dependency or control is not required where the transfer is made with entities established in a foreign State or territory with a privileged tax regime, or in a non-cooperative country.
Deductible expenses, paid or due by Central African companies to natural or legal persons who are domiciled or resident in a country with a preferential tax regime, are deductible only if the debtor provides proof that these expenses are actual transactions and are not exaggerated.
A company is deemed to be domiciled or resident in a State with a preferential tax regime if it is not taxable in that State or if it is subject to a tax on profits or income in that State which is more than half the amount of the corporation tax for in the Central African Republic.
Amounts paid or due to natural or legal persons domiciled or resident in a non-cooperative State or territory shall not be allowed a a tax deductible expense.
States and territories that do not comply with international standards on transparency and exchange of information in the field of taxation, so as to promote the administrative assistance necessary for the application of Central African tax legislation, are considered to be non-cooperative.
The list of these states is the one set by the OECD, the UN or the CEMAC.
CFC Rules
None