Democratic Republic of Congo: Global Tax Guide
Table of Contents
Legislation
Residence/Territorial Scope
Subject to the provisions of double tax treaties, income tax is levied on income from professional activities carried out in the Democratic Republic of the Congo, even if the company does not have its registered office, or residence there.
This applies to:
• profits of all industrial, commercial, artisanal, agricultural or real estate undertakings;
• miscellaneous income
• profits of liberal and other professions;
• sums paid as remuneration for the provision of services of any kind provided by natural or legal persons not established in the Democratic Republic of Congo.
Article 68 of Ordinance-Law No. 69/009 of 10 February 1969 on Schedule Income Taxes (‘the Income Tax Law’) states that foreign natural or legal persons who carry on an activity in the Democratic Republic of the Congo are taxable on the profits made by their permanent establishments or their fixed establishments located there.
Permanent Establishment
Article 69 of the Income Tax Law states that foreign natural or legal persons are considered to have a permanent establishment or a fixed establishment in the Democratic Republic of the Congo:
• when they have in the country a material installation such as a place of effective management, branches, factories, factories, workshops, agencies, stores, offices, laboratories, purchase or sale accounts, warehouses, leased buildings, a mine, an oil or gas well, a quarry or any other place for the exploration and extraction of natural resources, as well as any other fixed or permanent installation of a productive nature;
• in the absence of a physical installation, when they carry out a professional activity directly under their own company name for a period of at least six months;
• when they provide services, including consultancy services, through employees or other personnel engaged by an undertaking for that purpose, but only where activities of this nature continue for a period or periods totalling more than six months within any twelve-month period.
Under Article 69 bis of the Income Tax Law when a person, other than an agent with independent status, acts on behalf of a foreign enterprise, the foreign enterprise is considered to have a permanent or fixed establishment in the Democratic Republic of the Congo for all activities carried out by that person for that enterprise if the person:
• has powers in the Democratic Republic of Congo, which it usually exercises there, allowing it to conclude contracts on behalf of this company;
• not having this power, it usually keeps a stock of goods in the Democratic Republic of Congo from which it regularly takes goods for delivery on behalf of the foreign company.
Article 69 ter of the Income Tax Law states that an insurance undertaking of a foreign State is considered, except in the case of reinsurance, to have a permanent or fixed establishment in the Democratic Republic of the Congo if it collects premiums in the territory of the Democratic Republic of the Congo or insures risks incurred there through a person other than an agent enjoying an independent status.
An independent agent is covered in Article 69 ter B of the Income Tax Law. It provides that a foreign enterprise is not considered to have a permanent or fixed establishment in the Democratic Republic of the Congo merely because it carries on its activity in the Democratic Republic of the Congo through a broker, a general commission agent or any other agent enjoying an independent status, provided that such persons are acting in the ordinary course of their activity.
However, where the activities of the an agent are carried out exclusively or almost exclusively on behalf of that enterprise, and conditions are agreed or imposed between that enterprise and the agent in their commercial and financial relations which differ from those which might have been established between two independent enterprises, the agent is not an independent agent.
Entities Within Scope
Business Tax applies to both individuals, companies and other entities and is determined by the nature of the income, as opposed to the legal form of the person carrying out the activity.
Corporate Income Tax Rates
Article 83 of the Income Tax Law states that the standard rate of corporate income tax is 30%.
The rate of income tax is set at 14% on sums paid as remuneration for the provision of services of any kind provided by natural or legal persons not established in the Democratic Republic of Congo.
Minimum tax
Under Article 92 of the Income Tax Law, natural or legal persons whose taxable income consists, in whole or in part, of profits or profits and which are not subject to the tax regime for small enterprises are subject to a minimum tax set at 1% of the declared turnover, where the results are loss-making or profitable but likely to give rise to taxation lower than this amount.
Natural or legal persons in activity who do not achieve any turnover during a year are subject to the minimum tax at flat-rate of:
• 2,500,000 Congolese francs for large companies;
• 750,000 Congolese francs for medium-sized enterprises;
• 30,000 Congolese Francs for small companies.
Minimum tax is only payable for one-twelfth per month or fraction of a month if the taxpayer started his activities after January.
Natural or legal persons who have ceased their activities, without having been removed from the Trade and Movable Credit Register, are subject to the payment of a flat-rate minimum tax of:
• 500,000 Congolese francs for large companies;
• 250,000 Congolese francs for medium-sized enterprises;
• 30,000 Congolese Francs for small companies.
Taxable Income and Allowances
The profits of an industrial, commercial, artisanal, agricultural or real estate enterprise are those derived from all operations carried out by its establishments in the Democratic Republic of the Congo as well as any increases in the assets invested in the above-mentioned activities, including increases resulting from capital gains and losses.
Under Article 35 of the Income Tax Law, increases resulting from capital gains on real estate, tools, movable material, shareholdings and portfolio values are taxable to the extent that the realisation price exceeds the purchase or cost price, after deduction of the amount of depreciation already allowed for tax purposes. This also applies to immovable or movable property leased in whole or in part by companies.
Article 38 of the Income Tax Law provides that subject to reciprocity, the profits that an entity established in a foreign country derives from the operation of ships or aircraft owned or chartered by it and which call at the Democratic Republic of the Congo to load goods or passengers there are exempt.
Similarly under Article 38 bis income that a natural or legal person who is not resident or not established in the Democratic Republic of Congo receives as a result of subscribing to Treasury bills and bonds is also exempt.
Deductions
Under Article 29 of the Income Tax Law, taxable income is the net amount, i.e. on the basis of its gross amount minus only the business expenses incurred during the tax period with a view to acquiring and retaining the income and not have been incurred solely with a view to saving on business tax (2022 Finance Law amendment).
General
Under Article 43 of the Income Tax Law, the following are considered to be deductible business expenses:
• the rent actually paid and the rental charges relating to buildings or parts of buildings used for the exercise of the profession and any general costs resulting from their maintenance, lighting, etc.
• the general costs resulting from the maintenance of the equipment and movable objects assigned to the operation;
• salaries, wages, gratuities and allowances of employees and workers in the service of the holding, benefits in kind provided that they have been added to the remuneration;
• interest on capital borrowed from third parties and engaged in the operation and any similar charges, rents or royalties relating thereto.
Interest on mortgage claims on movable property rented out in whole or in part is not considered a deductible business expenses;
• transport, insurance, brokerage and commission costs.
Note that, expenses consisting of commissions, brokerage, commercial or other discounts, vacations, occasional or non-occasional fees, gratuities and other remuneration of any kind are not allowed as deductions unless they are justified by the exact indication of the name of the employee, name of the beneficiaries as well as the date of payments and the sums allocated to each of them.
• the amount of the profit distributed among the members of the company’s staff;
• the salaries granted in joint-stock companies to members of the General Council when it is justified that they correspond to normal salaries in relation to the nature of the real and permanent functions exercised in these companies in the Democratic Republic of Congo;
• the depreciation of fixed assets used for the exercise of the profession as well as those of fixed assets leased by a leasing institution approved by the Central Bank of Congo;
• professional charges relating to buildings and land rented out by real estate companies;
• costs of applied research and development, provided that they relate to clearly individualised projects (2022 Finance Law amendment).
Payments to non-residents
Article 43 bis A of the Income Tax Law provides that amounts paid by residents to a non-resident related party (either by way of a direct participation in its capital, or through the intermediary of shareholdings held by one or more other undertakings in the same group), as remuneration for a service rendered, are deductible if the following conditions are met:
• the reality of the service rendered is clearly demonstrated;
• the service in question cannot be rendered in the Democratic Republic of the Congo;
• the amount of the remuneration corresponds to the remuneration applied in identical transactions between independent undertakings.
Interest and royalties
Under Article 43 bis B of the Income Tax Law, interest, and other proceeds from bonds, receivables, deposits and guarantees, royalties from the assignment or grant of operating licences, patents for inventions, trade marks, manufacturing processes and formulas and other similar rights or remuneration for services paid for or payable by a natural or legal person domiciled in the Democratic Republic of the Congo to natural or legal persons who are domiciled or established in a foreign State or a territory and subject to a preferential tax regime, or a non-cooperative country, are deductible expenses only if the debtor provides proof that the expenses correspond to actual transactions and that they are not of an abnormal or exaggerated nature.
Persons are considered to be subject to a preferential tax regime if they are not taxable in that State or territory or if they are subject to taxes on profits which are more than half the amount of the tax on profits which they would have been liable in the Democratic Republic of the Congo.
States and territories that do not comply with international standards on transparency and exchange of information in the field of taxation, are considered to be non-cooperative.
Under Article 43 bis C of the Income Tax Law, interest paid abroad to partners or to any other person who is directly or indirectly in any relationship of interdependence with the company is deductible only if the repayment of the principal takes place within five years of the making available and the rate of such interest does not exceed the annual average of the effective rates charged by the credit institutions of the country in which the lending undertaking is established.
Under Article 43 bis D of the Income Tax Law (inserted by the 2023 Finance Law) interest paid to the partners or shareholders who have in law or are in fact the management of the entity are deductible only where the sums left or made available to the entity do not exceed, for the partners or shareholders as a whole, the amount of the paid-up share capital.
Depreciation
Article 43 ter A of the Income Tax Law provides that the amount of depreciation incurred during each financial year is calculated by means of a depreciation rate fixed according to the normal period of use determined according to the uses of each type of industry, trade or operation.
Under Article 43 ter B of the Income Tax Law, the cost price used as the basis for depreciation corresponds to the original value for which the fixed assets are to be recorded on the balance sheet.
This is defined as:
• the acquisition cost, i.e. the purchase price plus the ancillary costs necessary to put the asset in a state of use, for fixed assets acquired for consideration by the company;
• the market value, for fixed assets acquired free of charge;
• the value of the contribution, for fixed assets contributed to the business by third parties;
• the cost of acquiring the materials or supplies consumed, plus all direct or indirect production costs, excluding financial costs, for fixed assets created by the company.
Applied research and development costs must be amortised at the latest at the end of the third financial year following that in which they were incurred (Article 43 ter A-1 as inserted by the 2022 Finance Law).
Straight line depreciation is the standard method under Article 43 ter C of the Income Tax Law. However, companies subject to the actual tax regime can opt for the reducing balance method.
Under Article 43 ter E of the Income Tax Law, the reducing balance method can apply to:
• equipment and tools used for industrial manufacturing, processing, extraction or transport operations, with the exception of passenger vehicles;
• handling or lifting equipment, with the exception of metal trolleys made available to customers of the stores;
• installations producing steam, heat, energy and industrial cooling;
• security installations;
• facilities of a medico-social nature, with the exception of purely social institutions, of a sporting nature or solely devoted to the organisation of leisure activities;
• office machines, excluding all other office equipment and furniture;
• equipment and tools used for scientific or technical research operations;
• storage and storage facilities, excluding premises used for the exercise of the profession;
• the buildings and equipment of hotel companies, with the exception of capital goods of companies carrying out solely the activity of restaurant or café owner;
• agricultural machinery and livestock facilities, with the exception of buildings and land.
Article 43 ter F of the Income Tax Law, provides that the following are excluded from the reducing balance method:
• depreciable items whose normal useful life is less than four years or more than twenty years;
• patents, trademarks, goodwill, company, name and all other intangible assets.
Under Article 43 ter G of the Income Tax Law, the amount of the annual depreciation relating to items depreciable at the reducing balance rate is determined for the first annual period, from the date of commissioning, applying to the cost price a rate equal to the product of the straight-line depreciation rate normally applicable by the rate of the three coefficients: 2, 2.5 or 3 which corresponds to the normal period of use of the item according to whether this is four years respectively, five or six years, or more than six years.
Accelerated depreciation
Industrial enterprises which manufacture manufactured or semi-manufactured products and whose export turnover proportion is at least equal to 20% may opt for an exceptional depreciation system.
• Under Article 43 ter L of te Income Tax Law, the amount of the accelerated depreciation is:
• for the first year, from the date of commissioning or creation, applying a rate of 60% to the cost price of the element in question.
• for each of the following tax periods, by applying the reducing balance depreciation method to the residual value of the items.
Other deductible expenses
Article 44 of the Income Tax Law provides that payments made for a life annuity, a pension, health insurance or unemployment insurance are deductible. The sums deductible are calculated on the basis of the business income taxed for the previous year. They may not exceed 20% of the amount of the said income with a maximum of 180 zaire.
Non-deductible expenses
Article 46 of the Income Tax Law provides that the following are not deductible from taxable income:
• expenses, of a personal nature, such as in particular the maintenance of the household, the costs of instruction, leave and any other expenses not necessary for the exercise of the business;
• judicial or administrative fines of any nature;
• fees allocated in joint stock companies to the members of the General Council;
• expenses relating to assets leased, including the depreciation of the assets, except when they are leased by a leasing institution approved by the Central Bank of Congo;
• provisions made to meet losses, charges or depreciation of assets, with the exception of provisions for the reconstitution of mineral deposits, mandatory provisions for receivables constituted by credit and microfinance institutions in accordance with their specific regulations in force and certified by the statutory auditor, mandatory provisions made by insurance and reinsurance companies.
• the proportion of the following costs:
o 50% of the communication costs. However, internet costs are 100% deductible as long as the internet is used for exclusively professional purposes;
o 60% of the entertainment expenses.
• gifts, donations and subsidies. However, their payments to the Social Fund of the Republic, to research bodies, to works or bodies of public utility of a philanthropic and social nature and to sports associations, provided that they are located in the Democratic Republic of the Congo, are allowed as a deduction provided that they are justified and within the limit of 0.5% of the turnover for the financial year.
Provisions made by credit and finance institutions are deductible if they have been made in accordance with their purpose, if they are justified by the debtor’s situation and if the loss is clearly specified. Under no circumstances will a provision be allowed on debts whose compromise of recovery or payment has not been proven.
Head office/PE expenses
Article 72 of the Income Tax Law provides that general expenses and administrative costs of the head office, the principal establishment or the general management located abroad are not deductible from the profits made by permanent establishments in the Democratic Republic of the Congo.
Similarly expenses incurred abroad by a foreign natural or legal person are not allowed as a deduction from the profits made by permanent establishments in the Democratic Republic of Congo.
Tax Losses
Under Article 42 of the Income Tax Law, unutilised losses can be carried forward for offset against 60% of the taxable profit in future accounting periods.
The losses incurred in foreign permanent establishments are not available for offset against profits from operations in the Democratic Republic of the Congo.
Article 42 bis of the Income Tax Law includes anti-avoidance rules for the offset of loss carry-forwards when a company is sold or is subject to a reorganisation.
Withholding Tax
Article 13 of the Income Tax Law provides that a withholding tax applies to:
• income from shares having their registered office and principal administrative establishment in the Democratic Republic of the Congo. Under Article 14, this includes:
o dividends, interest, interest or founder’s shares and all other profits allocated in any capacity and in any form;
o total or partial repayments of the share capital, insofar as they include profits, capital gains or reserves previously incorporated into the share capital;
• income, including all interest and benefits, from capital borrowed for business purposes by companies or by natural persons who have their domicile, residence or establishment in the Democratic Republic of Congo;
• fees allocated, in joint stock companies, to the members of the General Council;
• income from shares charged to foreign civil or commercial share companies, having a permanent establishment in the Democratic Republic of Congo. This is fixed at a flat rate of 40% of the income earned;
• fees allocated in foreign joint-stock companies having a permanent establishment in the Democratic Republic of the Congo, to the members of the General Council (set at a flat rate of 10% of the income earned);
• the net amounts of the royalties. The net amount of royalties means their gross amount less the expenses or charges incurred with a view to their acquisition or preservation by the beneficiary. In the absence of evidence, the expenses or charges are fixed at a flat rate of 30% of the gross amount of the fees;
• income from Treasury bills and bonds.
Article 26 of the Income Tax Law provides that the withholding tax rate is 20%.
Transfer Pricing
Article 31 bis of the Income Tax Law provides that for the purposes of establishing the tax on profits payable by entities which are dependent on or have control over entities situated outside the Democratic Republic of the Congo, profits indirectly transferred to the latter either by increasing or reducing purchase or selling prices, or by sub-capitalization, or by any other means, are incorporated into taxable profits.
This also applies to entities that are dependent on an entity or group that also controls enterprises located outside the Democratic Republic of Congo.
Non-arm’s length relationships are deemed to exist between two companies:
o when one holds, directly or through an intermediary, the majority of the share capital of the other or in fact exercises decision-making power therein;
o when they are both placed, under the conditions defined above, under the control of the same undertaking.
The condition of dependency or control is not required when the transfer is made with entities established in a foreign State outside the Democratic Republic of the Congo whose tax regime is privileged, or in a non-cooperative country.
In addition to the increase or decrease in the purchase or sale prices referred to in paragraph1 above, which constitute abnormal management, the indirect transfer of profits may also be carried out by any other abnormal act of management, such as:
o excessive or unrequited royalty payments;
o waivers of revenue (sale at a reduced price, provision of free services, granting of interest-free loans or loans with low interest);
o write-offs of debts or commissions;
o debt forgiveness;
o benefits out of proportion to the service rendered.
Benefits provided to companies belonging to the same group may be regarded as forming part of normal management only if the entity granting them demonstrates the existence of an interest of its own. The general interest of the group alone is not sufficient to justify it.
In the absence of evidence provided either by the interested parties or by the Administration, the taxable profits will be determined, for each taxpayer, having regard to the normal profits of one or more similar taxpayers and taking into account, the capital invested, the turnover, the number of establishments, employees, and any other relevant information.
CFC Rules
None