Togo: Global Tax Guide
Table of Contents
Legislation
Residence/Territorial Scope
Article 95 of the General Tax Code provides that corporate income tax is payable only on profits made by companies operating in Togo as well as those whose taxation is attributed to Togo by a double tax treaty.
The following are deemed to be taxable in Togo:
• companies and other entities resident in Togo, i.e. whose registered office, place of effective management or electronic platform is located in Togo;
• companies and other non-resident entities with a permanent establishment in Togo or operating an electronic platform generating income from Togolese sources [inserted by the 2024 Amended Finance Law], subject to the provisions of double tax treaties.
The carrying on of a business is defined as the habitual exercise of a business activity that may either be carried out in the context of a permanent establishment or results from the carrying out of transactions forming a complete business cycle.
Permanent Establishment
Article 95(2) of the General Tax Code defines a permanent establishment as a fixed place of business through which the enterprise carries out all or part of its activity.
In particular, permanent establishments include:
• a place of management or operation;
• a branch office;
• a sales store;
• a warehouse;
• an office;
• a factory;
• a workshop;
• a mine, quarry or other natural resource extraction site;
• a construction project, an assembly or installation project or supervisory activities related to this project, but only if this construction project, project or activities last more than 6 months.
A permanent establishment is not considered to exist if:
• facilities are used solely for the purpose of storing or displaying goods belonging to the company;
• goods belonging to the company are stored for the sole purpose of storage or display;
• goods belonging to the company are stored for the sole purpose of processing by another company;
• a fixed business facility is used for advertising purposes only;
• a fixed place of business is used for the sole purpose of carrying out any other activity of a preparatory or ancillary nature for the undertaking.
A person acting in Togo on behalf of an enterprise not resident in Togo, other than an agent enjoying an independent status, is considered to be a permanent establishment:
• if it has general powers in Togo that it usually exercises there, allowing it to negotiate and conclude contracts in the name or on behalf of the company; or
• if it habitually maintains a stock of goods in Togo from which it regularly takes goods for delivery in the name or on behalf of the company.
An insurance or reinsurance undertaking not resident in Togo is considered to have a permanent establishment in Togo if it receives premiums or insures risks incurred there through an employee or through a representative which is not an agent enjoying an independent status.
A non-resident enterprise in Togo is not considered to have a permanent establishment in Togo solely because of the purchase of goods on behalf of the enterprise.
A non-resident company in Togo is not considered to have a permanent establishment in Togo merely because it carries out its activity there through a broker, a commission agent or any other intermediary enjoying an independent status, provided that these persons act in the ordinary course of their activity.
Entities Within Scope
Article 92 of the General Tax Code provides that the following are liable to corporation tax, regardless of their purpose:
• public limited companies,
• single-member public limited companies,
• simplified joint stock companies,
• limited liability companies,
• single-member limited liability companies when the sole shareholder is a legal person.
The following are also subject to corporation tax:
• general partnerships, limited partnerships, joint ventures,
• de facto companies, economic interest groupings ;
• cooperative societies, groupings and their unions and federations, as well as confederations of cooperative societies and groupings; whatever their activity;
• legal persons and companies engaged in intermediary operations for the purchase or sale of real estate or business assets or which usually buy the same assets in their own name with a view to reselling them, and credit foncier companies;
• legal persons and companies that subdivide and sell land belonging to them;
• legal persons and companies that rent out a commercial or industrial establishment equipped with the furniture and equipment necessary for its operation, whether or not the rental includes all or part of the intangible elements of the business or industry.
• insurance and reinsurance companies, whatever their form;
• banks and financial institutions;
• renters of furnished apartments;
• public establishments, State bodies or decentralised authorities which enjoy financial autonomy and which engage in an activity of an industrial or commercial nature;
• all other legal persons engaged in operations or operations of a profit-making nature, including companies and other non-resident entities with a permanent establishment in Togo.
Note that partners or members of general partnerships, limited partnerships, joint ventures, de facto partnerships, economic interest groupings, professional civil companies, real estate companies and the sole natural person shareholder of a limited liability company can opt for the income tax regime.
Corporate Income Tax Rates
Article 113 of the General Tax Code provides that the corporate income tax rate is set at 27% of taxable profit.
For the calculation of the tax, any fraction of the taxable profit less than 1,000 CFA francs is disregarded.
Taxable Income and Allowances
Article 97 of the General Tax Code provides that Taxable profit is the net profit determined on the basis of the overall results of operations of all kinds carried out by companies, including, in particular, ancillary income, financial income, capital gains on the sale of any asset either in progress or at the end of its operating period, and capital gains on free revaluation of balance sheets.
The 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 serve as the basis for tax, less any additional contributions and increased by the deductions made during this period by the partner(s). Net assets are defined as the excess of asset values over total liabilities from third-party receivables, depreciation and justified provisions.
Note that income corresponding to receivables from customers or payments received in advance of payment must be linked to the financial year in which the goods are delivered for sales or similar transactions and the completion of services for the supply of services.
However, this is amended:
• for continuous services remunerated in particular by interest or rent and for discontinuous services, but with successive instalments spread over several financial years as and when the performance is carried out;
• for works of enterprise giving rise to complete or partial acceptance, on the date of the acceptance, even if it is only provisional or made with reservations, or at the making of the project owner available if it is earlier.
Stock is valued at the cost price or at the rate on the closing day of the financial year if this price is lower than the cost price.
Work in progress is valued at cost price.
Assets and liabilities in foreign currencies are valued at the end of each financial year following the last officially known rate. The profit and loss resulting from this valuation must be linked to the company’s net results on a year-by-year basis as exceptional profits and losses.
Article 107 of the General Tax Code provides for a Parent-Subsidiary regime so that the gross income from the shareholdings of a parent company in the capital of a subsidiary company is deducted from the total net profit after deduction of a representative share of costs and charges. This share is fixed uniformly at 5% of the total income from the holdings but it may not exceed, for each tax period, the total amount of costs and charges of any kind incurred by the participating company during that period.
The following conditions must be met:
• the parent company must be in the form of a joint-stock company or limited liability company with its registered office in Togo;
• the subsidiary company must take one of the above forms and its registered office may be located in Togo or in a State of the Economic Community of West African States (ECOWAS);
• the equity securities held by the parent company must be in registered form or be deposited in an establishment approved by the Tax Administration and represent at least 10% of the capital of the subsidiary company; however, no minimum percentage is required for securities received as consideration for partial contributions eligible for the tax regime for mergers;
• the equity securities must have been subscribed to at the time of issue. Otherwise, the participating legal entity must have made a written commitment to keep them for a period of 2 years. The letter bearing this commitment must be annexed to the income statement; and
• the securities must be fully owned by the parent company.
Mergers of companies and similar transactions
Article 108 of the General Tax Code provides that capital gains other than those realized on goods, resulting from the free allocation of shares or company shares following mergers, demergers, partial contribution of assets by joint stock companies or limited liability companies are exempt from corporate income tax.
The same regime is applicable when a public limited company, or a company limited by shares or limited liability, contributes all of its assets to 2 or more companies constituted for this purpose in one of these forms, provided that:
• The beneficiary companies must all be of Togolese nationality or of a nationality of one of the Member States of the Economic Community of West African States (ECOWAS); and
• The contribution has been previously approved by the Minister of Finance.
Under Article 110 of the General Tax Code, if a company whose registered office is located outside Togo has disposed of one or more real estate properties located in Togo or grants the use of them free of charge or in return for a rent lower than the actual rental value, it is subject to corporate income tax on a basis that may not be less than 3 times the actual rental value of this or these properties. When the occupant has his tax residence in Togo, he is jointly and severally liable for the payment of this tax.
However, this does not apply to non-profit organizations.
Deductions
Article 98 of the General Tax Code provides that in order to be tax deductible, expenses must:
• be incurred in the direct interest of the company or be connected with the normal management of the company;
• correspond to an actual charge and be supported by sufficient justification;
• result in a decrease in the company’s net assets;
• be included in the expenses of the financial year in which they were incurred;
• contribute to the formation of a product that is not exempt from income tax.
The General Tax Code provides for further rules for specific expenses:
Remuneration expenses
Article 99 of the General Tax Code provides that direct or indirect remuneration, including allowances, benefits in kind and reimbursement of expenses allocated by companies, are allowed as a deduction only to the extent that they correspond to actual work and are not excessive in view of the importance of the service rendered and provided that they are justified and that they have given rise to the social security and tax deductions in force.
Social security contributions ancillary to the payment of remuneration allocated to employees are deductible in the same way as remuneration itself. The same applies to contributions paid by companies in respect of pension schemes resulting from legal obligations. The employer’s shares of voluntary or additional contributions arising from a scheme set up by the employer or from the employment contract are also deductible, provided that they constitute a taxable salary benefit in the hands of the beneficiary. They are not considered as such if the scheme is instituted by the trade union and approved by the General Directorate of Labour and Social Laws for the benefit of all salaried staff or the least favoured categories.
The flat-rate allowances that a company allocates to its directors or executives for representation and travel expenses are deductible when these expenses do not already include the usual expenses of this nature, reimbursed to the interested parties.
Property Expenses
Rental payments for business premises and equipment rented by the company are deductible expenses up to the fraction due or accrued in respect of the financial year.
Maintenance and repair costs are deductible if, in accordance with their purpose, they are intended to maintain the company’s fixed assets and installations in good condition without giving a capital gain to these assets or to extend their probable useful life beyond the depreciation period originally used.
Insurance Expenses
Deductible expenses for the financial year include insurance premiums paid to cover the risks incurred by the various assets or those paid to cover any expenses.
In addition, insurance premiums paid to companies approved in Togo under a savings and retirement group contract, and health insurance taken out for all the company’s salaried staff, are deductible.
Research Expenses
Research expenses and intermediary remuneration and fees are deductible when they meet the general conditions for deducting expenses.
Royalties
Royalties from the transfer or grant of operating licences, patents, trademarks, manufacturing processes or formulas and other similar rights that are valid are deductible up to a limit of 5% of turnover excluding tax. However, the sums paid are only allowed as a deduction from the profit if the debtor provides proof that these expenses correspond to actual transactions and that they are not exaggerated.
Technical Assistance/Head Office Expenses
The costs of technical assistance and the share of head office expenses payable by companies resident in Togo may not exceed 25% of the taxable profit before deduction of the expenses in question.
Headquarters expenses correspond to secretarial costs, remuneration of staff employed at headquarters and other expenses incurred by the parent company for the needs of all subsidiaries and/or permanent establishments.
Technical assistance costs are the costs of transferring or supplementing know-how or technology intended to assist in the realization, implementation or development of a product or technique. The 2024 Amended Finance Law also provides that this includes any other services provided between affiliated companies, in particular accounting, tax, IT, administrative, legal, financial and human resources services.
Finance Expenses
Interest on loans made by companies to foreign natural or legal persons domiciled or Residents outside Togo other than banks and financial institutions are deductible, provided that these loans are justified and within the limit of the legal interest rate.
This deduction is subject to the condition that the company’s capital has been fully paid up, whether it is a question of company incorporation or capital increase.
However, the total amount of deductible interest may not exceed 30% of the gross operating surplus. This does not apply to banks and financial institutions.
Interest paid to the partners on the basis of the sums paid by them into the social security fund, in addition to their share of capital, regardless of the form of the company, is deductible within the limit of that calculated at the legal interest rate plus 3 points.
Hotel and Restaurant Expenses
All hotel and restaurant expenses are allowed as a deduction up to a limit of 3 of the amount of turnover excluding tax.
Donations
Payments made to sports and cultural associations, works or organizations of general interest of a philanthropic, educational, cultural nature, recognised as being of public utility by the competent authority, are deductible up to a limit of 1% of turnover excluding tax.
Donations made to school canteens set up by the State are fully deductible.
Contributions or additional payments made on the issue and purchase of shares in a company mutual fund are deductible, provided that the fund is established in a WAEMU member State.
Payments to Non-Residents
Any deductible expenses paid by a natural or legal person domiciled or established in Togo to natural or legal persons who are domiciled or established in a foreign State or a territory situated outside Togo and are subject to a preferential tax regime there, or a non-cooperative country, are only allowed as deductible expenses for the purposes of tax assessment if the debtor provides proof that the expenses correspond to actual transactions, and that they are not abnormal or exaggerated.
This limitation also applies to transactions between companies established on Togolese territory, one of which benefits from a preferential tax regime by virtue of a law, a convention or any other provisions.
Persons are considered to be subject to a preferential tax regime in the State or territory in question if they are not taxable there or if they are subject to taxes on profits or income, the amount of which is more than half less than that of the tax on profits or income for which they would have been liable under the conditions of ordinary law in Togo, if they had been domiciled or established there.
States and territories that do not comply with international standards of transparency and transparency are considered to be non-cooperative.
Depreciation
Article 100 of the General Tax Code provides that depreciation can be calculated on a straight-line, or reducing balance basis.
Deductible depreciation is generally based on the relevant accounting principles. Companies can opt for depreciation according to the component method in accordance with OHADA accounting law.
Companies have the option of including in their deductible expenses for the determination of their taxable profit, the purchase price:
• small tools and equipment, when the unit value excluding taxes does not exceed 100,000 CFA francs;
• small office equipment, when the unit value before tax does not exceed 50,000 CFA francs.
The depreciation of new equipment and tools acquired or manufactured by companies subject to corporation tax may be calculated according to a reducing balance basis.
The reducing balance rate is obtained by applying a coefficient to the straight-line depreciation rates set according to the life of the asset as follows:
• 1.5 when the normal period of use of the property is 3 or 4 years;
• 2 when the normal duration is 5 or 6 years;
• 2.5 when the normal duration is more than six years.
The amount of the first annual declining balance depreciation is determined by applying the usable rate as defined above to the cost price of the fixed asset.
Subsequent depreciation is calculated by applying the depreciation rate used to the cost price of the asset minus the cumulative amount of previous depreciation.
Excluded from the benefit of reducing balance basis are fixed assets other than equipment and tools, as well as equipment and tools that are already used at the time of their acquisition, and those whose normal useful life is less than 3 years.
Companies benefiting from an approval under the provisions of an investment code may apply accelerated depreciation on equipment and new tools where:
• They have been acquired or put into service after the date of approval;
• They to be used exclusively for industrial operations of manufacturing or assembly, transport or management of agricultural, artisanal mining or tourist operations;
• The are normally usable for more than 5 years.
Establishment costs incurred at the time of the incorporation of the company or the acquisition by it of its permanent means of operation, may be depreciated over the first 3 financial years of the activity. This depreciation, if carried out in the absence of profits, may be considered to be regularly deferred in a period of loss and carried forward to the first profit results without any time limit.
Leased assets are depreciated over their normal period of use, regardless of the duration of the lease.
The depreciation of the leased property may not exceed the difference between the amount of the rents received during the financial year in question and the amount of the other charges relating to the leased property. These same provisions apply to property made available by a company to one of its directors or a member of its staff.
Depreciation applied and deemed deferred in a loss-making period can be carried forward without any time limit.
Land, works of art, antiques, jewellery and other assets that are not subject to deterioration and obsolescence are not depreciable.
Provisions
Article 102 of the General Tax Code provides that provisions made in order to meet clearly specified losses or expenses that are likely to occur due to current events are also deductible, provided that they have actually been recorded in the accounting records.
In particular, a provision made to meet a loss, expense or miscellaneous risk is only allowed as a deduction from the results if the expected losses or expenses are:
• themselves deductible by nature;
• clearly specified;
• probable and not merely contingent and result from events in progress at the end of the financial year.
Banks and financial institutions may deduct provisions for impairment of debts constituted in accordance with the prudential standards laid down by the BCEAO.
Insurance companies may deduct technical provisions constituted in accordance with the requirements of the Code of the Inter-African Conference of Insurance Markets (CIMA).
Tax Losses
Article 101 of the General Tax Code provides that an utilised loss can be carried forwards indefinitely but can only be offset up to 50% of the profit made during the relevant financial year.
Withholding Tax
Article 79 of the General Tax Code provides that for variable income investment products, the withholding tax rates are:
• 13% of the amount of distributed income;
• 7% of the amount of dividends distributed by companies listed on a stock exchange approved by the Regional Council for Public Savings and Financial Markets (CREPMF) within the West African Economic and Monetary Union (UEMOA).
For parent companies and subsidiaries established in Togo and meeting certain conditions these deductions are not made on distributed dividends.
For fixed income investment products, Article 80 of the General Tax Code provides that the withholding tax rates are:
• 6% for interest paid to creditors;
• 13% of the amount of distributed income;
• 3% of the amount of dividends distributed by companies listed on a stock exchange approved by the Regional Council for Public Savings and Financial Markets (CREPMF) within the West African Economic and Monetary Union (UEMOA).
Transfer Pricing
Article 104 of the General Tax Code provides that when determining taxable profits for an enterprise that engages in one or more commercial or financial transactions with an associated enterprise established in Togo or outside Togo, each of these enterprises must determine the amount of its taxable profits in accordance with the arm’s length principle.
The amount of taxable profits established by a company that carries out one or more commercial or financial transactions with an associated company complies with the arm’s length principle if the terms of such transactions do not differ from those that would be agreed between independent undertakings for comparable transactions in comparable circumstances.
For the purposes of establishing the corporation tax payable by enterprises which are dependent on or have control over enterprises located in Togo or outside Togo profits indirectly transferred to the latter, either by increasing or decreasing purchase or sale prices, or by any other means, are incorporated into the results shown by the accounts. Indirect pass-through profits are determined by comparison with those that would have been realized at arm’s length or in the absence of control.
The condition of dependence or control is not required when the transfer is made with companies established in a foreign State or in a territory located outside Togo whose tax regime is privileged.
CFC Rules
None