Tax and Financial Rebates under the 2013 Law on Private Investment Incentives in Cameroon
By Mfor Divine Afuba, Partner & Head of banking & finance law practice
On 18 April 2013 the President of the Republic of Cameroon promulgated Law N° 2013/004 of 18 April 2013 to lay down private investment incentives in the Republic of Cameroon. This law is an implementing instrument of Law N° 2002/004 of 19 April 2002 to institute the investment charter of the Republic of Cameroon, as amended by Law N° 2004/020 of 22 July 2004 (the “Investment Charter” for short).
The objective of this law is to provide tax, financial and even customs incentives to investors in Cameroon.
This note examines some of the aspects of this law, which was amended by Law N° 2017/015 of 12 July 2017. The law and its amendment shall be referred to as the “2013 Law”.
- The scope of the 2013 Law
The 2013 Law applies to Cameroonian or foreigners – be they natural persons or corporate entities – whether or not such persons are established in Cameroon. For this law to apply to any given person or entity, such person or entity must be conducting business in Cameroon or must be holding shares in Cameroonian companies (section 1(1)).
Section 2(1) of the 2013 Law enumerates the various investment operations that come within its embrace:
- the creation of businesses;
- the extension of businesses;
- the renewal of businesses;
- the asset restructuring and/or conversion of businesses.
Section 3(new) of the 2013 Law contains an exhaustive list of definitions. But for our own purposes, only two definitions are worthy of mention: the definition of the term “Establishment phase” and the definition of the term “Operation phase”.
- The establishment phase
The establishment phase of an investment is defined in section 3(new)(9) of the law as a period not exceeding five years during which the infrastructure and facilities essential for setting up a production unit are built.
- The operation phase
The operation phase of an investment is defined in section 3(new)(10) of the law as the:
“period during which production activities are effectively carried out, which starts to run:
- for new investors, automatically, upon or before the end of the establishment phase, once marketing or sale of products begins, as ascertained by the body in charge of promoting investments or small-and-medium-sized enterprises;
- for enterprises already established in Cameroon and carrying out new investments, once the said investments become operational as ascertained by the body in charge of investment promotion or small-and-medium-sized enterprises.”
- The incentives granted by the 2013 Law fall under two broad categories: common incentives and specific incentives.
These common incentives and specific incentives are fleshed out in two other enactments that implement the 2013 Law:
– Order N° 00000366/MINFI/SG/DGI/DGD of 19 November 2013 specifying the terms of implementation of the tax and customs benefits of Law N° 2013/004 of 18 April 2013 to lay down private investment incentives in the Republic of Cameroon (the “2013 Ministerial Order” for short);
– Order N° 0000031/MINFI/SG/DGI/DGD of 17 July 2014 amending certain provisions of Order N° 00000366/MINFI/SG/DGI/DGD of 19 November 2013 specifying the terms of implementation of the tax and customs benefits of Law N° 2013/004 of 18 April 2013 to lay down private investment incentives in the Republic of Cameroon (the “2014 Ministerial Order” for short).
- Common incentives
6.1. These incentives are tax and customs incentives and are granted to investors during the establishment and operation phases. They are available to any investor. Section 4 of the 2013 Law ordains that the investor’s activities must be in compliance with the laws in force and the investor must meet one of the following criteria, before he/she can benefit from the incentives:
- employ, during the operational phase and according to the size of the enterprise and sector, at least a Cameroonian by tranche ranging between five million F CFA and 25 million F CFA of planned investments;
- annual exports of 10% to 25% of turnover, net of taxes;
- use local natural resources of 10% to 25% of the value of inputs;
- contribute to value added of 10% to 30% of turnover, net of taxes.
6.2. Section 6 of the 2013 Law is to the effect that during the establishment phase, the investor shall enjoy common incentives, which include the following:
- exemption from registration duties on establishment or capital increase;
- exemption from registration duties on the lease of immovable property used exclusively for professional purposes that form an integral part of the investment programme;
- exemption from taxes and customs duties on all equipment and materials related to the investment programme;
- exemption from valued added tax (VAT) on the importation of equipment and materials;
- immediate removal of equipment and materials related to the investment programme during customs clearance operations.
6.3. During the Operation phase the investor may enjoy exemptions from, or reductions of payment of taxes, duties and other fees. The exemptions and reductions of payment include the following:
- corporate tax;
- tax on profit;
- registration duties on loans, borrowings, overdrafts, guarantees, increase and reductions of capital, registered capital repayment and liquidation;
- tax on income from movable assets during the distribution of income in the form of dividends;
- exemption from duties, taxes and fees on the importation of capital goods intended and used for the investment programme.
- Specific incentives
7.1. The first thing to know about specific incentives is that they may be provided to enterprises in addition to the common incentives. According to section 14 of the 2013 Law, these specific incentives may be granted to enterprises that carry out investments that contribute to the attainment of certain objectives that are considered as priority areas by the government of Cameroon. These include:
- the development of agriculture, fisheries, livestock and plant, animal or fishery product packaging activities;
- the development of tourism and leisure facilities, social economy and handicraft;
- the fight against pollution and environmental protection;
- the promotion and transfer of innovative technologies and research and development;
- the promotion of exports;
- the promotion of employment and vocational training.
7.2. Pursuant to the provisions of section 15 of the 2013 Law, any enterprise that intends to carry out investments that contribute to the achievement of the priority sectors mentioned in section 14 of the 2013 Law may benefit from the following common incentives:
- exemption from VAT on investment programmes;
- exemption from land tax on built-on and non-built-on estates on the site dedicated to the processing plant and of all immovable property extensions by use thereof;
- direct goods clearance at the request of the investor;
- fixed registration duties;
- special temporary admission of industrial equipment and materials likely to be re-exported.
7.3. In addition, any existing and operating enterprise that is carrying out an investment programme aimed at production capacity extension, assets renewal or performance enhancement may, for a period not exceeding five years, benefit from the common incentives listed in section 6 of the 2013 Law where such an investment programme ensures an increase in production of goods and services or in Cameroonian staff strength by at least 20% (section 17 of the 2013 Law).
- Financial and administrative incentives
In addition to the tax and customs incentives, the 2013 Law also provides financial and administrative incentives.
8.1. The financial incentives revolve around exchange control. They allow the investor, for example, to open local and foreign currency accounts in Cameroon and abroad and to carry out transactions on such accounts. They also allow the investor the right to freely cash and keep abroad, income from their transactions, dividends and proceeds of any kind from capital invested, as well as proceeds from the liquidation or sale of their assets. (section 12 of the 2013 Law).
8.2. As regards administrative incentives, they include, for example, the issuance of land titles and long-term leases, the issuance of environmental compliance certificates with respect to the investment projects concerned (section 13 of the 2013 Law).
The partners and lawyers of Dayspring Law Firm remain available to advise and assist local and foreign investors on the 2013 Law, and in all dealings with the Investment Promotion Agency, one of the government institutions put in place to monitor the implementation of this law.