Cameroon investment codes (Fr)
Export legal and fiscal notebooks - Kenneth Weissberg (1996)
In Cameroon, investment incentives are governed by ordinance No. 90/007 of November 8, 1990 on the Investment Code and its implementing decree No. 91/215 of May 2, 1991.
In 1994, this incentive scheme was substantially modified by ordinances n094 / 001, 002 and 003 of January 24, 1994 modifying certain provisions of the Investment Code in the context of the UDEAC tax and customs reform.
One of the objectives of this tax-customs reform being to reduce tax exemptions in order to optimize the national tax yield, the tax regimes granted under the Investment Code have been called into question. Each plan had to be renegotiated with the Ministry of Industrial and Commercial Development.
The Finance Law for 1995/1996 confirmed this policy of tax optimization by reducing the rate of abatement of the FOB value of exports from 5 % to 0.5 % and by imposing certain basic products delivered to Industrial Free Zones.
This reform did not, however, remove the Investment Code, which still remains in force and is still of some interest for any investor wishing to make an economic commitment in Cameroon.
It is however obvious that now, with the liberalization of the Cameroonian economy and the tax-customs reform, the Investment Code presents an essentially fiscal interest; the economic, customs and commercial advantages provided for by the Code which are almost common law.
After presenting the scope of the Investment Code (I) and the approval procedure (II), the advantages common to all the schemes of the Investment Code (III) will be exposed.
The different regimes proposed by this Code will then be analyzed separately, with their respective specificities (IV). Finally, the status of Industrial Free Zones will be the subject of a separate study, taking into account its specific nature (V).
I - SCOPE OF APPLICATION OF THE INVESTMENT CODE
The following may apply for approval to one of the plans of the Investment Code:
Any Cameroonian or foreign natural or legal person, who creates or develops an economic activity oriented towards:
- development of national natural resources,
- the creation of new jobs,
- production of competitive goods and services for internal consumption and export,
- increased exports of manufactured goods,
- transfer and adoption of appropriate technologies,
- the protection of the environment,
- improving the quality of life in rural and urban areas, and whose activity falls into one of these sectors:
- agricultural production, processing of agricultural products, animal husbandry, fishing, logging combined with wood processing, storage and preservation of food products,
- the transformation of hydrocarbons, the extraction and transformation of mineral resources, the manufacture of building and public works products, the transformation of materials leading to the production of a good,
- construction of buildings and public works, ship repair, technological research and data management, hospital training and medical analysis laboratories, catering establishments integrated into a tourist complex or located in a site recognized as being of tourist interest, accommodation establishments likely to be subject to classification, approved tourism agencies, tailoring, maintenance of industrial equipment focused on the manufacture of spare parts, testing, analysis and control of raw materials, finished or semi-finished products used or produced by industry.
II - APPROVAL PROCEDURE
1. The Investment Code Management Unit
To benefit from one of the schemes offered by the Investment Code, the company must submit an application for approval to the Investment Code Management Unit (CGCI), with the exception of the Free Industrial Zones scheme which falls under the jurisdiction of the National Office for Industrial Free Zones (ONZFI), see below.
Investment Code Management Unit
Former ONCPB building. 3rd floor
PO Box 15438
DOUALA - CAMEROON
Tel (237) 42.59.46 / 43.31.11
Fax: (237) 43.30.07
The approval request files must include a list of documents, the details of which appear in article 39 of decree n091 / 215 of 2 May 1991.
2. Approval of the Investment Code
The approval of a company to one of the regimes of the Investment Code is granted by regulatory act.
The agreement specifies:
at. Regarding the business
- the name and statutes of the beneficiary company,
- the place of establishment of the company showing that it is not in a prohibited zone for the exercise of the action concerned,
- the physical and financial investment program that the company offers,
- the company's employment and professional training policy,
- the objectives pursued in the investment program which must comply with the eligibility criteria corresponding to the regime granted.
b. Regarding administration:
- the eligibility criteria for which approval is granted,
- the regime and the advantages granted, distinguishing those relating to the installation phase from those relating to the operating phase; the transition from one phase to another being subject to control.
Any company approved under one of the Investment Code regimes must become operational (start of construction and equipping of the company) at the latest within two years from the date of signature of the act of approval . Failing this and in the absence of a valid reason, the act of approval becomes void.
III- BENEFITS COMMON TO ALL THE PLANS
The Investment Code has set up several advantages common to the different plans offered
A. Administrative advantage: the single window
The company approved under one of the Investment Code regimes automatically benefits from the centralized management of its authorization files necessary for its activity, at the level of the Investment Code Management Unit.
All files are processed by the one-stop shop (obtaining the exemptions provided for by the texts, authorization to exercise certain activities, visas for national and foreign staff, residence permit, access to administrative documents in matters of importation, etc.)
B. Economic benefits
Any investment approved under one of the regimes of the Investment Code benefits from the guarantee of non-commercial risks of article 15 of the Treaty establishing the Multilateral Investment Guarantee Agency ratified by Cameroon.
In addition, finished or semi-finished products processed in Cameroon and exported by the approved company are exempt from exit duties and insurance and transport taxes.
Lastly, the enterprise which exports part or all of its industrial production can deduct from its income an amount that cannot be carried over equal to 0.5 % from the FOB value of exports of its finished or semi-finished processed products (before on July 1, 1995, the abatement rate was 5 %).
C. Customs benefits
The approved company benefits from a common external customs rate including moderate customs rates on equipment and raw materials intended for companies.
It should be noted that the economic liberalization policy pursued by Cameroon in recent years has relaxed the customs regulations in force, which somewhat puts the advantages granted in this area to approved companies.
IV - SCHEMES PROPOSED BY THE CAMEROON INVESTMENT CODE AND THEIR RESPECTIVE SPECIFICATIONS
The Cameroon Investment Code includes several incentive schemes to invest:
- For the creation of new companies, the Investment Code organized the basic regime and the regime for strategic enterprises
- For the creation of exclusively export-oriented businesses, the Investment Code provides for the industrial free zone regime
- For existing and operating companies, the Investment Code has set up the reinvestment regime.
The tax advantages granted under these various regimes take into account the progress of the investment project and distinguish the installation phase from the operation phase.
During the installation phase:
the company is required to provide a personal and joint bond or guarantee to guarantee the difference between the amount of duties and taxes payable under common law and that reduced by duties and taxes resulting from the approval. The installation phase may be extended by reasoned request presented to the Investment Code Management Unit, on reasoned request or force majeure.
It is now necessary to explain the different investment regimes with their respective specificities.
1. Basic scheme
a) Eligibility conditions
To be able to benefit from the basic investment code regime, the project presented must:
- create jobs for Cameroonians (I per tranche of 10,000,000 F. CFA investment),
- have an export activity of at least 25 % of turnover excluding taxes, OR
- use national natural resources other than energy and / or goods produced in Cameroon up to at least 25 % of the value of its inputs.
In addition to the administrative, economic and customs advantages common to all the schemes of the Investment Code (see III), companies approved under the “basic” scheme benefit from the following tax advantages:
During the installation phase (three years)
- exemption from registration fees for acts of capital increase,
- exemption from registration fees for leases of buildings for exclusively professional use which are an integral part of the investment program selected (against 10 % under ordinary law),
- exemption from transfer taxes on the acquisition of buildings, land and buildings essential for the implementation of the program (against 15 % under ordinary law),
- exemption from registration fees for contracts for the supply of equipment and construction of buildings necessary for the implementation of the program, reduction of 50 % in corporate tax from the first tax year (the common law rate being 38.5 %),
- exemption from the special tax for registration of business insurance contracts.
During the operating phase (renewable period of five years)
- exemption from the minimum collection tax payable under corporate tax,
- reduction of: - 50 % of the corporate tax for legal persons (the common rate being 38.5 %), - 50 % of the tax on industrial and commercial profits for sole proprietorships
- reduction of 50 % of the proportional tax on income from movable capital (the common law rate for non-Cameroonian shareholders being 25 %),
- possible carry-over to the results of the following five financial years of the deficit resulting from the allocation of depreciation normally recognized during the first three financial years,
- deduction from the taxable income of the business of a non-reportable amount equal to 50 % of transport and utilities, when it settles in an area far from large urban centers.
2. Small and medium-sized enterprises scheme
a) Eligibility conditions
Companies must meet the following conditions to apply for approval to the “small and medium-sized enterprises” (SME) plans:
- create permanent jobs for Cameroonians (1 job for every 5,000,000 FCFA of investment),
- have a level of investment less than or equal to 1.5 billion CFA francs,
- have a stake in the capital of the Cameroonian natural person company or of Cameroonian company up to at least 35 % of this capital.
Decree n091 / 215 of May 2, 1991 specifies that it is an effective participation in the capital and excludes the use of counter letter.
Notwithstanding the administrative, economic and customs advantages already set out in Chapter III, economic operators approved under the "small and medium-sized enterprises" regime benefit from the following tax advantages:
- During the installation phase (three years)
During the installation phase, companies approved under the “small and medium-sized enterprises” regime enjoy the same tax advantages as those granted to enterprises under the “basic” regime.
- During the operating phase (non-renewable period of seven years)
In the operating phase, a company approved under the “SME” scheme benefits from the same tax advantages as under the “basic” scheme, with the additional possibility of deducting from its taxable income a non-reportable amount equal to 25 % of the wage bill paid to employees of Cameroonian nationality during the financial year in question.
3. Regime for strategic enterprises
Conditions of eligibility
To be approved for the “strategic business” plan, you must:
- be declared strategic in the Industrialization Master Plan, AND,
- have an export activity equal to at least 50 % of its annual turnover excluding taxes,
- use national natural resources, excluding energy resources and / or goods or services produced in Cameroon up to at least 50 % of the value of its inputs,
- create permanent jobs for Cameroonians (1 job for every 20,000,000 F. CFA investment).
If these conditions are met by the company, an agreement with the Cameroonian State may be signed, specifying the reciprocal commitments of the parties.
In addition to the administrative, economic and customs advantages set out above in Chapter III and IV, economic operators approved under the "strategic enterprises" regime benefit from the following tax advantages
- During the installation phase (three years)
During the installation phase, the tax advantages granted under the “strategic enterprises” regime are identical to those granted under the “basic” regime.
- During the operating phase (non-renewable period of twelve years)
In the operating phase, the company approved under the "strategic enterprises" regime benefits from the same tax advantages as in the "basic" regime, with the additional possibility of deducting from its taxable income a non-reportable amount equal to 25 % of the payroll paid to employees of Cameroonian nationality during the financial year in question.
4. Reinvestment scheme
Conditions of eligibility
If an enterprise is governed by ordinary law or by a special scheme which has expired, it may apply for approval of the "reinvestment" scheme provided that its program:
- has been approved under the reinvestment scheme of the General Tax Code,
- anticipates an increase in productivity and an increase in production of at least 20 % compared to the situation at the time of filing of its application for approval,
- enables it to offer a higher category of services than that which it was capable of providing at the time of filing its request for approval.
In addition to the administrative, economic and customs advantages described above (page 689), economic operators approved under the "reinvestment" regime benefit from certain tax advantages which, unlike the regimes previously studied, do not change over time.
For a period of three years from the date of granting of approval, the company approved under the "reinvestment" scheme benefits from:
- a reduction in corporate tax or proportional tax on the income of natural persons on the basis of 50 % of reinvestments accepted,
- exemption from registration fees for acts of capital increase,
- an exemption from the registration fees for leases of buildings for exclusively professional use forming an integral part of the investment program adopted by the company.
V - REGIME OF THE INDUSTRIAL FREE ZONE
Ordinance No. 90/001 of January 29, 1990 created the regime of the Industrial Free Zone and Industrial Point Franc in Cameroon and Order No. 5 IIMINDIC / IGI of December 28, 1990 set the terms of application.
Applications for the granting of Industrial Free Zone or Industrial Free Zone status must be submitted to the National Office of Industrial Free Zones (ONZFI). The Minister responsible for Industrial Development issues the decree granting the status of Industrial Free Zone which decree is notified to the candidate by ONZFI.
National Office for Industrial Free Zones
PO Box 925
DOUALA - CAMEROON
Tel: (237) 43.34.44
Fax: (237) 43.33.17
The conditions required to be able to benefit from the status of Industrial Free Zone or Industrial Free Point are as follows:
- use at the latest at the end of the 5th year, at least 80 % of Cameroonian staff and ensure their continuous professional training,
- produce goods or services intended exclusively for export or to markets outside Cameroon. (Note: A company in the Industrial Free Zone may export, exceptionally, part of its production to the national customs territory, under conditions set by the Ministry of Industry.)
- not to produce harmful effects for the environment,
- not to be in possession, without prior authorization, of products whose entry and storage are prohibited in an industrial free zone,
- not to carry out activities outside the Industrial Free Zone for which approval is sought,
- offer all the facilities and grant all support to the agents of the Cameroonian security forces who ensure the police and the maintenance of order in the Industrial Free Zones,
- organize clean security services in industrial free zones. (Note: The 1995/1996 Finance Law excluded forest exploitation companies from the status of Zone Franche Industrielle. Wood processing industries are however still eligible for this scheme).
* Commercial advantages
The General Exchange Program (PGE) in force in Cameroon does not apply to Industrial Free Zones. As such, imports and exports are not subject to a license, an authorization or a quota limitation.
It is important to recall that the common law of Cameroonian customs regulations has been relaxed in recent years in the context of the liberalization of the economy and the customs-tax reform; which somewhat puts into perspective the advantages granted in this area to companies in industrial free zones.
Imports and exports of Industrial Free Zones are subject to the prior declaration formality for statistical purposes for ONZFI and for inspection and control by customs services.
No price or profit margin controls apply to the products and services of companies in industrial free zones.
Companies approved as Zone Franche Industrielle or Point Franc Industrielle benefit from significant tax advantages:
- total exemption during the first ten years from direct and / or indirect taxes and charges in force or to be created as well as registration and stamp duties of any kind whatsoever,
- from the 11th year of operation, even exemption, with the exception of the tax on industrial and commercial profits (BIC) to which they are subject to the overall rate of 15 %.
The tax profit determined in application of the provisions of the General Tax Code is obtained after allocation:
- an amount equal to 25 % of the payroll paid to employees of Cameroonian nationality during the financial year,
- an amount equal to 25 % of the capital expenditure for the financial year. In the event of a change in the BIC tax base rules, the new provisions only apply to approved companies if they are more favorable to them.
- the deficits suffered during the exemption period are considered as expenses for the following years and deducted from the profits made during said years, without limitation of the delay period,
- no obligation to reinvest the special fixed asset revaluation reserve prescribed by the laws and regulations in force,
- exemption from transfer tax for any sale of real estate within the ZFI,
- exemption from any tax on the transfer of currency for any purchase or sale of currency by a ZFI company.
- Customs benefits
All exports from an industrial free zone enterprise are exempt from all customs duties and taxes and all other taxes, duties and direct and / or indirect taxes, current and future.
As for imports, they were exempt, like exports, from all duties and taxes until June 30, 1995.
Since July 1, 1995 (Finance Law 1995/1996) deliveries to industrial free zones of coffee, cocoa, medicinal plants, wood logs, rubber, sugar, palm oil and bananas are treated as exports and, as a result , subject to exit duty or export levy applicable to these products.
At the end of this analytical presentation of the investment incentives in force in Cameroon, it is necessary to note that these are primarily from a fiscal perspective since the policy of liberalization of the economy and the measures taken by the government Cameroonian within the framework of the tax-customs reform UDEAC.
In order to give back to the Cameroon Investment Code the means to enable it to fully ensure its attractive vocation with national and foreign investors, it seems necessary to review its provisions.
According to the Investment Code Management Unit, preparatory work has already been launched in this direction. Some even mention a regional investment code.