Cameroon’s Directorate General of Taxation has published Circular 003 of 15 January 2018, which includes certain changes to transfer pricing legislation to be applicable for the fiscal year 2018. Details of the changes are provided below.
Automatic filing of transfer pricing documentation by large companies
Starting from the fiscal year 2018, companies that are registered with the Large Taxpayers Office, and are considered to be related companies, will have an obligation to file transfer pricing documentation annually prior to the 15th of March. A related company is a company where at least 25% of their capital or voting rights is held directly or indirectly by an entity established outside of Cameroon. The same applies to companies that hold at least 25% of capital or voting rights in other companies established outside of Cameroon.
Transfer pricing documentation requirements are set out in Section M 19a of the Manual of Tax Procedures. The documents will have to be submitted to the Large Taxpayers Office in editable electronic format as well as in hard copy.
Failure to file within the deadline after a formal reminder, or the submission of false information or incomplete information, will attract penalties up to FCFA 50 million (approx. USD 100 thousand).
Transfer pricing and tax havens
Starting from the fiscal year 2018, Cameroon extended the scope of application of transfer pricing requirements to transactions with unrelated parties established in tax havens.Furthermore, deduction of expenses relating to transactions entered into with companies in tax havens will be disallowed, with an exception of the purchase of goods produced in tax havens.
A tax haven is considered to be any state or territory where the income tax rate is less than one-third of that applicable in Cameroon[1], or which is considered non-cooperative in matters of transparency and exchange of information for tax purposes by international financial organizations or international tax coordination organizations, such as the OECD and the Tax Affairs Committee or the Economic and Social Committee of the European Union.
Next steps to be taken
Cameroon taxpayers need to review how these changes will affect their operations with tax havens, and, if they are registered with the Large Taxpayers Office, be ready to submit transfer pricing documentation for the fiscal year 2018 onwards.
For more information, please contact one of the following:
- Michael Hewson, Director, e-mail: mhewson@grapheneeconomics.com, cell: +27 82 345 1212
- Valdis Leikus, Associate Director, e-mail: vleikus@grapheneeconomics.com, cell: +27 76 867 1478
[1] Applicable corporate income tax rate at the date of this alert was 33%