Effectiveness and Economic Impact of Tax Incentives in the SADC ...

A-4 APPENDIX
Democratic Republic of the Congo 109
A new Investment Code adopted in 2002 aims to support four key areas:
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Civil engineering companies involved in the construction and maintenance of roads and
motorways as well as public transport for passengers and goods;
Investments to develop mechanized agriculture and agri-processing;
Heavy investment to create a solid industrial base; and
Investments to develop the country’s natural resources, raising the added value and
increasing export capacity.
Investments in four sectors are explicitly excluded: mining and hydrocarbons; banking and
insurance; commerce; and arms and military equipment. The Investment Code also has
special provisions for qualifying small and medium enterprises, in the range of US$10,000-
200,000.
The main tax benefit is a full exemption from business tax for a period of 3 to 5 years,
depending on location. Approved investors are also exempt from payment of turnover tax on
locally sourced equipment, industrial inputs, and construction; tax on land and building
directly connected to the approved investment; and ad valorem duty on registration of their
capital. Approved investors are also exempt from duties and taxes on imports of new
machines, plant and equipment and spare parts (and used imports, in the case of small and
medium enterprises). The import duty exemption is capped at 10 percent of CIF value, except
for heavy-duty vehicles, ships, and aircraft. Companies that export finished or semi-finished
products are exempt from export duties and taxes. Manufacturers who export at least 20
percent of production qualify for a special 60 percent initial allowance on investment, and
declining balance depreciation of the remainder.
According to the Foreign Investment Advisory Service of the World Bank, the 2002
Investment Code provides “international best practice” in areas such as legal guarantees,
equal treatment of national and foreign investors, dispute mechanisms, and profit
repatriation. It also greatly simplifies the tax incentive regime and streamlines the procedures
for investment approval, compared to the 1986 Code. The new regime also has a provision for
financial assistance funded by an Investment Promotion Tax on imports and domestic
production.
Prospective beneficiaries must file an application for approval by interdepartmental decree
from the ministers responsible for planning and finance, following an assessment by the
National Investment Promotion Agency. One generally criterion is a minimum 35 percent
value added.
109 Supplementary sources include U.S. Embassy Country Commercial Guide 2002; FIAS project report 2002;
IMF country report 03/175