Lex Africa Guide 2012 Full - Afrer.org

turnover of each business. There are seven categories withturnovers ranging from FCFA5 million to FCFA15 million incategory seven and turnover of over FCFA2 billion in category 1.The tax payable is calculated by applying the stipulated rateapplicable to each category. The actual rate is fixed by the localauthorities in the area where the business is established andmust fall within a range stipulated by the General Tax Code.DeductionsTax deductions are allowed for reasonable expenditure incurredin performing activities that produce assessable income.Expenditure considered either excessive or unnecessary for thereasonable needs of the business will be disallowed to thatextent.DepreciationDepreciation is calculated using the straight-line method.Generally, all tangible fixed assets, new and used, owned by thecompany for business purposes and whose value diminisheswith time or when in use are depreciable. Rates depend on theuseful life of the asset but may not exceed those allowed by theGeneral Tax Code. Intangible assets are depreciated at ratesvarying from 20% to 50%. Goodwill, however, is not depreciable.The rates for tangible fixed assets range from 5% to 33.33% and,to be deductible, depreciation must be recorded in the books ofaccount. Depreciation deferred during earlier periods of tradingat a loss may be carried forward indefinitely. For depreciationpurposes, an asset’s cost is reduced by the amount of anyinvestment allowance granted by the Ministry of Finance undera reinvestment program.Management FeesHead office expenses and remuneration for technical, financial,or accounting assistance are deductible up to 10% of taxableprofits before the deduction of the expenses concerned. Forconstruction companies, the limit is 5% of turnover and, forapproved design bureaus (Bureaux d’études), 15% of turnover.However, this limit does not apply to technical assistance costsrelating to the erection of factory plant and machinery.TaxesTaxes such as business licence tax and stamp duties are generallydeductible but company tax paid is not an allowable deduction.Compromise payments, fines, confiscations, or penaltiesimposed as a result of a breach of any legal, economic, or taxprovision are also not deductible.Start-up CostsCosts connected with the organisation or setting up of acompany may be deducted. They must be written off within thefirst five years of the company’s existence.Bad and Doubtful DebtsBad debts are deductible but only specific provisions fordoubtful debts are deductible. However, if the debt provided foris subsequently recovered, the provision is added back to theresults of the year in which recovery was made and it is subject totax.RentsRental payments are deductible in full, provided that they arereasonable. However, any rentals paid to a shareholder with atleast a 10% shareholding in the company and who is involved inits management (or any rents paid to such a member’s spouse orchildren) may be deducted only if paid for premises rented to thecompany for its business use.Social Insurance and Housing Loan and Employment FundContributionsEmployers and employees contribute monthly to the NationalSocial Insurance Fund and the Housing Loan and EmploymentFund. For the Housing Loan and Employment Fund, employeescontribute 1% of their gross salaries and employers contribute2.5% of the total amount of employees’ salaries and fringebenefits. For the National Social Insurance Fund, employeescontribute 2.8% of basic pay plus allowances up to FCFA 300 000per month. Employers contribute 11.2% of basic pay, allowancesand benefits up to FCFA 300 000 per month per employee inaddition to 1.75%, 2.5% or 5% of total salaries depending on therisk category of activities performed by employees.Registration, Stamp and Other DutiesGenerally, all legal documents must be stamped and registered.All acts that record contractual obligations of transfers of leasesof property are usually subject to ad valorem registration dutiesranging from 1% to 15%. On the formation of a company and anysubsequent capital increase, a duty of between 2% and 0.25%applies, depending on the amount of capital. Fixed stamp dutiesare levied on motor vehicle licenses, advertising materials,passports, visas and bills of lading.Land and Landed Property AcquisitionA non-resident wishing to invest in Cameroon may sign leaseagreements or purchase land except in border areas. Deeds ofsale of land involving foreigners are valid and enforceablesubject to the approval of the Minister of Lands.Labour RelationsLabour relations are regulated by Law N° 92/007 of 14 August1992 which instituted the Labour Code. This Code issupplemented by several ministerial orders and also collectiveagreements regulating the particular sector of activity.An employer will usually have the freedom to hire any person ofhis choice. The law also gives the employer the right to dismissany employee at any time for good reason. Workers underprobation can be dismissed at any time without good reasonbefore the end of the probation period. The minimum period ofprobation is 15 days and the maximum period is 4 monthsdepending on the worker’s professional category.Compensation following the termination of employment willlargely depend on the ground of termination. Workersterminated during their period of probation are not entitled toany compensation except salary accrued up to the date oftermination. A worker who is terminated for grievousmisconduct is not entitled to compensation except salaryaccrued up to the date of termination and accrued leave pay.A worker whose services are terminated for reasons other thangrievous misconduct will be entitled to the followingcompensation:accrued salary up to the date oftermination;accrued leave pay;salary in lieu of notice ranging from onemonth’s salary to four monthsdepending on the worker’s professional17