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5.1. Tax Base for Resident Entities

Under the prevailing territorial system, resident companies are subject to corporate tax only on income derived from a business carried on in Cameroon. Income derived from a business carried out abroad in the form of a fixed establishment is excluded from the tax base in Cameroon, however passive foreign income is included in the tax base. The tax base includes all income derived from taxable business operations, including the disposal of business assets, as reduced by allowable deductions and allowances. From 2014, capital gains on the disposal of the shares of a legal person entitled to prospection, exploration or exploitation rights to natural resources situated in Cameroon are deemed to be Cameroonian source and are assessed to tax in Cameroon. Foreign-source dividends are added to taxable income. However, under a limited participation exemption regime, dividends received from sources in a CEMAC Member State are subject to tax in Cameroon for 10% of their amount only, the remaining 90% being exempt under the participation exemption regime.

The deduction of a number of expenses is either restricted or disallowed, including:

  • The deduction of interest on shareholder loans is limited in 2 ways: (a) the deduction of interest remunerating minority shareholders (controlling less than 25% of the capital of the payer) is limited to that remunerated at the Bank of Central African States (BEAC) rate plus 2 percentage points, and (b) the deduction of interest paid to controlling shareholders (holding 25% or more in the capital of the payer) is limited to that remunerating debts (or guarantees) within (i) a fixed debt-equity ratio of 1.5:1, and (ii) a limit of 25% of gross revenues of the payer, and (iii) an interest rate not exceeding the BEAC rate plus two percentage points.
  • Commissions paid to non-resident agents in connection with the sale of goods or services abroad are deductible up to a maximum of 5% of the sale proceeds. Royalties as well as rents for movable equipment are not deductible if paid to controlling shareholders. Payments to tax heaven residents are not deductible unless made in remuneration for the purchase of goods or services produced in the relevant jurisdiction, and the goods or services cleared customs duties in Cameroon.