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13.4.1. Main Rules

The Guinean tax code historically provided for the possibility for the tax administration to adjust taxable income in case of “abusive deductions”, without actually providing for detailed transfer pricing rules. More detailed transfer pricing rules, together with related documentation requirements, were introduced by the Finance Law 2014 and by Finance Law 2019 (hereafter TP Regulations). Pursuant to the TP Regulations, benefits indirectly transferred between related parties and benefits transferred to companies resident in jurisdictions with preferential tax regimes, by way of reduced or increased sales or purchase prices, the payment of excessive royalties, loans at low or unjustified interest rates, debt cancellation, excessive fees for services, etc or by any other means may be adjusted by the tax authorities. Failing the provision of proof to the contrary, the tax authorities may determine the taxable income of the taxpayer by reference to the taxable income of similar enterprises operated in Guinea. For this purpose, a company will be deemed to be resident in the jurisdiction with a preferential tax regime when it is subject to tax therein for an amount less than 50% of the amount it would be subject to in Guinea.

Mineral Resources

Mineral resources including in particular bauxite and, to a lesser degree, iron ore and gold, represent up to 95% of the country’s export earnings. In addition to the tax code as amended by the Finance Law 2014, the 2013 Mining Code also makes a reference to transfer pricing. Specifically, the Mining Code specifies that the OECD methods should be the guiding principle in determining the arm’s length price, and that companies trading in mineral resources or transferring legal title to rights on mineral resources, for prices which are lower than free market prices may be subject to an adjustment as well as to the penalties provided for under the tax code.

Further, the Mining Code provides for a pre-emption right whereby the State may acquire up to 50% of the production of a mining company at 105% of the FOB price applied by that company to its (related) clients, if it deems the price applied by that company during a minimum period of 6 months not to reflect the market price. Mining companies which conclude so-called Advanced Purchase Agreements (Convention d’achat prealable, or CAP), outlining their price fixing policy, may submit such CAPs to the relevant authorities for approval. The government has then one month to object to the price fixing mechanism or request its adjustment. Failing such objection or request, the State is barred from using its pre-emption right.

Definition of Related Parties

The TP regulations apply to transactions between related resident and non-resident entities. For these purposes, two entities are deemed to be related if:

  • One entity directly or indirectly holds a majority in the capital of the other entity, or otherwise effectively controls the decision-making process (majority of voting rights, same directors, economic dependence) in that entity; or
  • A third entity directly or indirectly holds the majority in the capital of both entities, or otherwise effectively controls the decision-making process in both entities.

Further, transactions with entities established in low-tax jurisdictions are deemed to be concluded with related parties regardless of the actual relationship between the parties. For these purposes, an entity is deemed to be established in a low-tax jurisdiction if it is subject therein to an income or profit tax that is less than half of the tax that would have been due in Guinea on the same income.

Applicable Transfer Pricing Methods

The law does not specify or rank the applicable transfer pricing methods. The Mining Code specifically refers to the OECD Guidelines in this respect, and it is assumed that the OECD sanctioned traditional and transactional methods may be applied.