background image
6.5. Deduction of Cross-Border Payments and Non-Deductible Expenses

Generally, all business expenses are deductible, unless specifically disallowed.

Following payments made to non-residents are not allowed as deductible expenses:

  • Head office overhead expenses, if they are unreasonable and not supported by documents;
  • Fees for technical assistance paid by subsidiary to its parent company in excess of 50% of taxable profits before the deduction of such fees. In case of loss year, taxable profit is computed on the basis of profit made in the previous fiscal year subject to tax audit; and
  • Royalties from patents, brands, models, etc. paid to non-CEMAC companies holding shares in resident companies, if they are unreasonable and not supported by documents.

The following expense types are not deductible or have limited deductibility for Equatorial Guinea tax purposes:

  • Taxes (except professional tax) are not deductible;
  • Fines and penalties are not deductible;
  • Payments like excessive remuneration paid to a director that do not provide compensatory benefits, gifts, and subsidies are not deductible;
  • Charitable contributions in excess of 0.5% of the turnover of the year and given for causes other than philanthropic, social, educational, sports, scientific or family purpose are not deductible;
  • Rent expenses for movable equipment paid to a shareholder holding, directly or indirectly, more than 10% of the capital, are not deductible;
  • Commissions and brokerage fees exceeding 5% of purchased imports are not deductible;
  • Interest expense in excess of interest rates on loans provided by the central bank is not deductible (see Sec. 13.2.);
  • The deductibility of payments made to foreign affiliates by the parent company is limited to 50%; and
  • Business expenses (related to salaries, wages, pensions, etc.) in excess of 20% of income or XAF 1 million, whichever is higher, are not deductible.