How to Benefit from Cameroon’s COVID Tax Palliatives, By Achare Takor
It comes as no surprise that challenges of the Covid-19 crisis are felt harder in the developing world, where reliance on tax revenue from large taxpayers is higher than that of most advanced economies. As a result, developing countries will require more support, especially financial, to help their health and fiscal systems withstand the current shocks. In response the Covid-19 pandemic, the Government of Cameroon decided on a number of fiscal measures to support Cameroonian businesses and households. Amongst these are the easing of tax burdens, and broad support for businesses and individuals with cash flow problems, difficulties in meeting tax reporting or payment obligations, or otherwise facing hardship.
These courses of action are focused on the collection of direct and indirect taxes, the extension of deadlines for filing tax returns without generating interest or penalties, or the suspension of tax prepayments. They mostly apply to corporate and individual income and withholding tax returns, periodic VAT returns or social security contributions, and, to a lesser extent, to customs or stamp and excise duties.
The government has tried to resolve these issues by providing these tax and customs measures below:
- Suspension of accounting verifications for the second quarter of 2020
The government has taken the decision to suspend all General Accounting Audits for Q2 2020. The only caveat for this are cases where there is a suspicion of tax evasion or fraud. In order for this measure to be accurately implemented, the procedures regarding the scope of suspension and the exceptions are explained in the subsequent paragraphs.
The suspension of tax audits applies to the accounting verifications provided for in Article LII of the General Tax Code and in general, to all on-site interventions within the company. This applies to spot checks, unannounced checks, the right of investigation, the right to physically establish stocks and the right of inspection is also applicable to regularisation procedures carried out from office, such as those of the pre-filled declaration and the compliance dialogue, are thereby still authorised.
- Scope of Suspension
The suspension of accounting audits covers the second quarter of fiscal year 2020, which is the period from April 1stto June 30th, 2020. During this period, no general or partial verification of the accounts and in general, no on-the-spot intervention shall be undertaken, all ongoing control procedures shall equally be suspended. This suspension of accounting verifications and on-the-spot interventions are granted to both the administration and taxpayers. However, it should be noted that the suspension does not apply in a case where the work in the business is completed and the tax payer has made his comments already, following the notification of adjustments. In a case like this, the services are entitled to notify any taxes that may be recalled.
- Exceptions to the Suspension of on-site interventions
- The suspension of general audit or other on-the-spot checks shall not apply where there is suspicious behaviour displayed by the taxpayer. This includes any behaviour giving rise to a presumption of fraudulent practice aimed at evading payment of tax or reducing the amount of tax;
- Regarding the validation of VAT credits, in particular in cases which require prior general checks, in accordance with the provisions of Article 149a of the General Tax Code, or when the business so requests.
- For interventions carried out at the taxpayer’s request, the taxpayer must guarantee compliance with the barrier measures necessary to protect all participants in the procedure.
- Extension of the deadline for filing statistical and fiscal declarations without penalties in case of payment of the corresponding balance.
The deadline for the filing of Annual Statistical Returns (DSF) at the taxpayer’s request may be extended without giving rise to any assessment. However, and looking at it critically, the application of this measure at an earlier time would have proven more impactful as companies in Cameroon were already immersed under the pressure of the COVID-19 pandemic. This had an adverse effect on their business and subsequently their treasuries.
There are some limitations as to those who can benefit from this measure. For instance, the requested deferral cannot be extended beyond the end of the second quarter of fiscal 2020, which is June 30th, 2020.The benefit of the penalty exemption is subject to the payment of the balance of corporate income tax (CIT) on March 15th, 2020. Consequently, in the event of the non-payment of the balance of corporate income tax by March 15th 2020, the services apply the fine for late filing of the Annual Statistical Return (DSF) provided for in article L99 of the GTC. The fine imposed on a taxpayer who has paid the balance of the tax due on March 15th, 2020, for the filing the Annual Statistical Report (DSF) after the deadline is simply cancelled. In the event that the notified has already been paid, a tax credit to the amount of the fine is recorded in his favour. This in be carried forward to its subsequent payments.
III. Suspension of the application of recovery measures for companies directly affected by the crisis.
Companies directly affected by the Covid-19 pandemic can benefit from tax deferrals and moratoria upon request. This measure is applicable to the following companies:
- Subject to the ordinary law moratorium provided for in Article L141 of the GTC, only undertakings in the sectors directly affected will benefit from the deferrals and moratoria due to Covid-19.
- The sectors directly affected include tourism (hotels, travel and accommodation agencies), transport and related activities.
Applications for moratoria submitted by undertakings affected by the crisis, although not falling within the aforementioned sectors, are assessed on a case-by-case basis. To add to that, the period of deferral or moratorium on payments to companies directly affected by the Covid-19 crisis is defined on a case-by-case basis.
The moratorium granted to companies affected by the crisis entitles them to the issue of a certificate of non-indebtedness (Attestation de Non Redevance) valid for one month, in accordance with the provisions of Article L94 of the Book of Tax Procedures.
Non-compliance with a payment deadline shall automatically render the moratorium or deferral null and void and shall result in the immediate reactivation of the collection measures forced by the tax collector.
Methods of Implementation
To benefit from the moratorium or a deferment of payment, an application must be made to the Director General of Taxes. These applications must comply with the conditions as stipulated in the circular No. 20/169/CF specifying the modalities of application of the fiscal measures to respond to Covid-19.
Companies must provide supporting evidence of the impact of the health crisis on the company’s financial situation, where the company does not fall within the above-mentioned sectors. Requests for a moratorium or deferment shall be processed within 72 hours, except where it requires a prior working session
- Support to enterprises’ cash flow through the special allocation of FCFA 25bn, for the clearance of stocks of tax credits on the Value Added Tax awaiting reimbursement
In order to support companies’ cash flow, a special fund of FCFA25bn is allocated to the reimbursement of VAT credits.
It should be noted that the competent services of the Directorate General of Taxes shall take the necessary steps to credit up to this amount to the escrow account dedicated to the reimbursement of VAT credits housed at the Central Bank (BEAC).
In addition, the operational tax departments will have to speed up the validation controls of those VAT credits that are still at their level and ensure that the corresponding files are forwarded to the division in charge of litigation at the General Tax Department for further processing
The question this poses is whether the special fund of 25bn will suffice to cover all the taxpayers who have stocks of VAT credit and are awaiting reimbursement.
The Director of Taxes of Taxes in an interview by a prominent local newspaper (Cameroon Tribune) noted that the difficulty is that there was a stock of VAT credits accumulated before the recent reforms; stock valued at approximately 25bn in mid-May. However, in the case where this does not suffice to cover all the taxpayers who have stocks of VAT credit awaiting reimbursement, hopefully further measures will be taken to this effect.
- Postponement of the Property Tax deadline for the 2020 fiscal year to September 30th, 2020
The deadline for payment of the property tax which is usually set at June 30th each fiscal year, as stipulated by article 579(1) of the GTC, is extended to September 30th, 2020.
Notwithstanding the postponement of the due date of the Property Tax, the distribution of pre-completed returns serving as a medium for payment of this tax will be able to begin as early as this month of June. The terms and conditions for the issue and payment of this tax remain unchanged
- Full deductibility of donations and gifts on the Corporate Income Tax (CIT) for companies who donate against Covid-19
The aim of this measure is to encourage companies to support in the fight against Covid-19 in Cameroon and give them the possibility to benefit from full deductibility of these expenses on their Corporate Income Tax.
Donations and gifts granted to the state or its branches within the framework of the fight against Covid-19 are fully deductible without any limitations. With regard to donations made to other organisations, their deductibility remains governed by the provisions of Article A-5 of the General Tax Code. This measure will be taken will be taken into account in the annual declarations of company results.
VII. Exemption from Hotel Tax for the remainder of the 2020 fiscal year
Accommodation establishments, whether classified or not, are exempt from hotel tax for the last three quarters of the 2020 financial year. Accommodation establishments, which are legally liable for this tax, no longer have to include the said tax in the invoices sent to their customers for the period in question.
This measure is applicable to the hotel tax due from March 1st 2020 until the end of the financial year 2020. In the case where it was previously collected from March 1st, it must be reimbursed and remains definitively acquired by the treasury insofar as it is a consumption tax which is borne by the customer. The implementation of this measure is immediate. It will be subject to subsequent regularization by ordinance or in the finance law.
We will finally note the following additional and custom measures:
- Exemption from Custom duties on all acquisitions of equipment, consumables and provision of services linked to the fight against Covid-19;
- Benefit from direct pickup, hoist pickup or pre-arrival declaration procedures for relief or humanitarian shipments ;
- Reduction of the requirement of certain commercial documents and procedures;
- RVC exemption;
- Acceptance of the documentation transmitted electronically (copies) in place of the originals subject to regularization if necessary;
- Acceptance of electronic invoices;
- Acceptance of copies of EUR1 movement certificate for the application of EPA tariff preferences;
- Acceptance of the system receipt in place of the original signed by the recipient subject to regularization;
- Suspension of the collection of interest for late payment of customs duties and taxes. Suspension for the period of three months of the payment of parking and demurrage charges in the Douala and Kribi ports for essential goods;
What impact will these measures have?
One issue that these measures will most likely bring about is how it will impact the state treasury. The need of the moment, unlike other distressing economic situations, is to rather have a more short/medium term focus than long-term one. The idea is to contain the economy and protect its people and their interests, by cohesively adopting such fiscal measures that support trade and industry, and ensure economic stability.
Now, the concern is that the interpretation and enforcement of these new measures could easily be the subject of controversy, and this may be rendered more challenging by the fact that some of the provisions of the General Tax Code are not exactly straightforward.
Will Cameroonian authorities maintain the kind of flexible approach which allowed the creation of the legal and operational conditions required for the successful implementation of these tax measures? And will they be willing to accommodate specific project needs with the passing of these tax measures? These questions will be answered soon enough, but there are reasons for a substantial amount of optimism.