By Achare Takor
An Overview of Section 124b of the General Tax Code
THUR 13 MAY, 2021-theGBJournal- Over the last decade, information technologies (IT) have revolutionized the way people and businesses carry out their daily activities worldwide. There is abundant evidence that the upsurge of technology has been a major contributor to fundamental economic change, notably the growth in global production and the distribution of intangible goods and services. As a result, the digital economy has become the new focus for economic growth in developing countries.
With ICT set to become the engine of development in Cameroon in its role as a hub in the Central Africa sub-region, the 2021 tax scheme has been updated to promote innovative ICT start-ups. Eligibility for the benefits of the start-up promotion scheme is subject to the consent of Approved Management Centres dedicated to start-ups. The specific obligations of the Approved Management Centres shall be specified by instrument issued by the Minister in charge of finance.
ICT start-ups whose status is confirmed by an approved management centres will be eligible to claim several incentives:
- a) During the incubation phase, which must not exceed 5 years, companies which fall under this category shell be exempt from all taxes, duties, levies and payments, except social security contributions
- b) At the end of the incubation phase, in the event of the sale of the start-up, a reduced capital tax gains rate of 10% – instead of the standard 16.5% – will be applied to the increase in the value of investments through the lifespan of ownership.
- c) If the company enters the operation phase at the end of incubation, it shall, for a period of five (5) years, benefit from:
– exemption from the business licence tax,
– exemption from registration fees on the incorporation, extension or capital increase instruments,
– exemption from all tax and employer’s charges on salaries paid to their employees except social security contributions,
– application of a reduced 5% rate of income tax on movable capital revenue on dividends paid to shareholders and interest paid to investors.
At the end of the fifth year of operation, ordinary tax law policies will become applicable.
The development of dedicated policy to support ICT start-ups signals commitment from the Cameroon government to development of the digital economy. If implemented properly, these tax incentives should attract investment to Cameroon. Secondary benefits of these policies include an increase in employment, capital transfers, research and technology development, and structural development in less-developed areas. Although it is difficult to approximate the value of these tax incentives in general, proper implementation is likely to improve overall economic welfare through increased economic growth and government tax revenue.
Achare Takor, Head of Intellectual Property Desk, Centurion Law Group
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