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

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

  • Head office overhead expenses pertaining to the Cameroon business and payments in remuneration for services (including research, technical, financial and accounting assistance) provided to Cameroonian firms by non-resident natural persons or legal entities are deductible up to a maximum of 2.5% of taxable profits before deducting such expenses. The deduction cap is fixed at 1% of turnover exclusive of tax for public works businesses, and 5% of turnover exclusive of tax for engineering-consultancy firms. In case of loss years, the 2.5% taxable profits cap is computed by reference to the most recent profitable year not yet covered by the statute of limitations. The limitation did not apply to technical assistance in connection with plant assembly. However, this carve out was removed by the Finance Law 2020, and technical assistance fees in connection with plant assembly are henceforth subject to the limitation. Note that there is no minimum holding threshold for parties to be deemed related for the purposes of this limitation: parties are deemed to be related and the deduction caps shall apply wherever a direct or indirect legal or factual dependency between the parties is deemed to exist. Finally, unless a tax treaty provides otherwise, the non-deductible portion is classified as a constructive distribution and is subject to withholding tax;
  • Royalties paid to a related party outside of the Economic and Monetary Community of Central Africa (CEMAC), which directly or indirectly manages or owns shares in the Cameroonian company, are deductible up to an overall limit of 2.5% of the taxable income before deduction of expenses;  
  • Rent paid for movable equipment to a shareholder that manages the company or holds directly or indirectly more than 10% of the capital of the company is not deductible;
  • Interest paid in excess of the rate of the Bank of Central African States (BEAC) plus 2 percentage points is not deductible for tax purposes (see other limitations to the tax deduction of the interest expense in Sec. 12.2.1.);
  • Commissions and brokerage service fees exceeding 5% of purchased imports and sales of exports are not deductible;
  • Payments to residents of tax havens are not deductible, except, effective 1 January 2018, payments relating to the purchase of goods produced in a tax haven (see Sec. 12.5.);
  • Amounts set aside for self-insurance are not deductible;
  • Gifts and subsidies exceeding 5% of the turnover of the clubs participating in official national competitions and the bodies in charge of such competitions are not deductible;
  • Bad debts are not deductible unless the debtor has extinguished all recovery avenues provided for under the guidelines of the OHADA Uniform Act relating to the organization of simplified procedures for collection and enforcement. However, effective 1 January 2022, the obligation to justify the exhaustion of the means of recovery does not apply for smaller debts not exceeding XAF 50,000 that have been provisioned over a minimum period of 5 years;
  • Effective 1 January 2021, losses due to damages and breakages incurred by companies in the brewing sector in excess of 0.5% of the total production volume are not deductible;
  • Penalties or fines are not deductible; and
  • Expenses paid in cash in excess of XAF 500,000 are not deductible.

As from 2017, damages to inventory and business assets are deductible only if supported by an expert’s report and actually inspected by a tax administration official of a certain rank. Effective from 1 January 2022, gifts and donations made by companies are fully deductible without any cap.

Note that excessive payments to non-residents, including royalties, service fees, or head office expenses, the deduction of which are disallowed for corporate tax purposes, are reclassified as constructive profit distribution and subject to withholding tax at the rate applicable to dividends and similar distributions.