Corporate Income Tax (CIT)
Who and what is liable?
Taxation principle is territoriality, place of registration, and residence
- Equatorial Guinea (EG) companies are taxed on the territorial principle.
- As a result, in principle, EG companies carrying on business outside EG are not subject to corporate income tax in EG on the related profits.
- EG companies are those registered in EG, regardless of the nationality of the shareholders or where the companies are managed and controlled.
- Foreign companies engaged in business in EG are subject to corporate income tax on EG-source profits.
- A legal entity present in EG for more than three months within a calendar year, or more than six months within two consecutive calendar years, and performing an economic activity or providing paid services in the country is considered as a resident for taxation purposes.
CIT tax highlights
Withholding Tax (WHT)
WHT exist for services performed by subcontractors of oil and gas companies. The Following rates are applicable:
- 25% rate applies to residents.
- 15% rate applies to nonresidents companies.
- 20% rate applies to nonresidents physical persons.
- 5% applies to mobilization, demobilization, and transportation.
- 15% and 20% rates above also apply outside the oil and gas sector.
- Taxation is final
- Withholding tax paid by residents who are physical persons or companies is considered a deductible charge.
Rates: 35% for residents
Minimum Tax: 3% of annual turnover for the preceding year, and cannot be less than XAF 0.8 million
- Minimum tax is paid in advance is payable by 31 March for preceding year activities
- Final Tax being Maximum between Minimum tax and CIT rate payable 15 days from the day following the date of receipt of the tax liquidation by tax office
- Tax return Tax returns must be filed by 30 April
- Taxable income is based on financial statements prepared according to OHADA (organization for the harmonization of business law in French-speaking Africa) standard
- Fiscal year starts from January 1st to December 31st
- Branch CIT rate is as per rate above. WHT of 25% is applicable on dividends paid to individuals or companies not having their usual domicile or headquarters in EG. Some restrictions exist for dividend earned from subsidiaries companies
- Double Tax Treaty with CEMAC countries reduces or exonerates Branch dividend tax
- Capital Gain is under CIT taxation, but can be deferred or eliminated in case of reinvestment.
- Losses are carried forward for 3 years
- Losses attributable to depreciation may be carried forward indefinitely.
- Losses may not be carried back.
- The statute of limitations period for CIT is 5 years following the year in which the tax was due.
Business expenses deductibility
Business expenses are generally deductible unless specifically excluded by law.
Here are some major restrictions and/or limitations:
- Head office overhead and remuneration for certain services (studies and technical, financial or administrative assistance) paid to nonresidents, if they are normal and substantiated are deductible
- The deductibility of the technical assistance made by the parent company to its subsidiary is limited to 50% of the intermediary tax result (accounting result plus potential fiscal reintegration).
- Commissions and brokerage fees exceeding 5% of purchased imports are not deductible
- Most liberalities, gifts and subsidies are not deductible.
- Fixed assets may be depreciated using the straight-line method at rates specified by the tax law(minimum, 5% to 100% Maximum)