Congo. Finance. on the real. (i.e. taxation. value) a deemed. paid, the real value, inclusive of. The draft. (new form. of the corporate.

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1 TSNewsalert Republic of Congo: Draft 2013 Finance Act The draft 2013 Finance Act includes several measures which, if adopted, will change the Congolese fiscal environment. This TSNewsalert summarizes the main changes included in the 2013 Finance Act. Tax Services (TS) Newsalert, Republic of Congo October 2012 Personal Income Tax Housing benefits granted to employees Concerning housing benefit, the draft Finance Act substitutes, from an individual income tax perspective, to the existing system (i.e. taxation on the real value) a deemed one (i.e. taxation on 15% of the gross salary) and, from a corporate income tax perspective, prohibits the deductibility of the difference between the real value, inclusive of ancillary rental charges, and the deemed 15% of gross salary. If adopted, said change will: For the employee: result in a reduction of the amount of individual income tax paid, For the employer : reducee the amount of the tax on salaries (i.e. Taxe Unique sur les Salaires ) but increase the taxable profit because of the reintegration of the differencee between the real value, inclusive of ancillary rental charges, and the deemed 15% of gross salary. Corporate Income Tax Reduction of tax rate In continuity with previous Finance Acts, the draft Finance Act reduces the corporate income tax rate from 34% to 33%. Corporate income tax return form The draft Finance Act states thatt for fiscal year 2013, companies will have to use the new CEMAC corporate income tax return form whichh has been modified to be compliant with Congolese tax law (new form for the determination of the corporate income tax basis and new tax balances for debts and liabilities). Introduction of a specific taxation regime to holding companies The draft Finance Act introduces a new taxation regime applicable to holding companies incorporated in Congoo complying with certain conditions.

2 Introduction of a tax group regime The draft Finance Act introduces, upon option and under certain conditions, a new group taxation regime. Under the new regime the taxable profits of the group s companies would be consolidated at the level of the holding company which also would pay the tax due. 5% withholding tax The draft Finance Act extends the application of the 5% withholding tax to companies regrouping professionals and increases penalties in case of non-payment. Capital gains realized by non-residents on transfers of shares of Congolese companies The draft Finance Act clarifies the taxation regime applicable to capital gains realized by non-residents on transfers of shares of Congolese companies. The new measures fix the applicable rate at 20%. Furthermore, the payment of capital gain tax has to be paid on the day the registration of the transfer of the considered shares takes place and all, seller and buyer and the company which shares are transferred, are jointly and severally liable for levied tax. Withhodling tax on payments made by building and public work companies to their subcontractors The draft Finance Act introduces a withholding on payments made by building and public work companies to their subcontractors, including to engineering offices, at the following rates: 3% for subcontractors taxable on their net profit, 10% for subcontractors taxable on a deemed profit ( Régime du forfait ). Non-observances, omissions or underpayments are sanctioned by a five million (5,000,000) CFA Francs fine and by the non-deductibility of the amounts so paid. Late payments are sanctioned by a 2% penalty per month or portion of month with a maximum of 100%. For the considered subcontractors, said withholding is considered as an instalment of tax. Business tax for ship owners working for oil companies The draft Finance Act adds a one thousand (1,000) CFA Francs CFA per ton of gross tonnage for business tax calculation purpose for ship owners working for oil companies. Introduction for foreign companies operating under a temporary license regime of a tax fine for failure of filing the annual statement of salaries and other remuneration for services paid The draft Finance Act introduces a five million (5,000,000) CFA Francs fine for foreign companies operating under taxation temporary license and governed by the article 126 ter of the General Tax Code, for failure to file the annual statement of salaries and other remuneration for services paid. October

3 Tax audit and communication right Debarment of the right to introduce a claim with the Tax Administration in the absence of answer to a tax reassessment notice The draft Finance Act organizes a debarment of the right to introduce a claim with the Tax Administration ( Requête introductive d instance ) for taxpayers which have either not answered to a tax reassessment notice or which have refused by bailiff act to receive such a tax reassessment notice. Strengthening of the communication right of the Tax Administration The draft Finance Act strengthens the communication right of the Tax Administration by requiring taxpayers to provide hard or soft copies of documents subject to this right. Introduction of a tax audit settlement procedure The draft Finance Act introduces a tax audit settlement procedure allowing taxpayers to ask for a reduction of all or part of penalties before recovery proceedings or during the course of a claim regularly introduced. Adjustments and deductions of revenues and charges The draft Finance Act provides that within tax audit operations: charges which remain unpaid two years after their booking are added back to the taxable profit of the first year subject to tax audit even if said charges have been recorded during a fiscal year which is statute bared effective or which has been already audited, except for capital gains, revenues which remain non collected two years after their booking are deducted from the taxable profit of the first year subject to tax audit even if said revenues have been recorded during a fiscal year which is statute bared effective or which has been already audited. Introduction of jointly and severally obligation for payment of tax The draft Finance Act provides that payment of tax collection notices ( Avis de mise en recouvrement ) can be recovered not only with the taxpayer whose name is mentioned on said bill but also with the tax bearer, its representatives or successors. Changes with regard to dividend tax («Impôt sur le Revenu des Valeurs Mobilières - IRVM») The draft Finance Act extends the application of the dividend tax (IRVM) to revenues which are deemed to be distributed. As a result, amounts added back to the taxable profit within a tax audit procedure are deemed to be distributed if they do not remain invested in the considered company. Introduction of tax incentives in favour of micro finances activities The draft Finance Act introduces various tax incentives in favour of micro finance activities and namely declining rebates on taxable profits and a 50% rebate on the basis of calculation of the tax on rental value of premises used for business purpose ( Taxe sur la valeur locative des locaux professionnels ). October

4 Introduction of a specific tax on alcoholic beverages and on tobacco The draft Finance Act introduces a specific tax on alcoholic beverages (twenty-five (25) CFA Francs per bottle) and on tobacco (fifty (50) CFA Francs CFA per pack), to be paid by the local producer or the importing company. Introduction of new measures regarding payments The draft Finance Act introduces new measures to channel payments through the banking system and namely the following: Obligation to make payments through banks above certain thresholds, except for inter-enterprises payments which must be channelled through banks regardless of their amounts; failing to the considered payments will be disregarded as deductible expense for tax purpose, And obligation to declare to the Tax Administration any opening of a bank account; failing to payments made will be disregarded as deductible expense for tax purpose. 5% customs duties reduced rate The draft Finance Act introduces, as an exceptional measure, a 5% custom duties reduced rate for all existing tax agreements ( Convention d établissement ), derogating to the investment code, to the custom duties code or to the general tax code, except for convention which have been ratified by law. Enterprises benefiting from such tax agreements remain liable for the payment of the computer fee levy ( Redevance informatique ) as well as for levies for financing supranational organizations (OHADA and CEEAC levies). Obligation to insure imports The draft Finance Act requires imports to be insured with an insurance coverage subscribed with an agreed/licensed insurance company. Customs clearance of imported goods The draft Finance Act rationalizes the various taxes, levies and others payments due on imported goods by limiting the number of such taxes, levies and other payments. Abolition of the professional trader card ( carte professionnelle de commerçant ) The draft Finance Act abolishes the trade license; since this is now established by the registration with the company register. Temporary authorizations to carry out activity ( Autorisations temporaires d exercer ATE ) The draft Finance Act limits to twelve (12) months, continued or not, the possibility for non-resident companies to carry out activities under the temporary regime in Congo. After twelve (12) months, the considered companies must be registered with the Congolese companies register either by opening a Congolese branch of a foreign company the duration of which is limited to two (2) years unless extended by authorization of the authorities, or by incorporating a Congolese company. October

5 In addition, the draft Finance Act increases the fee to be paid to obtain temporary authorizations up to ten million (10,000,000) CFA Francs for the first application and up to twenty-five millions (25,000,000) CFA Francs for the renewal. Contacts If you would like to discuss the implications for your organisation, please contact your usual PwC adviser or: PwC Republic of Congo Prosper Bizitou Emmanuel Le Bras Moïse Kokolo This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PwC. All rights reserved. Not for further distribution without the permission of PwC. PwC refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm s professional judgment or bind another member firm or PwCIL in any way. October

TSNewsalert. Taxable income brackets. From 1 to CFA Francs 1% From to CFA Francs 10%

TSNewsalert. Taxable income brackets. From 1 to CFA Francs 1% From to CFA Francs 10% www.pwc.com TSNewsalert Republic of Congo: main changes included in the 2014 Finance Act Tax Services (TS) Newsalert, Republic of Congo January 2014 Law No. 34-213 dated December 30, 2013, relating to