Over the last decade, information technologies have revolutionised the way people and businesses carry out their daily activities worldwide.
There is abundant evidence that the upsurge in 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 Cameroun, in its role as a hub in the Central Africa sub-region, the 2021 tax scheme has been updated to promote innovative ICT startups.
Eligibility for the benefits of the startup promotion scheme is subject to the consent of Approved Management Centres dedicated to startups.
The specific obligations of the Management Centres shall be specified by instrument issued by the minister in charge of finance.
The ICT startups, whose status is confirmed by Approved Management Centre, will be eligible to claim several incentives:
Firstly, during the incubation phase, which must not exceed five years, companies which fall under this category shall be exempt from all taxes, duties, levies and payments, except social security contributions.
Secondly, at the end of the incubation phase, in the event of the sale of the startup, a reduced capital tax gains rate of 10 per cent – instead of the standard 16.5 per cent – will be applied to the increase in the value of investments through the life span of ownership.
Third, if the company enters the operation phase at the end of incubation, it shall, for a period of five years, benefit from: exemption from the business licence tax, and exemption from registration fees on the incorporation, extension or capital increase instruments.
As well as exemptions from all tax and employer’s charges on salaries paid to their employees except social security contributions; application of a reduced five per cent 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 startups signals commitment from the Cameroun government to develop the digital economy. If implemented properly, these tax incentives should attract investment to Cameroun.
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.
Takor is Head of Intellectual Property Desk, Centurion Law Group
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