Corporate tax in Equatorial Guinea

Summary  
Corporate Income Tax Rate (%) 35 (a)
Capital Gains Tax Rate (%) 35 (b)
Branch Tax Rate (%) 35
Withholding Tax (%)
Dividends
25 (c)
Interest 25 (c)
Royalties from Patents, Know-how, etc. 10
Payments for Oil and Gas Services 5/6.25/10 (d)
Branch Remittance Tax 0
Net Operating Losses (Years)  
Carryback 0
Carryforward 3/5 (e)
    a) The minimum corporate tax is 1% of turnover. See Section B for details.
    b) In certain circumstances, the tax is deferred or reduced (see Section B).
    c) This tax is imposed on payments to nonresidents. For residents, the rate is 35%.
    d) This tax applies to payments for services performed by subcontractors of oil and gas companies. The 6.25% rate applies to residents. The 10% rate applies to nonresidents. The 5% rate applies to transportation, mobilization services (bringing a rig or vessel into Equatorial Guinea [EG]) and demobilization services (sending a rig or vessel out of EG) performed by nonresidents in EG.
    e) In general, companies may carry forward net operating losses for three years. However, companies operating in the hydrocarbon sector may carry forward net operating losses for five years.

Taxes on corporate income and gains

Corporate income tax. Equatorial Guinea (EG) companies are taxed on the territorial principle. As a result, 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.

Tax rate. The corporate income tax rate is 35%.

The minimum corporate tax is 3% of annual turnover for the pre­ceding year. The amount of this tax cannot be less than XAF800,000 (for further details regarding this tax, see Administration).

Capital gains. Capital gains are taxed at the regular corporate in­come tax rate. However, the tax can be deferred if all of the proceeds are used to acquire new fixed assets in EG within three years or in the event of a merger. If the business is totally or par­tially transferred or discontinued, only one-half of the net capital gains is taxed if the event occurs less than five years after the start-up or purchase of the business, and only one-third of the gains is taxed if the event occurs five years or more after the busi­ness is begun or purchased.

Administration. The tax year is the calendar year. Tax returns must be filed by 30 April. The minimum corporate tax must be declared and paid by 31 March of each year. The minimum corporate tax may be set off against the regular income tax payable for the same tax year.

Late payments and late filings of tax returns are subject to penal­ties. For the minimum corporate tax, the penalty equals 50% of the amount of the tax. For corporate income tax, the following are the penalties:

  • XAF200,000 per month of delay for the filing of the return. However, the total amount of the penalty cannot exceed 75% of the tax owed.
  • 50% of the amount not declared if the return has a shortfall that exceeds 1/10 of the declared profit. The penalty is increased to 100% in case of bad faith.

Dividends. Dividends paid to nonresidents are subject to a 25% withholding tax.

Resident companies normally include dividends received in taxable income. However, a parent company may exclude up to 90% of the dividends received from a 25%-owned subsidiary.

Foreign tax relief. EG does not provide relief for foreign taxes paid.

Determination of trading income

General. Taxable income is based on financial statements prepared according to generally accepted accounting principles and the rules contained in the general accounting chart of the Organization for Harmonization of Business Law in Africa (Organisation pour l’Harmonisation en Afrique du Droit des Affaires, or OHADA).

Business expenses are generally deductible unless specifically excluded by law. The following expenses are deductible only if they are normal and substantiated:

  • Head office overhead and re muneration for certain services (studies and technical, financial or administrative assistance) paid to nonresidents
  • Royalties from patents, brands, models or designs paid to a non-Economic and Monetary Community of Central Africa (Com-mun auté Économique et Monétaire de l’Afrique Centrale, or CEMAC) corporation participating in the management of, or owning shares in, the EG corporation

The following expenses are not deductible:

  • Rent expense for movable equipment paid to a shareholder hold­ing, directly or indirectly, more than 10% of the capital
  • A portion of interest paid to a shareholder in excess of the cen­tral bank annual rate and, if the shareholder is in charge of management, on the portion of the loan exceeding one-half of the capital stock
  • Commissions and brokerage fees exceeding 5% of purchased imports
  • Certain specific charges, penalties, corporate income tax and individual income tax
  • Most liberalities (payments that do not produce a compensatory benefit, such as excessive remuneration paid to a director), gifts and subsidies

Inventories. Inventories are normally valued at cost. Cost must be determined under a weighted average cost price method.

Provisions. In determining accounting profit, companies must es tablish certain provisions, such as a provision for a risk of loss for certain expenses. These provisions are normally deductible for tax purposes if they provide for clearly specified losses or expenses that are probably going to occur and if they appear in the financial statements and in a specific statement in the tax return.

Capital allowances. Land and intangible assets, such as goodwill, are not depreciable for tax purposes. Other fixed assets may be depreciated using the straight-line method at rates specified by the tax law. The following are the straight-line depreciation rates for major categories of assets.

Asset Rate (%)
Buildings 5 to 20
Plant and machinery, and transportation equipment 5 to 100
Office equipment 10 to 15

Relief for losses. In general, companies may carry forward net operating losses for three years. However, companies operating in the hydrocarbon sector may carry forward net operating losses for five years. Losses attributable to depreciation may be carried forward indefinitely. Losses may not be carried back.

Groups of companies. EG law does not allow the filing of con­solidated tax returns or provide any other form of tax relief for groups of companies. However, the OHADA Uniform Act on Accounting Law contains the principle of consolidated financial statements.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax; imposed on transactions
performed in EG that are not subject
to the oil and gas sector withholding
tax (see Section A)
General rate 15
Reduced rate 6
Specified products 0
Social security contributions; imposed on salaries; paid by:
Employer 21.5
Employee 4.5
Worker Protection Fund and Professional
Training Fund; imposed on salaries;
paid by
Employer (on gross salary) 1
Employee (on net salary) 0.5

Foreign-exchange controls

The EG currency is the CFA franc BEAC (XAF).

Exchange-control regulations exist in EG for financial transfers in the franc zone which is the monetary zone including France and its former overseas colonies. In the franc zone, transactions from XAF1 million to XAF10 million require a preliminary declaration to the Ministry of Finance. Outside the franc zone, a preliminary authorization from the Ministry of Finance and Budget is required for any transaction exceeding XAF10 million.

Tax treaties

EG has entered into the tax treaty of the former Central African Economic and Customs Union (Union Douanière et Économique de l’Afrique Centrale, or UDEAC).