The 2020 budget adopted by the National Assembly of Côte d’Ivoire earmarks roughly CFA8trn ($13.8bn), representing an increase of 9.9% compared to the 2019 budget of CFA7.3trn ($12.5bn). According to government forecasts, this figure will remain steady at CFA8trn ($13.8bn) in 2021 and reach CFA9trn ($15.5bn) in 2022.
Tax revenue in 2020 is expected to total CFA3trn ($5.2bn), up CFA381.8bn ($656.3m), or 10.7%, compared to the estimate made at the end of 2019. This breaks down as follows:
• Tax revenue of the General Tax Directorate ( Direction Générale des Impôts, DGI): CFA2trn ($3.4bn), up 12.9% compared to the estimate at the end of 2019 and representing 56.3% of total tax revenue. This mainly comprises taxes on income and salaries (CFA605.6bn, $1bn); value-added tax (VAT) (CFA533.9bn, $917.8m); industrial and commercial benefits (bénéfices industriels et commerciaux, BIC) tax, excluding oil and gas (CFA414.4bn, $712.4m); tax on income from movable capital (CFA147.5bn, $253.6m); oil and gas revenue (CFA91.4bn, $157.1m); registration and stamp duties (CFA129.3bn, $222.3m); taxes on banking operations (CFA85bn, $146.1m); and taxes in the telecommunications sector (CFA98.8bn, $169.8m);
• Tax revenues of the General Directorate of the Treasury and Public Accounting: CFA12.1bn ($20.8m), including CFA10.9bn ($18.7m) in taxes on income and wages; and
• Tax revenue of the General Directorate of Customs: CFA1.7trn ($2.9bn), up 8.1% compared to CFA1.5trn ($2.6bn) in 2019, which includes import taxes on general goods (CFA993.6bn, $1.7bn), export taxes (CFA419.2bn, $720.6m) and import taxes on petroleum products (CFA289.6bn, $497.8m). The Finance Law No. 2019-1080 on the management of the state budget for 2020 was published in the Official Gazette No. 21 of December 27, 2019. In accordance with the provisions of Article 1 of Decree No. 61-175 of 1961, the provisions contained in the tax schedule took effect on January 2, 2020, as confirmed by a 2019 memorandum from the director-general of taxes.
The 2020 Finance Law is in line with the Ivorian government’s vision outlined in the National Development Plan, which aims to accelerate the industrialisation and transformation of the Ivorian economy, as well as encourage the gradual compliance of national legislation with the international commitments undertaken by Côte d’Ivoire. This article outlines the strategic measures in the 2020 Finance Law related to:
• Improvements in the productivity of certain sectors of activity;
• Job creation measures;
• The reduction of regional disparities; and
• The progressive compliance of national legislation with the international commitments undertaken by Côte d’Ivoire.
Measures Under the Strategic Taxes
Tax measures have been taken in favour of employment. Article 1 of the tax appendix to the 2020 Finance Law makes three major changes to the tax incentives for job creation and training by apprenticeship contract, referred to, respectively, in Articles 111 and 111 bis of the French General Tax Code. These measures include:
• The introduction of tax credit for job creation through the hiring of Ivorians on fixed-term contracts (contrat à durée déterminée, CDD);
• Increasing the amount of the tax credit for apprenticeship contracts made with disabled persons; and
• Reversal of tax credits charged in the event of dismissal.
Job Creation Tax Credit
Previously, the tax credit was only granted for the conclusion of open-ended contracts. It was set at CFA1m ($1720) per job created and CFA1.5m ($2580) for persons with disabilities. Article 1 of the Fiscal Annex 2020 now grants tax credit in the amount of CFA500,000 ($860) per CDD that is concluded on December 31 of each year. This is only applicable once per person that has a contract with a consecutive duration of 12-24 months. However, there is still the question of whether the company will benefit from a second tax credit if the contracts of the employees concerned subsequently become permanent contracts.
Tax credit is available for an apprenticeship contract entered into with a person with a disability. The tax credit granted in this context is:
• CFA750,000 ($1290) for companies under a real tax system; and
• CFA150,000 ($258) for companies subject to the synthetic tax system. The amount of the tax credit initially granted was fixed at CFA500,000 ($860) and CFA100,000 ($172), respectively, for firms subject to a real tax scheme and firms subject to synthetic tax.
Article 13.1 of the Ivorian Labour Code defines an apprenticeship contract as a contract by which the head of an industrial, commercial or agricultural establishment, a craftsman or a manufacturer undertakes to provide methodical and comprehensive vocational training to another person, and by which the latter undertakes, in return, to comply with the instructions he or she receives and to carry out the work entrusted to him or her with a view to his or her training.
For disabled persons, the administrative commentary on Article 1 of the 2017 tax schedule refers to Article 1 of Act No. 98-594 of November 10, 1998 on guidance for disabled persons. This text defines disabled persons as those with physical, mental, visual, auditory impairments or cerebral palsy, and whose physical or mental integrity is temporarily or permanently diminished, either congenitally or as a result of illness or accident, in such a way as to impair their autonomy, or their ability to attend school or to hold a job.
The provisions relating to the number of posts to be created on 31 December of each year, the place where the apprenticeship period takes place and the means of declaration of the appropriation remain unchanged.
Reversal of Tax Credits in Layoffs
The dismissal of any beneficiary occurring within a period of 24 months from the date of the permanent contract entails the repayment to the Treasury of the amount of the tax credit previously deducted. In our opinion, this repayment should be made through the payment of additional income tax.
Similarly, any recruitment to replace the person made redundant must be justified by an improvement in the economic situation of the undertaking.
The rules on the number of posts to be created and the administrative documentation remain unchanged.
Indeed, the number of jobs to be created on December 31 must not be less than five for large companies and two for small and medium-sized enterprises (SMEs) – that is, companies with an annual turnover of less than CFA1bn ($1.7m).
Similarly, the determination of the tax credit must be made by means of a statutory declaration, which is accompanied by an employee registration certificate issued by the National Social Security Fund, a medical certificate and a document issued by the Ministry of Employment, Social Affairs and Vocational Training that attests to a physical or intellectual disability. The declaration shall be filed at the same time as the statement of results.
The tax credit referred to above remains non-refundable and non-deferrable. It can be offset against the income tax or the flat-rate minimum tax, payable in the year in which it is obtained.
Regarding taxpayers subject to the synthetic tax, the tax credit is in principle deducted from the wage tax contributions (employer’s contribution and national contribution for the economic, cultural and social development of the nation).
Support For Agro-Processing
Article 2 of the Fiscal Annex 2020 establishes a favourable tax regime for the benefit of enterprises engaged in the processing of agricultural products into finished products. The scheme consists of exemption from certain taxes and duties granted to enterprises that are engaged in these activities:
• The tax on banking operations (TOB) on loans for the installation of units for processing agricultural products into finished products; and
• The patent contribution and property tax on facilities assigned to the processing of agricultural products over a period of five years from the end of the investment programme. This measure is in line with the Ivorian government’s objective to encourage the processing of agricultural products into finished products before export. The measure is, however, subject to substantive and formal conditions.
Eligible investment programmes are those leading to the creation of a new undertaking for processing agricultural products into finished products or the creation of a new branch for processing agricultural products by an existing undertaking.
The scheme excludes investments made for the renewal or modernisation of the equipment of an existing processing unit or for the extension of its processing capacity. The same applies to second-hand goods.
The benefit of these tax benefits is subject to the approval of the director-general of taxes, upon presentation of an investment programme providing all the necessary details on the nature, size and cost price of the investments.
Once approval has been obtained, the investment programme must be carried out within two years, starting on December 31 of the year during which it is approved.
Firms holding approval are required to produce a declaration of completion within two months from the end of the completion of their investments, with a summary statement of the investments made.
If the approved programme is modified (such as an extension of investments) during its implementation, a new programme for the new investment tranche will have to be submitted for approval.
The benefit of this system is reserved for companies with regular and complete accounts that can be used as evidence in the courts of law and which have a regular tax situation.
In the event that the assets giving rise to the benefits are disposed before the end of a period of five years, the unpaid taxes will be claimed immediately.
In the event of non-compliance between the declarations and the investments actually made, the benefits are cancelled and the unpaid taxes are immediately claimed.
It is specified that taking advantage of this mechanism does not exclude the application of the more favourable provisions of the Investment Code. This means that the taxpayer has the right to opt for the benefit of the more advantageous provisions of said code, where applicable.
Each taxpayer is therefore free to choose the scheme they wish to benefit from; that is, the General Tax Code or the Investment Code.
Article 4 of Ordinance No. 2018-646 of 2018 on the Investment Code states that taxpayers may not benefit from the advantages provided by both systems at the same time.
Reducing Regional Disparaties
There are fiscal measures in place to support the policy of reducing regional disparities. Article 3 of the Fiscal Annex 2020 provides incentives for property development companies investing outside the district of Abidjan. The Abidjan Autonomous District is composed of the cities of Abidjan, Anyama, Bingerville, Brofodoumé and Songon.
These measures, which aim to reduce regional disparities, concern taxes on BIC and the contribution of patents.
The preferential arrangements applicable until December 31, 2023 are as follows:
• Exemption from the BIC tax on the proceeds from the sale of housing built before January 1, 2024 by real estate development companies, outside the district of Abidjan, over a period of five years. The tax schedule does not specify the means of proof of the date that the construction of the buildings was completed.
In the absence of requirements from the administration, it is therefore up to the taxpayers concerned to keep at the disposal of the administration a documented file attesting to the completion date – which must be before January 1, 2024 – and that the place of construction is outside the perimeter of the district of Abidjan.
This exemption does not, however, apply to income from the sale of land, which is an important part of the activities of real estate companies.
Companies that set up before January 1, 2024 and outside the district of Abidjan, whatever the nature of their activities, when the amount of investment made is equal or superior to CFA1bn ($1720), excluding taxes, are exempt from the contribution of patents for a period of five years.
The BIC tax exemption is reserved only for real estate development companies, while the exemption for the patent tax is available to all companies provided that they make the minimum investment required.
The fact that these provisions are aimed at companies that set up outside the Abidjan Autonomous District leads to the presumption that the measures are applicable only to companies whose head office is located outside the district of Abidjan.
The benefit of this measure does not exclude the application of more favourable provisions in the Investment Code.
The text of the tax appendix seems to allow for an accumulation of these advantages along with those of the Investment Code.
However, Article 4 of the Investment Code expressly excludes any possibility of cumulating the advantages resulting from these two schemes.
It should be noted that the exemptions in the Investment Code mainly concern the contribution of patents, but also the BIC tax, the employer’s contribution (excluding Vocational Training Development Fund taxes), VAT (under domestic rules and for imports of equipment needed to carry out the approved programme) and the TOB.
There are a number of tax measures in favour of the pharmaceuticals industry. Article 4 of the 2019 tax schedule exempts pharmaceutical companies from Customs duties and VAT, the acquisition of needed equipment, materials and tools with their spare parts, and the inputs that are necessary for both the manufacturing and packaging of medicines.
This new measure aims to promote the installation of drug manufacturing units in Côte d’Ivoire in order to reduce their costs.
The benefit of these advantages does not preclude the application of the more favourable provisions of the Investment Code, without the possibility of accumulation.
However, the text of the fiscal annex seems to institute an accumulation of the measures of the General Tax Code and the Investment Code. In our opinion, this requires administrative clarification.
Research & Development
There is a business tax regime for research, development and technological innovation activities.
Article 5 of the Fiscal Annex 2020 grants tax benefits to private companies carrying out research, development and technological innovation activities. According to the text, the research and innovation activities covered by the tax benefits are:
• Basic research, which refers to theoretical or experimental contribution to the solution of technical problems;
• Applied research, which refers to possible application of the results of basic research or the invention of new solutions; and
• Experimental development, which covers prototypes or pilot installations. The measure benefits private companies that allocate at least 15% of their costs exclusively to research and development activities. By expenses, we understand that it concerns all operations that are classified as Class 6, excluding, of course, provisions and depreciation.
The incentive scheme also extends to natural or legal persons who make a profession of taking shares in the capital of private companies engaged in research, development and innovation in order to then resell them.
The tax advantages offered by this scheme reach two groups:
• The private companies carrying out research, development and technological innovation activities; and
• Individuals or legal entities that are investing in the capital of the said companies.
Côte d’Ivoire’s international commitments have been taken into account in tax legislation.
The 2020 Tax Annex introduced a number of measures to improve the tax transparency framework in Côte d’Ivoire.
As a reminder, since the 2017 fiscal year, the Ivorian legislature has been working to harmonise and bring its domestic standards into line with international standards and commitments on tax transparency.
A mechanism to combat erosion of the tax base and transfer of profits has been developed. Article 23 of the Fiscal Annex 2020 provides details on the provisions relating to the country-by-country declaration.
Article 14.2 of the Fiscal Annex 2018 requires multinational companies that are established in Côte d’Ivoire and control companies that are located outside Côte d’Ivoire to file a country-by-country declaration of group profits and various economic, accounting and tax aggregates.
The Ivorian parent companies of multinational groups, which have achieved a turnover before tax of €750m or more for the fiscal year, are subject to this obligation.
As stated, this provision was confusing as to the fiscal year to be considered in determining whether or not an Ivorian parent company is subject to the obligation to file the return on a country-by-country basis.
In order to overcome the differences in interpretation, the director-general of taxation has previously provided clarifications in Memorandum No. 1606/ SEPMBPE/DGI/DLCD/SDCFI dated May 7, 2019.
According to the provisions of the memorandum, the country-by-country declaration is to be filed by all Ivorian parent companies of a multinational group, when it declared during the previous fiscal year a consolidated turnover before tax greater than or equal to the aforementioned threshold.
In order to ratify this position of the tax authorities, the legislator has amended Article 36 bis of the General Tax Code by modifying the first indent of paragraph 2 of the aforementioned article to read as follows: “Achieve consolidated revenues excluding taxes of at least €750m for the fiscal year preceding the fiscal year subject to declaration”.
In sum, when a company has realised and declared consolidated pre-tax sales equal to or greater than the threshold in question during a given fiscal year, the company is required to file a country-by-country declaration for the following fiscal year.
On March 30, 2020 the government announced the following tax relief measures in order to address the impact of the Covid-19 pandemic on taxpayers:
• The suspension of tax audit procedures for a threemonth period;
• A reduction of transport business licences by 25%;
• The postponement of payment for three months of: ◊ Flat-rate taxes for small traders and craftsmen (particularly for restaurants, nightclubs, pubs, cinemas and places of entertainment); and ◊ Taxes, duties and social contributions in case of cash flow difficulties encountered by companies; and ◊ Taxes on capital income for companies operating in the tourism and hotels sector that are experiencing economic difficulties.
• Exemption from import duties and taxes on health equipment, materials and other health inputs related to the fight against Covid-19;
• Penalty waiver for delays in the execution of public contracts and orders with the state and its branches during the crisis period;
• Reimbursement of VAT credits within two weeks by a lightening of Customs controls prior to import and the strengthening of Customs controls after import;
• Payment of public debt, especially to companies affected by the crisis, with priority for invoices under CFA100m ($171,900) in order to reach the maximum number of companies, especially SMEs;
• The reorganisation for payments of storage fees at the Port of Abidjan and the Port of San Pedro during the period of the pandemic in order to defer penalties in cases of deadlines that have been exceeded related to storage and stevedoring activities.
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