The recent 2018 financial law has introduced a new set of legislations that aim to modernise international taxation in Côte d’Ivoire, and more specifically, to strengthen the domestic rules on transfer pricing. In that regard, the country has positioned itself on the OECD rules on base erosion and profit shifting (BEPS) by adopting two key measures. First, multinational enterprises that meet certain requirements shall now file a country-by-country return. Second, thin capitalisation rules will now apply to loan arrangements set up with a foreign parent company.
Legal Changes In 2017
Before 2017, transfer pricing issues in Côte d’Ivoire were dealt with by Article 38 of the General Tax Code and Article 50 BIS of the Tax Procedure Book. These two provisions did not refer directly to a formal transfer pricing documentation procedure nor any thin capitalisation rule to limit the deductibility of the interest. The tax administration was therefore reassessing the taxpayers, based on an extensive interpretation of these two provisions.
Starting in January 2017, Article 15 of the tax annexure of the Financial Law introduced a new piece of legislation that clearly requires a transfer pricing documentation system to be put in place by all Côte d’Ivoire-based corporations engaged in non-arm’ slength transactions with foreign corporations. It also introduced a transfer pricing tax return to be filed with their financial statement.
Updates In 2018
The tax annexure of the 2018 Finance Law has provided additional provisions to complete the 2017 transfer pricing legislation and provide the country with a comprehensive and more complete framework on transfer pricing matters.
From now on, under the combined 2017 and 2018 pieces of new legislation, any Côte d’Ivoire-based corporation that is engaged in a non-arm’s-length transaction will fall under the newly enacted transfer pricing rules. Concerning what will be considered as non-arm’s length, this will include any transaction that took place between a Côte d’Ivoire entity and a foreign one that has a link of ownership, either directly or indirectly, of any means. The percentage of shares held is irrelevant. As soon as there is an ownership relation, of even less than 1% directly or indirectly, the transaction will trigger exposure to transfer pricing rules and shall be reported in the annual transfer pricing return. Transfer pricing exposure may also be triggered in the absence of a link of ownership if a foreign entity dealing with a Côte d’Ivoire-based entity can exercise substantial influence on the latter and vice versa. Under the current state of the domestic legislation in Côte d’Ivoire, transfer pricing rules can be summarised as follows: 1. Transfer pricing documentation requirement: Since January 2017 Côte d’Ivoire-based corporations are required to put in place formal transfer pricing documentation based on the OECD model and adopt guidance principles to substantiate the price determination for all the controlled transactions. They are also required to file an annual transfer pricing return along with the financial statements.
2. Country-by-country reporting: There is a new requirement for corporations to file a country-by-country report for groups of companies having, among other conditions, an aggregate worldwide turnover exceeding €750m.
3. Thin capitalisation rules: The new rules set by Article 14 of the tax annexure of the 2018 Financial Law has established new thin capitalisation rules in Côte d’Ivoire.
There will be a limited deductibility for interest paid to foreign parent corporations when one of the following conditions are met:
• The debt/equity ratio shall not exceed one;
• The interest rate shall not exceed by over two points the prime rate of the West African Central Bank; or
• The loans shall be reimbursed within five years from the date of its generation.
4. New definition of tax haven: Tax havens now include the following three groups: countries defined as such by the OECD; countries on the EU’s list of tax havens; and countries defined as such by Côte d’Ivoire. Nevertheless, a country may be designated as a tax haven either by the OECD and the EU and excluded from the list of Côte d’Ivoire’s tax havens if such a country has concluded a tax treaty or information exchange agreement with Côte d’Ivoire.
5. Additional anti-avoidance rules for corporation located in tax havens: Any transaction with a corporation located in a tax haven will trigger transfer pricing exposure and will be subject to documentation requirements, regardless of whether or not the entities involved are related or members of the same group. Also, an increased tax rate will apply to all profits and/or payments derived from a transaction that happened between a Côte d’Ivoire-based corporation and a foreign entity located in a tax haven, as defined by Article 14 of the tax annexure of the 2018 Financial Law.
Potential Impact
With these new sets of legislations, it is clear that Côte d’Ivoire, like many other West African countries, has taken an important step forward in building a strong legal framework on transfer pricing to protect its taxable base and increase the tax revenue necessary to fund its increasing social needs. This new piece of legislation is a good starting point.
The tax administration shall provide training and build strong technical capabilities to enable a fair and smooth application of this important legislation. The digitisation of the compliance process will be, more than ever, one of the key success factors in the implementation of a comprehensive and efficient transfer pricing legislation.
Foreign Workers
Côte d’Ivoire is endowed with significant human resources, compared to a number of African countries. With regard to the development of their activities, Ivorian companies may have the need for skills unavailable in the local labour market, and may sometimes seek recourse by employing foreign personnel. This is the case in specific sectors such as mining and oil exploitation, where there is a need for a qualified and experienced labour force. This option is possible in Côte d’Ivoire, as long as certain rules are respected, most noticeably via compliance with a quota, within certain sectors. In general, a working permit or visa through a Youth Employment Agency (former AGEPE) is demanded after three months of employment. It is therefore not necessary for assignments lasting less than three months.
Fees For Agepe Visa
The fees that can be charged for employment of foreign workers are as follows.
For an employee of African origin:
• Fixed-term contract: one-half of a month’s salary;
• Permanent contract: three-fourths of a month’s salary For an employee of non-African origin:
• Fixed-term contract: One month’s salary;
• Permanent contract: 1.5 months’ salary OBTAINING AN ENTRY AUTHORISATION: To enter Côte d’Ivoire, foreigners from outside the Economic Community of West African States must request a visa, which are delivered by all embassies or consulates of Côte d’Ivoire abroad. The first application is limited to 90 days, and for this there are fees payable to a specialised administrative body. Since January 2014, a new e-visa system allows for travel to Côte d’Ivoire without a visa, then requesting one upon arrival to the airport (a flying visa or “visa volant”). For long-term stays, the expatriate may request a multiple-entry visa that will allow him to enter and exit the territory at his discretion.
Soliciting Delivery Of Residency Permit
undefined After accumulating three months of presence on Ivorian soil, the expatriate may solicit a temporary residency card, valid for one year. The processing time will be one week. The required documents will be:
• Copy of the passport (with entry visa);
• Residency certificate in Côte d’Ivoire;
• Local working permit;
• Two passport-sized photos. So that all members of the resident’s family (partner and legitimate or recognised children) benefit from the same conditions, the following documents, if applicable, will also be required:
• Proof of marriage;
• Proof of children’s’ affiliation.
Employment With Wage Compensation
undefined Carrying out a paid job in Côte d’Ivoire requires the issuance of an individual employment authorisation and issuance of a work contract visa.
All vacancies for a given position must be declared by the employer to the AGEPE and must be published for one month, across a mass-circulation daily newspaper. The employer can recruit an expatriate if the position is not filled within a month. Before being hired, the expatriate must hold a work contract or an employment letter referred by the AGEPE on a form, which has been specifically drawn up for that purpose.
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