Corporate restructuring operations are becoming more frequent. This generally involves the partial or total transfer of the corporate rights that constitute the capital of a company established in Côte d’Ivoire. From a fiscal standpoint, the transfer of shares or shares registered by an act are theoretically subject to mandatory formal registration.
The relative tax regime has evolved over time; until 2015 the General Tax Code stipulated that these operations be taxed at the fixed rate of only CFA18,000 (€27), whether the transfer was partial or in total. In light of the low income generated from the tax, Ivorian officials instituted the 2016 Finance Law, which implemented a proportional duty of 1% on such operations. Subsequently, the 2017 tax schedule specified that the proportional right instituted by Article 764A of the French Tax Code concerns disposal for valuable consideration of the capital rights of companies located in Côte d’Ivoire. Thus, the 1% registration fee applies whether the assignee is a natural or legal person and regardless of their place of residence or nationality. No condition relating to their legal status, place of residence and nationality is required. To be subject to the 1% proportional duty, the company whose rights are assigned must be located in Côte d’Ivoire.
However, a number of actions are exempt from the proportional fee, including the sale of corporate rights of companies listed on the Bourse Régionale des Valeurs Mobilières; disposal of the corporate rights of other companies carried out by companies whose activity consists of the acquisition, management and transfer of said rights; and transfers made by foreign natural or legal persons to Ivorian natural or legal persons, concerning the social rights they hold in companies operating in Côte d’Ivoire. Where the parties do not request the services of a management and intermediary company or a notary, or when said company is not established in Côte d’Ivoire, the payment of the registration fee is the responsibility of the transferor, or, as the case may be, the transferee. This payment is made by withholding tax on the proceeds coming from the transfer of corporate social rights. The deed of assignment must be registered and the related rights must be paid within one month from the date of transfer of the corporate rights.
Representative Offices
Côte d’Ivoire provides for a tax regime specific to representative offices, which are entities now recognised by the Organisation for the Harmonisation of Business Law in Africa since the most recent reform of the Uniform Act on Commercial Companies and the Economic Interest Group (UACCEIG).
Setting up a subsidiary or branch sometimes requires significant organisation, especially in the case of its first implementation on a foreign market. Representative or liaison offices, which therefore remain an alternative in some cases, are defined by Articles 120-121 et seq. of the UACCEIG as establishments owned by companies that are responsible for linking them to the market of the state party in which they are located.
However, the representative or liaison office, considered as evidence the company is willing to be present on the market, does not have a legal personality or enjoy management autonomy. Regardless of the fact it may be the establishment of a foreign company, it remains subject to the law of the state party in which it is located. Côte d’Ivoire provides a special tax regime for this type of establishment.
Former Regimes Recap
Through a 2006 memorandum, the Ivorian tax administration made the distinction between representative or liaison offices that are preparatory or auxiliary to the activity of the foreign company. These included the offices whose services did not constitute the very object of the represented company. This tax system was only applicable in the absence of international tax treaties.
Included in such cases were the prospecting offices or studies set up for the establishment of an industrial or commercial establishment in Côte d’Ivoire; offices carrying out exclusively scientific research activities and gathering information; and those installed for advertising purposes. Such firms were subject to a minimum annual lump sum tax of CFA2m (€3000) and additional taxes, excluding the contribution of licence tax, value-added tax (VAT) and securities income tax.
The same memorandum defined other types of representative or liaison offices as those carrying out all or part of the business of the company they represented. In such cases, the office was liable for all taxes; however, they were subject to special methods of determining taxes. For example, tax on profits was established at a fixed rate of 7% of the actual operating expenses of the office or the sums made available for the exercise of its activities in Côte d’Ivoire. As for the contribution from business licensing, the turnover tax used to be carried out based on the total effective operational expenses. This method also applied to the special equipment tax.
For the representative or liaison offices carrying out activities in both categories simultaneously, the tax assessment was derived from the totality of their operations as if it were a liaison office of the second category, with activity indirectly related to the business’ operations.
Current Regime
In a 2018 memo, the tax administration proceeded with an adjustment of the existing tax system. Authorities established a precise classification of representative and liaison offices, excluding the second category, in which certain abuses from taxpayers were found. Henceforth, representations of foreign companies carrying out a preparatory or auxiliary activity, in relation to the main activity of the foreign enterprise they represent, are considered as liaison or representative offices for tax purposes, irrespective of the form indicated by the entity when it is registered in the commercial register or the taxpayer file of the General Tax Code. These offices remain exempt from the contribution of patents, VAT and securities income tax, but remain subject to the minimum flat tax instead of the tax on profits and other types of taxes related to their representations. The minimum flat tax here is CFA2m (€3000).
In addition, those exercising all or part of the activity of the enterprise that they represent or pursuing activities not having a preparatory or auxiliary character, are no longer considered and treated as representative or liaison offices. These representatives are now subject to all types of taxes determined under the conditions of ordinary law, namely a real basis. Thus, they are required to charge their services or sales normally and keep accounts in accordance with the standards in force to determine their results and pay taxes under the conditions of ordinary law.
New Investment Code
In 2012 Côte d’Ivoire implemented a new investment code, superseding the one implemented in 1995. The new investment code established a set of incentives for private investment that was more relevant to the country’s new economic situation in terms of growth prospects and the government’s economic goals. In line with ambitions of becoming an emerging market by 2020, Côte d’Ivoire launched the National Development Plan (Plan National de Développement, PND) 2016-20. The PND envisages investment on the order of CFA30trn (€45bn) over its five-year duration.
Through these investments, the country wants to attract more capital from foreign investors. For this reason, the government has decided to revisit the Investment Code, a set of texts that sets the conditions, benefits and general rules applicable to direct, national and foreign investments made in Côte d’Ivoire. In August of that year, Presidential Ordinance 2018-646 repealed Presidential Ordinance 2012-487 on the Investment Code, as amended by Presidential Ordinance 2015-714. Precisely, the 2018 Investment Code aims to promote sustainable development through productive and socially responsible investments in Côte d’Ivoire, regional and local content development, and by the promulgation of a competitive business environment.
New concepts have emerged and have been clarified as follows:
• The certificate of approval for investment is an act issued to the investor in the implementation phase.
• The investment declaration certificate is an act issued to the investor in the declaration system to certify the admissibility of his file.
• The certificate of approval for the operation is an act issued to the investor. This establishes that they are the beneficiary of the Investment Code’s benefits during the exploitation phase.
• The structure is designated for all projects that are part of a sector-specific development strategy.
This includes projects that entail heavy investments, require a high level of technology, add value to the national economy, and/or fulfil the criteria defined by the Investment Code.
• The introduction of a tax credit for certain categories of businesses upon the completion of their investment programmes is determined as a percentage of the amounts invested.
• Local content is defined as the development of the economic fabric and local skills by involving workers in economic activities, such as the creation of sustainable jobs, vocational training, outsourcing and the opening of capital to nationals.
• The agency in charge of investment promotion is tasked with monitoring and evaluation .
• Monitoring and evaluation systems for tax expenditure will be established. Sectors eligible for the benefits of the 2018 Investment Code are classified into one of two categories. The first includes the agricultural, agro-industrial, health care and hospitality sectors. Hotels investments are considered hospitality if the planned amount is of equal or greater value than CFA5bn (€7.5m) in zone A and CFA2bn (€3m) in zone B or C. The second category include all sectors not falling under category one, sectors of activity than are not expressly excluded from the 2018 Investment Code, and investments in the hotel sector which are under the aforementioned thresholds. Trade, banking, financial services, non-industrial construction, and liberal profession sectors are excluded from any benefits relative to the Investment Code.
A decree is set to clarify the provisions of the new code. Specifically, it will exhaustively determine the list of activities in sectors excluded from the benefit of the Investment Code. As of December 2018 such decree had not yet been enforced, and therefore information on the investment zones A, B and C is not yet available.
Tax Incentive Regimes
There are two tax incentive regimes: the reporting tax incentive regime and the accreditation regime. 1. Reporting tax incentive regime: This applies to investments relative to the creation of activities. The benefits granted in this scheme relate exclusively to the exploitation phase, and the investor is issued with a certificate of investment declaration. The benefits of the reporting regime applies depending on which zone the investment pertains to. a. Category-one investments: Such investments directed at zone A would benefit from a five-year, 50% exemption on: profit tax, including the flat minimum tax; patents and licences; employer contributions to national employees, excluding apprenticeship taxes and taxes for continuous vocational training; and property tax. Meanwhile, an investment directed at zone B would benefit from an exemption for a total of 10 years divided into two parts. The first five years are fully exempt from taxes applicable to a zone A investment and income tax on securities for dividends paid to domestic shareholders. The following five years grant a further 50% exemption on the same elements. Category one investments directed at zone C are exempt from all aforementioned taxes for the first 10 years, with a 75% reduction for the following five-year period. b. Category-two investments: Category-two, zone-A investments give a 25% tax credit attributable to profit tax, including the flat minimum tax, patent and licence contributions; VAT; employer contributions directed at citizen employees; and taxes on land assets. Investments directed at zone B are provided with a 35% tax credit to those elements listed for zone A. For zone-C investments, a tax credit of 50% is attributable to the same taxes as those in zone A. These tax credits are chargeable until full refund. 2. Accreditation regime: The approval regime is applicable to investments relative to the creation or development of activities. The procedures applicable to this plan will be defined by decree. Investment thresholds are set at a minimum of CFA200m (€300,000), excluding VAT and working capital for large companies; CFA10bn (€15m) for large shopping centres in zone A; and CFA5bn (€7.5m) for those located in zones B and C.
The benefits granted during the implementation phase include an exemption of Customs duties, with the exception of statistical fees, and community and continental levies; and a temporary suspension on VAT collected for the acquisition of goods, services and work. These advantages cover equipment, capital equipment and the first batch of locally acquired or imported spare parts, as well as works and services carried out domestically or abroad. Also, benefits in the implementation phase are subject to the presentation by the investor to the competent public services of a certificate of approval for investment, issued by the agency responsible for the promotion of investments.
Benefits during the operational phase are granted to large corporations. In these cases, such entities have been defined as enterprises with an annual turnover greater than CFA1bn (€1.5m). a. Category-one investments: For category-one investments directed at zone A, the accreditation regime offers a five-year, 50% tax exemption on profit tax, including the flat minimum tax; patent and licence contributions; employer contributions directed at citizen workers, with the exception of the apprenticeship tax and the additional taxes for continuous vocational training; local content tax, except for the apprenticeship tax and the additional taxes for continuous vocational training; and real estate property taxes.
Regarding zone-B investments, the accreditation regime grants a full tax exemption for the first five years and a 50% write-off for the next five years on profits, including the flat minimum tax; patent and licence contributions; employer contributions directed at citizen workers, with the exception of the apprenticeship tax and the additional tax for continuous vocational training; local content taxes, except for the apprenticeship tax and additional taxes for continuous vocational training; real estate property taxes; and taxes on security dividends directed at national shareholders.
With zone C investments, the accreditation regime gives a full tax exemption for the first 10 years after the investment, and a 75% discount on the following five years on profits, including the flat minimum tax; patent and licence contributions; employer contributions directed at citizen workers, with the exception of the apprenticeship tax and additional taxes for continuous vocational training; local content, except for the apprenticeship tax and additional taxes to continuous vocational training; real estate property taxes; and taxes on security dividends directed at national shareholders. b. Category-two investments: Large corporations belonging to category two sectors are eligible for tax credits defined as a percentage of the investment. Firms investing in zone A benefit from a 25% tax credit on profit tax, including the flat minimum tax; patent and licence contributions; real estate property taxes; VAT; and employer contributions directed at citizen workers. For zone B investments, the accreditation tax grants a 35% relief on profit tax, including the flat minimum tax; patent and licence contributions; real estate property taxes; VAT; and employer contributions directed at citizen workers. The same tax credits are available to investments directed at zone C with the exception that the tax relief for these investments is 50%. The credit tax for investments in zones A, B and C are all attributable until complete reimbursement.
Structural Projects
When projects satisfy the right conditions to fall under the Investment Code’s structural projects category, the Investment Promotion Agency (Centre de Promotion des Investissements en Côte d’Ivoire, CEPICI) submits an application for open negotiations to the government for the purpose of signing a state convention. Negotiations are conducted by the CEPICI, in liaison with all stakeholders of the state services, including local authorities if necessary. Once the convention has been approved by the Council of Ministers, it is signed by the minister in charge of finance and budget, as well as the minister(s) from the sector(s) in question. In addition to the advantages granted by the Investment Code, projects in this category benefit from the advantages granted to them in the state convention. 1. Application of local content policy: In addition to the aforementioned benefits, large foreign companies eligible for the benefits of the Investment Code are entitled to tax credits provided that they apply a local content policy on job creation, thereby opening social capital and subcontracting to nationals.
These benefits consist of granting tax credits from the end of the total exemption period that relates to their specific conditions. To favour local employment programmes, an additional 2% tax credit is granted to companies who employ over 80% Ivorian executives and managers. To bolster the participation of national companies in economic development, an additional 2% tax credit can be obtained if at least 25% of activities subcontracted by the company are conducted by national companies. This applies to any outsourced activity consisting of infrastructure work, software, spare parts manufacturing and goods intended to be incorporated into a product. Finally, companies opening their capital to national investors are eligible to an additional 2% tax credit if the amount represents 15% of the total capital invested for said project. 2. Guarantees granted to investors: As part of the government’s strategy to improve the overall business environment and institutional framework, investors are guaranteed the facilitation of formalities relating to the realisation of investments. They also have unlimited access to foreign currencies under the compliance regime that covers foreign currency regulation and the authorisation of transferring assets relating to the investment provided this meets tax regularity.
Additionally, intellectual property rights, including patents, trademarks, trade names and rights over technology transfers, are protected. The government has also moved to facilitate obtaining both work and residence visas. Finally, developed industrial zones, agricultural lands and areas of tourist interest are currently under development.
Investments made in connection with the creation and development of activities not yet operating on the date of the new code’s enforcement may benefit from the more favourable provisions it grants provided the investor requests it. The conditions to be met are determined by decree, and the request must be made within six months of the new Investment Code enforcement.
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