Congo, Democratic Republic of the
There is no group taxation regime per the DRC tax legislation.
The following specific transfer pricing requirements are provided by the Tax Code:
- Interests on loans are not considered as deductible expenses for the borrower if the borrower is a private limited company and the lender is a shareholder.
- Where a local company is directly or indirectly controlled by a foreign company, any abnormal advantage given to the latter or related person is considered as an indirect distribution of profits and is then added back to the profits of the local company.
- In respect of payments made by a local company to a foreign company, for services (management services, technical assistance services), the Tax Code provides that such expenses may be deductible if (i) the services rendered can be clearly identified, (ii) the services cannot be rendered by a local company, and (iii) the amount paid for the service is not overstated and is commensurate to the nature of the service itself.
Finance Law 2015 imposes an obligation for companies established in the Democratic Republic of the Congo to have transfer pricing documentation on operating transactions with their affiliated companies located abroad. However, Finance Law 2015 only provides general guidelines for the information to be provided (i.e. structure of the group, selection of the most appropriate transfer pricing method).
Companies established in the Democratic Republic of the Congo that are dependent, in law or in fact, on companies or groups of companies established outside the Democratic Republic of the Congo and whose annual turnover, excluding tax, is equal to or exceeds USD 1 million shall submit either a paper or an electronic declaration containing a simplified documentation on the transfer pricing in accordance with the tax administration's template. Such declaration has to be made within two months from the deadline to file the CIT return.
Furthermore, the Finance Law for FY 2020 has introduced the possibility of concluding a prior agreement (APA) with the Tax Administration on the method of determining intragroup prices for a maximum duration of 4 years.
There are no thin capitalisation rules in the DRC tax legislation. However, it is provided in the Mining Code, from a general perspective, that, for the holder of a mining licence, the ratio of the funds borrowed against the amount of own funds should not exceed 75/25.
Moreover, the OHADA Treaty provides that shareholders’ equity should be above half of the company’s authorised share capital.
Controlled foreign companies (CFCs)
No specific provision relating to CFCs are provided for in DRC law.