Specific group tax regime
There is a specific tax regime derogatory to the common law tax regime that is applicable, under conditions, to groups of companies.
According to the provisions of Article 11 b. of the tax measures applying to groups of companies, groups of companies are those constituted by companies subject to CIT, or a foreign equivalent tax, united between them through direct or indirect capital links of at least 50% and that allow one of them or several companies, jointly, to control the others.
The control is defined as:
- either the direct or indirect holding of the majority of the vote in another company or
- the nomination, during two consecutive years, of the majority of the members of the board of directors of another company.
To be eligible for this specific tax regime, and without any prejudice of other activities performed to the profit of third parties, the head of the group of companies must perform to the profit of other companies of the group an activity relating exclusively to the following fields:
- Provisions of services of any kind, notably technical, accounting, financial, administrative, data processing, legal, human resources, and commercial corresponding to functions of management, coordination, and control of the group's companies.
- Research and development (R&D) to the sole profit of the group.
- Management of the intra-group finance.
Each company subject to CIT that is a member of the group and fulfils the conditions provided by the law will be subject to a separate taxation of its results according to the rules of common law and subject to amendments expressly provided by the law for the determination of the taxable result.
The express amendments provided in the scope of the specific tax regime applicable to groups of companies are the following:
Net capital gains are taxed at a reduced rate of 20% when they are realised in the scope of intra-group operations.
Expenses deductible from the taxable result subject to CIT
The following expenses are deductible within the group:
- Head office fees and management fees determined on a lump sum basis, according to the conditions of allocation of the expense between the companies’ members of the group defined in a previous ruling with the tax authorities.
- The whole of the interests on partners' current accounts (i.e. on the sums put, by the partners, at the disposal of a company of the group) within the sole limit of the intervention rate TIAO of the BEAC (equivalent to 2.85%) raised by 2%.
- Rents of movables carried out within the group by the mother company or between companies of the same group.
Sums subject to CIT according to the provisions of Article 206 of the Gabonese Tax Code paid by a Gabonese debtor member of a group of companies to a foreign company member of the same group are exempted from the 20% WHT even though no DTT aiming to avoid double taxation has been concluded between Gabon and the country of residence of the beneficiary of the remunerations.
Transferable securities income tax (IRCM)
Companies of the group that benefit from transferable securities income originating from Gabon are exempted from IRCM when the said revenues are paid by a company member of the group.
In return, payments carried out by the head of the group of companies to the profit of its partners (individuals or legal entities) are subject to IRCM at a unique and at source rate of 10% (instead of 20%).
It is to be noted that the transferable securities incomes having their source abroad and which gave rise to taxation in their country of origin give the right in Gabon to a tax credit of the amount of the taxation that is deductible from the CIT of the fiscal year of perception of the incomes. The aforesaid tax credit applies even though no DTT aiming to avoid double taxation has been concluded between Gabon and the country of origin of the incomes.
The head of the group of companies is liable for VAT.
Members of a group of companies could, however, on option, consider the following provisions of services performed within the group as being out of the scope of application of VAT:
- Provisions of services of any kind, notably technical, accounting, financial, administrative, data processing, legal, human resources, and commercial.
- Fees relating to studies.
- Putting at disposal of personal.
- Management of finance.
The option for the subjection of the above-mentioned operations must be formulated by the concerned taxpayers on express request addressed to the General Tax Manager.
Deeds relating to incorporation, increase or reduction of share capital, breaking up with or without clearance, merger, scission, partial contribution of assets, and transfer of shares of a company member of a tax group, are subject to a fixed duty of XAF 50,000.
In the absence of a more favourable duty provided by the common law of registration, the changes of ownership and use that are not provided at Article 6 of the Gabonese Tax Code are subject to a proportional rate of 1% when carried out by members of the same tax group.
Requirements relating to declaratory obligations
The adherence to the group tax regime must be notified in writing by the head of the group of companies to the General Tax Manager accompanied by the list of the companies included in the tax perimeter of the group.
Each company remains liable for the periodical returns applicable to its activity.
For the purpose of calculation and verification of the returns, each tax return relating to the CIT of each company of the group will be gathered and filed at the same time by the head of the group of companies before the Tax Office.
The Gabonese Tax Code provides rules regarding transfer pricing issues.
According to these rules, any payment considered to be a result of mismanagement will be subject to the CIT rate at 30% (35% for companies operating in the oil and mining sectors) plus penalties.
Indeed, Article 12 of the Code provides that "By virtue of law or in fact, for companies which are dependent of companies or groups of companies located outside the CEMAC area, or for those which possess the control of companies located outside the CEMAC area, payments or expenses realised by any mean whatsoever or any kind of advantages or help granted to third parties without equivalent counterpart for the company, comparable to abnormal act of management, constitute transfer of profits subject to corporate income tax".
It is applicable for the following:
- Payments constituting an increase or decrease of purchases or sales.
- Payments of excessive royalties or royalties without compensation.
- Relinquishment of revenues (underestimated sale price, free of charge service provision, granting of a free loan or a loan with low interests).
The abnormal act of management is not limited to expenses; it also includes any form of advantages or allowances granted to third parties without any equivalent compensation for the company.
Article 13 of the Gabonese Tax Code provides that "The advantages or assistance granted by companies belonging to the same group can only be considered as resulting from a normal management if the company which grants these advantages or assistance demonstrates the existence of its own interest in acting as such. The general interest of the group is not sufficient to justify such practices".
Further to the Financial Act for 2017 implementing the Organisation for Economic Co-operation and Development (OECD) regulation, a Master file containing information about the group structure and a Local file in relation to the structure, transfer pricing policy, and group transactions of the local entity must be provided to the tax authorities on a yearly basis, at the same time as the Annual Tax Return (DSF).
The Financial Act for 2017 has also introduced penalties, in case of failure to provide the Master and Local files, corresponding to 5% of the transactions realised with companies of the group with a minimum of XAF 65 million per year.
In addition, a Country-by-Country (CbC) report must be filed by the ultimate parent company of the group before the tax administration of which it depends.
Thin capitalisation rules have been introduced by the Finance Act 2018.
When the company paying the interest is deemed to be thinly capitalised, only a portion of that interest may be deductible from the taxable result.
A company is deemed thinly capitalised when the amount of interests paid on inter-company loans exceeds, simultaneously, the three following limits during the same fiscal year:
- The product of interest payments on inter-company loans x ((1.5 x equity)/loans granted to group affiliates).
- Interests received by the company by affiliates.
- 25% of the profits before tax + interests paid + depreciation taking in consideration to be deducted from the considered tax profit + share of the rents of leasing taken into account for determining the transfer price of the property at the end of the contract.
In a thinly capitalised company, the fraction of interests exceeding the highest of the above-mentioned ratios would not be tax deductible in the course of the considered fiscal year.
Controlled foreign companies (CFCs)
There is no specific tax rule under Gabon legislation related to CFCs.