Congo, Republic of

There is specific group taxation within the CEMAC area.

Where a joint stock company and a private limited company own either registered stock in a joint stock company or shares in a private limited company, the net proceeds of the share in the second company paid to the first during the financial year shall be deducted from the total net profit of the latter, less a percentage for costs and charges. This percentage is fixed at 10% of the total amount of the proceeds. This system shall apply when all of the following conditions are met:

• The stocks or shares owned by the parent company represent at least 25% of the capital of the subsidiary company.
• The parent company and subsidiary companies have a registered office in the CEMAC state (Cameroon, Central Africa Republic, Chad, Gabon, Equatorial Guinea, and Republic of Congo).
• The stocks or shares allotted at the time of issue are still registered in the name of the participating company, which undertakes to retain them for at least two consecutive years in registered form.

Another group taxation regime is also available upon option and under certain conditions, wherein the taxable profits of the group’s companies can be consolidated at the level of the holding company, which will pay the tax due.

Transfer pricing

Companies registered in the Republic of Congo with gross annual turnover net of taxes equal to or exceeding XAF 500 million must keep transfer pricing documentation at the reach of the tax administration so as to justify the transfer pricing policy used in all transactions with legally related entities outside the Republic of Congo.

Targeted companies are required to spontaneously and annually provide to the tax administration a transfer pricing documentation, a light transfer pricing declaration, and a country-by-country (CbC) report within six months from filing their summary financial statements. Companies that fail to comply with this requirement will be fined at XAF 5 million prior to an eight-day formal notice.

The sums invoiced by a foreign company that are considered as not reflecting arm’s-length conditions must be reintegrated in the Congolese company’s financial year’s result, for a third of their amount.

To justify transfer pricing policy, companies shall ensure that the prices of the transactions are in conformity with the five different methods to set up the arm's-length principle (derived from Organisation for Economic Co-operation and Development [OECD] recommendations).

During a tax audit, if the amounts invoiced by a foreign company do not reflect the arm's-length principle, these amounts would be completely added back to the tax base of the Congolese company.

The conclusion of advance transfer pricing agreements with the tax authorities is subject to the payment of XAF 10 million.

Thin capitalisation

There are no specific thin capitalisation rules in the Republic of Congo.

Holding companies

A taxation regime applies to incorporated holding companies complying with certain conditions.

Within this regime, capital gains on shares are:

• subject to CIT at standard rate if the shares transferred have been held during less than two years
• subject to a reduced CIT rate (25% of the standard rate, i.e. 7.5%) if the shares transferred have been held during more than two years, and
• tax exempted if (i) the shares transferred have been held for more than two years and (ii) the shares held include at least 60% of shares of CEMAC resident companies.

In addition, these companies benefit from other tax advantages, such as a WHT exemption on certain types of interest as well as a reduced WHT on dividends paid (i.e. 50% of applicable rate).

Controlled foreign companies (CFCs)

There is no provision under Congolese tax law related to CFCs.