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Gabon: Main Features of the New Tax Code
In Gabon, a new general tax code was enacted in 2009 that replaced the country’s previous tax laws.
The general tax code (Code Général des Impôts—CGI) was enacted by Act no. 027/2008 of January 22, 2009, and replaced Gabon’s previous tax laws (Code des Impôts Directs et Indirects and Code de l’Enregistrement, de l’Impôt sur le Revenu des Valeurs Mobilières et du Timbre).
The following discussion provides an overview of certain provisions of the new tax code.
New Conditions for the Deductibility of Expenses
Gabon’s new tax code includes a new definition of tax deductible expenses for corporate income tax purposes (Article 11 of the
CGI).
Under the new provisions, six conditions now must be satisfied for an amount to qualify as a tax-deductible expense. Of the six conditions, three are newly codified (even though, in practice, they had already been relied upon by tax inspectors during tax audits). These three new conditions are:
- The charge for the expense must be incurred in the direct interest of the taxpayer’s operations or relate to the company’s normal management.
- The expense must be included in the charges for the fiscal year during which it was incurred.
- The expense must not be considered to be an abnormal act of management.
Definition of an “abnormal act of management”
Under Article 11 of the CGI, the term an “abnormal act of management” is defined as any action that places the burden of an expense (or loss) on the taxpayer or that deprives the taxpayer of income without justification or proof that the action was in the interest of the taxpayer’s commercial operations.
Under this definition, such an act could be one that is conducted in the interest of a third party or that only provides the taxpayer with a negligible interest that is out of proportion with the advantage that a third party would receive from it. Therefore, an abnormal act of management is not limited to charges. It also includes any form of advantages and aids granted to third parties with no return for the company.
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Transfer Pricing Rules
Drawing on the concept of an abnormal act of management, the new tax code also introduces the concept of transfer pricing.
Under Articles 12 and 13 of the CGI, for companies that are in a dependent situation—whether a
de jure or de facto dependency—with respect to companies or groups of companies located outside the
Communauté Économique et Monétaire d’Afrique Centrale (the Economic and Monetary Community of Central Africa or CEMAC, which includes Cameroon, Congo, Gabon, Chad, Equatorial Guinea and the Central African Republic) or for those companies that control other companies located outside the CEMAC, any payments or expenses made by any means that can be likened to abnormal acts of management constitute transfers of profits that are subject to Gabonese corporate income tax.
Consequently, there is a transfer of profit if a Gabonese company does not prove that it was in its own interest to grant such advantages or aids to other entities of the same group. Note that the group’s general interest is not, in itself, sufficient to justify such practices.
Several examples of situations that can constitute transfers of profits are listed in the Code. They include:
- Payments in the form of increases or decreases in purchases or sales
- Payments of royalties that are excessive or with nothing in return
- Waivers of income (sales at lowered prices, provisions of services free of charge, grants of loans either interest-free or at inappropriately low interest rates)
- Waivers of debts or commissions
- Cancellations of debt
- Advantages out of proportion with the service provided
Lastly, any sums that a company located in Gabon pays to a foreign company located in a tax haven jurisdiction (a country with a low or nonexistent income tax rate) as payment for the use of valid patents, trademarks, designs and models, any payments of interest, or for the remuneration of services are to be included in the Gabonese company’s taxable income if the taxpayer does not provide proof that these payments correspond to real operations and that the payments are not excessive.
Liability for Payment of Corporate Income tax
Under the new tax code, the tax authorities can take action jointly against (1) a company governed by Gabonese law that is a subsidiary of a foreign company and (2) the foreign company itself, if it shown that the foreign company performed a taxable activity in Gabon without declaring or paying the corporate income tax owed with respect to the activities conducted in Gabon.
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For more information, contact a tax professional with Fidal Direction Internationale* in Paris:
Yves Robert, Tax Partner : +33.1.55.68.15.76,
yrobert@fidalinternational.com
Mohamed Mahjoubi, Tax Manager: +33.1.55.68.16.53,
mmahjoubi@fidalinternational.com
*Fidal is a French law firm that is independent from KPMG and its member firms.
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