Tax Guide for US Expats Living and Working in Cameroon
Who Is Liable For Income Taxes in Cameroon
Individuals who have their tax domicile located in Cameroon are subject to personal income tax on their worldwide income. Persons who have their tax domicile located outside Cameroon are subject to personal income tax only on their income derived from Cameroon. Cameroonian and foreign nationals who earn income or profits taxable in Cameroon under the terms of an international convention to avoid double taxation are also subject to personal income tax, regardless of whether their tax domicile is located in Cameroon.
An individual is considered to have his or her tax domicile located in Cameroon if he or she meets one of the following conditions:
- He or she has a home or a principal place of residence in Cameroon.
- He or she is engaged in a salaried or non-salaried activity in Cameroon, except when this activity is an accessory activity.
- He or she maintains a “center of interests or business” in Cameroon.
- He or she is a civil servant or state employee working in a foreign country and is exempt from tax in the foreign country.
Income subject to tax. For personal income tax purposes, taxable income consists of total net income from all categories earned by the taxpayer within the tax year, plus the profit from any gainful transactions engaged in by the taxpayer, less an abatement of XAF 500,000.
Employment income. For purposes of the personal income tax, employment income includes all cash and noncash remuneration and allowances. Benefits in kind are valued according to the following fixed percentages of gross remuneration received.
Allowances covering professional expenses and family-related allowances and benefits are specifically exempt. The tax base for employment income consists of gross remuneration and benefits after the 30% deduction for professional expenses (see Deductions).
In addition to the personal income tax, Crédit Foncier and FNE taxes are levied on employment income. The tax base for purposes of these taxes is the same as the tax base for personal income tax, except that the 30% deduction may not be claimed.
Self-employment and business income. Self-employed individuals are subject to personal income tax on profits derived from activities in Cameroon. Profits are categorized into the type of activity from which they are derived—commercial, professional and agricultural—and taxable income realized from each activity is calculated separately. Total net income from all categories is then subject to personal income tax under the rules applicable to employed individuals.
Taxable income derived from commercial activities and handicrafts depends on the tax regime of the taxpayer. Self-employed individuals with an annual turnover, exclusive of tax, of XAF 15 million to XAF 50 million are subject to the basic tax system. Taxable profit assessed under the basic tax system is determined based on the taxpayer’s statement of accounts.
In the absence of a return or accounts, the taxable income is determined by applying to turnover a percentage of profit margin, which is fixed by a decree issued by the tax authorities. The following are the rates of the profit margins.
Self-employed individuals engaged in commercial activities or handicrafts with annual turnover, exclusive of tax, exceeding XAF 50 million, but not exceeding XAF 100 million are subject to the simplified tax system. Their taxable income is the difference between revenue and expenses required for operations.
Self-employed individuals engaged in commercial activities or handicrafts with annual turnover exceeding XAF 100 million are subject to the actual earnings tax system, and their tax is calculated in the same manner as company tax.
Under the 2009 Finance Act, self-employed intermediaries and agents are subject to the tax applicable to the categories of commercial activities or handicrafts to which their activities relate.
The tax is withheld at source by the payers of the commissions.
Except for individuals engaged in the liberal professions who are also subject to the actual earnings tax system, taxable income derived from professional activities is the difference between income received and expenses paid during the tax year and is computed on a cash basis.
Profits from agricultural activities of farmers, tenant farmers and sharecroppers are included in taxable income. In general, taxable income is determined in the same manner as income derived from commercial activities.
Investment income. Investment income is subject to withholding tax at a rate of 16.5%, which includes a 10% local surtax. Special rules apply to capital gains (see Capital gains).
The following types of interest income are exempt from personal income tax:
- Interest accruing on savings accounts containing deposits of not more than XAF 10 million
- Interest on savings accounts for housing purposes
- Interest on home loan accounts
- Interest on cash notes
Income derived from the rental of real property is subject to a 10% withholding tax if the rent is paid by government bodies and public establishments, corporate bodies or self-employed individuals assessed under the actual earnings or simplified systems.
Rent paid to enterprises assessed under the actual earnings system is not subject to this withholding tax.
Directors’ fees. Directors’ fees are treated as dividend income, not as employment income. They are subject to withholding tax at a rate of 16.5%. The tax must be withheld by the payer company and remitted to the Treasury within 15 days after the payment.
Capital gains. Capital gains derived from the sale of real property by individuals are subject to personal income tax at a flat rate of 10%, which is withheld by the notary in charge of executing the deed of conveyance.
Gains derived from the sale of shares are subject to personal income tax as income from securities at a rate of 10% if the total amount of the gains exceeds XAF 500,000. Otherwise, the capital gains are exempt from tax.
The tax on capital gains derived from the transfer of certain fixed assets may be deferred if the gains are reinvested.
Deductions
Employment deductions. The following expenses are deductible in determining employment income:
- An amount equal to 30% of the gross remuneration and benefits received
- Pension plan contributions
Business deductions. Deductible expenses for commercial, professional and agricultural activities are similar. They include the following items:
- Costs of materials and inventories
- All expenses incurred to conduct the activity (including personnel expenses, certain taxes, rental and leasing expenses, and finance charges)
- Depreciation expenses
- Provisions for losses and expenses
B. Inheritance and gift taxes
For deceased Cameroon residents, estate tax is levied on worldwide personal property, real estate situated in Cameroon and in tangible property located outside Cameroon. For nonresidents, only personal property and real estate located in Cameroon are subject to estate tax. The rates of estate tax vary from 0% to 10%, depending on the value of the net assets. The tax may be reduced, depending on the relationship between the recipient and the deceased.
All deeds that transfer real estate or business assets located in Cameroon, and all gift deeds executed in Cameroon, are subject to gift tax. The rates range from 5% to 20%, depending on the relationship between the recipient and the donor.
C. Social security
Social security contributions are calculated at the following rates on the basis of remuneration paid, including benefits in kind. Contributions of employees are withheld monthly by the employer.
Cameroon has concluded a social security totalization agreement with France to eliminate double taxation.
To learn more about the history, culture, economy and other information about Cameroon
We have been preparing US income tax returns for US Citizens and permanent residents living in Cameroon for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Cameroon and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the Cameroon tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Cameroon Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed while working in Cameroon, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Cameroon.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a request a consultation by phone, skype or email