Tax Guide for US Expats Living and Working in the Republic of Congo
Who Is Liable For Income Taxes in the Republic of Congo
Residents are subject to tax on worldwide income. Nonresident employees who work in Congo more than two weeks a year are subject to tax on their Congolese-source income, regard less of where their employers are resident.
Individuals are considered resident if they have a dwelling in Congo, either as owners or as tenants with leases for at least one year, or if they otherwise maintain their principal residence in Congo.
Income subject to tax
Employment income. Taxable employment income includes all compensation, allowances and benefits in kind. Benefits in kind are valued at the following rates based on gross compensation.
Benefit Rate (%)
Accommodation 20
Domestic servants 7
Utilities 5
Food 20
Car 3
Phone 2
If the actual value of the benefit in kind is higher than the value calculated at the above rates, the actual value of the benefit in kind is taxed.
Self-employment and business income. Self-employed individuals are subject to tax on income from commercial, agricultural and professional activities. Taxable income consists of total income from all categories.
Taxable income from commercial and agricultural activities includes all receipts, advances, interest and gains directly related to the activities. It is calculated on an accrual basis, with a possible option for a deemed-profits system if turnover does not exceed a certain amount.
Capital gains derived from sales of fixed business assets may be exempt if reinvested.
Taxable income from professional activities is determined on a cash basis. Taxable income equals the difference between amounts received and expenses paid during the calendar year, including gains or losses from the sale of professional assets.
Investment income. Dividend and interest income from investments in Congo are included in taxable income. Residents are also taxed on foreign investment income.
A withholding tax, called proportional tax, is levied on dividends at a rate of 20%, on directors’ fees at a rate of 22%, and on bonds and debentures at a rate of 30%. After the income is included in taxable income, the proportional tax withheld is deducted from general income tax due.
Directors’ fees. Compensation paid to directors is treated as investment income and is subject to income tax. Taxes withheld by the payer may be credited by the recipient against general income tax payable.
Taxation of employer-provided stock options. Congolese law does not specifically address the taxation of employer-provided stock options.
Capital gains. Capital gains are taxed at ordinary income rates.
The taxable portion of gains from the disposal of real property is the difference between the sale price and the revalued purchase price. For developed land, the gain is reduced by 5% for each year of ownership in excess of 10 years. Therefore, the gain is exempt from tax if the real property is owned for at least 20 years before the sale. For undeveloped land, the gain is reduced by 3% for each year of ownership in excess of 10 years.
Gains derived from sales of shares are generally exempt from tax. However, one-third of the gain is taxed if, during the five preceding years, the seller, together with his or her ascendants, descendents and spouse, held more than 25% of the capital stock of the company and if any of these individuals served as managers or directors in the company at any time during the five-year period.
Deductions
Deductible expenses. To determine taxable income, the following expenses are deducted:
- A 20% deemed deduction for employment-related expenses.
- Pension plan contributions, limited to 6% of gross compensation.
- Social security contributions.
- Interest on loans for which the taxpayer is liable, restricted to the first six annual payments of loans related to the construction or acquisition of a principal apartment building. The deductible amount is limited to XAF 1 million.
- Alimony paid pursuant to a judicial decision.
- Medical expenses paid by the taxpayer and dependents, not exceeding 10% of net income up to a maximum of XAF 200,000. Prosthesis and pharmaceutical expenses are excluded.
Personal deductions and allowances. The family coefficient rules described in Rates are used instead of a schedule of personal allowances and deductions.
Business deductions. All expenses necessary to carry on a professional activity are deductible. Deductible expenses for commercial and agricultural activities include the following:
- Expenses necessary to carry on the activity, such as personnel and rental expenses
- Depreciation
- Provisions for losses and expenses
- Interest on loans from shareholders
- Certain taxes, including business tax, license fees and tax on wages
Rates. Tax is levied at progressive rates, up to a maximum rate of 45%. Income is taxed under a family coefficient system, which adjusts the amount of income subject to the progressive tax rate
table according to the number of family members. Under this system, taxable income is divided by the number of family allowances to which the taxpayer is entitled. The amount calculated corresponds to the income per allowance. Tax is then computed for one allowance and multiplied by the number of family allowances. No more than 6.5 allowances may be taken.
In general, nonresidents are considered unmarried for tax purposes (married without children if they are French). Tax payable is the greater of the tax that results from the application of the regular rates or 20% of their taxable income.
Nonresidents are subject to withholding tax at a rate of 20% on payments for work or services carried out in Congo. This rate also applies to French residents under the France-Congo tax treaty. The withholding rate is 20% for royalties derived by nonresidents, except residents of France, for whom the rate is 15%.
Relief for losses. Losses in one category may be deducted from income in other categories. If income from all categories does not fully offset the loss, the remaining loss may be carried forward for three years.
B. Other taxes
Global minimum tax. Global minimum tax (impôt global for-faitaire , IGF) includes industrial and commercial profit tax, value-added tax (VAT), standard tax and apprenticeship duty. IGF applies to taxpayers whose annual turnover does not exceed XAF 40 million.
IGF is levied at a rate of 8% on turnover multiplied by 1 for taxpayers not subject to VAT and by 1.18 for taxpayers totally or partially subject to VAT.
Inheritance and gift tax. If a deceased person or donor was a resident of Congo, inheritance or gift tax is payable on worldwide net assets, unless otherwise provided by applicable tax treaties.
Resident foreigners and nonresidents are subject to inheritance and gift tax only on assets located in Congo.
Inheritance and gift tax rates vary, depending on the relationship between the recipient and the deceased or donor and on the value of the gift or inheritance. The rates range from 0% to 60%.
C. Social security
Contributions. Social security contributions are withheld monthly by employers. The tax base includes all compensation, benefits and allowances.
The following contributions are required and are paid by the employer, with the exception of the pension contribution, which is paid by the employer and the employee.
Totalization agreement. To provide relief from double social security taxes and to assure benefit coverage, Congo has entered into a totalization agreement with France.
Under this agreement, French employees are exempt from social security taxes for one year.
Congo has signed a social security treaty with other member countries of the Common African and Mauritian Organization (Organisation Commune Africaine et Mauricienne, or OCAM), which are Benin, Burkina Faso, Central African Republic, Côte d’Ivoire, Gabon, Mauritius, Niger, Rwanda, Senegal and Togo. Congo continues to apply this treaty.
We have been preparing US income tax returns for US Citizens and permanent residents living in the Republic of Congo 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 the Republic of Congo 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 Indian 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 Indian 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 India, 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 the Republic of Congo.
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 consultation by phone, skype or email