In order to deal with the proliferation of illicit financial flow and to fight against international tax fraud and tax evasion, the various States throughout the world have adopted a set of international instruments aimed at promoting tax transparency and the exchange of information. Cameroon is not an exception. Willing to align its regulation with these international practices and standards to which it has adhered, its 2023 tax legislator has instituted section M 8(d) which laid down the rules applicable to the beneficial owner. However, the Cameroonian legislator has not defined this nation. It is therefore appropriate to refer to the definition given by the Ministry of finance which is almost the same as the one provided by the FATF (Financial Action Task Force). As per the said definition, beneficial owner is defined as ‘’ (…) the individual (s) who own(s) or control(s) a client and/or the legal entity on whose behalf a transaction is carried out (…). It may also refer to the directors of a legal entities’’. The new fiscal provisions oblige the afore-mentioned persons to identify and declare their beneficial owners under penalty. It is therefore appropriate to clarify the legal regime of the beneficial owner in Cameroon. This leads us to present the content of the obligation to declare the beneficial owner (I) before unveiling the sanctions applicable to the non-compliance with this obligation.
- The content of the obligation to declare the beneficial owner
The obligation to declare the beneficial owner as introduced by section M8 (d) of the General Tax Code extends to all legal persons and administrators of legal entities established in Cameroon. Whether they are governed by the Cameroonian or foreign law, whether or not they are subject to corporate income tax or personal income tax, they are bound by this obligation. The obligation consists in identification and declaration of the beneficial owner of the legal persons and legal entities. Concerning the identification, paragraph 1(b) of the same section obliges the beneficial owner, in order to identify him, to provide all the necessary information. As for the declaration, it is done at two levels. Firstly, the initial declaration shall be done thirty (30) days from their registration. The deadline for the second declaration is the 15th March of each year at the same time as the submission of annual tax return (DSF). The obligation to declare aims at disclosing information relating to the beneficial owners. As the result of such an obligation, entities concerned are to keep a register for this purpose. The information contained in this register and the supporting documents shall be kept for a minimal period of five (5) years from the end of the year in which the legal entity or duties of the administrators of the legal entities ceased. Failure to comply with these reporting obligations is subject to penalties.
- The sanctions for the non-compliance to declare the beneficial owner.
The non-compliance with the obligations relating to declaring the beneficial owner exposes the defaulting party to fines provided for in the Manual Of Tax Procedures. The sanction depends on whether the identification obligation or declaration is not met. With regard to the penalty for failure to comply with the obligation to identify the beneficial owners, paragraph 1 (a) of sanction M 8 (d) refers to the fine provided for in section M 104 of the Manual Of Tax Procedures. This is a fixed fine of up to five million (5,000,000) CFA Francs applicable to any person who has provided false information, who has opposed the right to communication or who abstained to communicate information and documents to tax authorities. The above- mentioned sanction shall therefore apply whenever the beneficial owner has not been identified.
As far as the non- declaration of the beneficial owner is concerned, paragraph (2) of section M8, refers to sanction provided for in section M 99 paragraph 2 of the Manual of Tax Procedures. This fine is set at one million (1,000,000) CFA Francs per month. It applies whenever a formal notice to declare within the legal deadline has remained without effect.
In conclusion, it appears that the obligation to declare the beneficial owner taken by the Cameroonian legislator by means of the 2023 finance law constitutes a way of identifying them. By subjecting the non-compliance with obligation to the application of sanctions, the Cameroonian legislator aimed at combating illicit financial flows and international tax fraud and tax evasion. Nevertheless, it is important to keep an eye open to the coming evolution on this matter. In fact, the finance law 2023 states that the conditions for implementing these modalities of declaration of the beneficial owner shall be laid down in a specific instrument.
Author: Didier Ozoto