It is undeniable that Multinationals play a pivotal role in the global economy nowadays. Accounting
for almost 80 percent of the tax revenue of developing countries, these firms represent important
sources of revenue for tax administrations around the world. However, it must be recognized that
the profits they sometimes declare do not always reflect their real income. Indeed, they continually
develop strategies to reduce the tax base in order to avoid paying taxes in the countries where they
operate. In order to safeguard and protect their tax bases, governments joined within the
Organization for Economic Co-operation and Development (OECD) have committed themselves to
jointly combat tax fraud and tax avoidance. It is in this logic that Cameroon signed on the 11 th July
2017 the OECD Multinational Convention to fight the phenomenon of tax base erosion and profit
shifting (BEPS). Reason why, it is henceforth crucial for the country to control intercompany
transactions. Therefore, the transfer pricing documentation appears as a tool of paramount
importance in this fight. Although the groundwork of this tool was laid down by the 2007 Finance
Law, the obligation to produce TP documentation was introduced in Cameroon in 2012 and revised in 2020. As per the current legislation, the obligations relative to transfer pricing documentation result
from the combined application of the OECD Guidelines, Finance Laws and their implementing
circulars, the General Tax Code (GTC) and above all, Decision number 00000005/MINFI/DGI/LRI/L of
the Minister of Finance dated 4 th January 2023, which sets out the content and format of the transfer
pricing documentation. This begs the question of what are these obligations? These are, the
obligations to produce transfer pricing documentation (I) and to match its content with legal
requirements (II).
- The obligation to bring out transfer pricing documentation
The obligation to produce transfer pricing documentation is written down in Section M19a (new) of
the GTC. It should be considered from the point of view of its content, deadline and applicable
sanctions. With regards to the content of the obligation, paragraph one (1) of the aforementioned
section stipulates that affiliated companies with an annual turnover (excluding VAT) of one billion
(1,000,000,000) CFA francs or more are subject to this obligation. On the contrary, related
companies, which do not accrue such annual turnover are exempted from this obligation. The
obligation consists in providing the tax authorities with the documentation justifying the policy of
transfer pricing applied to intercompany transactions of any kind. It should be noted that the
dependency links between entities of the same group are provided for in Section 19a of the GTC. As
for the deadlines, the TP documentation must be presented to Tax Inspectors on the date of
commencement of the tax audit. That is to say, there is no annual obligation to submit the TP
documentation. However, affiliated companies subject to this obligation must prepare their
documentation pending a probable tax audit, which limitation period is four (04) years. As for
sanctions, any failure to comply with the obligation to provide TP documentation gives rise to a fine
of 5% of the amount of intercompany transactions for each audited financial year. Besides, the
amount of the said fine applied per transaction cannot be less than fifty million (50,000,000) FCFA.
These sanctions concern the failure to produce, the incomplete or partial production and the late
production of information required by the Tax Administration. The same penalty may apply if the
content of TP documentation does not comply with the legal requirements.
- The obligation to align the content of the documentation with the legal requirements
The obligation to align the content of the TP documentation with legal requirements is based on a
combination of legal and regulatory provisions. In fact, section M 19a (new) of the GTC as revised in
2020 states in its paragraph 2 that ‘the content of the transfer pricing documentation (…) shall be defined by a separate instrument.’ In application of these provisions, the Minister of Finance issued a
decision on the 4 th January 2023 setting the content and format of the TP documentation. Asper this
this obligation, related companies with an annual turnover equal or greater than one billion
(1,000,000,000) CFA francs (excluding VAT), shall provide a series of information corresponding to
the requirements set by the tax authorities, which are almost the same as those proposed by OECD.
There are two categories of information. The first category deals with information relating to the group
to which the company located in Cameroon belongs. This information generally concerns the legal and
capital structure of the group, its field(s) of activity, list of its intangible and tangible assets, its
financial activities as well as its fiscal situation. The second category includes the information relating
to the Cameroonian entity. This mainly targets the organizational structure and field(s) of activity, a
list of its transactions with affiliated companies and its financial information. This information
constitutes a regulatory framework to which companies subject to TP documentation must adhere. In
addition, these companies are required to submit the content of the documentation in an electronic
format so that the documentation can be exchanged, read and used by the Tax Authorities. Failure to
comply with these requirements shall lead to the same penalties as those applicable to the failure to
submit the documentation.
In conclusion, it appears that the obligations in matters of TP documentation result from the recent
evolution of the tax legislation. Related enterprises should abide by the legal and regulatory
requirements in order to avoid fiscal sanctions. To this end, they shall design their TP documentation
exactly as demanded and hand it over within the legal timeframe. It should be noted that the Tax
Officials are becoming more and more regarding on TP documentation which turns out to be an
indispensable tool for controlling transactions between related parties so as to fight against
international tax evasion and avoidance efficiently.
Author: Charlotte Noko, Tax & Legal Consultant; Supervisor: Albert Désiré Zang, Managing Partner