Transfer pricing documentation draws almost all of its essence from the model adopted and introduced by Action 13 of the OECD’s final report of 2015. It consists of a master file, local file and country-by-country declaration, the meanings of which should be specified. The master file defines the general information required from multinationals and provide an overview of the group’s activities and its TP policy worldwide. The local file defines the specific information to be provided by the local entity on its transactions with associated companies located in different countries. The country-by-country declaration consists, among other things, for Multinationals to disclose, for each tax jurisdiction where they operate, the amount of their annual turnover, profit before tax, share capital and tangible assets. These three components of TP documentation require Multinationals to set out their TP policies in a coherent manner to enable the Tax Authorities to better control the prices charged in inter-company transactions. Cameroon, which has ratified the OECD multinational convention, has gradually clarified the concept and content of TP documentation. This results from Financial Laws, their implementing circulars and recently the decision of the Minister of Finance laying down the content and format of TP documentation. However, when analyzing this legal framework, it is difficult to state that it takes exact account of the structure of TP documentation as set out in the OECD model. In this respect, it seems logical to ask whether the triple components of the TP documentation which are master file, local file and country-by-country declaration is a reality in Cameroon. Answering this question requires an analysis of the Cameroonian current tax legislation from the perspective of the master and local files (I) and that of the country-by-country declaration (II).
- Tax legislation in Cameroon: ambiguity with regard to master and local files
The analysis of the Cameroonian tax legislation from the master file and local file angle is of paramount importance. In effect, these files constitute the first two levels of the standardized approach to TP documentation as developed by Action 13 of the OECD BEPS Action Plan. Unfortunately, the current tax legislation shows some ambiguities in relation to the said files. This is because neither the General Tax Code (GTC), nor the financial laws together with their implementing circulars, and even the recent decision of the Minister of Finance setting out the content and format of TP documentation, do not mention the master and local files as an integral part of the TP documentation. Thus, the production of these two files does not constitute a legal obligation in Cameroon. The taxpayer cannot therefore suffer tax sanctions for failing to produce the master and local files. However, it is crucial to question whether Cameroon which ratified the multilateral convention of OECD on BEPS violate the TP’s principles of the said organization. The answer is obviously “NO” because the regulation in-force obliges a certain category of taxpayers to submit a TP documentation. Such a documentation should be presented in a single file. As a matter of fact, reading carefully the Minister of Finance’s decision on the content of TP documentation, one can detect that the information to be provided by Multinationals perfectly match those of the master and local files as suggested in the OECD model. It is also worth noting that the harmonization of the national rules affecting cross-border transactions is one of the main pillars of the OECD’s action plan to combat tax base erosion and profit shifting (BEPS). As such, Cameroon would benefit to modify its regulation in order for the latter to clearly specify that TP documentations of multinationals shall be made of master file and local file distinctively. This envisaged harmonization should equally take into consideration the country-by-country declaration.
- The legal vacuum with regard to country-by-country declaration
It is also important to question the Cameroonian tax law considering the country-by-country declaration, which constitutes the third element of TP documentation according to the OECD action plan. After a careful analysis of the current tax legislation, it appears there is a legal vacuum concerning the country-by-country declaration. In fact, the GTC and the Minister of Finance’s decision which sets the content of TP documentation are completely silent on the country-by-country declaration. This means that Multinationals are exempted from producing this document, which, along with the master and local files, form the backbone of the TP documentation according to the OECD. It is therefore hard to understand the silence of the Cameroonian Legislator and Tax Authorities on this matter, given that the information it contains is crucial to the control of intercompany transactions. This document is almost more important as the declarations made by authorized entities are exchanged between jurisdictions based on bilateral or multilateral information exchange agreements. This enables Tax Administrations to jointly fight and control inter-company transactions in view of the optimum tax collection. Considering the importance of this declaration, we would have expected that the Minister’s decision on TP documentation had taken it into consideration. The non-existence of this document in the national legal system means that the TP documentation is not only incomplete but also less effective as a tool for combating fraudulent profit shifting.
In conclusion, TP documentation in Cameroon hardly complies with OECD guidelines. While it should be noted that the documentation is ambiguous with regard to the master and local files, one should keep in mind that it also suffers from a vacuum concerning the country-by-country declaration. It would therefore be appropriate for Cameroon to reform its tax legislation so that taxpayers are obliged to submit TP documentation under the conditions and format indicated by OECD. To this end, it would be great to adopt the master and local files and introduce the country-by-country declaration.