Cameroon’s upstream oil industry is one of the most important sources of funding for the government
budget. For two decades, this sector was governed by the 1999 Petroleum Code. The sector mainly deals
with hydrocarbon exploration, research and production operations. After 20 years of application, this
Code had become obsolete and ill-adapted to the evolution of the oil sector observed throughout the
world. With a view to revitalizing this industry, the Cameroonian legislator revised its legal framework by
adopting a new petroleum code to govern oil operations in the upstream sector. This is Law No.
2019/008 of April 25, 2019. Four years after its entry into force, the new code was followed by Decree
No. 2023/232 of May 4, 2023, setting out the terms and conditions of its implementation. The new
regulations, which are designed to attract investors introduces, among other innovations, a more
profitable customs, foreign exchange and taxation regimes. It is this last aspect that will be the focus of
our analysis. This is a set of tax benefits, consisting of exemptions from taxes, duties and levies grantable
petroleum companies and their subcontractors in the context of their oil activities. This begs the
question of what is the real content of the tax benefits laid down by law in Cameroon’s upstream oil
sector? To answer this question, we need to look at the tax advantages associated with all oil operations
(I) and those relating only to research, development and production operations (II).
Tax benefits for all upstream oil operations
The introduction of various tax incentives to investments in the upstream petroleum sector
demonstrates the Cameroonian legislator’s desire to promote petroleum operations. This is shown by a
set of tax benefits applicable to all the petroleum operations such as exploration, research, production,
storage, transportation and processing of hydrocarbons. In fact, holders of petroleum contracts and
their sub-contractors are exempted from certain taxes and levies while conducting the aforementioned
activities. This includes the exoneration from Value Added Tax (VAT), Special Tax on Petroleum Products
(STPP) and any similar tax as well as registration duties; as per Section 110 paragraph 1 and 5 of the new
petroleum code. With regard to VAT and STPP, the aforementioned text in its paragraph 1 specifies that
the exemption applies to the supply of goods and services of all kinds, including studies, which are
directly related to the execution of petroleum operations. As for the registration duties, paragraph 5 of
the same section states that the exemption applies to loan agreements and contracts directly related to
oil operations. An analysis of these legal provisions clearly reveals the legislator’s desire to set up an
attractive tax system for the benefit of oil companies. This is also the rationale behind the tax benefits
associated with research, development and production operations.
Tax benefits for research, development and production operations
During the research, development and production phases, investors in the upstream oil sector also
benefit from a number of tax advantages. Section 110 paragraph 1 of the aforementioned Petroleum
Code states that holders of petroleum contracts are exempted from all export duties and taxes on their
research, development and production activities. In addition, they are exonerated from all direct taxes
on the revenue of their petroleum transactions with the State, decentralized local authorities, and any
legal entity governed by public law. Contractors are also exempted from distribution tax on dividends
paid to their shareholders. The same way, interests paid to non-resident lenders, for funds relating to
development investments are exempted from Withholding tax (WHT). Also, paragraph 2 of Section 110
of the petroleum code provides that petroleum companies and their subcontractors may enjoy the
exemption from WHT during the conduct of their research and development operations. This exemption
targets assistance, equipment rental, materials and all services rendered in connection with oil
operations. However, it should be noted that the exemption granted is only valid on condition that the
subcontractors do not have a permanent establishment in Cameroon and supply private goods and
services at cost price, on behalf of the holder. The list of exempted goods and services shall be
established by the Minister of Finance after consultation with the Minister in charge of Hydrocarbons.
In conclusion, petroleum companies and their subcontractors are likely to enjoy tax relief at all stages of
upstream oil activity in Cameroon. These advantages consist of a series of exemptions from taxes, duties
and levies. Consisting of exemptions from VAT, export duties, TSSP, distribution tax, WHT and
registration duties, these tax benefits reflect the legislator’s desire to revitalize this sector of activity by
making it more attractive to investors.
Author: Jean Didier Ozoto, Tax & Legal Consultant; Supervisor: Albert Désiré Zang, Managing Partner