In an effort to combat the widespread erosion of tax bases and restore confidence in the
international tax system, the OECD and the UN have adopted regulations mandating
multinationals to inform tax administrations about their pricing strategies in transactions
between related entities. This information is consolidated under the term transfer pricing
documentation. Since 2017, Cameroon has adhered to the OECD Multilateral Convention on
Mutual Administrative Assistance in Tax Matters, thereby adopting the requirement to
establish transfer pricing documentation and gradually integrating it into its tax legislation.
However, with the enactment of the Finance Laws of 2024 and 2025, this obligation, which
traditionally applied exclusively to multinational enterprises operating in different
countries, was unexpectedly extended to cover Cameroonian companies owned or controlled
by other entities also based in Cameroon, subject to meeting certain conditions. This
extension was formalized through an amendment of Section M19.a of the General Tax Code
(GTC). More importantly, instruction Letter No. 00000007/MINFI/DGI/LRI/L, issued by the
Minister of Finance on January 2 nd 2025, clarifies the enforcement modalities of the
provisions of the General Tax Code (GTC) concerning transfer pricing. On page 5, it
stipulates that “the provisions on transfer pricing (…) apply to domestic transactions carried
out between a company established in Cameroon and another company established in
Cameroon belonging to the same group of multinational enterprises.” Furthermore, the text
specifies on page 6 that these provisions also apply to transactions between a permanent
establishment located in Cameroon and its head office also situated in the country. Given
that transfer pricing issues are intrinsically linked to international transactions, it is difficult to
understand how transfer pricing documentation could be applicable to domestic transactions
between Cameroon-based companies. This raises legitimate concerns as to whether
Cameroonian tax legislature has deviated from international standards. It is clear that this
approach suffers from three major flaws.
The first weakness in extending the obligation to produce transfer pricing documentation to
domestic transactions lies in the Cameroonian tax legislature failure in 2024 and 2025 to
adopt a holistic approach to transfer pricing. In fact, a combined reading of international legal
frameworks including the UN and OECD Model Tax Conventions on Income and on Capital,
the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations,
and the UN Practical Manual on Transfer Pricing for Developing Countries reveals that
transfer pricing regulations apply solely to cross-border transactions. By extending transfer
pricing rules to domestic transactions, the Cameroonian legislature has clearly departed from
international regulations. This approach contradicts OECD guidelines, which specify that
“domestic issues are not considered in these Guidelines, which are exclusively devoted to the
international aspects of transfer pricing”. Additionally, it goes against Paragraph 1.1.6 of the
UN Practical Manual, which states that “transfer pricing is a general term for establishing
the prices of cross-border, intra-firm transactions between related parties”. It is crucial to
highlight that the concept of related or associated enterprises is central to transfer pricing
issues. Consequently, transfer pricing does not apply unless associated enterprises are
involved, not based on the broader definition under Cameroonian law, which includes entities
established within Cameroon, but rather based on the definition enshrined in Articles 9 of the
UN and OECD Model Tax Conventions. These articles, which establish the arm’s length
principle, define related enterprises as those belonging to a multinational group, located in
different countries, and engaging in intra-group transactions. This definition should have
guided the Cameroonian legislature and tax administration in drafting transfer pricing control
rules.
The second issue with the legislature’s approach is that while cross-border intra-group
transactions pose a potential risk of tax evasion, this concern does not apply to domestic intra-
group transactions. Such operations do not require justification through transfer pricing
documentation because there is no conceivable risk of tax evasion. Since both entities are
located in Cameroon, the tax administration can easily monitor their transactions. For
example, when two entities from the same group operate in Cameroon, the transaction amount
constitutes an expense for Company X (the payer) and revenue for Company Y (the
recipient). Both entities are subject to tax rules governing expenses and income under the
General Tax Code (GTC).
Finally, the third disadvantage is that the documentary requirement for transfer pricing, now
applicable to related Cameroonian companies, may be detrimental to these entities. Drafting
transfer pricing documentation requires considerable expertise, which companies may not
always possess. Consequently, they may need to hire tax consultancy firms to prepare the
documentation, incurring additional expenses that strain their financial resources. Moreover,
these companies are unfairly exposed to severe tax penalties for non-compliance with transfer
pricing documentation requirements, even though domestic related transactions should
logically fall outside the scope of transfer pricing obligations. Section M19a (new) of the
GTC imposes a minimum fiscal fine of 50 million CFA francs per transaction and per fiscal
year. Such a penalty, applied to entities that should not be subject to transfer pricing
documentation requirements, appears unjust.
In conclusion, the extension of the obligation to produce transfer pricing documentation to
domestic transactions between companies established in Cameroon constitutes a breach of
international UN and OECD standards on transfer pricing. This is because transfer pricing
regulations are designed exclusively for cross-border transactions and explicitly exclude
domestic operations. Furthermore, issues related to tax base erosion and tax evasion are
irrelevant in this context, as profits remain within Cameroon. The new transfer pricing
documentation framework exposes affiliated Cameroonian companies to heavy and unjust tax
penalties. Therefore, it is imperative for the Cameroonian legislature to revise the law to align
it with international standards and for the tax administration to abandon the enforcement of
this highly detrimental measure for taxpayers.
Authors: Jean Didier Ozoto, Senior Tax & Legal Consultant), Yves Bertrand Abena, Tax &
Legal Consultant; Supervisor: Albert Désiré Zang, Managing Partner