In order to reconcile the imperatives of tax revenue mobilization with the protection of taxpayers’ rights, Cameroonian tax regulations require the tax authorities to establish and justify, both in law and in fact, any assessment imposed on a taxpayer in the course of a tax audit. This requirement helps ensure the regularity of the audit procedure and prevents arbitrary action by the tax administration. However, the administration may encounter difficulties linked to the complexity of taxpayers’ activities or the diversity of the transactions they carry out, difficulties that can lead it to make errors in legal classification or to confuse the rules of law underlying a tax assessment. Such errors generally result in the abandonment of an assessment that is nonetheless substantively well-founded, or in relief being granted on tax liabilities that were normally due. To prevent such mistakes from undermining the optimal collection of taxes, the Cameroonian legislature, through the 2026 Finance Law (FL 2026″), has enshrined the possibility for the administration, in the course of the contentious phase of a tax audit, to change the legal basis or the grounds supporting an assessment originally established on a different legal footing or rationale. This was achieved through the introduction of new Section M 125 c into the General Tax Code (GTC). The provisions of this article state that: “The Administration is authorised to substitute the legal basis or grounds for a claimed or contested taxation.” In examining what this reform truly entails, a careful analysis shows that it is both an instrument for streamlining tax audits and securing the tax base (I), and one accompanied by safeguards for the taxpayer (II).
I. Substitution of Legal Basis and Grounds: A Tool for Streamlining Tax Audits and Securing the Tax Base
The possibility to substitute the legal basis or grounds, conferred on the administration by FL 2026, represents a genuine reinforcement of its tax-audit powers. Indeed, the administration may now, in the course of an audit, replace the erroneous legal provision on which an assessment was based with the provision most appropriate to that assessment. Furthermore, the tax authorities may henceforth replace the justification initially relied upon to support an assessment or a penalty with another justification, where the first proves inaccurate, incomplete, or unsuitable. This amounts to a genuine consolidation of the administration’s audit powers, enabling it to correct its own errors so that they no longer automatically result in the abandonment of a tax assessment once the underlying facts are materially established. The scope of application of the mechanism is set out in the combined provisions of Section M 125-c, paragraph 1 of the GTC and point 618 (page 91) of the FL 2026 financial law implementing circular. These texts specify that substitution may apply to any tax, duty, levy, or contribution, and may concern either a claimed or a contested tax liability. The reach of the measure is further clarified by paragraph 2 of the same article, which states that substitution may occur at two points: during the audit procedure, prior to issuance of the Notice of Tax Collection (AMR); or during the contentious phase. While substitution raises no particular difficulty when it occurs before issuance of the AMR, the position differs where it takes place during the litigation phase. At that stage, a taxpayer who has already initiated a challenge against the assessment may have built their case around the legal basis initially invoked by the administration. A change in legal basis or grounds is therefore liable to alter the terms of the dispute, to the taxpayer’s detriment. Be that as it may, this prerogative granted to the administration to secure tax reassessments remains subject to safeguards in favour of the taxpayer.
II. Taxpayer Safeguards in Connection with the Substitution of Legal Basis and Grounds
To protect taxpayers against arbitrary action by the administration, the 2026 Finance Law formally circumscribes the power of substitution granted to the tax authorities in the context of audits. To this end, the reform delineates the scope of substitution, conditions its admissibility, and preserves the taxpayer’s legal avenues of appeal. As to scope, point 619 (page 91) of the FL 2026 circular specifies that substitution cannot occur, in particular, where the assessment has been the subject of a final court decision; where it rests on new facts unrelated to the original procedure; or where the original procedure was tainted by a substantial irregularity that deprived the taxpayer of their safeguards. Clearly, substitution should concern the same taxable matter and the same tax or duty, with the facts underlying the assessment remaining unchanged. It should not give rise to new assessments or become a means by which the administration searches indefinitely for a legal basis capable of salvaging any claimed or contested liability. As to admissibility, paragraph 3 of Section M 125 c of the GTC provides that substitution is admissible “only if the taxpayer has benefited from the full range of procedural safeguards and rights of defence.” According to point 620 of the FL 2026 circular, these safeguards amount to two cumulative conditions. First, the taxpayer must be informed of the new basis or new grounds through a written, reasoned notification. Second, the taxpayer must be given the opportunity to submit written observations within 30 days of notification of the substitution. The taxpayer thus retains the ability to contest the relevance of the new legal basis, the facts relied upon by the administration, or, more broadly, the merits of the assessment itself. It should be noted that substitution suspends the running of procedural time limits, which resume upon notification of the taxpayer’s observations or, absent any response, on the day following expiry of the thirty (30) day period. Finally, as regards remedies, the circular specifies that, following substitution, the taxpayer retains the full range of legal remedies available, namely, administrative claims and judicial appeals, within the time limits and forms prescribed under ordinary law. These safeguards help preserve the adversarial character of the audit procedure and ensure respect for the rights of the defence.
Ultimately, the enshrinement of the substitution of legal basis or grounds under FL 2026 enables the tax authorities to correct the legal basis or grounds of a tax assessment initially established on an inappropriate footing. Such a prerogative helps limit the risk that a well-founded assessment might be annulled on account of a mere error, thereby contributing to the streamlining of tax audits and the securing of tax revenue. That said, substitution cannot be equated with a general licence to alter the basis of an assessment at any time. It remains bound by legal conditions designed to guarantee the regularity of the audit and to preserve taxpayers’ rights. The reform thus forms part of the broader pursuit of a balance between the effectiveness of tax enforcement and the protection of taxpayers’ rights.
Author: Jean Didier Ozoto, Senior Consultant; Supervisor: Albert Désiré Zang, Managing Partner