(Business in Cameroon) - Cameroon has abolished the value-added tax (VAT) applied to life insurance for this fiscal year.
In the circular of the Minister of Finance (Minfi), which sets the guidelines for this year’s financial policy, it is stated that “life insurance contracts and commissions on savings-type life insurance” are exempt from VAT. To justify this cancellation, the document mentions the need “to promote the mobilisation of long-term savings.”
This VAT was extended to life insurance in the 2019 finance law at a rate of 19.25% but it has never been applied due to insurers’ protests. According to the country’s insurance companies association, the application of VAT on life insurance is simply applying “taxation on savings which has already been taxed since it is savings on the salary.” For its president, Théophile Gérard Moulong, this decision should lead, eventually, to the disappearance of life insurance.
This argument found an attentive ear with the Minister of Finance. Following the discontentment of insurers, Louis Paul Motaze, instructed, in May 2019, the suspension of “tax adjustment measures” concerning life insurance companies.
“Insofar as an inappropriate application of the tax law could have irreversible consequences that could affect the survival of the insurance companies concerned, I invite you to postpone the execution of the tax adjustment measures initiated on these companies, pending the outcome of the consultation,” the minister wrote in a letter addressed to the Director-General of Taxes.
This year then, the grievances of insurance companies in favour of a VAT exemption on life insurance products was finally endorsed by public authorities.