(Business in Cameroon) - Cameroon’s Minister of Finance Louis Paul Motazé sent a letter last September 6 to Alain Olivier Noël Mekulu Mvondo, MD of the national pension fund CNPS, to put an end to the battle against the Directorate General of Taxes (DGI). "I have the honor of informing you that your arguments have been recognized as well-founded. Indeed, as tax law is interpreted strictly, current tax legislation does not make you the legal debtor (collector, ed) of the IRPP (personal income tax) on pensions paid, as provided for in article 81 of the general tax code,” Minister Motazé wrote, immediately canceling the CFA25.6 billion tax reassessment levied on CNPS by the DGI because for several years, this state-owned company had not been collecting IRPP on the retirement pensions it paid monthly.

However, Minister Motazé has made it clear that the funds seized from CNPS accounts as a result of this tax reassessment will not be reimbursed, and are now considered "tax credits", from which the taxes payable by CNPS over the coming months and years will be gradually deducted. This is insofar as, even though this state-owned company "enjoys, for all its activities related to social security benefits, a privileged tax regime per current legislation", it remains "subject to the common law tax regime" concerning all its "commercial activities (financial investments, property rental, etc., ed)", as stipulated in paragraphs 1 and 2 of the decree of June 7, 2018, on the reorganization and operation of this state-owned company.

According to tax expert Alain Ndzana Biloa, the CNPS's recent victory over the tax authorities is simply the consequence of a legal vacuum. "It's the strict application of the law. There is indeed a legal vacuum. The Minister is not questioning the principle of taxing pensions, but is relying on the fact that Article 81 of the General Tax Code forgot to expressly mention that it is the CNPS that must collect this tax and pay it back", he stresses.

Revision of the General Tax Code

This article, which deals with the procedures for collecting IRPP on salaries, pensions, and life annuities, is silent on the procedures for collecting IRPP on pensions and life annuities. It simply states that IRPP on salaries "is deducted directly by the employer at the time of each payment". "Even if the Code does not designate the collector of IRPP on pensions, it goes without saying that the CNPS should collect it, in its capacity as the body responsible for managing retirees' pensions", maintains a tax official, whose argument nevertheless comes up against the "strict" nature of tax law, which leaves no room for interpretation and is based solely on what is expressly written or indicated in the Code. It was this refusal to subject tax law to any interpretation that prompted the Minister of Finance, in his letter dated September 6, 2023, to cancel the tax reassessment imposed on CNPS by the tax authorities.

However, as the tax expert points out, the Finance Minister's statement does not call into question the taxation of retirement pensions, which is strongly contested by certain workers' unions.  For these unions, like the Union générale des travailleurs du Cameroun (UGTC), the taxation of pensions and life annuities, although prescribed by the General Tax Code, is at odds with article 40 of the May 22, 1973 decree on the organization of social welfare in Cameroon. This decree stipulates that "by the activities it carries out, the national pension Fund is exempt from all taxes, stamp duties, and registration fees". "This provision applies to the CNPS as a company exempt from the taxes to which ordinary businesses are subject, and not to the services it provides", a tax officer said. Indeed, it is the legal entity (CNPS) that is concerned by the decree of May 22, 1973, and not the individual (the pensioner) on whom the IRPP is applied. This is why article 30 of the General Tax Code stipulates that "income from public and private salaries, wages, allowances, emoluments, pensions, and life annuities are taxable when the remunerated activity is carried out in Cameroon. Pensions and annuities are deemed to have been received in Cameroon when the debtor is established in Cameroon". It is this provision, present in the Cameroonian tax regulations since 1973 (see article 68 of this year's General Tax Code), that the tax authorities now wish to apply, in the context of broadening the tax base, given the Treasury's ever-increasing financial needs.

But to implement this measure for taxing retirement pensions, according to our sources, it will first be necessary to revise the General Tax Code, to specify the actor responsible for collecting the IRPP on retirement pensions. This is usually done through the Finance Act. It is therefore unlikely that this amendment will be made before the 2024 Finance Act is passed. This de facto postpones the collection of IRPP on retirement pensions and life annuities.