Agro-Sector

Business Development Incentives:
Agri Sector

Agriculture represents more than half of the non-oil and gas export earnings and employs almost sixty percent (60%) of the working population in Cameroon. Ninety percent (90%) of the rural households are somehow employed in agriculture’, as per the World Bank report in 2021.

In Cameroon, the socioeconomic crisis repercussion of the Covid-19 and the war in Ukraine have revealed the need to strengthen this sector in order to reduce the external dependency. Thus, the Head of State’s Circular number 001 of August 23, 2022 on the preparation of the 2023 Budget suggested incentives to strengthen the existing common law system, which promotes the agriculture, livestock and the fisheries sector.

In this context, amending Section 122 of the General Tax Code, the tax legislator has revised a series of tax incentives to increase the national production of consumer goods, promote agricultural mechanization, promote the migration of economic agents from informal to the formal sector and also to increase the processing of certain local products. This begs the question what are the various tax benefits that agricultural investors are likely to enjoy?

It’s worth mentioning that the granting of these incentives differs in respect to the investment phase (I) and the operation phase (II) of the project.

Phase I: Tax incentives at the investment phase

The investment phase can also be referred as establishment phase, period during which the infrastructures and facilities essential for the setting up of the production unit is built. At this phase, individual farmers, cooperatives or common interest groups benefit waiver from taxes and levies on wages paid to seasonal agricultural workers. In addition, the amended section 22 of the GTC provides for the exemption from VAT on the purchase of pesticides, fertilizers and inputs used by farmers, as well as for stock breeding and fisheries equipment and materials listed by the legislator.

Another tax relief that the sectors may enjoy is the exoneration from registration fees/duties for the following transactions or operations: transfers of land used for agriculture, stock breeding and pisciculture; loan agreements to finance investment. Agricultural companies are also exempted from land tax property. The new tax incentives at the investment phase are mostly composed of tax exemptions. They are different from those granted at the operation phase.

Phase II: Tax incentives at the operation phase

The operation phase is the period during which production activities are effectively carried out. It cannot exceed ten (10) years. The tax legislator makes a clear demarcation on agricultural investors. Some of them are subject to the tax incentives of the new financial law while the others fall under those laid down by the law of 18 April 2013 establishing private investment incentives in Cameroon. They should be addressed separately. Concerning investors benefiting from the tax incentives in the new financial law, they are individual farmers and cooperatives or common interest groups (CIGs).

For the first five (5) years, they enjoy incentives like exemption from business licenses, tax installment and the minimum collection of income tax and income tax. At the sixth year, they are entitled to exemption from business licenses and a payment of a flat income tax levy at the rate of 0.55% of turnover including council tax. As for agricultural investors benefitting from the incentives of the law of 18 April 2013, they refer to any other investor which is not individual farmer, cooperative or common interest group. They therefore refer to commercial companies engaged in agricultural production and stock breeding. The main tax benefits they may have are:

Tax reduction of 50% for 5 years which targets CIT, registration duties (lease agreement, ownership transfers) and distribution tax on dividends;
Exemptions: registration duties (loans and shareholders’ current accounts);
Deferral of deficits for 5 years;
Reduced rate of 5% for customs duties (only for equipment and materials which are not manufactured locally).

Conclusively, the current tax incentives grantable to agricultural investors result from the combined reading and application of both the 2023 financial law and the law of April 2013 establishing incentives to private investment in Cameroon. The tax advantages depend on whether farmers or entities are at the investment or the operation phase.

Whereas tax exemptions are provided during the investment stage; economic agents operating in the agricultural sector may enjoy both tax exonerations and tax reductions during the operation phase. Hopefully this will increase the domestic production and reduce western dependency to a certain degree.