congo-democratic-republic-of-ctg24 by worldtradepresss

Congo, Democratic Republic of

ey.com/globaltaxguides

Kinshasa/Lubumbashi

110 Boulevard du 30 juin

2nd Immeuble Onze Treize

Local B

Kinshasa – Gombe

Democratic Republic of Congo

Croisement Chausée Laurent Désiré

Kabila et Avenue Lomami

Lubumbashi – Haut Katanga

Democratic Republic of Congo

Principal Tax Contact

 Pierre-Alix Tchiongho

A. At a glance

+243 999-30-68-68

Mobile: +243 97-777-6963

Email: pierre-alix.tchiongho1@cd.ey.com

(a) The corporate income tax rate is 30% for all companies registered in the Democratic Republic of Congo (DRC).

(b) See Section B.

(d) Under the amended Mining Code, dated 9 March 2018, interest on loans abroad to mining companies is not subject to withholding tax if the following conditions are satisfied:

• The loan is exclusively used for the mining project.

• The interest rates and other borrowing terms for carrying out the projects are established in accordance with the arm’s-length principle.

(e) The net amount of royalties is subject to tax. For this purpose, net royalties equal gross royalties minus professional expenses, or 30% of gross royalties (resulting in an effective tax rate of 20%).

(f) This withholding tax applies to payments for services provided to Congolese companies by foreign companies and individuals without a permanent establishment in the DRC. The tax base is the gross amount of the applicable invoice.

(g) Under the amended Mining Code, dated 9 March 2018, the carryforward period for mining companies is limited to five years following the year of the loss.

B. Taxes on corporate income and gains

Corporate income tax. Congolese companies are taxed on the territoriality principle. As a result, companies carrying on a trade or

Increases resulting from realized capital gains on buildings, tools, materials and movable assets (regardless of whether they result from rent payments), as well as on participations and portfolios, are taxable to the extent that the sales price exceeds the acquisition price or cost. A deduction is made from the amount of the depreciation that has already been claimed for tax purposes.

Special tax on capital gains for mining companies. Law No. 007/2002 of 11 July 2002 on Mining Code and Decree No. 038/2003 of 26 March 2003 regarding the Mining Regulations, as amended and completed to date by the Law No. 18/001 of 9 March 2018, and Decree No. 18/024 of 8 June 2018, introduced a special tax at a rate of 30% on capital gains from the sale of shares (Article 253 bis of the Mining Code and Article 529 bis of the Mining Regulations). Ministerial Order No. CAB/MIN/ FINANCES/2020/021 of 3 December 2020 set out the terms of calculation, filing and settlement of the special tax on capital gains from the sale of shares.

Administration. The fiscal year extends from 1 January to 31 December. Tax returns must be filed by 30 April.

Under the 2024 Financial Law corporate tax installments, each representing 30% of the previous year’s tax base for the first two installments, and 20% for the third installment, must be paid before 1 August, 1 October and 1 December of the year in which taxable income is generated, using a provisional installment payment slip according to the model set by the tax administration. The balance of tax due must be paid by the following 30 April.

A penalty of 2% per month is assessed for late payment of tax. Tax is fixed automatically if a tax return is not filed.

Dividends. In principle, dividends paid are subject to a 20% withholding tax. The rate of dividend withholding tax for mining companies is 10%. A dividend withholding tax applies to branches.

Foreign tax relief. In general, foreign tax credits are not allowed. Income subject to foreign tax that is not exempt from Congolese tax under the territoriality principle is taxable.

C. Determination of trading income

General. Taxable income is based on financial statements prepared in accordance with principles set by the Organization for the Harmonization of Business Law in Africa (Organisation pour l’Harmonisation en Afrique du Droit des Affaires, or OHADA) Accounting Act, except for banks and insurance companies. The net amount of income is taxed. This amount equals gross income minus business expenses incurred during the tax year to acquire and retain the income. Business expenses are generally deductible unless specifically excluded by law. The following expenses are not deductible:

• Head office, remuneration or management fees for services paid to nonresidents that are not justified

• Head office overhead or remuneration for certain services (studies and technical assistance) paid to nonresidents

• Expenditure of a personal nature, such as maintenance of household, appraisal fees, holidays and other expenses not necessary for the profession

• Corporate income tax, as well as real tax (tax on movable assets, tax on vehicles or tax on mining concessions), to the extent that the real tax does not constitute an operating expense

• All judicial or administrative fines, and fees and charges relating to breaches by income beneficiaries

• Certain specific charges, gifts, subsidies and penalties

• Directors’ fees allocated under the Corporations Act to members of the General Council

• Expenditures on leased property, including depreciation of the property

• Provisions for losses, expenses or depreciation of assets, excluding provisions for the recovery of mineral deposits and provisions for the recovery of bank capital

• Commissions and brokerage fees if it cannot be proven that the tax on turnover (see Section D) has been paid for these items

• Most liberalities (payments that do not produce a compensatory benefit, such as excessive remuneration paid to a director)

Donations and subventions. Under the 2023 Financial Law, donations and subventions are deductible if paid to the Social Fund of the DRC (Fonds Social de la République), to research organizations, to public interest organizations of philanthropic and social purposes, and to sport associations located in the DRC, up to a limit of 0.5% of the annual turnover, and if justified or documented.

Telecommunications costs. Fifty percent of telecommunication costs are deductible. The 2023 Finance Law adds that the internet costs are 100% deductible provided the internet connection is used for professional purposes only.

Entertainment costs. Forty percent of entertainment costs remain deductible.

Interest paid to shareholders. Under the 2023 Finance Law, interest paid to the shareholders that legally or factually have the power to manage the company are deductible only if the sums put at the disposal of the company do not exceed, for all the shareholders, the amount of the paid share capital.

Inventories. Inventories are normally valued at their historical cost or acquisition cost.

Provisions. In determining accounting profit, companies must implement certain provisions, such as a provision for risk of loss or for certain expenses. These provisions are not deductible for tax purposes. However, provisions for recovery of bank capital and provisions for the recovery of the mineral deposit are deductible for tax purposes.

Tax depreciation. Land and intangible assets, such as goodwill, are not depreciable for tax purposes. Other fixed assets may be depreciated using the straight-line method at rates specified by tax law. The following are some of the specified annual rates.

assumed, and an explanation concerning the selection and application of the methods used

• An analysis of comparative elements considered as relevant by the company if the selected method requires it

The transfer-pricing documentation (a condensed version) must be filed with the tax administration within two months after the filing of the corporate income tax return.

In addition, the corporate income tax law disallows branches from deducting overhead charges incurred by the parent company and charged back to the branch.

Certification of the financial statements. Before 2023, annual financial statements had to be certified as correct by the taxpayer or its representative and countersigned by either the accountant or advisor. From 2023, to be accepted by the tax administration, the financial statements must be certified by a chartered accountant duly registered at the national association of the chartered accountants in accordance with the conditions defined by a decree from the Minister of Finance.

Companies subject to the certificate are all companies established in the DRC, including those required by law to use a specific accounting framework other than SYSCOHADA (for example, banks, microfinance institutions, insurance companies and social security). Exceptions are provided for small businesses that have a turnover of less than CDF80 million and that, in accordance with tax legislation, must keep their accounts using the minimal cash system.

F. Tax treaties

The DRC has entered into double tax treaties with Belgium and South Africa. The following are the withholding tax rates under the treaties.

(a) The 10% rate applies if the Belgian recipient company was eligible under the Investment Code or another investment incentive and if it holds at least 25% of the capital of the payer. Otherwise, the rate is 15%.

(b) The 5% rate applies if the South African recipient company holds at least 25% of the capital of the payer. Otherwise, the rate is 15%.