Côte d’Ivoire finance bill 2022 will adjust tax on related party transactions

By Moïse Gnakouri, Doctoral researcher, Catholic University of Louvain, Brussels

This Côte d’Ivoire government’s 2022 finance bill, unveiled on October 20, provides for, among other provisions, an adjustment of the taxation of intra-group transactions.

Current law

The current Ivorian tax law provides that, subject to tax treaties’ provisions, persons and companies who do not have a professional establishment in Côte d’Ivoire are subject to the tax on non-commercial profits on the basis of the sums they receive as remuneration for services of any kind provided or used in Côte d’Ivoire.

The collection of this tax is carried out by a withholding operated by the company resident in Côte d’Ivoire to which these services have been provided or which has used these services.

As the Ivorian tax legislation currently stands, the withholding tax is due when the sums are paid or when the sums are entered into a current account.

Through this process, companies concerned by this withholding tax could reduce their declared profit since the sums are expensed while the withholding tax is not applied.

Finance bill amendment

Attempting to resolve what is considered to be a prejudicial situation for the Ivorian treasury, the 2022 finance bill provides that the withholding tax on non-commercial profits and/or value-added tax (VAT) is due as soon as the sums concerned are recorded in an expense account or credited to a third-party account.

These recorded amounts must also be mentioned in the financial statements that companies that are established in Côte d’Ivoire are required to file annually with the tax authorities.

The financial statement must also contain a description of the method used by the taxpayer to determine its transfer pricing.

Any omission or insufficiency in the application of withholding taxes will be sanctioned by the non-deductibility of the amounts paid or expensed, without prejudice to other sanctions provided for in the Book of Tax Procedures (Livre de Procédures Fiscales).

The vote on this bill will take place in December 2021, and, once approved, it will come into force at the beginning of January 2022.