Chad’s 2019 Finance Law was adopted by the Chadian Parliament on 30 December 2018, and published by the President of the Republic on 31 December 2018. The Law became applicable as from 1 January 2019.
This Alert summarizes the main changes included in this Finance Law which would impact a company’s day-to-day business.
Amendments related to Personal Income Tax (PIT) on salary
The 2019 Finance Law has introduced four amendments to PIT on salary.
First, the amount of transportation allowance permitted as deductible from the PIT base calculation, is now limited to 30% of the basic salary of each employee. It should be noted that no limitation existed before this new Finance Law.
Second, the deduction of XAF600,000 from the PIT base was eliminated. This deduction was introduced by the 2018 Finance Law.
Third, the 2019 Finance Law has increased the rate of benefit in kind to be included in the PIT taxable base.
Finally, the new Finance Law has reaffirmed the requirement to pay personal income tax on salary on a monthly basis, in the proportion of 1/12 of the estimated annual amount.
Introduction of a fine for non-compliance with the transfer pricing documentation requirement
The transfer pricing documentation requirement was introduced in Chad by the 2018 Finance Law. Until now, non-compliance with the transfer pricing documentation requirement was sanctioned by the non-deductibility of the intragroup transactions involved.
As from 1 January 2019, a new sanction was introduced. Going forward, in addition to the non-deductibility of intragroup transactions, the non-compliance with the transfer pricing documentation requirement is sanctioned by a fine of 5% of the gross intragroup transaction with a minimum of XAF50 million.
Introduction of new criteria for qualifying the tax haven
Introduced in Chadian Tax Law by the 2018 Finance Law, the term “tax haven” was defined as non-cooperative or privileged taxation countries or territories included in the “black list” published by the Organisation for Economic Co-operation and Development (OECD).
Under new criteria introduced by the 2019 Finance Law, a “tax haven,” from tax perspective, is defined a country or territory included in the “black list” published by the OECD, the European Union or by the Chadian competent authority (i.e., Ministry of Finance and Budget).
As recall, the sums paid an entity located in a country or territory qualified as “tax heaven” in respect of overhead cost or technical assistance fees, are only deductible up to 50% of the gross.
Amendments related to the 4% levy on imports
A 4% levy is applied by Chadian Custom Authority to imports of goods by individuals or entities located in Chad. This levy can be temporarily suspended under certain conditions.
Through 31 December 2018, the temporary suspension of the 4% levy was granted on demand to Public Liability Companies current with their tax obligations.
From 1 January 2019, any company may request suspension of the 4% import levy if all the following conditions are met:
- The company is current with its tax liabilities.
- The company has registered annual revenue equal or higher than XAF500 million.
- The company has at least 20 employees registered with the social security fund (CNPS), 60% of them at least being Chadian.
When the above conditions are met, the company can request a suspension of the 4% levy on a quarterly basis.
The import levy is increased to 15% of the gross value of imported goods, for entities not registered with tax and not having a valid tax identification certificate.
New rules for minimum tax payment
The 2019 Finance Law has changed the rules for minimum tax payment. While the rate of 1.5% of monthly revenue was maintained, the new Finance Law has set the minimum amount going forward payable by companies as follow:
- XAF1 million for companies subject to the simplified taxation regime.
- XAF2 million for companies subject to the actual taxation regime (i.e., large size companies).
Prior to the 2019 Finance Law, a unique flat amount of XAF1 million was applicable.
Introduction of Value Added Tax (VAT) withholding by private companies
The new Finance Law has introduced the requirement for private companies to withhold VAT charged to them by their suppliers not included in the list periodically published by the Tax Authority.
It should be noted that prior to 2019 Finance Law, the VAT withholding requirement existed for the Public Treasury when paying private companies in respect of public procurement.
New invoice requirement for VAT deduction
The 2019 Finance Law has set new information to be included in the invoices delivered by VAT taxpayers. The absence of required information may lead to the rejection of input VAT deduction.
Reduction of registration tax on the sale of built property
Formerly subject to an 8% registration rate, the sale of built property is going forward subject to registration duties at the rate of 5%. This rate also applies for unbuilt property since last year.
For additional information with respect to this Alert, please contact the following:
EYG no. 012885-18Gbl
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