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Union of the Comoros

Country Name: Union of the Comoros
Currency: Comorian Franc (KMF)
Primary Tax Authority: General Directorate of Taxes (Direction Générale des Impôts – DGI)
Key Legislation:

  • General Tax Code
  • Income Tax Law
  • Corporate Tax Code
  • Value Added Tax (VAT) Law

Fiscal Authority Allocation

Centralized Fiscal System:
The Union of the Comoros operates a centralized tax system, with the General Directorate of Taxes (DGI) responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), and value-added tax (VAT). Local governments have limited taxing authority.

Corporate Income Tax (CIT)

Standard Rate: 50%
Comoros imposes a corporate income tax rate of 50% on the net taxable income of resident companies. This high rate is primarily due to the country’s limited revenue sources, although businesses in strategic sectors may benefit from tax exemptions or reductions.

Corporate Forms and Taxation:

  1. Corporation (Société Anonyme – SA): The most common corporate form, subject to the 50% CIT rate.
  2. Branches of Foreign Companies: Taxed at the same CIT rate on Comorian-sourced income.

Exemptions and Incentives:

  • Investment Incentives: The government offers tax exemptions or reductions for companies investing in key sectors such as agriculture, fisheries, and tourism. This can include tax holidays and reduced CIT rates for a specified period.
  • Free Zones: Businesses operating in designated free zones may benefit from CIT exemptions and customs duty reductions.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 10%
The Comoros applies a VAT rate of 10% on most goods and services. VAT is levied on the sale of goods, provision of services, and imports.

Exemptions:
Certain basic goods, including food products, healthcare services, and education, are exempt from VAT. Exports are zero-rated, allowing businesses to reclaim VAT on inputs used to produce exported goods.

Personal Income Tax (PIT)

Progressive Rates:
The Comoros applies progressive personal income tax rates as follows:

  • Up to KMF 500,000: 0%
  • KMF 500,001 to KMF 2,000,000: 10%
  • Above KMF 2,000,000: 30%

Dividends:
Dividends paid to residents and non-residents are subject to a 15% withholding tax.

Additional Mandatory Contributions

Social Security Contributions:
Employers and employees must contribute to the Comoros’ social security system, which provides pensions, healthcare, and unemployment benefits.

  • Employer Contribution: 5% of gross salary.
  • Employee Contribution: 2.5% of gross salary.

Withholding Taxes

  • Dividends: 15% for both residents and non-residents.
  • Interest: 15%
  • Royalties: 10%
    Withholding tax rates may be reduced under the Comoros’ double taxation agreements (DTAs).

Transfer Pricing Rules

The Comoros does not have formal transfer pricing regulations. However, companies engaging in cross-border related-party transactions are expected to follow the arm’s-length principle, consistent with international norms.

Special Tax Regimes

  • Investment in Agriculture and Tourism: The government prioritizes investment in agriculture and tourism as part of its economic diversification efforts. Companies investing in these sectors may benefit from tax holidays, customs duty exemptions, and reduced VAT rates.
  • Free Trade Zones: Businesses operating in free trade zones can enjoy CIT exemptions, customs duty reductions, and simplified tax procedures to encourage export-driven activities.

Other Taxes

  • Property Tax: Property taxes are levied annually based on the value of land and buildings. Rates generally range from 0.2% to 1%, depending on the location and use of the property.
  • Customs Duties: Import duties are applied to goods brought into the Comoros, with rates ranging from 5% to 30% depending on the type of goods.
  • Excise Taxes: Excise duties are levied on products such as alcohol, tobacco, and fuel.

Double Taxation Agreements (DTAs)

The Comoros has signed a limited number of double taxation agreements with other countries. These agreements help reduce withholding taxes on dividends, interest, and royalties, and prevent the double taxation of cross-border income.

Local Taxes

Local governments in the Comoros do not have significant taxing authority. All major taxes, including VAT, CIT, and PIT, are managed and collected by the General Directorate of Taxes (DGI).

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by March 31st of the following tax year. Personal income tax returns are due by the same date. The tax year in the Comoros follows the calendar year.

Penalties for Late Filing:
Penalties for non-compliance or late filing include interest on overdue taxes and fines. Interest on unpaid taxes is generally set at 1% per month, with additional penalties for significant delays.

Recent Developments

Economic Diversification Efforts:
The Comoros is focused on diversifying its economy away from dependence on subsistence agriculture and fisheries by promoting investments in tourism, renewable energy, and infrastructure. The government offers tax incentives to attract foreign direct investment (FDI) in these sectors, including tax holidays and customs duty exemptions.

Infrastructure Development:
The government is working to improve the country’s infrastructure, particularly in transportation and energy. Tax incentives are available for companies involved in infrastructure development, especially for renewable energy projects.

Regional Trade Integration:
The Comoros is seeking to strengthen its position within regional trade blocs, such as the Common Market for Eastern and Southern Africa (COMESA), by improving its regulatory framework and aligning with international trade standards.

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