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Central African Republic

Country Name: Central African Republic (CAR)
Currency: Central African CFA Franc (XAF)
Primary Tax Authority: Directorate General of Taxes and State Property (Direction Générale des Impôts et des Domaines, DGID)
Key Legislation:

  • General Tax Code (Code Général des Impôts)
  • Investment Charter
  • Value Added Tax (VAT) Law
  • Customs Code

Fiscal Authority Allocation

Centralized Fiscal System:
The Central African Republic operates a centralized tax system. The Directorate General of Taxes and State Property (DGID) under the Ministry of Finance is responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), and customs duties.

Corporate Income Tax (CIT)

Standard Rate: 30%
The Central African Republic imposes a corporate income tax rate of 30% on net taxable income for resident companies and non-resident companies with a permanent establishment in the country.

Corporate Forms and Taxation:

  1. Resident Companies: Taxed on worldwide income.
  2. Non-Resident Companies: Taxed only on CAR-sourced income.

Exemptions and Incentives:

  • Investment Incentives: The Investment Charter offers tax holidays, CIT reductions, and customs duty exemptions for companies investing in sectors such as agriculture, infrastructure, tourism, and renewable energy. These incentives include CIT exemptions for up to five years.
  • Special Economic Zones (SEZs): Companies operating in SEZs benefit from CIT exemptions, VAT exemptions, and reduced customs duties on imported raw materials and capital goods.

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

Standard Rate: 19%
The Central African Republic imposes VAT at a standard rate of 19% on most goods and services. VAT is applied to domestic production and imports.

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

Personal Income Tax (PIT)

Progressive Rates:
The Central African Republic applies a progressive personal income tax system to residents’ worldwide income and non-residents’ CAR-sourced income.

Resident Tax Rates for 2023 (Annual Income):

  • Up to XAF 500,000: 0%
  • XAF 500,001 to XAF 1,500,000: 10%
  • XAF 1,500,001 to XAF 3,000,000: 20%
  • Above XAF 3,000,000: 30%

Non-Resident Tax Rate:
Non-residents are taxed at a flat rate of 20% on CAR-sourced income.

Deductions and Allowances:
Deductions are available for personal expenses, such as social security contributions, medical expenses, and charitable donations.

Additional Mandatory Contributions

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

  • Employer Contribution: 16% of gross salary.
  • Employee Contribution: 4% of gross salary.

Withholding Taxes

  • Dividends: 15%
  • Interest: 15%
  • Royalties: 20%
    The Central African Republic imposes withholding taxes on payments to non-residents, including dividends, interest, and royalties. These rates may be reduced under double taxation agreements (DTAs).

Transfer Pricing Rules

The Central African Republic adheres to the arm’s-length principle for related-party transactions. Companies must ensure that cross-border transactions between related entities are conducted at market value. Transfer pricing documentation is required for large companies engaging in significant related-party transactions.

Special Tax Regimes

  • Special Economic Zones (SEZs): Companies operating in SEZs are offered tax holidays, customs duty exemptions, and VAT reductions for up to 10 years. These zones are designed to promote investment in manufacturing, logistics, and export-oriented industries.
  • Investment Incentives: Under the Investment Charter, companies investing in agriculture, infrastructure, and renewable energy benefit from CIT exemptions, customs duty reductions, and VAT deferrals for up to five years.

Other Taxes

  • Customs Duties: The Central African Republic, as a member of the Central African Economic and Monetary Community (CEMAC), applies customs duties based on the CEMAC Common External Tariff. Rates vary between 5% and 30%, depending on the type of goods.
  • Excise Taxes: Excise taxes are levied on goods such as alcohol, tobacco, fuel, and luxury products.
  • Property Tax: A property tax is levied on land and buildings, based on the market value or rental value of the property.

Double Taxation Agreements (DTAs)

The Central African Republic has signed several double taxation agreements (DTAs) with countries including France and neighboring CEMAC member states. These agreements help reduce withholding taxes on cross-border income and prevent the double taxation of income earned in the CAR and other jurisdictions.

Local Taxes

Local governments may impose minor municipal taxes, such as property taxes and business registration fees. However, most significant taxes, including CIT, PIT, and VAT, are centrally administered by the Directorate General of Taxes and State Property (DGID).

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by March 31st of the following year. Personal income tax returns are generally due by April 30th. VAT returns are filed monthly or quarterly, depending on the size of the business.

Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. The standard penalty is 1% per month on overdue tax amounts, with additional penalties for tax evasion or underreporting income.

Recent Developments

Investment in Renewable Energy:
The Central African Republic is encouraging investment in renewable energy projects, particularly in solar and hydropower. Tax incentives, including CIT exemptions, VAT exemptions, and customs duty reductions, are available for companies investing in renewable energy infrastructure.

Focus on Infrastructure Development:
The government is working to attract investment in infrastructure projects, such as roads, telecommunications, and energy facilities. Companies involved in infrastructure development benefit from tax incentives, including CIT holidays, customs duty reductions, and VAT deferrals.

Mining Sector:
The mining sector is a major driver of the Central African Republic’s economy, and the government continues to promote investment in mineral exploration and production. Companies operating in this sector may benefit from reduced withholding taxes and customs duty exemptions on equipment imports.

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