DEMOCRATIC REPUBLIC OF CONGO Law and Practice Contributed by: Salvatrice Bahindwa, Concorde Akonkwa and David Djunga, LegalterLaw
The tax regime is henceforth based on a standard tax rate of 30% on net profits, coupled with a minimum rate of 1% of turnover for companies in a deficit or low-profitability situation. The following entities are liable to Corporation Tax by virtue of their legal form, irrespective of their object: • public limited companies (PLC), whether multi- member or single-member; • private limited companies (Ltd), whether multi- member or single-member; and • simplified joint-stock companies, whether multi- member or single-member. The following entities are liable to corporation tax solely by election: • general partnerships; • limited partnerships; and • joint ventures. Foreign civil or commercial joint-stock companies with a permanent or fixed establishment in the Democratic Republic of Congo are likewise liable to corporation tax. Beyond corporation tax, the Congolese fiscal system comprises various additional taxes, notably as fol - lows. • Value added tax (VAT) is levied on the supply of goods and services, with a standard rate of 16%. • Property tax on immovable property, the amount of which is fixed according to surface area and varies according to the nature of the property and the ranking of localities. • Vehicle tax, the amount of which varies between USD40 and USD100 (depending on the type of motor vehicle). • Special road traffic tax, the amount of which varies between USD9 and USD300 (according to the type of motor vehicle). 9.2 Withholding Taxes on Dividends, Interest, Etc A withholding tax at the rate of 20% shall be levied on dividends or interest paid to investors holding shares
in a commercial company. The withholding tax shall be declared within ten days following the month during which the income was paid to the beneficiary, made available to them or credited to an account opened in their name. The DRC has entered into several bilateral tax trea - ties aimed at preventing double taxation. These trea - ties provide for reduced withholding tax rates for dividends, interest and royalties; which generally vary between 5% and 15% for dividends and between 0% and 10% for interest, depending on the specific treaty. For example, the Double Taxation Agreement (DTA) between the DRC and South Africa allows the state in which the company paying the dividends is resident to tax them in accordance with its laws, but limits this tax to 5% (or 15% in certain cases) of the gross amount if the beneficial owner is a company holding at least 25% of the capital of the paying company and is resident in the other contracting state, which is advantageous compared to the 20% withholding tax applied under Congolese legislation to dividends paid to non-resident companies. For interest arising in a contracting state and paid to a resident of the other state, it may be taxed in the state of origin, but the tax is capped at 10% of the gross amount if the ben - eficial owner is resident in the other state, compared to a 20% withholding in the DRC without the treaty, thereby reducing the potential tax burden by half. 9.3 Tax Mitigation Strategies The optimisation of the depreciation base constitutes a primary strategic approach. The legal revaluation of fixed assets and the structuring of acquisitions enable the increase of tax-deductible expenses, particularly effective in sectors with high capital intensity. Intragroup financing strategies also represent a lever to be explored. The utilisation of loans, royalties and service fees between connected entities may reduce the taxable base, subject to compliance with thin cap - italisation rules and the arm’s length principle. Congolese legislation authorises the carrying forward of losses for five years, which allows for their strategic utilisation according to anticipated profitability cycles.
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