18, October 2023
The Cameroonian Ministry of Finance issued a note Tuesday informing of the signing of a new cooperation deal with China. The document, signed as part of a visit by Minister Louis Paul Motazé to Beijing, aims to “eliminate double taxation on income and prevent tax evasion and avoidance.”
According to the Organization for Economic Co-operation and Development (OECD), double taxation, recognized as a barrier to trade and investment between countries, “arises when comparable taxes are imposed in two or more states on the same taxpayer in respect of the same taxable income or capital, e.g. where income is taxable in the source country and the country of residence of the recipient of such income.” To avoid this practice, which experts believe hampers international trade, cross-border investment, and the movement of people, states generally signs tax treaties.
National Development Strategy 2020-30
The Ministry of Finance revealed that the new agreement between Cameroon and China is the fruit of “a long negotiation process that began in 2013”. It marks “a decisive step in the implementation of the National Development Strategy 2020-30 (SND30) and towards the emergence of our country by 2035″. “Since China is one of Cameroon’s leading economic and trade partners, it was necessary to negotiate a tax agreement to remove tax obstacles to trade between the two countries, in particular the double taxation of companies operating in both countries,” the ministry explained.
Over the past two decades, China has become Cameroon’s leading customer (25.8% market share in 2021, according to the INS) and supplier (17.5% market share in 2020) as well as a leading investor. According to data contained in the 2021 World Investment Report published by UNCTAD, the stock of foreign direct investment (FDI) captured by Cameroon between 2000 and 2020 is estimated at $9,026 million (CFA 5,434.3 billion), mainly thanks to China. “Between 2000 and 2014, Cameroon captured CFA 2,750 billion in foreign direct investment, including CFA 1,850 billion from China. This represents around 67% of FDI entering Cameroon”, points out a document from the Presidency of the Republic, citing UNCTAD data.
The Cameroonian government seeks through the new agreement with China to further enhance the existing level of economic cooperation with the Asian country. “This agreement will undoubtedly boost trade between Cameroon and China, and attract even more Chinese investment to Cameroon,” the Finance Ministry said.
New mining projects in the pipeline?
The signing of this tax agreement occurs at a time when the Cameroonian government is embarking on several mineral exploitation projects, many of which are of significant interest to China. One such project is the Mbalam-Nabeba mining project, a world-class iron ore deposit spanning Cameroon and Congo.
Cameroon has chosen Bestway Finance, an investment vehicle allied with China’s AustSino, to build the railroad that will make the deposit exploitable. The license to mine the deposit was awarded on August 17, 2022, to Cameroon Mining Company, also linked to Bestway Finance, which recently announced agreements with at least four Chinese companies for the project. At the Lobé iron ore deposit in Kribi, in the southern region of Cameroon, China’s Sinosteel was awarded the operating license signed on July 1, 2022.
By inking this agreement with China, Cameroon now has 15 double taxation treaties and two global multilateral agreements. On a bilateral basis, these include agreements signed with France (1976), Canada (1988), Switzerland (1990), Tunisia (1999), Morocco (2012), South Africa (2015), the United Arab Emirates (2017), Germany (2017), the Czech Republic (2023) and the six Cemac member countries. However, these agreements do not always guarantee an increase in FDI for Cameroon. For example, despite signing the agreement with the United Arab Emirates in 2017, the first investment from that country has yet to materialize.
Source: Business in Cameroon