Let’s talk about Cameroon Tech Startups to Benefit from Tax Exemptions for Up to 5 Years.
Navigating the Cameroonian business terrain is a necessity for every startup. Regardless of the industry, the ability to walk through regulatory hurdles could be the difference between a startup that succeeds and one that fails.
Since 2017, there have been endless calls from the Silicon Mountain community for the government to exempt young startups from paying taxes and recognizing these establishments as research institutions.
This point has always come up during several meetings including the Silicon Mountain Community meeting with the French Ambassador, the Canadian High commissioner’s visit, an official visit from the Ministry of Post and Telecommunications, the meeting with a delegation from the Ministry of Scientific Research and Innovations (MINRESI), etc.
The Solution as Tech Startups to Benefit from Tax Exemptions for Up to 5 Years
Those endless calls have finally yielded fruit. Cameroon Tech Startups to Benefit from Tax Exemptions for Up to 5 Years. This decision is contained in the 2021 Finance Law of Cameroon. It is a move that would create an enabling environment for entrepreneurs with innovative (usually tech-enabled) ideas to start and scale their startups in a regulatory environment.
While many consider the decision to be one of the many steps to digital economy promotion in Cameroon by the government, it is also receiving mixed reactions from both startups and the public.
The decision, to many, is still very unclear, reason for the many mixed feelings about the new law. To get an understanding of what it means, Cameroon Tech News caught up with Laye Mbunkur. He is someone who is versed with the Cameroon taxation system and has been helping startups register their businesses and declare their taxes. His company, BlueMoon Outsourcing and Consulting, provides backup support to businesses by declaring their taxes, CNPS/NSIF follow-up, business registration, company registration, coaching and mentorship, web design, and offers many more business-related needs. He’s also a Business Development Manager at ActivSpaces, Cameroon’s leading tech hub.
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Laye’s Interpretation of the 2021 Finance Law Concerning Tech Startups
The government of Cameroon has introduced some incentives for digital economy promotion.
- The government is recognizing technology innovation startups as startups and not companies that are to pay taxes.
- Technology innovation startups can now constitute and create a Tax Management Centre (TMC) or belong to one and benefit from tax exemption, duties, levies and payments.
- However, these startups will have to pay for social security commonly known as CNPS only.
- At the end of their incubation phase, they will benefit from exemption from business registration fees, business license tax, and exemption from all taxes and employers charges on salaries paid to the employees with the exception of social security (CNPS).
- They will pay a reduced company tax rate fee of 15% only, which is less than half of what other companies pay. This applies after the 5 years of their incubation period.
As outlined in the law, startups will only benefit from this if they affiliate with a Tax Management Centre (TMC).
Do these TMCs exist already?
“Yes, they do but not structured to suit tech startups. They have been created since 2011 to suit other small and medium-sized enterprises and not tech startups. TMCs exist in all regions of Cameroon with each region having at least one. This, therefore, means these tech innovation startups will have to create their TMCs or the government provides one as stipulated in the finance law,” Laye told Cameroon Tech News.
How then do we go about it?
Will it be possible for Silicon Mountain (SM) startups to create a TMC for themselves? Laye believes if startups come together and give it a push, they will have one. In confirmation, he reveals his company, BlueMoon Outsourcing and Consulting, has been working on that before now. He outlines two major requirements amongst many, which must be present for a TMC to be created:
- At least 100 tech startups paying taxes must come together.
- The need to have registered tax experts to follow up.
Besides these two, other requirements are easy to come by.
When will this finance law stipulating Tech Startups to Benefit from Tax Exemptions for Up to 5 Years go operational?
For now, no one knows when this law will take effect. For one thing, the 1996/97 finance law creating Tax Management Centres only went operational 15 years later in 2011. What’s more, many SMEs for whom these centres have been created do not even know of their existence. Neither do they make use of it despite having at least one in each region.
Reactions from Silicon Mountaineers
According to Laye Mbunkur, this move by the government is an enormous effort towards contributing to the growth of startups and the promotion of digital adoption in Cameroon. “Not only will it encourage startups to build solutions, but it will also force many others to dare the IT Entrepreneurship field which has been a nightmare to them due to taxes.”
Furthermore, Startups have been limited to doing business and many lose business opportunities because of their inability to pay taxes. “They cannot file tenders, cannot be awarded contracts and many others because they are not registered. So this law will see many of them register their businesses and compete fully with others,” Laye added.
However, not everyone sees this move as a major difference. Their reason: taxes have never been a major problem to startups in Cameroon. A look at a social media post by one Silicon Mountain entrepreneur reveals the tax compliance rate by startups is low and has nothing to do with their failure.
Another entrepreneur, who prefers anonymity, says startups hide under their incubators and never graduate from that status because of taxes. Since they can’t register their companies and pay taxes, they have remained at the startup level and everything covered by their incubators. As such, the law doesn’t make any difference as taxation has not been a problem for these startups.
Aside from taxes, what other problems do startups face?
Taxation is not the only thing hindering the progress of startups in Cameroon. Being a stakeholder in the tech community, leading a startup, and coaches/mentors startups, Laye Mbunkur has firsthand knowledge of many problems hindering the growth of startups in Cameroon.
Poor Local Adoption
Most startups’ products and services have not penetrated the local market. In a country like Cameroon, if a startup’s solution hasn’t hit the international market and is adopted by foreign multinationals, local users do not recognize it. Startups need to win competitions before local users start making use of its solution. Most of these trophies are hard to win. Do they focus on building the solution or going in for competitions?
Most of the skilled persons learned by themselves and later became entrepreneurs. They desire to work with other skilled persons so that they build solutions with international standards. Frustratingly, it is difficult to find skilled persons because most of them graduate without the necessary working skills. The educational system poses the problem here.
Access to Finance
Cameroonians have not yet seen the need to invest in startups, says one Silicon Mountain entrepreneur. Most people don’t want to bear the risk of investing in a startup whose survival is doubtable. That is why you see many falling victims to money fraud scams. Since Cameroonians are unsure about investing in startups, the startups keep struggling with survival and this contributes less to their solution building.
Apart from this finance law, how else can the government aid in startup growth?
Silicon Mountain community members are hoping to get more answers/solutions from the government. If the government can recognize startups as research institutions and not as companies, it means they can do more.
The government, for instance, can promote local product/solution adoption to help startups grow faster. For one thing, it’s demoralizing for the development of government websites, software, ID card systems, etc. to be given to foreign companies when Cameroonian startups are up to these tasks. If these projects are given to local startups, money circulates within the economy and these sectors grow bigger.
Another option is for the government to compel multinationals to outsource about 30% of their tech-related work to startups.