Client Alert : Equatorial Guinea
2021 Budget Law
The Government of Equatorial Guinea (“EG”) issued Decree No. 9/2020, dated December 22nd, which approves the general state budget for the financial year 2021 (the “2021 Budget Law”)
What happened?
The general objectives of the 2021 Budget Law are to reduce further macroeconomic imbalances, addressing weaknesses in the financial sector, promote economic diversification with the implementation of the business climate roadmap, and to promote good governance and transparency.
This alert is designed to capture the main changes to the General Tax Code and Fees Law as from January 1, 2021.
What are the Consequences?
| Changes | Details | Impact | |
| 1 | Minimum Income Tax (“MIT”) Rate Reduction from 3% to 1.5% | The amount of tax due by each company may not be less than that which will result from the application of 1.5% on the turnover or overall income obtained during the previous fiscal year | a. A reduction of MIT payable will improve cash-flow b. A reduced MIT rate will lead to a reduced income tax expense for entities with net losses, and those entities whose ratio of turnover to taxable profit is lower than 1:23 |
| 2 | Reduction of withholding tax (“WHT”) rate of gross income earned in EG by non-resident individuals from 20% to 15%. | Withholding agents must withhold a percentage for corporate tax or personal income tax equivalent to 15% from non-resident legal or natural persons on the gross income obtained in EG from any type of commercial or industrial activity, services in general, construction leasing | Entities that bear the WHT taxes for non-resident individuals will have an improved cashf-low, reduction of tax expense, and better contract negotiations with non-resident individuals resulting from a reduced WHT rate. |
| 3 | Reduction of registration right for public contracts from 2% to 0.5% | The registration of all public maintenance contracts of the State, autonomous entities, and public companies to be awarded during the 2021 financial year shall be subject to a fee of 0.5% of the value of the contract, as registration right | a. Reduction in registration expenses will lead to an increased bottom-line b. Improved cashflow from the reduction of payable right |
| Changes | Details | Impact | |
| 1 | Minimum Income Tax (“MIT”) Rate Reduction from 3% to 1.5% | The amount of tax due by each company may not be less than that which will result from the application of 1.5% on the turnover or overall income obtained during the previous fiscal year | a. A reduction of MIT payable will improve cash-flow b. A reduced MIT rate will lead to a reduced income tax expense for entities with net losses, and those entities whose ratio of turnover to taxable profit is lower than 1:23 |
| 2 | Reduction of withholding tax (“WHT”) rate of gross income earned in EG by non-resident individuals from 20% to 15%. | Withholding agents must withhold a percentage for corporate tax or personal income tax equivalent to 15% from non-resident legal or natural persons on the gross income obtained in EG from any type of commercial or industrial activity, services in general, construction leasing | Entities that bear the WHT taxes for non-resident individuals will have an improved cashflow, reduction of tax expense, and better contract negotiations with non-resident individuals resulting from a reduced WHT rate. |
| 3 | Reduction of registration right for public contracts from 2% to 0.5% | The registration of all public maintenance contracts of the State, autonomous entities, and public companies to be awarded during the 2021 financial year shall be subject to a fee of 0.5% of the value of the contract, as registration right | a. Reduction in registration expenses will lead to an increased bottom-line b. Improved cashflow from the reduction of payable right |
| Changes | Details | Impact | |
| 1 | Minimum Income Tax (“MIT”) Rate Reduction from 3% to 1.5% | The amount of tax due by each company may not be less than that which will result from the application of 1.5% on the turnover or overall income obtained during the previous fiscal year | a. A reduction of MIT payable will improve cash-flow b. A reduced MIT rate will lead to a reduced income tax expense for entities with net losses, and those entities whose ratio of turnover to taxable profit is lower than 1:23 |
| 2 | Reduction of withholding tax (“WHT”) rate of gross income earned in EG by non-resident individuals from 20% to 15%. | Withholding agents must withhold a percentage for corporate tax or personal income tax equivalent to 15% from non-resident legal or natural persons on the gross income obtained in EG from any type of commercial or industrial activity, services in general, construction leasing | Entities that bear the WHT taxes for non-resident individuals will have an improved cashflow, reduction of tax expense, and better contract negotiations with non-resident individuals resulting from a reduced WHT rate. |
| 3 | Reduction of registration right for public contracts from 2% to 0.5% | The registration of all public maintenance contracts of the State, autonomous entities, and public companies to be awarded during the 2021 financial year shall be subject to a fee of 0.5% of the value of the contract, as registration right | a. Reduction in registration expenses will lead to an increased bottom-line b. Improved cashflow from the reduction of payable right |
The Fees Law
From the 1st of January 2021, the Ministry of Labour, Employment Promotion and Social Security is authorised to charge fees for services rendered that are not covered by the current Fees Law, Law No. 10/2017, dated 20th of November, as indicated below:
Employment-related Services
| Description | Amount (XAF) | |
| 1 | Authorisation and Registration of Employment Contracts | 4,000 |
| 2 | Guestbook Registration | 10,000 |
| 3 | Settlement of Employment Contract | 10,000 |
| 4 | Certifications | 5,000 |
| 5 | Issuance of Work Permit Duplicate | 20,000 |
Employment-related Services
| Description | Amount (XAF) | |
| 1 | Authorisation and Registration of Employment Contracts | 4,000 |
| 2 | Guestbook Registration | 10,000 |
| 3 | Settlement of Employment Contract | 10,000 |
| 4 | Certifications | 5,000 |
| 5 | Issuance of Work Permit Duplicate | 20,000 |
Employment-related Services
| Description | Amount (XAF) | |
| 1 | Authorisation and Registration of Employment Contracts | 4,000 |
| 2 | Guestbook Registration | 10,000 |
| 3 | Settlement of Employment Contract | 10,000 |
| 4 | Certifications | 5,000 |
| 5 | Issuance of Work Permit Duplicate | 20,000 |
Company Registration
| Description | Amount (XAF) | |
| 1 | Small-sized Companies | 10,000 |
| 2 | Medium-sized Companies | 20,000 |
| 3 | Large-sized Companies | 50,000 |
Company Registration
| Description | Amount (XAF) | |
| 1 | Small-sized Companies | 10,000 |
| 2 | Medium-sized Companies | 20,000 |
| 3 | Large-sized Companies | 50,000 |
Company Registration
| Description | Amount (XAF) | |
| 1 | Small-sized Companies | 10,000 |
| 2 | Medium-sized Companies | 20,000 |
| 3 | Large-sized Companies | 50,000 |
Company De-Registration
| Description | Amount (XAF) | |
| 1 | Small-sized Companies | 5,000 |
| 2 | Medium-sized Companies | 10,000 |
| 3 | Large-sized Companies | 25,000 |
Company De-Registration
| Description | Amount (XAF) | |
| 1 | Small-sized Companies | 5,000 |
| 2 | Medium-sized Companies | 10,000 |
| 3 | Large-sized Companies | 25,000 |
Company De-Registration
| Description | Amount (XAF) | |
| 1 | Small-sized Companies | 5,000 |
| 2 | Medium-sized Companies | 10,000 |
| 3 | Large-sized Companies | 25,000 |
Other Services
| Description | Amount (XAF) | |
| 1 | Small-sized Companies | 25,000 |
| 2 | Medium-sized Companies | 50,000 |
| 3 | Large-sized Companies | 100,000 |
Other Services
| Description | Amount (XAF) | |
| 1 | Small-sized Companies | 25,000 |
| 2 | Medium-sized Companies | 50,000 |
| 3 | Large-sized Companies | 100,000 |
Other Services
| Description | Amount (XAF) | |
| 1 | Small-sized Companies | 25,000 |
| 2 | Medium-sized Companies | 50,000 |
| 3 | Large-sized Companies | 100,000 |
Issuance of Work Permits
| Description | Amount (XAF) | |
| 1 | Type PTA (workers in the Agricultural sector) | 5,000 |
| 2 | Type A Permit (temporary foreign workers) | 50,000 |
| 3 | Type BI Permit (temporary foreign workers) | 75,000 |
| 4 | Type BR Permit (temporary foreign workers) | 125,000 |
| 5 | Type C Permit (temporary foreign workers) | 150,000 |
| 6 | Type PP (Permanent Permit) | 150,000 |
| 7 | Type PCP (Self-employed Permit) | 150,000 |
Issuance of Work Permits
| Description | Amount (XAF) | |
| 1 | Type PTA (workers in the Agricultural sector) | 5,000 |
| 2 | Type A Permit (temporary foreign workers) | 50,000 |
| 3 | Type BI Permit (temporary foreign workers) | 75,000 |
| 4 | Type BR Permit (temporary foreign workers) | 125,000 |
| 5 | Type C Permit (temporary foreign workers) | 150,000 |
| 6 | Type PP (Permanent Permit) | 150,000 |
| 7 | Type PCP (Self-employed Permit) | 150,000 |
Issuance of Work Permits
| Description | Amount (XAF) | |
| 1 | Type PTA (workers in the Agricultural sector) | 5,000 |
| 2 | Type A Permit (temporary foreign workers) | 50,000 |
| 3 | Type BI Permit (temporary foreign workers) | 75,000 |
| 4 | Type BR Permit (temporary foreign workers) | 125,000 |
| 5 | Type C Permit (temporary foreign workers) | 150,000 |
| 6 | Type PP (Permanent Permit) | 150,000 |
| 7 | Type PCP (Self-employed Permit) | 150,000 |
What should my company do?
Internal Notification
Notify pertinent personnel about the 2021 Budget Law.
Preparation for Inspections
Ensure your personnel is prepared for any inspections by having a clear internal procedure.
Compliance with the Rules
Ensure your company continues to comply with all with all tax and labour related laws and regulations applicable to its operations.
Monitoring
Continue monitoring any subsequent modifications and changes to the applicable laws and regulations.
Tailored Support
Seek independent legal advice to better understand the applicability of the 2021 Budget Law.
ABOUT THE AUTHOR
Abraham Abia Biteo Roka is the Managing Director at Clarence and widely recognised as one of the leading energy lawyers in Equatorial Guinea, often speaking at events around the world. Abraham is particularly renowned for his ability to create and implement country and sector specific standards, policies and procedures.
Abraham Abia Biteo Roka is the Managing Director at Clarence and widely recognised as one of the leading energy lawyers in Equatorial Guinea, often speaking at events around the world. Abraham is particularly renowned for his ability to create and implement country and sector specific standards, policies and procedures.
ABOUT CLARENCE
Clarence offers its clients the freedom to operate in Africa. Thanks to our diverse resources, we understand Africa better than most firms. We assist clients to identify, assess and effectively minimise operational legal and regulatory risks. We develop creative and efficient solutions to operational challenges, so our clients can focus on growth and revenue. Our approach is to bridge the gap between external and in-house counsels. Our areas of practice include Energy and Natural Resources, Real Estate, Construction, Joint Ventures, Corporate and Commercial, Risk Management & Compliance, Litigation and Dispute Resolution, Government Relations, Customs and Taxation, Employment and Immigration, Aviation and Telecommunications. For enquiries, contact us at info@clarenceabogados.com