Equatorial Guineea - Budget Law 2021
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.

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