Equitorial Guinea VAT, GST, and Sales Tax Guide

Equatorial Guinea

Malabo GMT +1

EY

Immeuble SEGUIBAT Ground Floor

Malabo II

Apdo (P.O. Box) 752 Malabo

Equatorial Guinea

Indirect tax contacts

Nicolas Chevirnais +241 01 74 21 68 (resident in Gabon) nicolas.chevirnais@ga.ey.com

Maxime Mbassi +240 333 09 67 19 maxime.augustin.mbassi@gq.ey.com

Davy Georges Obiang Ondo +240 333 09 67 19 georges.obiang@gq.ey.com

A. At a glance

Name of the tax Value-added tax (VAT)

Local name Impuesto sobre Valor Añadidos (IVA)

Date introduced 28 October 2004

Trading bloc membership Central African Economic and Monetary Community (CEMAC)

Administered by Ministry of Finances, Economy and Planification

VAT rates

Standard 15% Reduced 6% Other Zero-rated (0%) and exempt

VAT number format Tax identification number, (3 digits/1 digit)

VAT return periods

Thresholds

Monthly

Registration None

Deregistration None

Recovery of VAT by non-established businesses No

B. Scope of the tax

The following transactions are subject to VAT in Equatorial Guinea (EG):

• Goods sold or assigned for valuable consideration

• Services provided

• Self-consumed goods and services

• Imports

• Other operations done by individuals or legal entities in their sphere of professional, individual or business activities, including extraction industries of all kinds

When these operations are performed in EG, they are subject to VAT, unless they are included in the list of exemptions, even though the domicile of the individual or legal address of the debtor corporation is located outside the territorial borders of EG.

C. Who is liable

All individuals and legal entities habitually or occasionally and independently performing the economic activities of production, trade or rendering services, as well as all operations con nected to the said activities, including extractive, farming and liberal professional or similar activities, are subject to VAT in EG.

Moreover, any individual or legal entity, reflecting VAT in an invoice or any other document, for the fact of having invoiced it, is required to declare and pay the said VAT.

Exemption from registration. The VAT law in EG does not contain any provision for exemption from registration.

Voluntary registration and small businesses. There is no specific registration for VAT in EG. Resident businesses (those that carry out operations or provide remunerated services in EG for more than three months within a calendar year or six months within two consecutive calendar years) are required to register with the tax administration in order to receive a tax identification number for all their tax obligations.

Group registration. Group VAT registration is not allowed in EG.

Non-established businesses. Non-established businesses are not required to register for VAT in EG. A WHT of 15% is accounted for on payments made by resident companies on behalf of nonresident companies.

Non-established businesses can voluntarily register for VAT in EG and if done so, must appoint an authorized and solvent agent with the EG tax authorities, resident of Equatorial Guinea, who will be jointly and severally liable with it for the payment of VAT. However, there is no mecha nism to collect input tax incurred by non-established businesses in EG.

Tax representatives. A non-established (nonresident) taxable person must appoint near the EG tax administration an authorized and solvent agent, resident in EG, who will be jointly and severally liable with it for the payment of VAT.

In the event a taxable person fails to appoint an agent, then both VAT, as well as any fines that may be payable, will be paid by the client on behalf of the party with no permanent place of business in EG.

Reverse charge. When the supplier of services is nonresident in EG and cannot collect and remit the VAT, the customer (who must be VAT-registered in EG) established in EG should account for the VAT via the reverse-charge mechanism.

Domestic reverse charge. There are no domestic reverse charges in EG.

Digital economy. There are no special rules related to supplies made within digital economy in EG.

Nonresident providers of electronically supplied services for business-to-business (B2B) supplies are not required to register and account for VAT. Instead, the customer must self-account for VAT via the reverse-charge mechanism (see the Reverse-charge subsection above).

Nonresident providers of electronically supplied services for business-to-consumer (B2C) sup plies are not required to register and account for VAT. As such, no VAT is accounted for on the supply.

There are no other specific e-commerce rules for imported goods in EG. Online marketplaces and platforms. There are no special rules related to supplies made within online marketplaces and platforms in EG.

Registration procedures. There is no specific registration for VAT in EG. The registration with the Ministry of Finances is sufficient for all tax obligations.

For such purposes, each legal entity engaged in economic activity, no matter what the nature or output, and who is classified as a taxable person, is obliged to submit to the tax administration its registration. The deadline to submit the registration request (by paper format) to the tax administration in person, is two days following the commencement of the activities in EG.

The documentation to be provided to the tax administration for registration purposes is the following:

• Name or company name

• Name and surnames of its legal representative

• Seed capital and increases, if any, used in its businesses

• Copy of the bylaws and articles of incorporation in which the purpose and capital stock are stated, names and interests of the partners or shareholders

• Principal place of business; district, town or village

• Activities of the company

• Reason for registration

Upon registration, a tax identification number will be issued, which is used for all taxes and not specific to VAT.

Deregistration. The deregistration at the EG Ministry of Finances is applicable for all tax obliga tions. The deregistration request should be filed to the Ministry of Finances within 45 days fol lowing the end of the activity. In addition to the documentation listed above for the registration, for deregistration the taxable person should also provide the notarial deed of dissolution or liq uidation of a company and the reason for deregistration. After the filing of the said documents, the tax administration usually sends to the taxable person a tax audit notification including all the necessary documentation to be provided. The deregistration certificate is issued by the tax administration at the end of the inspection and the payment of the additional debt, if any.

Changes to VAT registration details. The taxable person should notify the tax administration in writing about any change in its VAT registration details (e.g., company name, address). There is no deadline provided by the law, but it is advisable to send the notification during the month the said change occurs.

D. Rates

The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.

The VAT rates are:

• Standard rate: 15%

• Reduced rate: 6%

• Zero rate: 0%

The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for the zero rate, reduced rate or an exemption.

• Insulin and its salts

• Quinine and its salts

• Antibiotics

Examples of goods and services taxable at 0%

• Pharmaceutical products

• Fertilizers

• Dental wax

• X-ray plates, tapes and films

• Insecticides

• Rubber hygiene and pharmacy items (including surgical gloves)

• School books in flexible protective covers

• Glass for eyeglasses

• Medical-surgical sterilizers for laboratories

• Wheelchairs and other vehicles for the physically challenged

• Spares for wheelchair and other vehicles for the physically challenged

• Corrective lenses

• Medical surgical devices

• Dental chairs

• Other medical and surgical furnishings

• Other agricultural supplies

Examples of goods and services taxable at 6%

• Meats and poultry

• Milk and cream that are not concentrates and not containing sugar or other sweeteners

• Milk and cream concentrated or sweetened

• Bread

• Rice

• Prepared foods for children

• Books and schoolbooks

The term “exempt” refers to supplies of goods and services that are not liable to tax and don’t qualify for input tax deduction.

Examples of exempt supplies of goods and services

• Raw agricultural, livestock, fishing and hunting products sold directly to the end consumer by the owner

• Sale of products resulting from soil and subsoil extraction activities

• Operations transmitting real estate between individuals that do not qualify as real estate devel opers and that are subject to asset transfer tax

• Interest generated by foreign loans

• Interest generated by deposits of nonprofessional clients in credit or financial establishments

• Travelers with small imports when the value of the goods does not exceed XAF500,000

• Banking, insurance and reinsurance operations, which are subject to a specific tax

• Operations transferring real estate, and real estate rights and mutations of goodwill that are subject to the asset transfer tax or other equivalent taxes

• Medical services, including transportation of accident victims and sick people, and medical assistance to individuals provided by public hospitals and health centers or similar agencies, and medical assistance provided by members of the medical and paramedic corps

• Staple commodities, as well as their supplies, the supplies of livestock and fishing products used by producers, so long as said products are exempt

• Services provided in the field of school or university teaching by public and private establish ments or similar agencies

• Importation and sale of school or university books

• Sale of newspapers and periodicals, not including income received from advertising

• Rental of unfurnished houses

• Operations relating to the international traffic of: Ships or vessels used in industrial or commercial activities on the high seas Salvage or rescue ships

Airplanes and ships used in international transit operations and related services, in accord ance with the provisions of article 158 and following of the EMCCA Customs Code

• Social, educational, sports, cultural, philanthropic, or religious services or operations provided to their members by nonprofit benevolent and charitable agencies, so long as said operations can be directly related to the collective defense of the moral or material interests of their mem bers. However, these are taxable when they are in a situation of competition with the private sector

• Importation of equipment goods

• Amounts deposited by the Public Treasury into the Central Bank in its capacity of issuing bank, as well as proceeds of the operations of said currency issuing bank

• Suspensive Customs systems to defer or suspend taxation can be accorded to mining, oil and timber companies. Nonetheless, the right to said systems must be sole and limited exclusively to investment goods strictly necessary to practice the activity in the implementation, prospect ing or research phases

Option to tax for exempt supplies. The option to tax exempt supplies is not available in EG.

E. Time of supply

The VAT time of supply (or tax point) is defined as the as the event in which the necessary legal conditions are fulfilled leading to the enforceability of the tax. Enforceability is defined as the right of the Public Treasury to demand that the taxable person pay the tax by a specific date.

For goods, the general rule is that the tax point is when the right to dispose of the goods as owner is transferred. If the sale contract stipulates that the supplier retains ownership of the goods, the tax is due at the time of the physical transfer of the goods from the supplier to the buyer.

For services, the tax point is the date when payment is received. In principle, if the consideration for a supply of services is paid in instalments, VAT is due on the receipt of each instalment. For transfers of real estate, the tax point is at the date of transfer.

Deposits and prepayments. The collection of advance payments (prepayments) for supplies of goods does not give rise to VAT (except in the case of continuous supplies of goods). The tax due point for advance payments for services occurs on collection of the payment.

Continuous supplies of services. For the continuous supplies of services, the tax point is when payment is received.

Goods sent on approval for sale or return. There are no special time of supply rules in EG for goods sent on approval for sale or return. As such, the normal time of supply rules apply.

Reverse-charge services. The tax point for reverse-charge services is at the time that the tax is incurred.

Leased assets. For leased assets, the tax point is when the interest or payment is due.

Imported goods. For imported goods, the tax point is the time of the declaration of the goods into EG.

F. Recovery of VAT by taxable persons

A taxable person may recover input tax incurred in relation to the acquisition of goods and ser vices necessary for the business.

Invoices must show the tax identification number of the parties, the invoice number, the transaction date, the price and the applicable VAT.

Moreover, any natural or legal person that charges VAT on its invoice shall be bound to declare and remit the corresponding tax.

Following these provisions, VAT charged is in practice remitted when there is a balance further to the application of VAT deduction mechanism.

The time limit for a taxable person to reclaim input tax in EG is two years. The right to a deduc tion can be exercised until the end of the second fiscal year following that of the chargeability.

Nondeductible input tax. Taxable persons that do not have in their possession the invoices or the respective import declarations naming them the actual recipient have no right to deduct VAT. Moreover, VAT is not be deductible on exempt transactions.

Examples of items for which input tax is nondeductible

• Self-consumption and subsidies for equipment exempt from VAT

• Payment of damages that are a compensation of a transaction subject to VAT

• Private vehicles used for nonbusiness purposes

Examples of items for which input tax is deductible (if related to a taxable business use)

• VAT stated on purchase invoices issued by the providers, whenever these latter are legally authorized to charge VAT

• VAT paid at the time of import

• VAT levied on goods equipment, excluding private vehicles, as well as their spare parts and their respective repair expenses

• Consumables used for business purposes such as paper, ink, computers, furniture, etc.

Partial exemption. Taxable persons that make both taxable and exempt supplies are authorized to deduct the VAT levied on goods and services acquired by applying a prorated amount of the deduction. This prorated amount is calculated based on the fraction of the turnover relating to operations that are deductible.

The above fraction is the ratio of:

• Amount of respective income for transactions subject to the VAT, as the numerator

• Total amount of income of any kind obtained by taxable person, as the denominator

Approval from the tax authorities is not required to use the partial exemption standard method in EG. Special methods are not allowed in EG.

However, the prorated deduction calculation is carried out during the filing of the corporate income tax (CIT) return or tax inspections, which are done on a yearly basis.

The prorated figure will be set per fiscal year and not on a monthly basis. The prorated figure established at the end of the fiscal year is then valid for monthly returns for the following fiscal year.

Capital goods. There are no special input tax recovery rules for purchases of capital goods. Normal input tax deductibility rules apply (see above). Kindly note that the importation of certain capital goods are exempt from VAT.

Refunds. When the amount of VAT deductible for one month exceeds that of VAT due, the surplus constitutes a tax credit to be compensated with the VAT due for the following period.

The deduction right can be exercised until the end of the second fiscal year after that of enforce ability.

Pre-registration costs. Input tax incurred on pre-registration costs in EG is not recoverable.

Bad debts. Output tax accounted for on supplies that do not get paid by the recipient (i.e., bad debts) is not regulated in EG. However, based on the CEMAC regulation n°07/011 dated 19 December 2011, this VAT might be deducted. For unpaid transactions, when the debt is really

and definitively irrecoverable, the rectification of the invoice can be done by sending a duplicate of the initial invoice with sufficient regulatory information, including “invoice remained unpaid for the sum of X price excluding VAT and for the sum of X corresponding VAT that may be deducted.”

Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in EG.

G. Recovery of VAT by non-established businesses

Input tax incurred by non-established businesses in EG is not recoverable.

H. Invoicing

VAT invoices. Each taxable person is required to issue and deliver invoices for goods delivered or services provided to its clients, whether they are registered taxable persons or not, as well as down payments received for said operations and that give rise to the enforceability of the tax.

In case goods or services are acquired without an invoice, the party acquiring those will be jointly and severally liable for the respective tax on said operations, except when it reports this circumstance to the tax administration.

Credit notes. VAT credit notes might be issued by a supplier to a customer to reflect a reduction in, or discount applied to, the price originally invoiced, or the cancellation of the invoice related to the goods or services supplied.

A credit note must be cross-referenced to the original invoice and contain the references of the invoices that are amended or canceled.

Electronic invoicing. Electronic invoicing is allowed in EG, but not mandatory. To be valid, the electronic invoices must contain all the compulsory information as normal full VAT invoices. However, in practice, it is recommended to issue paper invoices, as electronic invoicing is not yet officially authorized by the tax administration.

Simplified VAT invoices. Simplified VAT invoicing is not allowed in EG. As such, full VAT invoices are required.

Self-billing. Self-billing is not allowed in EG.

Proof of exports. Zero VAT rate is applied to exports. However, the corresponding export return should be certified by the customs services. This certified document might be used as evidence that the goods were exported from EG.

Foreign currency supplies. The domestic currency in Equatorial Guinea is Central African CFA franc (XAF). However, the local legislation does not prohibit transaction in foreign currency. Transactions may be realized in one of the currencies of the two parties or in any other currency accepted by both parties to the transaction. Regarding the cash payment, this should only be made in XAF.

Supplies to nontaxable persons. There are no special invoicing rules for supplies to nontaxable persons in EG. As such, full VAT invoices are required.

Records. All accounting documents (including invoices) must be kept in EG and available at any time during a tax inspection.

Taxable persons are required to keep the following accounting registries, apart from the account ing books (journal, ledger, general balance of accounts, inventory book) required by the OHADA (acronym for the French “Organisation pour l’harmonisation en Afrique du droit des affaires,”

which translates into English as “Organization for the Harmonization of Corporate Law in Africa”) accounting regulation:

• A registry book of all invoices issued separated into those belonging to operations that are subject, exempt, not subject and self-consumption

• A registry book of invoices received

• A registry book of investment goods

• A book with current accounts of clients and suppliers

Record retention period. Taxable persons should keep all accounting items showing income and expenses for five years following the respective supplies.

The abovementioned accounting books must allow a precise determination of the following for each settlement period:

• Total amount of VAT that the taxable person has charged to its customers

• Total amount of VAT that suppliers have passed on to the tax administration during the same settlement period and that taxing imported goods

Electronic archiving. Accounting documents can be archived in electronic format. However, these documents should be available for tax audit at the request of the tax administration.

I. Returns and payment

Periodic returns. VAT returns should be made on a monthly basis, within the first 15 days following when payment was received for supplies.

The taxable basis is the turnover obtained during the previous month. In case the taxable person does not perform any transaction during the month, they are required to file a mandatory nil return.

All invoices corresponding to the concerned month should be annexed to the return before the filing in order to avoid the rejection of the said return.

If a taxable person is partially exempt (makes both taxable and exempt supplies), they can file a separate annual return for regularization purposes for the prorated amount it has claimed as input tax during the calendar year.

Periodic payments. The VAT payment should be made immediately after the corresponding dec laration (i.e., 15th of the month following the recovery of the amount). However, in practice, the tax administration allows that the VAT returns should be filed by the 15th of the month following the transaction and the corresponding payment by the end of the same month. For example, July 2022 VAT return should be filed by 15 August 2022, and the corresponding payment should be proceeded by 31 August 2022.

The banks can only transfer the money into the bank account of the Public Treasury if the settle ment note signed by the tax administration is joined to the wire transfer order.

VAT is normally paid on a monthly basis. However, at the end of the calendar year, all taxable persons must carry out a VAT payment reconciliation. Any outstanding output tax must be paid to the tax authorities. Any outstanding input tax can be requested from the tax authorities. The request should be addressed to the General Director of Tax and Contributions for the amounts equal or less than XAF500,000. For the amount higher than XAF500,000, the request should be addressed to the Ministry of Finances, Economy and Planification.

Electronic filing. Electronic filing is not allowed in EG.

The original return form (purchased at the tax administration at XAF2,000/EUR3.50 per copy) should be filled, signed, stamped and submitted to the tax administration for the issuance of the

corresponding settlement note. This settlement note allows taxable persons to proceed to the VAT payment near the bank, then confirm the said payment at the Public Treasury and the General Direction of Tax and Contributions.

Payments on account. Payments on account are not required in EG.

Special schemes. No special schemes are available in EG.

Annual returns. Annual returns are not required in EG.

Supplementary filings. No supplementary filings are required in EG.

Correcting errors in previous returns. At any time, the tax administration will correct material factual and arithmetic mistakes, by operation of law or at the request of the interested party, so long as a year has not gone by since the act subject to the correction was announced. Such cor rections must be done in person and in writing. No specific penalties apply if the errors are corrected voluntarily.

Digital tax administration. There are no transactional reporting requirements in EG.

J. Penalties

Penalties for late registration. In the case of late registration, the taxable person will be punished with a fine from half to the full amount of the tax due with a minimum of XAF150,000, per month or fraction of month.

Penalties for late payment and filings. Penalties for late filing and payment of VAT amount to 60% of the amount due.

Penalties for errors. The EG tax administration allows a taxable person to amend their tax returns in case of error. Thus, in case of insufficient reporting or any error in the VAT return, a taxable person might file an additional return requesting an additional settlement note or the amendment of the return previously filed depending on the case.

In case the amendment is made within the deadline to file the return (i.e., by 15th of the month), no penalties will be due. Otherwise, the 60% penalties mentioned above will be applied.

No penalties apply for the failure to notify, or late notification to, the tax authorities of changes to a taxable person’s VAT registration details. For further details, please see the subsection above Changes to VAT registration details.

Penalties for fraud. VAT penalties may increase to 100% of the amount due in case of fraud.

Personal liability for company officers. In the case of violations committed by entities, their admin istrators that did not carry out the necessary actions that were their responsibility for compliance of the violated tax liabilities or accepted the noncompliance by their subordinates or adopted agreements that made these violations possible will be ancillary liable of the tax violations and of the total amount of the tax debt.

Statute of limitations. The statute of limitations in EG is five years. This is the period that the tax authorities can go back to review returns, identify errors and impose penalties.

Taxable persons can correct errors or omission in the VAT return before the tax administration carries out its annual tax audits.