Generalities on externally funded public contracts
The implementation of projects jointly funded by the State of Cameroon and international donors brings in the concept of counterpart funds.
The counterpart is the share that the Government of Cameroon supports as part of a jointly funded project under a loan or grant agreement expressly providing for this coverage.
We distinguish between counterpart funds in real expenditure and counterpart funds in taxes and customs duties.
Counterpart in real expenditure is any direct financing from own resources of the State, destined for the procurement of goods and services for the benefit of a jointly funded project under the conventional conditions.
Consideration in taxes and customs duties, is any direct coverage from own resources of the State of taxes and customs duties resulting from the implementation of a jointly funded project under conventional conditions.
In both cases, the resources for these kinds of expenditures are budgeted by the State, in a common fund called “counterpart funds” which is kept at the Ministry in charge of the economy (MINEPAT for Cameroon).
Tax system of public contract with external financing
The tax regime for contracts with outside funding is contained in Decree No. 2003/651/PM of 16 April 2003 to lay down rules for the implementation of the tax and customs regime of public contracts. This decree provides, inter alia, that:
- Contracts are concluded inclusive of all taxes (Article 2 (1));
- They are subject to the tax legislation in force on the date of the agreement (Article 2 (2));
- The legally liable person for the taxes, duties and levies due on the contract is the successful bidder (Article 3 (a));
- However, VAT is borne by the contracting authority (Article 3 (b));
- Where for a public contract financed by external resources, the financing agreement does not make provision for the coverage of duties and taxes by the successful bidder, such duties and taxes shall be borne by the Contracting authority. (Article 3 (c));
- The Project Owner shall be bound to make provision in his budget for appropriations to cover the taxes and duties he shall be called upon to bear within the public contracts, in accordance with the provisions of article 3 above. (Article 4);
- Subject to international tax treaties and to certain exceptions, profits or revenues earned by companies, consultants and consultancy firms involved in the execution of public contracts are subject to the common law tax regime. (Provided for in Section 7 of the General Tax Code).