Ivory Coast: Transfer pricing - Changes in mechanisms to combat tax evasion in Ivory Coast

Starting with the 2004 tax annex, transfer pricing rules have been gradually tightened with restrictions on the deductibility of intra-group expenses, followed by documentation and reporting requirements for intra-group transactions and beneficial owners. 

1. Tax framework for intra-group expenses 

• In 2004, the tax annex capped the deduction of intra-group expenses that were real, normal, and not excessive at 5% of turnover and 20% of overheads. 

• In 2016, the tax annex increased by 25% the rate applicable to income from securities paid to persons established in territories with preferential tax regimes or non-cooperative territories as defined by the OECD and the EU. 

• In 2017, it introduced a limit of 30% of taxable income before depreciation, provisions, taxes, and interest expenses for interest on shareholder current accounts, which may not exceed the fully paid-up share capital of the debtor company and the Central Bank interest rate plus two points. 

• In 2018, a third deduction limit of 50% of gross amounts paid to related or unrelated persons was introduced for transactions to territories with preferential tax regimes or non-cooperative jurisdictions as defined by the OECD and the EU. 

2. Transfer pricing reporting and documentation requirements 

Since 2017, the CI has strengthened its tax measures to combat profit shifting through reporting and documentation requirements. 

1. Reporting requirements 

• Statement of International Intragroup Transactions: must be attached to the financial statements and only applies to companies that have transactions with related entities.  

• Country-by-Country Report: mandatory for groups with consolidated turnover > 250 billion CFA francs, enabling analysis of global revenue distribution.  

2. Documentation requirements 

• Transfer pricing documentation, produced at the request of the tax authorities during tax audits by companies with turnover of at least 500 million, includes: 

• A master file providing information on the group's activities and its transfer pricing policy; 

• A local file relating to the local entity and the justification for its transfer prices.  

• Register of beneficial owners, established in 2019, enabling the identification of the individuals who ultimately control an entity. 

3. Applicable penalties 

The CGI provides for penalties in the event of non-compliance: 

• A fine of 5,000,000 plus 5,000,000 per month of delay; 

• A fine of 0.5% of transactions not included in the documentation, with a minimum of 10 million; 

• The reintegration of intra-group expenses into the tax result. 

In summary, transfer pricing regulations in Ivory Coast are gradually aligning with international standards. Under these circumstances, it is important for companies to anticipate potential tax audits.