The taxation system in Comoros ensures flexibility and beneficial conditions for businesses. The absence of income tax for non-resident legal entities that conduct their business operations outside the jurisdiction, minimized requirements or financial reports, and enhanced data confidentiality are the features that make Comoros an attractive place to optimize tax liabilities and conduct global business operations. Let’s take a more detailed look at the characteristics of the country’s fiscal system, rates, and tax incentives to evaluate the prospects of conducting commercial activities in the region.
Why Do Businesses Opt for Comoros?
Comoros is located in the Indian Ocean on the eastern coast of Africa. The island nation borders Seychelles, Madagascar, and Mozambique, which gives it a geographical advantage. The jurisdiction has a republican form of government, which has created attractive conditions for international business.
The economy of Comoros is mixed (agriculture is the dominant industry) and has limited centralized planning. Thanks to this, companies and enterprises have more freedom in making commercial decisions. The state is a member of the Common Market for Eastern and Southern Africa (COMESA) and the League of Arab States. This gives Comoros international business access to wide economic opportunities and benefits.
Features of the Tax Regime on the Islands
The Comoros tax regime was elaborated according to the French model. Its main characteristics include a simplified structure and strict compliance with tax terms, which create a predictable and stable system for individuals and legal entities. The main fiscal authority of the jurisdiction is the General Tax and State Property Administration (Direction Générale des Impôts et des Domaines) under the Ministry of Finances, which is responsible for collecting different taxes and monitoring compliance with laws. Fiscal functions are also performed by the Customs and Excise Department, which actively maintains administrative efficiency and ensures state income collection.
The fiscal year in the jurisdiction corresponds to the calendar year (that is, it lasts from January 1 to December 31), which simplifies planning and liability management for individuals and legal entities. Tax returns must be submitted before March 31 of the next year. Taxes cover only the income received from the business operations carried out within the country.
Let’s take a detailed look at the peculiarities of the Comoros fiscal system:
| Tax category | Description | Rate/conditions |
| Corporate | This is a net profits tax applicable to local and foreign companies. No capital gains tax or dividend tax is payable. | The rate is up to 30%. The companies that conduct their business operations mainly in free economic zones and/or outside the jurisdiction can enjoy tax benefits. |
| Individual income tax | The income received in the Comoros territory is taxed at a progressive scale. Non-residents do not pay income tax unless the profits are obtained locally. | The rate varies between 0% and 30%, depending on income. If you generate less than KMF 800,000, the rate equals 0%, while income exceeding KMF 5 600 001 is taxed at 30%. |
| VAT | It is applicable to goods and services provided inside the country only. | A standard rate is 10%, but it may be reduced to 5% or even 0% for separate categories of goods and services. |
| Customs duties | Levied from the goods that cross borders. | The rate depends on the category of goods, the country of their origin, and their classification under the Harmonized System of Goods Description. Goods from COMESA member countries are subject to reductions or exemptions. |
| Property tax | It is applicable to any real estate, including residential, commercial, or industrial property. | A 20% tax is paid if you rent out residential real estate or farms. Commercial objects are subject to a 30% rate. |
Tax Benefits and Incentives for Business in Comoros
The Comoros government is actively developing a system of tax incentives to attract investments and stimulate businesses, especially in key economic sectors. Below is the list of measures aimed at improving the business environment and supporting local enterprises.
Establishment of Free Economic Zones (FEZs)
Companies registered in Moroni or Anjouan and carrying out their operations there can benefit from a reduced Comoros income tax rate of 5% to 15%, depending on the type of business and the amount of investments. In addition, they are exempted from import duties on raw materials and equipment, which finally helps companies to reduce initial and operating expenses.
Investment Tax Credits
If a business owner has a large project, such as building a plant, tourist attraction, or infrastructure object, he can benefit from a tax credit of up to 30% of the investment. These credits are counted towards the Comoros corporate tax rate, which helps companies reduce the burden and return their investments more quickly.
Tax Breaks for New Companies
Startups and new enterprises created in the fields of agriculture, renewable energy, transport, and tourism may be exempt from a Comoros corporate tax rate for up to five years.
VAT Exemption
The benefits apply to companies that export local products (vanilla, clove, ylang-ylang). The suppliers of medicines, food products, and school supplies are also VAT-exempt, which makes business in these fields more cost-effective and socially oriented. VAT exemption also covers the transactions that are directly connected with business activities outside the country.
Tax Benefits for Foreign Companies in Comoros
A flexible fiscal policy is one of the key factors that attract foreign businesses to the country. Let’s look at the advantages of operating in the jurisdiction:
- No capital gains tax applies if you sell assets (real estate or shares)
- Zero tax on dividends payable to shareholders
- VAT exemption for transactions made outside the country
- Tax breaks and benefits for separate business spheres
- Simple financial reporting, which helps to reduce the administrative burden
- No currency control.
The Procedure of Keeping Tax Reports in Comoros
Non-resident companies registered in Comoros must comply with local laws and duly submit tax returns. The reporting procedure includes the following steps:
- Foreign company registration in Comoros. You will need to obtain a taxpayer identification number (TIN) required to submit tax returns and pay contributions.
- Filling out the tax return. Both foreign and local companies are required to declare all income received in the territory of Comoros. The reports on corporate tax (income tax) are submitted annually. The deadline for sending them to the respective authorities is March 31 of the year that follows the reporting year. VAT is reported quarterly. If the company fails to submit reports on time, it may face punitive sanctions. Income and expenses are accounted for on the basis of the International Financial Reporting Standards (IFRS), which simplifies the task for companies.
- Payments. Taxes are paid in the local currency (Comoros franc) to the bank accounts of tax authorities simultaneously with the tax return submission.
- Use of preferential terms. Non-resident companies can take advantage of exemption from fiscal liabilities if they operate in priority sectors or are registered in free economic zones. If you want to use the available benefits, you will need to attach relevant documents to the declaration and provide reports to prove compliance with the program conditions.
- Checks and audits. Controlling authorities may conduct selective checks of the financial reports submitted by non-resident companies. If they detect any violation, the authorities may have all the reports audited, followed by possible additional tax assessments and penalties.
Conclusion
Tax planning for commercial operations in Comoros requires a careful approach and compliance with laws. To avoid fines and legal consequences, you must account for all foreign assets and income correctly and precisely. Our experts will help you optimize the fiscal burden: we will reduce costs at the expense of beneficial tax rates and correctly structured accounts.
20 September 2024 