Central African Republic (CAR) transfer pricing laws align with the Guidelines set by the Organization for Economic Co-operation and Development (OECD Guidelines). They are incorporated within the General Tax Code.
Arm’s Length Principle
If a resident company based in the Central African Republic makes payments to related foreign companies, and these payments are unrecognizable, the tax authorities will recalculate the profits as if the transaction had followed the arm’s length principle. This ensures that companies don’t avoid taxes by shifting profits to countries with lower taxes.
Related Party Definition
Two companies are considered related if:
- One company owns most of the shares of the other or has power to make decisions for the other.
- A third party controls both companies.
Transfers to entities in low-tax jurisdictions (paying less than 50% of CAR taxes or not taxed at all) are excluded from the control definition. Payments to such entities are deductible only if economically justified and not excessive.
Transfer Pricing Methods
The methods that can be used to determine the arm’s length price in Central African Republic are:
- Comparable uncontrolled price method
- Resale price method
- Cost plus method
- Transactional net margin method
- Profit split method
The law in the Central African Republic does not list specific methods that companies must use for setting prices in transactions between related parties (like parent and subsidiary companies). Instead, the CAR follows the international standard set by the OECD.
Documentation Requirements
In the Central African Republic (CAR) the law does not require companies to prepare special transfer pricing documents for transactions between related companies (like a parent and its subsidiary).
Advance Pricing Agreements (APA) and Mutual Agreement Program (MAP)
In the Central African Republic, a taxpayer can ask the Tax Administration for an official opinion about how a transaction will be taxed before they sign a contract, start a project, or take legal action. If the taxpayer gives the tax office all the needed information, and the tax office gives an answer, that answer is binding meaning the tax office cannot later change its mind about how it will treat the transaction for tax purposes.
Penalties
CAR does not apply specific penalty provisions for incorrect pricing in related-party transactions.
Taxation at a Glance
The tax system in the Central African Republic is governed by the General Tax Code and overseen by the Tax Administration. The Parliament, made up of the National Assembly and the Senate, holds the authority to pass tax laws and set tax policy.
The currency of Central African Republic is the CFA franc and bitcoin. The official name of the Central African Republic tax authority is the General Directorate of Taxes and Domains.
The table below provides a summary of the main taxation rates related to businesses:
Tax Type | Tax Rate |
Corporate Tax | 30% |
VAT | 19% |
Withholding tax on dividends to non-residents | 15% |
Withholding tax on interest to non-residents | 15% |
Withholding tax on royalties to non-residents | 15% |
Our firm provides our clients with comprehensive assistance in their transfer pricing needs globally. To contact a team member, please click here.
