Ivory Coast: What tax breaks are there for start-ups?

20/07/2018

Daniel Kablan Duncan, the Ivorian Vice President, has announced that by 2020, the Information and Communications Technology (ICT) sector should account for 15% of the Ivory Coast's GDP. Tax and financing are central to the pledge.

A specific free zone

The Ivory Coast has no specific legal and tax regime for start-ups. The Ivorian General Tax Code includes some measures, such as granting a 20% tax credit for the acquisition of patents and production methods. Yet, profits need to be made... We should note that, as with all companies, losses may only be carried forward for five years.

Start-ups can however establish themselves in the biotechnology and information and communications technology free zone "ZBTIC". This is located 40km from Abidjan and the tax regime is very attractive. They are then exempt from all taxes and duties subject to payment of an annual fee of 2.5% on annual revenue and, from the sixth year of business, an annual tax of 1% on revenue.

Many investment funds

he Ivory Coast is one of the top ten African countries having attracted the most financing for start-ups in 2016.
Certain measures are provided for to reduce taxation on bank loan interest.

However, the lack of tangible assets and risks of losses make access to these loans difficult and the interest rates remain high.

Start-ups are therefore increasingly turning to private equity funds. Some are even exclusively dedicated to financing African start-ups. These funds generally invest through capital contributions with the aim of reselling their interest in the medium to long term.

A true regional hub

The Ivory Coast has an attractive holdings company regime that reinforces its role of regional hub. In addition to a corporation tax rate of 25%, the lowest in the subregion, the holding companies regime offers lower taxation on dividends and on interest paid by the holding company. Furthermore, capital gains from the transfer of securities are subject to a reduced rate of 12% (instead of 25%).

They are completely exempt when the holding company's portfolio comprises at least 60% of investments in companies that have their headquarters in a member country of the West African Economic and Monetary Union.

Individuals do not enjoy the same tax advantages. Founders must take charge of their investment structure so that they are not treated less favourably than their investor in case of a capital gain. 

Expert opinion in Jeune Afrique Magazine, July 15, 2018.

Authors

Deana D'Almeida
Deana D'Almeida
Counsel
Paris