Personal Income Tax Lecture Notes by Pa ACHA

Lecture notes on personal income tax by Pa ACHA 670-092-299
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UNIT 4: PERSONAL INCOME TAX
4.1 – Notion of Personal Income Tax
Personal Income Tax (PIT) otherwise known as Individual Income Tax is a tax calculated on the Income of a
natural or physical person. Natural persons refer to individuals who earn incomes from their own personal
activities, in their own names. They can be workers, sole traders, craftsmen, artists, and any other persons who
carry out lucrative or profitable income earning activities in their own names.
4.2 – Domain of Application
The Incomes of natural persons are in accordance with the following categories as stipulated by Section 24
of the General Tax Code:
 Salaries, Wages, Pensions, and Life Annuities: That is, fixed payments earned over a given period as
a compensation for services rendered to a third party;
 Incomes from stocks and shares or securities in general: Such as Dividends, Interests, and Capital
Gains;
 Incomes from Real Estates or Landed property: That is, Rents from Land and Buildings, Capital
Gains from the transfer of Real Estates;
 Profits from Craftwork (Handicraft), Industrial and Commercial Activities: Such as Net Incomes
earned by sole traders who carry out Industrial and Commercial activities, Craftsmen, and others;
 Profits from Agricultural or Farming Business: Such as Net Incomes earned by Poultry Farmers,
Breeders, Individual Farm Firms and Lucrative farming activities in general;
 Profits from Non-Commercial and related Professions: That is, incomes earned by Consultants,
Legal Practitioners, Medical and Para-Medical Practitioners and such other persons.
4.3 – Taxable Persons
Sections 25 and 26 of the General Tax Code stipulates that, subject to the provisions of international
conventions, Personal Income Tax shall be paid by all natural persons having Cameroon as their Fiscal
Residence. The following are considered to have a Fiscal Residence in Cameroon:
 Persons having their Homes or Principal Residence in Cameroon;
 Persons who carry out a remunerated or non-remunerated activity in Cameroon, unless they can justify
that this activity is carried out on accessory or secondary basis;
 Persons who have the core of their economic interest in Cameroon.
The following persons are also liable to Personal Income Tax:
 Civil Servants and State Agents working in foreign countries but who are not taxed in those countries;
 Persons with physical Residence or Tax Domicile out of Cameroon, on the part of Revenue or Profits
made in Cameroon;
 Persons of Cameroonian or Foreign Nationality with or without a Tax Domicile in Cameroon, who earn
Profits or Income Taxable by Cameroon under the terms of an International Convention so as to avoid
double taxation;
 Partners in General (Ordinary) Partnerships and Active Partners in Limited Partnerships who have not
opted for the Company Tax shall also be liable to the Personal Income Tax for the part of their social
profits corresponding to their rights in the Partnership;
 Members or Partners of the Civil Society (Natural Persons), of Joint Ventures and de facto firms not
liable to the company tax.
4.4 – Persons Exempted from Personal Income Tax
In accordance with Section 27 of the General Tax Code, the following persons are exempted from the Personal
Income Tax:

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 Diplomatic and Consular Staff of Foreign Nationalities subject to reciprocity (that is, on the basis that the
country they are representing grant similar exemptions to Cameroonian Diplomatic and Consular Staff in
these countries);
 Natural Persons, exclusively for their activities liable to the Global Tax;
 Persons earning a monthly Taxable Salary of less than 62,000 FCFA.
4.5 – Characteristics of the Taxable Income
The Taxable Income liable to the Personal Income Tax has the following specific characteristics:
• It is NOT a Global Taxable Income: That is, each type of revenue earned by the same Tax Payer is
specifically taxed at the end of the fiscal year based on the assessment rules set out by the Tax Law;
• It is an Annual Income: As the Taxable Revenue for each category of income is that earned by the Tax
Payer during an annual period (Fiscal year);
• It is the Net Revenue: That is, at the level of each category of revenue, the specific expenses incurred
on it have to be deducted in order to obtain the Net Taxable Income for that category of income.
4.6 – Personal Income Tax on Each Category of Income
According to Section 29 of the General Tax Code, each type of revenue has its own assessment base and
mode of Taxation as follows:
4.6.1 – Personal Income Tax on Salaries, Wages, and Life Annuities: The domain of application,
assessment base and Taxation modalities for salaries, wages, and life annuities are as follows:
4.6.1.1 – The Taxable Income and Exemptions: According to Section 30 of the General Tax Code, the
Taxable Income comprises of income from salaries, wages, allowances, emoluments, pension/.;ns and life
annuities, and earnings of insurance agents, travelling sales men and representatives when the remunerated
activity is carried out in Cameroon.
According to Section 31 of the General Tax Code, the following incomes are exempted from the tax:
 Special allowances granted to workers to cover related duty and service expenses, so far as they are
actually spent and not overstated;
 All types of Family Allowances or benefits;
 Allowances and benefits paid in any form by the State and Local Government Units in the form of
assistance or insurances as laid down by the law;
 Temporary Allowances, benefits and life annuities paid to victims of Industrial Accidents or their rightful
claimants;
 Any payments to compensate for disabilities;
 Flat Salary Supplement paid to Civil Servants;
 Scholarships;
 Lump sums received as Death Pension Allowances;
 Bonuses paid to workers during the award of Labour Medals;
  Monthly Taxable Salaries less than 62,000 FCFA.
4.6.1.2 - Personal Income Tax Assessment Base on Salaries, Wages, Life Annuities and Pensions: They
base for calculating Personal Income Tax is obtained after deducting three items from the Taxable elements:
 Professional Expenses at the Rate of 30%;
 Old Age Pension paid by the worker at the Rate of 4.2%;
 An Annual Tax Allowance of 500,000 FCFA (41,667 FCFA per month).

Lecture Notes on Personal Income Tax by Pa Acha
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The assessment base of Personal Income Tax (PIT) on Salaries and Fixed remunerations is obtained from
the following computations:
GROSS EARNINGS
Less Compensatory Allowance
Less Reimbursement for expenses (Reimbursement Allowance)
Less Cash Allocations for Advantages in Kind
= GROSS TAXABLE SALARY (G.T.S)
+ Advantages in Kind (evaluated on G.T.S) =
Intermediate Taxable Salary (I.T.S)
Less Professional expenses (30% of I.T.S)
Less Compulsory Retirement Pension to the National Social Insurance Fund (NSIF)
Less Income Tax Allowance of 500,000 FCFA per year or 41,667 FCFA per
month= INCOME liable to PIT (Net Taxable Salary)
According to Section 33 of the General Tax Code, benefits or advantages in kind are evaluated according to the
following rates:
 Housing, at 15% of the Gross Taxable Salary;
 Electricity, at 4% of the Gross Taxable Salary;
 Water, at 2% of the Gross Taxable Salary;
 Domestic servant at 5% of the Gross Taxable Salary per servant;
 Vehicle, at 10% of the Gross Taxable Salary;  Food (feeding), at 10% of the Gross Taxable
Salary.
NB: If the computations are based on itemised elements of the Pay Package, then the steps are as follows:
BASIC SALARY
+ Overtime Earnings
+ Any Allowance not granted as compensation or reimbursement of expenses
= GROSS TAXABLE SALARY (G.T.S)
+ Advantages in Kind (evaluated on G.T.S as above)
= Intermediate Taxable Salary (I.T.S)
Less Professional expenses (30% of I.T.S)
Less Compulsory Retirement Pension to the National Social Insurance Fund (NSIF)
Less Income Tax Allowance of 500,000 FCFA per year or 41,667 FCFA per month
= INCOME liable to PIT (Net Taxable Salary)
4.6.1.3 – The Annual and Monthly Personal Income Tax Liability : Two tools are used in the determination
of the Personal Income Tax liability:
 The Monthly Tax Deduction Table for the monthly PIT liability;
 The Personal Income Tax Bracket for the determination of the annual PIT liability.
In practice, two approaches are applied for the determination of monthly PIT deductions.
(i) Determination of Monthly PIT using the Monthly Tax Deduction Table
The Table states that for need of simplicity, the Gross Taxable Salary is used to determine the monthly tax
deductions. The Gross Taxable Salary is rounded down to the nearest 250 FCFA and the various monthly

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deductions are read from the table. It carries deductions for PIT, Additional Council Tax on PIT (10% PIT), the
Housing Loan Fund Tax and the Audio-Visual Tax.
This implies that this approach ignores the deduction of the three items mentioned above. That is, Professional
Fees at the rate of 30% of the Intermediate Taxable Salary, the Worker’s Contribution for Old Age Pension and
the monthly Tax Allowance of 41,667 FCFA. However, it favours the Tax Payer as a lower PIT liability is
obtained. The monthy Tax deduction table is developed from the following Flow Chart of the Fiscal
Dtermination:
Monthly Gross Taxable Salary (MTS)
Rate
PIT on Worker’s Salary
Less than 62,000 FCFA
0%
0
62,001 FCFA to 310,000 FCFA
10%
(MTS x 70% - MTS X4.2% - 41,667) x 10%
310,000 FCFA to 429,000 FCFA
15%
16,693 + (MTS – 310,000) x 70% x 15%
429,001 FCFA to 667,000 FCFA
25%
29,188 + (MTS – 429,000) x 70% x 25%
Above 667,001 FCFA
35%
70,830 + (MTS – 667,000) x 70% x 35%
NB: See Extract of Monthly Tax Deductions Table
(ii) Determination of Monthly PIT from the Annual Tax Bracket
This approach uses the annual Net Taxable Salary rounded down to the nearest thousand FCFA and the
annual Personal Income Tax Liability is obtained using the following Income Tax Bracket:
Taxable Income Bracket (FCFA)
Rate
0 to 2,000,000
10%
2,000,001 to 3,000,000
15%
3,000,001 to 5,000,000
25%
Above 5,000,000
35%
The annual Personal Income Tax Liability is then divided by 12 to obtain the monthly Personal Income Tax
Liability. However, the above Tax Bracket can be expressed on monthly basis as follows:
Taxable Income Bracket (FCFA)
Rate
0 to 166,667
10%
166,668 to 250,000
15%
250,001 to 416,667
25%
Above 416,667
35%
The flat monthly income tax allowance will therefore be 500,000 ÷ 12 = 41,667 FCFA
Example
Mr. KELUH has a monthly Gross Taxable Salary of 530,000 FCA and an Old Age Pension of 8,400 FCFA
for the month of February 2021.
Required:
(i) Calculate the Monthly PIT using the Annual Base
(ii) Calculate the Monthly PIT using the Monthly Base

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(iii) Calculate the Monthly PIT from the Taxation Flow Chart and Tax Table
Solution
(i) Calculation of the Monthly PIT using the Annual Base
Elements
Calculations
Amounts
Gross Taxable Salary
530,000
Less Professional Expenses
30% x 530,000
(159,000)
Less NSIF Contribution
(8,400)
Monthly Base of PIT
362,600
Annual Base of PIT
362,600 x 12
4,351,200
Less Tax Allowance
(500,000)
Annual Taxable Salary
3,851,200
Annual Taxable Salary (Rounded down)
3,851,000
Annual PIT:
Taxable Income Bracket (FCFA)
Amount in
Bracket
PIT Rate
PIT (FCFA)
0 to 2,000,000
2,000,000
10%
200,000
2,000,001 to 3,000,000
1,000,000
15%
150,000
3,000,001 to 3,851,000
851,000
25%
212,750
Annual Personal Income Tax Liability
562,750
Therefore, Monthly PIT Liability 562,750 ÷ 12 = 46,896 FCFA
(ii) Calculation of the Monthly PIT using the Monthly Base
Elements
Calculations
Amounts
Gross Taxable Salary
530,000
Less Professional Expenses
30% x
530,000
(159,000)
Less NSIF Contribution
(8,400)
Less Monthly Tax Allowance
(41,667)
Monthly Base of PIT
320,933
Monthly PIT:
Taxable Income Bracket
(FCFA)
Amount in
Bracket
PIT Rate
PIT (FCFA)
0 to 166,667
166,667
10%
16,667
166,668 to 250,000
83,333
15%
12,500
250,001 to 320,933
70 9333
25%
17,733
Monthly Personal Income Tax Liability
46,900
(ii) Calculation of the Monthly PIT from the Taxation Flow Chart and Tax Table