PROCEDURE FOR SETTING UP A COMPANY REPRESENTATIVE OFFICE OR LIAISON OFFICE IN CAMEROON
PROCEDURE FOR SETTING UP A COMPANY REPRESENTATIVE OFFICE OR LIAISON OFFICE IN CAMEROON
SETTING UP A COMPANY REPRESENTATIVE OFFICE OR LIAISON OFFICE IN CAMEROON
HOW DOES A REPRESENTATIVE OFFICE OPERATE IN CAMEROON?
The representative office is a liaison office considered the first step of the establishment of a foreign company in Cameroon. It allows for defining the strategies for an effective settlement, studying the local market, analysing the feasibility of the project, testing the activity, and even promoting a product or a service without marketing it however.
The representation office is only used as a connection between customers (or partners) and the foreign company. It does not have any commercial activity. No employee with the power to legally bind the foreign company (negotiation and conclusion of contracts) can depend on it. However, it is possible to recruit a secretary or a sales employee. In this case, it will be local personnel reporting directly to the foreign company and considering doing a temporary mission in Cameroon.
The representation office is not a permanent establishment of the foreign company neither in Cameroon nor in the OHADA area and therefore is neither subject to registration in the Trade and Movable Credit Register (RCCM), nor the local taxation.
It is defined as being an establishment belonging to a company and serving as a liaison between the latter and the market of the Contracting State in which it is located. It has no management autonomy and only carries out activities of a preparatory or auxiliary character concerning the founding company.
a. Functioning of a representative office in Cameroon
Like a branch, a representative office has no legal personality separate from its founding company. Its assets and liabilities are considered to be those of the founding company. It must have a legal representative (natural person).
It can be the establishment of a company whose registered office is not located in Cameroon. However, unlike branches, it is not limited to two years.
It must be registered in the Trade and Personal Property Credit Register.
In summary, a representative office is a branch with no commercial activity (i.e., trading and industrial activities or the provision of services). As a cost centre, it cannot carry out any commercial activity.
The representation activities can be summarized as activities of a preparatory and auxiliary character. These activities include follow-up, coordination, information gathering, promotion or public relation activities and more generally any administrative duties not directly generating profits.
Conversely, it cannot engage in trading activities or be involved in such activities, such as negotiating and/or entering into any commercial contracts, on behalf of the founding company.
The representative office is intended to be a simple structure.
However, the representative office must not be involved in a commercial activity per se, such as:
• following-up commercial contracts;
• transferring or fulfilling customers’ orders;
• delivering goods to the company’s customers;
• receiving or storing goods held for resale;
• coordinating and supervising the activities of the business entities of the group to which it belongs.
In reality, these situations correspond, in most cases, to the tax concept of the permanent establishment, resulting in the classification of a foreign company as a tax resident and thereby subject to the taxes applicable to commercial activity in the country concerned. There may be specific cases subject to tax treaties for the avoidance of double taxation. If the representative office carries on all or part of these activities, it becomes an office of a commercial nature, and, the situation of certain representative offices can indeed be perceived as ambiguous in this respect, without however meeting the definition of commerciality. In the event of commerciality, the activity must be operated by an entity having a commercial legal form.
To trade, the liaison office needs to be transformed into a branch when its activity exceeds that of a representation activity.
Article by CHUO ANGABUA JUNIOR
‘’The content of this article is intended to provide a general guide to the subject matter. We insist specialist advice be sought depending on your specific circumstance’’
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