Ivory Coast Mining Legislation Update: Cancelation of Certain Corporate Tax Incentives for Holders of Exploitation Permits

Posted in Mining Western Africa Blog post

Following in the footsteps of other African countries, Ivory Coast (Côte d’Ivoire) reformed its mining legislation in 2014 with the purpose of attracting new investment and fostering growth in the Ivorian mining sector. The mining industry is now regulated primarily by Law No. 2014-138 dated 24 March 2014 containing the text of the new Mining Code and its Implementing Decree No. 2014-397 dated 25 June 2014.

In a manner similar to other mining legislation and consistent with the Community Mining Code of the West African Monetary and Economic Union (UEMOA), the new Ivorian mining legislation provides several tax and customs incentives to exploitation permit holders, including an exemption from the tax on industrial and commercial profits (impôt sur les bénéfices industriels et commerciaux, also known as “corporate tax”) and the minimum flat tax (impôt minimum forfaitaire) during the first 5 years of commercial production.

Unfortunately, the Government of Ivory Coast has recently repealed, by way of an Ordinance No. 2018-144 dated 14 February 2018, these tax incentive provisions of the Mining Code. The 5-year corporate tax holiday was a tax incentive that made Ivory Coast competitive from an investment standpoint, as opposed to some of its neighboring mineral-rich countries. For example, Burkina Faso and Guinea do not grant such tax incentives and Mali, rather than allowing a full exemption, grants an abatement on the corporate tax rate for a 15-year period commencing on commercial production.

The Ivory Coast Government’s proposal to cancel these tax exemptions was met with outcry by the mining industry when it was first announced in 2017 by the then Minister of Industries and Mines, Mr. Jean-Claude Brou. Amid the numerous criticisms levelled at the proposed cancellations, it was argued that such a measure would constitute a violation of the principle of tax stability guaranteed under the Mining Code and would severely affect the bankability of mining projects. Furthermore, it was suggested such repeal would be in contradiction with Ivory Coast’s international obligations, as the UEMOA Community Mining Code provides for a three-year exemption from corporate tax. Following the adoption of the Ordinance in February 2018, the mining industry strongly condemned the Government’s attempt to force it through and called upon the Government to open discussions. The fact that the Ordinance had not yet been officially published (a legal requirement for it to enter into force) raised some hopes that the Government might change its position, but any such hopes were dashed on 12 April 2018, when the Ordinance was finally published in the Official Gazette.

It is nevertheless worth noting that the Ordinance is not intended to apply to holders of validly existing exploitation rights in existence at the time of its entry into force. As such the tax stability in favor of holders of existing exploitation permits is preserved. The Ordinance further offers a two-year partial relief for exploitation permits awarded over the course of the year 2018, which will benefit from an abatement of their corporate tax at the rate of 75% in the first year and 50% in the second year of commercial production.

This will undoubtedly have an impact on the financials of future mining projects in Ivory Coast, as the need for a corporate tax holiday, allowing for a quicker return on investment, is generally well understood and well accepted in the mining sector. The question remains as to whether this is an isolated attempt at reducing the tax benefits available to the industry or whether the authorities are considering other rollbacks of tax incentives and/or the adoption of new taxes, all of which would increase the financial burden on mining projects in Ivory Coast and have a serious impact on the attractiveness of the country’s mining sector as a whole.

It should also be noted that whilst the amendment to the Mining Code was effected by way of an ordinance, i.e., a decision of the Government in an area which normally must be the subject of legislative action, and as such will no doubt be scrutinized by legal practioners in an attempt to ensure that due process was followed and that no legal argument subsists to contest the validity of this measure.

The upcoming months will prove to be telling.

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