Quick guide for transfer of shares in an existing holding company in the DRC.

Dispute resolution:

The OHADA treaty provides an arbitration procedure. Disputes relating to the general uniform acts, or indeed any other business dispute, can be submitted to the OHADA arbitration procedure.

The DRC is also a signatory of the ICSID Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) and adheres to the rules of the International Chamber of commerce.

DRC signed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards Commerce.

Land acquisition:

The State exclusively owns land in the DRC; however, it can grant companies and individuals occupancy rights through: perpetual concession contracts only available to Congolese citizens; or ordinary concession contracts available to foreign investors, registered companies and Congolese citizens with 25-year occupancy which is renewable.

Foreign employee:

- Foreign individuals intending to work in the DRC are required to obtain a work permit, generally valid for two years and renewable:

- Expatriates may enter the country with a business visa, conclude a contract of employment with a local company and then apply for a work / residency permit.

- Businesses holding a mining licence are allowed to hire a maximum of 5% of foreign employees for management staff and a maximum of 10% for other positions.

Fixed-term contracts and temporary employment services:

It is legally permissible to conclude a limited or fixed term duration contact which will terminate at the end of the project. Fixed term contracts are limited to a two-year period and may only be renewed once.

Exchange Control:

Exchange control regulations apply in the DRC. Commercial banks are generally authorised, subject to relevant taxes being paid, to transfer funds out of the country.

The following fees and restrictions apply:

- The Central Bank of Congo (“BCC”) levies a change royalty of 0, 2% on any payment to or from abroad regardless of the status of the transferor and transferee. Any transfer of funds to or from the country is subject to a foreign exchange levy (redevance de suivi de change) at the rate of 0.2% (in addition to bank charges);

- Cross-border transfers from and to the DRC, with a value equal to or greater than U.S. $10,000 (including, entry of capital as direct investment, portfolio and other investments, including pre-financing of exports) must be made through an approved credit institution or intermediary and are subject to an RC declaration;

- Revenues (remuneration, direct investment, portfolio, and other investments income, such as profits, dividends, leasehold interests) can only be received or transferred through an approved bank.

Tax:

The general system of taxation in the DRC is based on the principle of territoriality and tax is accordingly levied on all income derived from the DRC.

The followings are the main taxes:

- Corporate tax at 40%;

- Corporate tax for mining companies at 30%, A minimum tax of 1% of declared revenue applies, irrespective of taxable income. Capital gain is included in ordinary taxable income;

- Withholding tax on income from movables at 20% and for mining activities at 10%;

- Personal income tax rate is based on a sliding scale with a maximum of 30%;

- Property tax is levied from US$0.30 to US$1.50 per square metre of the built property;

- Tax on rental income at 22%;

- Valued Added Tax (“VAT”) at the uniform rate of 16% on the local sale, import and provision of services.

The law introducing VAT was promulgated in 2010 but its effective date was 1 January 2012. VAT replaced turnover tax which is no longer applicable in the DRC.

VAT taxable supplies, VAT is levied on the supply of goods and services in the DRC.

VAT rate 16 registration threshold. Any person or entity who carries on business in the DRC and has an annual taxable turnover / expected annual taxable turnover exceeding CDF 80-million must register for VAT.

Businesses whose turnover is below the registration threshold would cease to be subject to VAT from the following year, but may apply for voluntary registration.

- Reverse VAT on imported services;

- A non-resident is required to designate a VAT representative in DRC who will be jointly liable for payment of VAT. Where such non-resident fails to appoint a VAT representative, the VAT due are payable by the client in the DRC.

- Double tax agreements are in force with Belgium and South Africa.

Loss:

Losses may be carried forward indefinitely. However, the deduction of losses brought forward is capped at 60% of the net taxable profit of the particular year in respect of which the loss deduction is claimed.

A company that fails to submit its tax return on time for a specific tax year forfeits the right to carry forward the losses incurred in that year.

Transfer pricing. In terms of the DRC’s transfer pricing rules, where a DRC company is directly or indirectly connected to/associated with a non-resident company, any undue benefit granted to the latter company would be re-characterised as an abnormal act of management and ignored for corporate income tax purposes.

In order to avoid reassessment in such situation, the resident company must provide evidence that the transaction has been carried out independently without any consideration for the group company’s interest.

“Associated persons” is broadly defined and includes participation in capital or through holdings doing business in the Democratic Republic of Congo (DRC)

Limitations on interest deductibility,

There are no thin capitalisation rules in the DRC.

Payroll tax:

The income tax rates applicable to resident individuals are: annual chargeable income (CDF) tax rate

up to 1 944 000 0%

1 944 001-21 600 000 15%

21 600 001-43 200 000 30%

over 43 200 000 40%

The tax is calculated based on a progressive scale and the overall tax shall not, in any case, exceed 30% of taxable income. In addition to employment income tax, employers are liable for exceptional tax on the remuneration of expatriates (impôt exceptionnel sur les rémunérations des expatriés) in respect of remuneration paid to expatriates at a rate of 25% (10% for mining companies).

-social security contributions

-Both employees and employers must make monthly social security contributions to the INSS.

The employer contribution rate consists of:

family welfare: 6.5%;

professional risk: 1.5%; and

retirement pension: 5%

The employee contribution rate is 5% on payroll tax. A payroll levy is payable by employers to the National Office of Professional Training (Institut National de Préparation Professionnelle,

(“INPP”) at a rate of:

3% for public companies and companies with a workforce of 1 to 50 employees;

2% for companies with 51 to 300 employees; and

1% for companies with a workforce of over 300 employees.

Employers are also obliged to contribute 0.2% of remuneration to ONEM and cover all the medical costs of its employees and their families.

The DRC does not levy stamp duties, except for the transfer of mining shares, which is subject to 1% tax on the transfer value, there is no transfer duty on the transfer of shares or bonds, but the transfer of immovable property is subject to registration duty at the rate of 6% of the price (1.5% in the case of a merger and to 3% in the case of a transfer of business activities)