“Is it possible for me to deduct personal expenses through my business?”
Tax questions small business owners ask
Many small business owners have asked me this question and my answer to them is YES. However, there are certain things that they need to keep in mind.
Net taxable profit
The net taxable profit in Cameroon is established after the deduction of all expenses that are directly incurred when carrying out the activity. Any excessive or unnecessary expenditure will not be deducted, so you have to be very careful.
People have shown me receipts of their personal purchases in supermarkets, bills paid in night clubs and other leisure places, haircut in a classy salon, etc. Not all of such expenses can be deducted or qualified as a business expense.
For it to be qualified a business expense, it must have successfully passed the assessments in Section 7 of the General Tax Code of Cameroon. You can check download the 2019 version in English or 2020 version in French. You will need to have 2020 Finance Law of Cameroon which you can also download to use alongside the English version.
Checkout this tax guide for limited liability companies in Cameroon
When we talk of tax-deductible expenses, three things should come into your mind – they should be necessary, reasonable and ordinary.
Examples of tax-deductible expenses include
General administrative expenses like equipment, rent, supplies, utility costs, legal & accounting services, telephone, salaries, professional dues, etc.
The last two must be reasonable and are deducted if they’re directly related to or associated with the business. This means, business was discussed or took place before, during or after the entertainment.
However, it should be noted that not all of certain expenses are deducted. Some have a ceiling level that is taken into consideration before deduction.
Food for thought!
You may have a hard time convincing tax officers to prove that some personal expenses should be deducted. You will also have to answer to shareholders or partners why you have to use their investment to run personal expenses in the case of a limited company or partnership that has opted for corporate tax.
I will advise you to separate your business expenses from your personal expenses - even if you are a sole proprietor.
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