The Tax System of Comoros: Key Features, Benefits, and Business Opportunities

Let’s start with a brief overview of the Comoros economy. The country’s economy is a typical example of a small developing one and it faces numerous challenges. But the country also possesses growth potential due to its natural resources and strategic location. Let’s consider the primary industries, sources of income, and main challenges in more detail.

Major sectors of economy

1. Agriculture
Agriculture is the backbone of the Comorian economy and more than 80% of the population is involved in farming. The main crops include vanilla, cloves, and ylang-ylang (a plant used in perfume production). Comoros is one of the largest vanilla producers in the world and ylang-ylang is an essential export item that gives the islands a unique niche in the global market.

2. Fishing
Comoros is an insular country and fishing naturally plays a significant role in the economy. However, this sector is still underdeveloped. The country is working to harness its marine resources more efficiently and collaborating with international organizations to improve fishing techniques and promote sustainable growth.

3. Tourism
Tourism is just beginning to take off in Comoros. The country has vast potential in this area thanks to its stunning beaches, unique nature, and warm climate. But poor infrastructure, lack of investment, and political instability are currently holding this sector back.

4. Service Sector
Lately, services such as finance, transportation, and administrative assistance have been slowly growing. However, the service sector still needs significant efforts to reach its full potential.

Sources of income

Comoros’ primary sources of income come from exporting agricultural products such as vanilla and cloves as well as financial assistance from international organizations and the Comorian diaspora.

Additionally, the country receives international aid from organizations such as the United Nations, the World Bank, and the African Development Bank. These funds are directed towards infrastructure projects, healthcare, education, and environmental initiatives.

Population satisfaction

The people of Comoros face many challenges including economic instability, a lack of jobs, and high prices for food and essential goods. The country’s infrastructure leaves much to be desired: roads, hospitals, and schools are in poor condition.

That said, however, the Comorians demonstrate resilience and live in a spirit of solidarity. Strong family and community bonds help many cope with the hardships they face.

Key challenges

1. Political instability
The Comoros has experienced multiple political crises and coups that undermine stability and deter investment.

2. Low standards in education and healthcare
Access to quality healthcare and education is limited, especially in rural areas.

3. Economic dependence on few sectors
The country is overly dependent on agricultural exports and diaspora remittances. This makes the economy vulnerable to external factors such as fluctuations in vanilla prices.

4. Infrastructure
A lack of adequate roads, ports, airports, and electricity systems hinders economic growth and hampers the development of sectors such as tourism and logistics.

How challenges are addressed

1. International aid
The country actively cooperates with international organizations to secure financial assistance and technical support. The funds are allocated to infrastructure development, reforms in education and healthcare, and poverty reduction programs.

2. Economic diversification programs
The Comorian government is striving to diversify the economy by developing tourism and fishing as well as attracting foreign investments. Establishing free economic zones and offering tax incentives to businesses are part of this strategy.

3. Fighting political instability
The authorities are working to strengthen the political system and achieve long-term stability, which would appeal to foreign investors.

Taxes in Comoros

The Comoros tax system offers significant benefits to entrepreneurs. Total tax exemptions on income for companies operating outside the jurisdiction, minimal reporting requirements, and a high level of confidentiality make the islands a great choice for international businesses.

Why entrepreneurs choose Comoros

Located in the Indian Ocean, off the coast of Africa, the Comoros Islands neighbors countries such as Seychelles, Madagascar, and Mozambique, giving it strategic importance. Comoros is a Republic and this fact creates favorable conditions for foreign entrepreneurs.

Besides, Comoros is a member of the Common Market for Eastern and Southern Africa (COMESA) and the Arab League. This offers access to attractive economic conditions for international businesses.

Key features of the tax system

The tax policy of the Comoros Islands follows the French model: there is a clear and predictable tax structure. The main tax authority is the General Directorate of Taxes and State Property responsible for tax collections and oversight. In addition, the Customs and Excise Department plays a role in tax administration.

The tax year coincides with the calendar year and the filing deadline is March 31 of the following year. Taxes are only applied to income earned within Comoros.

Main taxes in Comoros

The tax system covers several categories of taxes. Here are the main ones:

● Corporate tax: This is levied on the company’s net profit. The rates reach 30%. For businesses operating in free economic zones, the rate may be reduced to 5-15%.

● Personal income tax: A progressive rate from 0% to 30% applies. Only local income is taxed and non-residents pay tax exclusively on income earned within the country.

● VAT: The standard rate is 10% but it may be lowered to 5% or entirely lifted for some goods and services.

● Customs duties: These vary based on the category of goods, the country of origin, and other factors. COMESA members enjoy certain exemptions.

● Property tax: Applies to any real estate, with rates of 20% for residential properties and 30% for commercial ones.

Tax benefits and incentives for businesses

The Comoros government actively uses tax incentives to attract investors and promote key sectors of the economy. Here are the main measures:

● Free Economic Zones: Companies operating in Moroni or Anjouan can benefit from reduced corporate tax rates and exemptions from import duties on raw materials and equipment.

● Investment credits: Large projects can receive tax credits of up to 30% of the investment amount, which helps accelerate return on investment.

● Tax holidays: Startups in agriculture, tourism, transportation, and other priority sectors can enjoy exemptions from corporate tax for up to five years.

● VAT exemptions: Companies exporting local products or supplying socially important goods are exempted from VAT.

Benefits for foreign companies

The Comoros Islands attracts foreign businesses with its flexible tax policy. Here are the main advantages:

● No capital gains tax on asset sales;

● Zero tax on dividends;

● VAT exemptions for transactions outside the country;

● Attractive tax holidays;

● Simplified reporting requirements;

● No currency control.

How to file tax reports in Comoros

Foreign companies have to comply with tax rules and submit reports in Comoros. The main steps include:

1. Registering a company: Obtain a Tax Identification Number (TIN).

2. Filing declarations: Annual corporate tax declarations and quarterly VAT reports have to be submitted. The deadline is March 31.

3. Paying taxes: Payments are made in local currency together with report submission.

4. Utilizing incentives: Eligible companies can benefit from tax exemptions.

5. Audits: Random audits are possible and penalties may be imposed if requirements are breached.

Conclusion

Proper tax planning in Comoros requires precision and strict adherence to the law. Experts at International Wealth can help you take full advantage of available incentives and minimize your tax burden.