INVESTING IN COMOROS

The Comorian Government has made substantial efforts to improve the business climate, investment conditions and the entry of foreign investors.

CLIMATE FOR INVESTMENT

The new investment code approved in 2007 is more liberal and attractive than the previous one. It provides investors with a conducive legal framework, the free movement of capital and profits and equal rights for foreign and national investors. The National Agency for Investment Promotion «Invest in Comoros» is the main institution in charge of liaising with investors and centralized approaches. Its role is to serve as an intermediary to the government with investors to carry out business registration procedures and issue special permits.

The Invest in Comoros agency also processes applications for approval of investment that offer the following benefits:
• Exemption from customs duties and taxes on materials and equipment intended to the investment project;
• Deducting taxable earnings (tax on various benefits) on the amount of investments made.
The duration of these benefits is 7 years (Plan A) for an investment project amounting between 5 million KMF (about € 10 000) and 100 million KMF (about € 200 000). Beyond 100 million KMF (Plan B), duration of benefits is 10 years.

When requesting approval, the investor must provide a certificate confirming the availability of project funds, in addition to the application form and information about the company registration. For large-scale projects, a feasibility study and studies on environmental impact should also be carried out. Comoros offer investment opportunities in several areas. The tourism sector remains the most promising area. Comoros have very attractive and yet undeveloped natural resources. The proximity of Comoros with other islands in the Indian Ocean and with South Africa is an asset. The agricultural and fishing sectors also offer interests to investors through the abundance and diversity of food crops and the richness of the waters. However, investors face numerous challenges including poor infrastructure which hinder transportation and make water and electricity supply difficult and expensive. Investments are planned in this area and should allow better network efficiency. To attract foreign investors, a law on economic citizenship adopted in December 2008 paved the way for the massive inflow of investment (up to USD 200 million) from Middle East countries in return for Comorian nationality to part of the stateless people residing in these countries. These capital inflows should be used mainly in Comorian infrastructure development, the rest being destined to represent an extra budget resource for the State. (Source UNCTAD). The creation of ANPI and the adoption of the new investment code fostered business creation and the arrival of new foreign investors. Foreign investors can invest freely in Comoros, «subject to specific provisions aimed, in particular, at ensuring protection of health and public health, welfare or public economic order.»

Emergence of new partners

The Union of Comoros belongs to the Organization of the Islamic Conference and the Arab League. It is part of the COMESA and the Indian Ocean Commission (IOC), for which it held presidency in 2008-2009.

Between 2006 and 2011, former President Sambi developed relations with Arab countries (Saudi Arabia, UAE, Kuwait, and Libya) and Iran, which were affirmed by the visit of President Ahmadinejad in Moroni in 2009, the signing of several cooperation agreements and the initiation of military cooperation. Qatar, a new partner of Comoros, hosted a conference in March 2010 for their development during which about €540 million have been pledged by donors from the Gulf area. Relations with China are excellent since independence: construction of the People’s Palace, support in the health sector, vocational training, balancing the budgetary gap in the context of negotiations with the IMF, and 22 million euros granted on December 14th, 2009 by the Exim Bank of China.

In June 2002, France supported the resumption of cooperation of the European Union. The 10th EDF envelope for Comoros amounted to € 48.1 million over the 2008-2013 period, with a focus on transport infrastructure (€ 27M, i.e. 60%) and education (11.25 M €, i.e. 25%), added to a governance cross-sectional envelope of €6.75 M.

The business environment

The development of the private sector in Comoros is hampered by an unfavourable business environment, particularly due to the lack of reliable infrastructure, lack of skilled workforce and lack of corporate culture.

Comoros is ranked 159th out of 183 countries in terms of ease of doing business, according to Doing Business 2011; 193rd out of 202 jurisdictions in terms of quality of legislation based on the governance indicators of the World Bank, and 172nd out of 179 countries in economic freedom, according to Heritage Foundation. This poor ranking is justified by cumbersome procedures that investors face when they start up a business, look for funding etc... Financial instruments offered by banks are limited, interest rates are high, and medium and long term financing is generally not available. To improve the business environment, the Comorian government in 2010 sought the assistance of the IFC. The implementation of a new investment code and the creation of an investment promotion agency were achieved. The provisions of the new investment code will help promote private investment and ensure legal certainty. The reform program is supported by donors, with the support of Arab countries. The main objective is to improve the business environment in Comoros, by improving business regulation and reducing time and costs required to do business, by implementing a Centre for effective dispute resolution (ADR) and the development of a leasing market by the end of the fiscal year 2013. The Integrated Framework programme funded by several organizations, including the UN Development Programme (UNDP) and the WTO, aims at assisting businesses and establishing a one-stopshop within ANPI. The Union of the Comoros belongs to the Organization of Islamic Conference and Arab League. It is part of the COMESA and the Indian Ocean Commission (IOC), which it chaired in 2008- 2009.

Qatar, a new partner of Comoros, organized a conference in March 2010 for their development during which more than €450M have been pledged by donors in the Gulf area. Relations with China are excellent since independence: construction of the People’s Palace, support in the health sector, vocational training, balancing the budgetary gap in the context of negotiations with the IMF, and 22 million euros granted on December 14th, 2009 by the Exim Bank of China. The Indian Ocean Commission (IOC) The Indian Ocean Commission (IOC) is an intergovernmental organization created in 1984 by the General Agreement of Victoria (Seychelles). The IOC includes five Member States: Comoros, France (Reunion), Mauritius and Seychelles. The IOC strategy adopted in 2005 is based on four pillars: the promotion of political and diplomatic cooperation; economic and trade cooperation; sustainable regional development and strengthening of regional identity; and the bringing together of people. A study on regional integration in the IOC area, initiated in 2011 by the Bank, should identify promising projects.

(Source : COI 2011)

The legal and regulatory framework

Comoros is a founding member of the Organization for the Harmonization of Business Law in Africa. Thus, the common rules to State Parties of the OHADA Uniform Acts adopted by the Council of Ministers mainly govern the legal affairs in the Union of the Comoros.

1. General Commercial Law
This act was adopted by the Council of Ministers of 17 April 1997, and entered into force on 1 January 1998. In accordance with the provisions of the Treaty on the Harmonization of Business Law in Africa, the provisions of this Act are directly applicable and binding in all sixteen State Parties. The scope of the Act is very wide because it applies to any merchant, natural or legal person, any undertaking (micro and very small enterprises carrying on small and limited trade) and any economic interest grouping whose head office is located in the Comorian territory.

2. Law on commercial companies and Economic Interest Groups (EIG)

This Uniform Act was adopted by the Council of Ministers of OHADA on April 17, 1997. It entered into force on 1 January 1998. Every commercial company, including those in which the State or a corporate body governed by public law is a partner, whose registered office is located in the territory of one of the States Parties shall be subject to the provisions of this Uniform Act. Any person, whatever his nationality, wishing to engage in a commercial activity in the form of a company in the Union of the Comoros shall choose one of the types of companies provided for in the Uniform Act. This Uniform Act has the advantage of providing economic agents with a wide range of structures for the constitution of their enterprise. Under OHADA Law, companies can be incorporated as commercial companies referred to as “sole proprietor”, partnerships, limited partnerships, limited reliability companies and public limited companies. Any natural person or corporate body may be partner in a commercial company where he is not subject to any prohibition, incapacity or incompatibility as defined notably in the Uniform Act relating to the General Commercial Law. The minimum share capital is 750 000 KMF, or about 1 524 euros for the SARL and 7 500 000 KMF for the S.A, which is nearly 15 240 euros. Both types of companies admit their constitution by a single shareholder under OHADA Law.

3. The Investment Code

The Investment Code aims at strengthening the private sector, promoting export-oriented growth and added value, and diversifying exports, particularly in the processing industry. The Investment Code provides for:

• Tax exemption on profits and on single tax for the first fiscal years;
• Exemption of transfer tax on the purchase of land or buildings;
• Exemption of turnover tax and consumption tax for building materials and equipment;
• Exemption of consumption tax for imported raw materials;

Security for investment is supported by the legislation in force.

4. The General Tax Code

The new Code opens the Union of the Comoros to a new tax policy system known as a single tax regime. In other words, each income category has its own tax system, unlike the schedular system where each income category, depending on its origin, is taxed differently. The new system facilitates the setting up and activities for entrepreneurs and foreign investors. The new Tax Code has two tax systems: the corporate income tax (CIT) and the personal income tax (PIT).

The CIT applies to companies established in Comoros or which achieve income from Comorian sources, taxing 35% on profits made. However if their turnover exceeds 500 million KMF, the CIT rate increases to 50% for public industrial and commercial institutions and industrial or commercial enterprises incorporated as joint stock companies and in which the Union of the Comoros, the islands, local authorities or public institutions directly or indirectly hold the entire share capital. Personal income tax (PIT) applies to the total net income achieved. The PIT rate is progressive and varies between 0% and 30%. For PIT, income shall be declared on the basis of a tax return (which differs according to the tax system: CIT or PIT) provided by the tax board. The tax is based on the net global income that corresponds to the net sectional income.

Furthermore, a tax was introduced on earnings lying outside the global rate of 10% on income served to natural or legal persons domiciled outside Comoros, by companies or institutions located in Comoros, the State or decentralized territorial authorities under earnings paid for a service except for compensation generated by loans borrowed overseas, including partners’ current accounts. This provision is common to CIT and PIT.

5. The public procurement code

The Union Assembly adopted the law on the public procurement code and delegation of public services on 29 December 2011, at its plenary session marking the end of its second ordinary session. This new law provides for three bodies in charge of procurement and delegation of public services: the contract management cell, the national directorate for supervising markets (Direction Nationale de contrôle des marchés) and the market regulatory authority (Autorité de régulation des marchés). The adoption of this public procurement code certainly improves the legal framework for business and contributes to fight against corruption.

6. The law on tourism

A new law on tourism has been adopted by the Assembly of the Union of the Comoros last December. This new law is adapted to the business environment and aims at achieving the ambitions of the Union regarding tourism. Beyond the classification of the various players in the tourism industry and beyond the clear and precise definition of their rights and obligations, the new law finalizes the application procedures for approval and authorization to exercise tourist activities. It also created the National Tourism Board, an independent public institution whose task will be to promote tourism, manage tourism infrastructure and achieve the national tourist policy with the Ministry of Tourism.

Presentation
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