Resident companies are taxable on territorial basis i.e. only income generated or sourced through Comoro Island is subject to corporate income tax in the country.

Capital gains from the sale of assets are taxed as ordinary income. However, gains from the sale of fixed assets (except the portfolio) are not included in the taxable profits of the financial year in which they are realized, if an equal amount is reinvested within a period of 3 years in fixed assets in the taxpayer’s own business. If the capital gain is so reinvested, it will reduce the base price of the asset acquired for depreciation purposes, or for book value purposes if the asset is not depreciable. In both cases, this may lead to a recognition of higher capital gain on disposal of the replacement asset.

Dividends received by a resident parent company from a resident subsidiary may be eligible for the participation exemption regime whereby 90% of their amount is excluded from the taxable base and the remaining 10% added to taxable income. The participation exemption regime is applicable provided the parent holds at least 25% in the capital of the subsidiary for at least 2 consecutive years. The minimum holding period does not apply if the interest in the subsidiary was acquired on issue. Also, the regime may apply where the minimum 2-year holding period is not yet satisfied on condition that the parent commits to maintain the participation until the end of the 2-year period.

Forex variations are recognized at the end of the tax year by reference to the last exchange rate and will result in taxable income or deductible loss. When the forex gain or loss recognized relates to a loan or debt expressed in a foreign currency, the tax treatment depends on the term of the debt or loan. Forex variations on debt or loans with a term not exceeding one year are recognized fully during the same year. In contrast, variations on debt or loans with a term exceeding one year are recognized in proportion to the repayment of the debt or loan.

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