We recently assisted employers operating in Ivory Coast to carefully assess the tax treatment of employee expense reimbursements. The client needed to ensure compliance with wage taxation rules and requested clarification on the relevant legislation.
Under Articles 115 and following of the General Tax Code, income paid by companies to employees, whether in cash or in kind, explicit or implied, is subject to taxation under the wage tax system unless expressly exempted by law.
This principle extends to amounts made available to employees to cover expenses arising from their professional activities. In principle, reimbursements intended solely to cover business-related expenses should not be included in the wage tax base.
However, practical complexities arise where expenses serve both professional and private purposes.
Where an employee incurs an expense strictly on behalf of the employer, and both employer and employee can demonstrate that no portion of the reimbursement is used for private purposes, the amount falls outside the scope of wage taxation.
In these circumstances:
Guidance issued under Note No. 01231/MBPE/DGI-DLCD of 12 April 2022 addresses situations where resources or amounts provided by an employer are used for both professional and private purposes.
Typical mixed expenses include:
Where part of the expense is used privately, the private portion must be included in the wage tax base.
If a clear and precise allocation between professional and private use can be established, only the private portion is taxable.
However, where no reliable separation can be made, one-third of the total amount is deemed taxable under the wage tax system.
This clarification reinforces the importance of documentation and expense tracking. Employers should implement robust policies to distinguish between pure reimbursements and mixed-use benefits.
Failure to substantiate exclusive professional use may result in automatic inclusion of one-third of the reimbursement as taxable income.
If this article raised questions or highlighted areas you’d like to understand better, let’s talk.Our team can walk through the details, implications, and practical considerations for your business.
