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The Comoros Islands

Lowtax Editorial
21 April, 2015

It has had a troubled start to life as an independent nation, with political instability holding back its development. But the Government of the Comoros Islands (also referred to here as Comoros) is putting in place a legal framework designed to attract foreign investment, especially in tourism, an industry with much potential in this largely unspoiled group tropical islands.

Introduction: Where Are The Comoros Islands?

The Comoros are situated at the northern mouth of the Mozambique Channel, about two-thirds of the way between northern Madagascar and northern Mozambique. The four main inhabited islands include Grand Comore, Anjouan, Moheli and Mayotte, although only the first three form the Republic of Comoros; Mayotte is a French department.

With a total surface area of 2,235 sq km, the terrain of the islands varies from low hills to rugged volcanic mountains, the tallest of which is Mount Karthala at 2,360m, an active volcano which last erupted in 2007. The climate is tropical marine and there is a rainy season from November to May each year.

Population and Language

The population of approximately 767,000 (July 2014 est.) is a diverse ethnic mixture of African, Arabian and South Asian origin. However, the overwhelming majority of the population (about 98 percent) are sunni muslim, and Arabic is one of the three official languages alongside French and Shikomoro, a blend of Swahili and Arabic; French is the language of business. Moroni is the largest city, federal capital and seat of the government of Comoros, with a population of about 56,000 in 2014.

A Brief History Of The Comoros Islands

The islands have been inhabited since the first half of the first millennium AD. Islam arrived in the Middle Ages with traders from the Arabian Peninsula and North Africa. The Comoros was a key staging post on maritime trading routes between Africa, the Middle East, India and South East Asia. A prosperous area with Swahili culture was formed by alliances between the Comoros Islands, Zanzibar, Pemba, Lamu, and the towns along the Kenyan and Tanzanian coast which exported slaves, ivory and other goods from Africa to Arabia and India.

France established a colony in Mayotte in 1841 and protectorates over the other islands in 1886, which were constituted as a single administrative unit under the authority of the Governor General of Madagascar in 1908. In 1912 the colony of Mayotte and its dependencies became a province of the colony of Madagascar, then under French rule. Following World War Two, the islands were detached as an administrative area of Madagascar and became an Overseas Territory of France.

At a referendum organized by the French administration in 1974, the Comorians voted overwhelmingly in favour of independence, which was declared in the following year. France maintained sovereignty over Mayotte, however. The political history of Comoros has been rather turbulent in the meantime, with power changing hands a number of times as a result of coups. In 1997, demands for increased autonomy on the islands of Anjouan and Moheli led to the breakup of the Federal Islamic Republic. In 2001, the government reformed as the Union of the Comoros under a new constitution which gave each of the three islands more autonomy than had been enjoyed previously. The island country continues its present form of confederal government albeit with minor changes approved in a 2009 referendum. In May 2011, Ikililou Dhoinine won the presidency in peaceful elections widely deemed to be free and fair.

The Economy

Although the rugged landscape makes farming difficult, agriculture remains the largest component of the economy, with just under half of available land given over to food production. Agriculture, including fishing and forestry contributes 50 percent to GDP, employs 80 percent of the labour force, and provides most of the exports. Export income is heavily reliant on the three main crops of vanilla, cloves, and ylang-ylang, used in the manufacture of perfume. Remittances from 200,000 Comorans contribute about 25 percent to the country’s GDP. The economy has grown at rates of between 3 and 4 percent in the last three years. The currency is the Comoran franc (KMF) which is pegged to the euro at a rate of EUR1 = KMF492.

Recent political instability has restricted economic development of the Comoros Islands, and investment in infrastructure is sorely needed. However, there have been some encouraging signs for the economy in last few years: in December 2012, the IMF and the World Bank's International Development Association supported USD176m in debt relief for Comoros, resulting in a 59 percent reduction of its future external debt service over a period of 40 years; and in late 2013, a US-based investment company invested USD200m in a project to explore for hydrocarbons in Comoran territorial waters, the largest financial investment in the country’s history. Tourism has yet to really take off in the Comoros Islands, but with its tropical climate, natural beauty and 400km of coastline, it is a sector with much potential, and one the Government is keen to develop. Indeed, a law on tourism was recently passed by the legislative assembly intended to promote investment in this industry.

Comoros is a member of the Common Market for Eastern and Southern Africa, which counts the following other countries within its membership: Burundi, D.R. Congo, Dijbouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Seychelles, Madagascar, Malawi, Mauritius, Rwanda, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.

Comoros also belongs to the Organization of Islamic Conference, the Arab League, the Indian Ocean Commission.

The Legal Framework and Commercial Law

Comoros has a mixed legal system of Islamic law, the French civil code of 1975 and customary law. Importantly however, Comoros is a member state of the common legal area known as the Organization for the Harmonization of Business Law in Africa (usually referred to by its French acronym, OHADA). Formed by treaty in 1993, OHADA’s goal was to harmonise certain aspects of the legal frameworks of the countries situated in West and Central Africa which use the CFA Franc as their currency. Including the Comoros, there are currently 17 members of OHADA, including: Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Republic of the Congo, Côte d'Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal, Togo, and the Democratic Republic of Congo.

OHADA member states are obliged to enact, subject to transitional measures, Uniform Acts that have direct effect and supersede national laws. There are nine Uniform Acts including General Commercial Law; Commercial Companies and Economic Interest Groups; organizing Security Interests; organizing Simplified Recovery Procedures and Measures of Execution; organizing Collective Proceedings for Clearing Debts; Arbitration; organizing and harmonizing Undertakings Accountings Systems; Contracts for the Carriage of Goods by Road; and Cooperative Companies.

To ensure compliance with, and encourage consistent interpretation of, the Uniform Laws, a supranational court has been established, known as the Common Court of Justice and Arbitration.

All traders, including legal and natural persons, situated in a contracting state to the OHADA treaty are subject to the Commercial Law. Natural persons or corporate bodies, and economic interest groups, set up or being formed on the date of entry into force of Uniform Acts must harmonize the conditions under which they carry on their activity within a period of two years from the date of publication of this Uniform Act in the Official Gazette.

Under the Commercial Law, traders are defined as persons whose regular occupation is to carry out commercial transactions. Commercial transactions include the following:

  • the purchase of movable or immovable property for resale;
  • banking, stock-exchange, currency exchange, brokerage and transit transactions;
  • contracts between traders for business purposes;
  • the industrial exploitation of mines, quarries and any natural resource deposit;
  • rental of personal property;
  • manufacturing, transportation and telecommunication operations;
  • intermediary transactions such as commission, brokerage and agency, as well as intermediary operations relating to the purchase, underwriting, sale or rental of immovable property, businesses, shares in commercial companies or building societies; and
  • transactions carried out by commercial companies.

The Uniform Act relating to Commercial Companies and Economic Interest Groups was substantially updated and improved by an amendment which came into force on May 5, 2014. These changes are intended to enhance legal certainty while making company law more flexible in a bid to promote investment and economic development in OHADA member states.

Under OHADA law, companies can be incorporated as sole proprietors, partnerships, limited partnerships, limited liability 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 in the Uniform Act relating to the General Commercial Law. The minimum share capital for a société à responsabilité limitée (SARL, or a limited liability company), is KMF750,000, and for a société anonyme (SA) is KMF7.5m.


Taxation in Comoros is based on the French tax system. However, taxes are complex and tax rates are quite high.

Under the General Tax Code, corporate tax applies to Comoros-source income at a rate of 35 percent. However, corporate tax rises to 50 percent if a company’s turnover exceeds KMF500m.

Individual income is taxed at progressive rates up to 30 percent, which applies on income of more than KMF3.5m. No tax is paid on income up to KMF150,000. All individuals with a permanent occupation in Comoros are subject to personal taxation. Self-employed individuals are subject to corporate tax. There is also a capital income tax of 15 percent.

There are a number of taxes on property. Taxes on recording property transactions are levied at 2 percent of the value for property rights and mortgages and 1 percent of the cumulative value for leases. Tax on real estate transfers is charged at 2-9 percent of the selling price depending on the type of property involved.

There is an annual tax on the rental value of a property of 20 percent for residential units and farms, and 30 percent on industrial and commercial units.

There is also a per-hectare tax of up to KMF10,000 on agricultural land, the rate of tax depending on the type of land use.

Real estate capital gains are taxed at a flat rate of 20 percent.

There is a consumption tax of 10 percent, except for basic necessities (0 percent), water supplies, private school fees and inter-island air fares (3 percent) and electricity and telephone supply, and banking services (5 percent).

Import tariffs apply on various items imported into Comoros at rates of up to 30 percent.

The Investment Law

In an attempt to improve the business environment of Comoros, boost foreign investment and create employment, the new Investment Code was passed in 2007. The new code 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 tasked with liaising with investors under the Code. Its role is to serve as an intermediary between the government and investors, carry out business registration procedures and issue special permits.

The Investment Code also provides tax incentives for approved investors, including the following:

  • exemption from customs duties and taxes on imported materials and equipment intended to be used in the investment project;
  • potential for substantial reductions in corporate tax, in an amount related to the amount spent by the investor.

These tax incentives are available for seven years on investments of at least KMF5m. However, they are extended to 10 years on investments exceeding KMF100m.


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