Studies have proven that taxes are high or better still have increased and might still increase in the developing countries especially the African countries and employees are always seeking ways to minimize their tax bite. In addition, a rise in salary may only provide very little additional spendable income. A more advantageous devise may be the deferral of income to a person's later years through the use of a qualified pension plan, profit sharing or deferred compensation plan. Such a devise might also enable an executive to maintain her current standard of living even after she retires. Finally a qualified pension or profit - sharing plan will enable an executive or employee to build up a large estate.

The terms pension and profit sharing plan are most often used interchangeably. However it is important for you the reader to understand the basic difference. In a pension plan , retirement benefits can definitely be determined. This means that should the employee mandatory retire at any given age say X years, he or she would receive a definite amount per month for the rest of his/her life.

On the otherhand in a profit sharing plan, the contribution to an employee's profit-sharing plan is based upon a predetermined percentage of the company's profits. If the company makes profits then the employees would benefit proportionately and if the company does not do well then the employees will receive very little in the way of benefits. Stock bonus plans also offer the same type of benefits as pension and profit sharing plans. The requirements relating to profit sharing plans also relate to stock bonus plans except that employees ultimately receive distributions in the company's own stock. There is also a hybrid type or plan whereby an employer is required to contribute a given percentage of an employee's contribution. One feature of this hybrid plan is that an employee's retirement benefit cannot be determined at any point in time prior to an employee's retirement. This is what is common with Cameroonian pensioners.

The advantage of these retirement plans are many fold. Its benefits to the corporation is that the contribution to the pension or profit- sharing plan is immediately deductible within certain limitations. The fact that the corporation is on the accrual basis of accounting is of no consequence since the deduction is allowed if actually paid during the year or no later than the due date of corporate tax return, including extensions.

Note that the actual payment must be made by the corpaortion during the specified period. Cases have held that the making of an accrual entry, even when the corporation is on the accrual basis, is not sufficient. While the corporation obtains the benefit of an immediate deduction, there are no immediate tax consequences to the employee beneficiary. The assets accumulated in the pension plan are usually invested in income producing assets. Of great importance is the fact that the income produced by the investments will not be taxed to the plan. This is true whether the income -producing trust assets were highly beneficial to an employee who makes contributions to a qualified pension or profit sharing plan.

Ashu Felix Tambong