Benin: Global Tax Guide
Table of Contents
Legislation
Residence/Territorial Scope
Article 5 of the General Tax Code provides that corporate income tax is payable on profits of entities operating in Benin as well as on profits whose taxation is attributed to Benin by double tax treaty.
The following are deemed to be operating in Benin:
• companies and other entities resident in the Republic of Benin, i.e. those whose registered office or place of effective management is located in the Republic of Benin;
• companies and other non-resident entities with a permanent establishment in the Republic of Benin.
In the case of a non-resident company with a permanent establishment in Benin, the profits of the non-resident company are only taxable to the extent that they are attributable to:
• the permanent establishment; or
• sales, in Benin, of goods of the same or similar nature as those sold by that permanent establishment; or
• other industrial or commercial activities carried on in Benin and of the same or similar nature to those carried on by that permanent establishment.
Article 7 of the General Tax Code provides that if a legal person whose registered office is located outside the Benin has disposal of one or more immovable properties located in Benin or grants the use of them free of charge or in return for a rent lower than the actual rental value, it shall be subject to corporation tax on the actual rental value of the or properties.
Permanent Establishment
Article 6 of the General Tax Code (Amended by the 2024 Finance Act) 1) provides that a “permanent establishment” is defined as a fixed place of business through which the company carries out all or part of its activity.
In particular, permanent establishments include:
• a place of management or operation;
• a branch office;
• a warehouse;
• an office, including when it is made available to a person to store the goods of others;
• a factory;
• a workshop;
• a mine, oil or gas well, quarry, or other natural resource extraction site;
• a facility or structure used for the exploration or exploitation of natural resources.
The following are also deemed to be a permanent establishment:
• a construction site, an assembly or installation project or the monitoring activities carried out thereon, when this site, project or activities have a duration of more than 3 months;
• the provision of services, including consultancy services, by an enterprise acting through employees or other personnel engaged by the enterprise for that purpose, but only if the activities continue for the same or a related project in Benin’s territory for a period or periods totalling more than 183 days, within any 12 month period.
There is no permanent establishment if:
• facilities are used solely for the purpose of storing or displaying goods belonging to the company;
• goods belonging to the company are stored for the sole purpose of storage or display;
• goods belonging to the company are stored for the sole purpose of processing by another company;
• a fixed place of business is used for the sole purpose of purchasing goods or gathering information for the company;
• a fixed place of business is used for the sole purpose of carrying out any other activity for the company.
When a person acts in Benin on behalf of an enterprise, that enterprise is deemed to have a permanent establishment in Benin for all the activities carried out by that person for the enterprise, if this person ordinarily enters into contracts or usually plays the primary role leading to the conclusion of contracts that are routinely entered into without material change by the company, and that these contracts are:
• on behalf of the company, or
• for the transfer of ownership of, or the grant of, the right to use property owned by or right to be used by such business, or
• for the provision of services by that company.
This does not apply when a person who acts in Benin on behalf of a non-resident enterprise carries out a business activity in Benin as an independent agent and acts for the enterprise in the ordinary course of that activity. However, where a person acts exclusively or almost exclusively on behalf of one or more undertakings to which he or she is closely linked, that person shall not be considered to be an independent agent within the meaning of this paragraph in respect of each of those undertakings.
The fact that a resident company controls or is controlled by a non-resident company is not sufficient, in itself, to make any of those companies a permanent establishment of the other.
Entities Within Scope
Article 3 of the General Tax Code provides that the following are liable to corporation tax:
• public limited companies, simplified joint stock companies, limited liability companies and limited partnerships;
• cooperative societies, groupings and their unions and federations, as well as confederations of cooperative societies and groupings, whatever their activities;
• any company whose partner is a natural or legal person.
• public enterprises, State bodies or decentralised authorities which enjoy financial autonomy and which engage in an activity of an industrial or commercial nature;
• legal persons engaged in intermediary operations for the purchase or sale of real estate or business assets or which, usually, buy the same assets in their name with a view to reselling them, and credit foncier companies;
• legal persons who subdivide and sell land belonging to them;
• legal persons who rent out a commercial or industrial establishment equipped with the furniture and equipment necessary for its operation, whether or not the rental includes all or part of the intangible elements of the business or industry;
• the successful bidders, concessionaires and farmers of communal rights;
• insurance and reinsurance companies, whatever their form;
• banks and financial institutions;
• all other legal persons engaged in profit-making operations or operations;
• corporations engaged in petroleum, mining and forestry.
The following can opt to be subject to corporate income tax:
• general partnerships and economic interest groupings (EIGs);
• joint ventures;
• civil societies.
Corporate Income Tax Rates
Article 46 of the General Tax Code provides that the standard rate of corporate income tax is 30%.
However, a reduced rate of 25% applies to:
• legal persons with an industrial activity, with the exception of extractive industries;
• private schools of school, university, technical and vocational education.
For companies benefiting from a mining or oil agreement, the tax rate is determined by this agreement. However, this rate may not be lower than the ordinary rate provided for above.
Minimum Tax
Article 47 of the General Tax Code provides for a minimum tax equal to:
• 10% of the income that can be received for real estate investment companies;
• 3% of the income that can be collected for companies in the construction and public works sector;
• 1% of the cashable products in all other cases.
In all cases, the tax may not be less than 250,000 CFA francs.
Taxable Income and Allowances
Article 9 of the General Tax Code provides that taxable profit is the net profit, determined on the basis of the overall result of operations of all kinds carried out by taxpayers, including in particular the disposal of any part of the asset, whether in progress or at the end of its operation.
Net profit is the difference between the values of the net assets at the end and at the beginning of the period the results of which are to be used as the basis for the tax, less any additional contributions and increased by the deductions made during the same period by the operator or by the partners.
Net assets are defined as the excess of asset values over the total liabilities of third-party receivables, depreciation and justified provisions.
Article 10 of the General Tax Code provides that taxable income includes, in particular:
• sales of goods and services;
• financial products;
• non-ordinary income, in particular proceeds from the disposal of fixed assets;
• ancillary income or products;
• income from securities;
• packaging deposit products;
• income from the rental of built and unbuilt buildings, including ancillary income;
• aid of a commercial nature;
• work in progress;
• foreign exchange gains;
• revaluation capital gains or
• all other income relating to the activities carried out by the companies.
Under Article 12 of the General Tax Code, income corresponding to receivables from customers or to payments received in advance in payment of the price are linked to the financial year in which the goods are delivered for sales or similar transactions and following the progress of the services for the supply of services.
Inventories are valued in accordance with the provisions of Article 44 of the Uniform Act of the Organization for the Harmonization of Business Law in Africa relating to accounting law and financial reporting.
Raw materials and goods that have been prepaid for but not received are included in inventory.
Work in progress is valued unit by unit, or category by category, at cost price, excluding purely commercial and administrative costs.
Differences in the translation of foreign currencies and foreign currency-denominated receivables and liabilities in relation to the amounts initially recognised are determined at the end of each financial year on the basis of the last exchange rate and taken into account in determining the taxable result for the financial year.
Article 14 of the General Tax Code provides that the following are exempt from corporate income tax:
• bonuses arising from transactions made with the members and distributed to them in proportion to the order of each of them, in the case of consumer cooperative societies;
• the share of the net profits which is distributed to the workers, under the conditions laid down by the texts governing the workers’ cooperative production societies.
Income from securities and movable capital included subject to withholding tax are exempt from corporate income tax.
However, share of the costs and charges set at a flat rate of 30 per cent of this amount is charged to the amount of this income other than the proceeds of securities issued by the Republic of Benin, the Beninese public authorities and their subsidiaries.
Article 17 of the General Tax Code provides that capital gains arising from the disposal, during the course of operations, of fixed assets are not be included in the taxable profit for the financial year in which they were realised, if in the declaration of the results of that financial year, the taxpayer undertakes to reinvest in fixed assets in his companies in Benin before the expiry of a period of 3 years from the end of the financial year, a sum equal to the amount of these capital gains added to the cost price of the items sold.
Article 18 of the General Tax Code also provides that capital gains, other than those realized on goods, resulting from the allocation of shares or shares following mergers, demergers or partial contributions of assets, are exempt from corporate income tax provided that the transactions benefit legal persons liable to corporation tax and having their registered office in Benin.
Certain entities are specifically exempt from corporate income tax under Article 4 of the General Tax Code. This includes:
• consumer cooperative societies which merely group together the orders of their members and distribute in their depots the foodstuffs, products or merchandise which have been the subject of these orders;
• economic housing offices;
• mutual or cooperative savings and credit institutions governed by Law No. 2012-14 of 21 March 2012;
• provident societies, agricultural cooperative societies, agricultural general interest associations, agricultural mutual insurance and reinsurance companies;
• mutual benefit societies;
• chambers of commerce, industry, crafts, agriculture and trades, when they are not engaged in activities of a commercial nature;
• legally constituted non-profit associations and organizations;
• open-ended investment companies for the part of the profits derived from the net income from their portfolio or from the capital gains they make on the sale of the securities or shares forming part of this portfolio;
• venture capital or equity financial institutions and venture capital or equity investment companies for the part of the profits derived from the net income of their portfolio. This exemption is for 15 years from the date of creation of the company and is subject to various conditions.
Deductions
Article 20 of the General Tax Code provides that the taxable profit is determined after deduction of all expenses meeting the following conditions:
• be included in the expenses of the financial year in which they were incurred;
• be incurred in the direct interest of the business or be connected with the normal management of the business;
• correspond to an actual cost;
• be supported invoices, subject to the express derogations granted for certain activities by the Director General of Taxes;
• contribute to the formation of a non-exempt product;
• result in a decrease in the company’s net assets.
Expenses of any kind in amounts greater than or equal to 100,00) CFA francs may not be paid in cash.
Salary/Personnel Costs
Under Article 22 of the General Tax Code, remuneration paid to an employee is deductible only to the extent that it corresponds to actual work and is not excessive in view of the importance of the service rendered. This provision applies to all direct or indirect remuneration, including allowances, allowances, benefits in kind and reimbursement of expenses.
Expenses not yet paid at the end of a financial year may be deducted only on condition that the company has made firm commitments to the employees as to the principle and method of calculating the sums due. These expenses are recorded as fees payable when their amounts are known exactly or, if not, as a provision corresponding to their probable amounts.
The following are also deductible, if they meet the general conditions for the deductibility of expenses:
• staff training costs;
• sickness benefits;
• the health insurance premium paid by the company to an insurance company in the context of the performance of a contract taken out for all staff or for a given employee.
Finance Costs
The total amount of net deductible interest due annually on all debts incurred by a company is limited to 30% of the profit before tax, interest, depreciation and provisions.
The portion of interest that is not immediately deductible may be carried forward and deducted in respect of the following financial years up to a maximum of 5 years.
This does not apply to interest paid or payable by financial institutions or by approved insurance companies which are recorded as operating expenses.
Commissions/Fees/Royalties
Under Article of the General Tax Code, commissions or brokerage payments on goods purchased on behalf of enterprises operated in Benin are allowed as a deduction from taxable profits up to a limit of 5 per cent of the amount of tax-free purchases made by central purchasing bodies or intermediaries.
Royalties are deductible provided that the debtor provides proof that the rights to which these royalties are attached are still valid.
However, if the company receiving the royalties is not operating Benin, the total amount deductible is limited to 5% of the turnover excluding tax.
Under Article 28 of the General Tax Code, sums paid as remuneration for headquarters and technical assistance expenses are deductible, if the debtor provides proof that they correspond to actual transactions, that they are not of an abnormal nature and that they are not exaggerated.
The share of the general expenses of the head office to be borne by subsidiaries and/or permanent establishments located in Benin may not exceed 10% of the taxable profit before deduction of the expenses in question.
Headquarters expenses correspond to secretarial costs, remuneration of staff employed at headquarters and other expenses incurred by the parent company for the needs of all subsidiaries and/or permanent establishments.
Technical, accounting and financial assistance costs, study costs and other similar expenses are deductible up to 10% of the general expenses if they are paid to a company not operating in Benin.
Article 29 of the General Tax Code provides that the following are not deductible:
• sums, other than reimbursements of expenses actually incurred, paid by a permanent establishment to its head office or to any of its other establishments in consideration for a rental of movable or immovable property, the use of intellectual property rights, or as commission, for specific services provided or for a management activity;
• interest paid by a permanent establishment other than a bank to its head office in return for sums that the head office has drawn from its own funds and made available in any form to that permanent establishment.
Interest, royalties for the assignment or granting of operating licences, patents for inventions, trademarks, manufacturing processes or formulas and other similar rights, or remuneration for services, paid or due by a natural or legal person domiciled in the Benin to persons who are domiciled in a foreign territory subject to a preferential tax regime in Benin are deductible only if the debtor provides proof that the expenses correspond to actual transactions and that they are not of an abnormal or exaggerated nature.
Persons are treated as subject to a preferential tax regime, if they are not taxable there or if they are subject to taxes on profits the amount of which is more than half less than the amount of the tax on profits for which they would have been liable in Benin.
Insurance Premiums
Article 31 provides that the following are deductible:
• insurance premiums contracted for the benefit of the company to cover risks the realisation of which directly and by itself leads to a reduction in net assets;
• insurance premiums constituting an operating expense;
• health insurance premiums paid to insurance companies for the benefit of all staff when reimbursements of expenses of this nature for the benefit of the same persons are not included in the deductible expenses.
The sums set up by the company for the purpose of its own insurance are not deductible.
Gifts and Donations
Under Article 32 of the General Tax Code, gifts and donations, are deductible up to a limit of 1 of turnover excluding tax.
Donations in the fields of education, health, the cultural and tourism industry and the arts or collective infrastructure granted to the State, its branches and sports federations recognized by the government, are deductible up to an additional limit of 25,000,000.
Gifts and objects specially designed for advertising, supported by invoices, are allowed as a deduction up to a limit of 3 of the amount of turnover before tax.
Amortisation and Depreciation
Under Article 37 of the General Tax Code, the deduction of development costs is spread over 4 years if their amount exceeds 1,000,000 CFA francs.
Depreciation rates are set by order of the Minister in charge of finance.
The entry value of the assets is the acquisition cost determined in accordance with accounting rules. However, expenses that are not yet actual, estimated, are excluded from the depreciable base.
Patents, licences and other intangible rights with a value of less than 1,000,000 CFA francs and small tools with a unit value of less than 250,000 CFA francs may be fully depreciated as soon as they are acquired, if they are included as overheads and not as a fixed asset.
The depreciation of passenger cars is deductible only for the fraction of their purchase price, all taxes included, which does not exceed 25,000,000 CFA francs.
This limit applies to all vehicles registered in the category of passenger cars when the operation of these vehicles does not constitute the main purpose of trade or industry.
In the case of leasing, the lessee is only allowed to deduct the depreciation relating to the fixed asset that is the subject of the contract, as well as the related financial charges.
Article 39 of the General Tax Code provides that new equipment and tools that meet the two conditions may be subject to accelerated depreciation:
• to be used exclusively for industrial operations such as manufacturing, handling, hospitality, telephony, transport or farming;
• have a lifespan of more than 5 years.
For these equipment and tools, the amount of the first annual depreciation allowance, calculated on the basis of their normal period of use, is doubled, the period is then reduced by one year.
Companies may depreciate their equipment and tools which meet the following conditions in accordance with the reducing balance basis system:
• be acquired in new condition for a unit value at least equal to 10,000,000 CFA francs excluding value added tax;
• be usable for a period of more than 3 years.
The declining balance rate is obtained by assigning to the straight-line depreciation rate a coefficient of:
• 1.5 when the normal period of use of the property is 3 or 4 years;
• 2.0 when this normal duration is 5 or 6 years;
• 2.5 when this normal duration is more than 6 years.
Provisions
The following are deductible under Article 41 of the General Tax Code:
• provisions made in order to meet deductible losses or expenses, clearly specified, which current events make probable and which have their origin in the financial year in question, provided that they are actually recorded in the financial statements for the financial year and that they appear in the statement of provisions;
• technical provisions constituted by fire, accident and miscellaneous risk insurance companies, in particular provisions for cancellation of premiums and provisions for late claims, provided that:
o that they have been determined in accordance with the cadence method recommended by the Inter-African Conference of Insurance Markets;
o that the statistical bases used be represented at any request of the inspector in charge of the assessment or control;
• provisions for impairment of debts constituted by banks and financial institutions in accordance with the standards laid down by the Central Bank of West African States.
Tax Losses
Article 43 provides that unutilised losses can be carried forward for offset until the fifth financial year following the loss-making year.
Withholding Tax
Article 86 of the General Tax Code provides that for income from securities other than bonds, the tax is calculated as follows (subject to the terms of any applicable double tax treaty):
5% for:
• dividends distributed to non-resident members in Benin;
• dividends distributed by companies listed on a stock exchange approved by the Regional Council for Public Savings and Financial Markets within the West African Economic and Monetary Union;
• capital gains generated on the sale of shares by individuals or non-resident legal persons;
10% for:
• dividends other than those above;
• the profits of permanent establishments;
15% for all other types of taxable income.
For income from bonds, Article 87 of the General Tax Code provides that the rates are:
• 6% for income from bonds and for redemption lots and premiums paid to creditors and bondholders. However, the government is authorized to set by regulatory act an applicable rate of less than 6% when the bonds have a maturity greater than or equal to 5 years and are issued to finance investments in priority sectors;
• 3% for income from bonds issued by the Member States of the West African Economic and Monetary Union, by public authorities or by their branches, when the maturity of the bonds is between 5 years and 10 years. This rate is set at 0% when the duration of the bonds is more than 10 years;
• 5% for capital gains generated on the sale of bonds.
Transfer Pricing
Article 11 of the General Tax Code provides that for entities that sell goods or raw materials listed on a stock exchange to affiliated companies the amount of taxable income may not be less than that determined on the basis of market prices on the day of the contract for the sale of the goods or raw materials, or on the day of delivery, whichever is higher.
Article 45 of the General Tax Code provides for a general transfer pricing provision and states for the purposes of establishing corporate income tax for entities which are dependent on or controlled by entities located outside Benin, profits indirectly transferred to the latter, either by increasing or decreasing the purchase or sale prices, or by any other means, are incorporated into taxable profits.
Indirect pass-through profits are determined by comparison with those that would have been realized at arm’s length or in the absence of control.
An arm’s length relationship or control are deemed to exist between two companies:
• when one holds, directly or through an intermediary, the majority of the share capital or voting rights of the other or in fact exercises decision-making power therein, or;
• where they are both placed, under the conditions set out above, under the control of the same undertaking or person.
The condition of dependence or control is not be required when the transfer is made with enterprises established in a foreign State subject to a privileged tax regime.
CFC Rules
None