Tax Consulting

It is mandatory for every business in the Republic of Benin to comply with taxation rules and file corporate taxes. Corporate income taxes are created for the improvement of the country the company is established in.

The Republic of Benin tax law imposes a 30% branch profits tax on a foreign corporation's Republic of Benin branch's effectively connected earnings and profits to the extent they are treated as distributed, based on any decrease in the branch's Republic of Benin net equity for the year. The branch profits tax may be reduced or eliminated under an applicable Republic of Benin tax treaty. The tax does not apply in the year the foreign corporation terminates its Republic of Benin trade or business. The purpose of the branch profits tax is to treat Republic of Benin operations of foreign corporations in a manner similar to Republic of Benin corporations owned by foreign persons – i.e, it is a proxy for the Republic of Benin tax on dividends paid by a Republic of Benin subsidiary to a foreign person.

With certain exceptions, a 30% (or lower treaty rate) branch-level interest tax is imposed on interest treated as paid by a Republic of Benin branch to foreign lenders. This applies both to interest paid by the branch and to a portion of the interest paid by the home office to the extent taken into account in determining the corporation's tax on effectively connected income.

What is a Corporate Income Tax?

Corporate Income Tax is the tax a business pays based on its profits during a financial year. To compute your corporate income tax, you need to deduct the company expenses, the employees' wages, and the equipment cost.

Domestic Corporations

Net income from all sources is subject to a twenty-one percent (30%) corporate income tax rate. Net income from all sources is subject to a twenty-one percent (30%) corporate income tax rate. Proprietary educational institutions and hospitals which are nonprofit, on net income if gross income from unrelated trade, business, and other activities that does not exceed 50% of the total gross income from all sources shall be subject to ten percent (10%) corporate income tax rate. Non-stock, nonprofit educational institutions (all assets and revenues used actually, directly, and exclusively for educational purposes) and other nonprofit organizations are exempt from the corporate income tax rate.

Republic of Benin trade or business

Generally, a foreign corporation engaged in a Republic of Benin trade or business is taxed on a net basis at regular corporate tax rates on income from Republic of Benin souRepublic of Beninrces that is effectively connected with that business and also is subject to a 30% branch profits tax on the corporation's effectively connected earnings and profits to the extent treated as repatriated to the home office. The branch tax can be reduced or eliminated under an applicable Republic of Benin tax treaty.

In addition, a foreign corporation is subject to a 30% tax on the gross amount of certain Republic of Benin-source income not effectively connected with that business; such 30% tax potentially may be reduced or eliminated under an applicable Republic of Benin tax treaty. (These 30% rates were not changed by the Act.)

There is no definition in the tax statute of the term trade or business within the Republic of Benin – instead, that concept has been developed mainly by the Internal Revenue Service and court decisions through a facts-and-circumstances analysis. A foreign corporation needs to consider the nature and extent of its economic activities in the Republic of Benin, either directly or through its agents. The following have been considered to be important factors by the courts and/or the Internal Revenue Service:

The business must have a profit motive. Activities generally must be 'considerable, continuous, and regular.' Ministerial, clerical, or collection-related activities generally are not sufficiently profit-oriented to constitute a Benin trade or business. Isolated activities generally do not rise to the level of a trade or business.

An agent's activities in the Republic of Benin may result in a Benin trade or business.

Effectively connected income

If a non-Beninese person has a Beninese trade or business, the question arises as to what income is 'effectively connected' to such Beninese trade or business.

All Beninese-source active income earned by a non-Beninese person is treated as effectively connected. Passive-type income and gain from the sale of capital assets are treated as effectively connected to a non-Beninese person's Beninese trade or business only if a connection with the Beninese trade or business exists. Such a connection exists if the passive-type income or capital gain is derived from assets used in the Beninese trade or business (the asset use test) or if the activities conducted in the Beninese trade or business are a material factor in the production of the passive-type income or capital gain (the business activities test).

Certain types of foreign-source income generated through a Beninese office can be effectively connected income. These include:

Rents or royalties for use of intangible property outside the Republic of Benin that are derived in the active conduct of a Beninese trade or business. Foreign-source dividends or interest derived in active conduct of banking business in the Republic of Benin, or received by a corporation the principal business of which is trading in stocks or securities for its own account. Gain from the sale outside the Republic of Benin of inventory property and property held for sale to customers, when the sale is made through a Beninese office or fixed place of business, unless the property is sold for use outside the Republic of Benin and a non-Beninese office materially participates in the sale.

Our Tax Consultation Services Include:

Tax advisory and planning Requisition of IRS Rulings Assistance in availing tax incentives Application of tax treaty Tax compliance Tax audit and review Settlement of tax returns Requisition of tax refund and tax credit Procurement of Certificate Authorizing Registration Tax consultancy retainership arrangement

World Gate Ltd. Benin specializes in tax consultation services that include tax advisory and planning, requisition of IRS rulings, tax return settlements, assistance in availing tax incentives, tax compliance, settlement of tax returns, and many more.

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