Benin: Permanent Establishments – forthcoming developments after introduction of public-private partnership law

Benin’s tax legislation does not provide a precise definition of the notion of permanent establishment of foreign companies; however, there are some articles in the CGI (General Tax Code) to link the application of certain taxes to permanent establishments of foreign companies. This is the case, in particular, for the provisions of Article 147 of the CGI regarding the territoriality of corporation tax, which make it possible to tax the exploitation carried out by a foreign company within the framework of a permanent establishment.

The taxation applicable to permanent establishments of foreign companies in Benin has not changed significantly over the past three years.

As a major innovation, a taxpayer file was established in 2017 under the operational structures of the DGI (Tax Administration), which includes foreign companies with a permanent establishment in Benin who regularly fulfil their reporting obligations and payments.

If a file is withdrawn because no declaration is made, the tax will be levied on operations carried out by natural and legal persons not included in the DGI file, subject to Article 179-bis to 179-sexies of the CGI.

In addition, Benin actively participates in the BEPS project and hosted the second regional meeting of the Inclusive Framework on BEPS for French-speaking countries, organised by the OECD in partnership with the Centre de rencontres et d’études des dirigeants des administrations fiscales (CREDAF) and the Pôle Stratégies de développement et finances publiques (a joint initiative of UNDP and France), which took place from 3 to 5 July 2017 in Cotonou (Benin).

This commitment has not yet been put into practice by taking legislative and regulatory measures to regulate the activities carried out by permanent establishments of foreign companies in Benin.

The recent adoption of the public-private partnership law in Benin will, however, in the medium to long term, result in the establishment of several permanent establishments of foreign companies selected to carry out works under public and private contracts in several fields. Aware of the shortcomings of the tax law on the tax regime applicable to these institutions, the state is preparing to make several decrees on the tax regime, to be applied to foreign companies that operate in Benin through their permanent establishments.