The concepts of permanent establishment and transfer prices were included in the 2020 and 2021 finance laws, thus filling the void that has prevailed for a long time.
New conditions for the deductibility of costs subject to the transfer prices (article 21.f amended in 2021) introduced in the fiscal law of Benin in 2021
The 2021 finance law capped the deductibility of these costs at 5% of taxable profit before deduction of the costs in question; in the event of a deficit, this provision shall apply to the results of the last non-prescribed profit year.
Methods of establishing corporation tax and determining indirectly transferred profits (article 37 of the Benin Tax Code amended in 2020)
Since 2020, the profits indirectly transferred to companies which are under the dependence or which have the control of companies located outside Benin, either by the increase or the reduction of the purchase or sale prices, or by any other means, are incorporated in the results recognized by the accounts for the establishment of the corporation tax due by these companies.
These benefits are determined by comparison with those that would have been realized in the absence of arm’s length or control.
These provisions also apply for the determination of the taxable profit in Benin of a legal person exercising its activity both in Benin and abroad.
Determination of the taxable profit of a permanent establishment in Benin of a foreign legal person (article 37 of the Benin Tax Code amended in 2020)
For these branches, no deduction is allowed for the sums which would be, if applicable, paid or due, for other purposes than the reimbursement of costs incurred, by the permanent establishment at the head office of the legal person or at any of its offices, as royalties, fees or other similar payments, for the use of patents or other rights, or as commissions for specific services rendered or for management activity or, except a case of banking enterprise, as interest on amounts loaned to the permanent establishment.
Annual Transfer Pricing declaration (article 34.4 amended in 2020)
Since 2020, companies that are dependent on or have control of companies established outside Benin whose annual turnover excluding taxes or gross assets is greater than or equal to one billion francs are subject to an annual declaration of transfer prices before 1 May each year.
This declaration has three parts:
- Part 1: General information on the group of associated companies
- Information on the ultimate parent company of the group
- Main activities of the group › General description of the Transfer Pricing policy applied by the group in relation to the reporting company
- Intangible assets held by the group and used by the reporting company
- Impact of any restructuring carried out within the group on the reporting company
- Part 2: Specific information concerning the reporting company
- Transactions with affiliated companies and Transfer Pricing determination methods applied
- Nature of transactions with associated companies
- Company name, state or jurisdiction concerned by Transfer Pricing flows
- Nature of the relationship with the related company
- Transfer Pricing method applied
- Change in method made during the year
- Specific information on loans and borrowings with related persons
- Information on prior price agreements and tax rulings
- Part 3: Additional information
Read the WTS Global Transfer Pricing Newsletter here.
