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10. INCENTIVES AND SPECIAL REGIMES

Various incentives are granted under several laws in Benin, including the Investment Code, Mining Code, Petroleum Code, Environment Code, and Free Zone Law etc.

Investment projects in priority sectors may benefit from a tax regime, the modalities of which are defined by the Council of Ministers. Further, certain companies engaged in business such as investment, mining or petroleum, as well as those holding approvals granted by the State, are exempt from taxes, and duties  within the limits of the terms of their approval or their specifications. Companies approved under a sectorial code (e.g. mining, hydrocarbons, etc…) and other taxes within the limits of the terms of their approval.

Tax Incentive for Start-Ups

Effective 1 January 2022, Benin has introduced certain tax benefits for start-ups innovating in the field of Information and Communication Technologies (ICT) with annual turnover of up to XOF 100 million which inter alia includes an exemption from corporate income tax and  employer paid social security contributions on wages for the first two years, with a 50% reduction for the third year.

Tax Incentive for Significant Capital Expenditure

The following incentives are provided to authorized companies that make significant capital investments:

  • Authorized companies which undertake capital investment of between XOF 50 million and XOF 1 billion are exempted from principal customs duties at import during the investment period, customs duties at export and also from the corporate income tax during the exploitation period;
  • Authorized companies which undertake capital investment of between XOF 50 billion and XOF 500 billion are exempted from principal customs duties on imports during the investment period, corporate income tax, customs duties, business tax, license tax and are also granted a reduction of 80% of the employer’s share of payroll taxes during the exploitation period; or
  • Authorized companies which undertake capital investment of more than XOF 500 billion are exempted from principal customs duties on imports during the investment period, corporate income tax, the employer’s share of payroll tax, business tax, and license tax during the exploitation period.

Tax Incentive for Companies Licensed to Operate in Industrial Free Zones

Depending upon the geographic area, the following incentives are provided to companies that are licensed to operate in Industrial Free Zones:

  • Exemption from corporate income tax for the first 10, 12, and 15 years for zones 1, 2 and 3, respectively; and
  • Reduction of the rate of corporate income tax to 20% for the five years starting from the 11th, 12th, and 13th year for zones 1, 2, and 3, respectively;
  • Exemption from VAT for the duration of the approval for specific goods and services; and
  • Exemption from land taxes and business tax for one year from the signing of the agreement.

Tax Incentive for Newly Incorporated Companies

Newly incorporated companies are eligible to a  reduction in the rates of corporate income tax due on their business profits, as follows:

  • Corporate income tax is reduced by 25% for the first and second financial year; and
  • Corporate income tax is reduced by 50% for the third financial year.

However, the aforesaid reduction does not apply, if:

  • The company so incorporated, is created as a part of a total or partial takeover of pre-existing activities; or
  • The company so incorporated has recalled its rights following a tax audit procedure.

Further, in addition to the above, newly incorporated companies (whose turnover is more than XOF 50 million) are also exempted from the employer’s share of payroll taxes in the first year of their activities. Further, newly incorporated companies are also exempted from the employer’s share of payroll taxes for two years on the remuneration paid for the first job of an employee declared to social security.

Companies with one year of activity and having a long-term contract with a Benin employee after one year of service, can benefit from a non-renewable annual corporate income tax credit, which is quantified as follows:

  • XOF 100,000 for 1 to 5 jobs created;
  • XOF 200,000 for 6 to 10 jobs created;
  • XOF 350,000for 11 to 20 jobs created; or
  • XOF 500,000 for more than 20 jobs created.