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13.4. Transfer Pricing

The new tax code does not address transfer pricing matters in detail. It directs, however, that  transactions between related parties should be conducted at arm’s length. In case any profits before tax are indirectly transferred abroad (by adjusting the sale or purchase price, or by any other means) to a company outside Benin that controls or is controlled by the Benin corporate taxpayer, such profits may be added back to taxable income. The adjustment is based on the profits which would have accrued absent such control.

For these purposes, two persons are deemed to be related if one directly or indirectly controls the majority of capital or voting power in the other or factually exercises therein decision-making powers, or if both are controlled in the same manner by a third person. The control condition need not be met if one of the parties is established in a preferential tax jurisdiction. For these purposes, a person is deemed to be established under a preferential tax regime  if it is not taxable in the said jurisdiction or if its  income tax liability therein is more than half lower than the tax liability which would have been due  under the Benin tax laws.

The new tax code does not address the transfer pricing methodologies in detail. It does, however, specify that the price charged between related parties for commodities traded on an exchange cannot be lower than the quotation price on the day of conclusion of the contract or on the date of shipping, whichever higher (so-called “sixth method”).

Country-by-Country (CbC) Reporting

Benin has to date not introduced a Country-by-Country reporting requirement. However, Benin has joined the OECD Inclusive Framework which presupposes a commitment to implement the BEPS minimum standards, including Country-by-Country reporting.