This year, the government of Benin will provide additional tax incentives to startups in the digital services industry. This is contained in a set of new tax measures announced by the tax administrator in the country. Startups in the sector of information and communication technologies in the West African country that are incorporated and innovating will benefit from specific tax benefits offered by the General Tax Code.

In article 147 of the new General Tax Code (CGI), startups are now exempt from paying corporate income tax (IS) in the first two years of business activity. 

There is also a provision for a two-year tax exemption from the employer’s payment on wages (VPS) and a 50 percent reduction in the IS and VPS in the third year.

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However, in order to qualify for this scheme, the startup must satisfy two major requirements:

• it must have an annual turnover of less than one hundred million CFA francs (without taxes).

• and receive a label.

The conditions for obtaining the startup label are defined by a decree issued by the Council of Ministers.

Tax Exemption For Venture Capital Firms

Last year, the West African country introduced a set of new tax exemptions for investment firms in the country. 

Under Article 146 of the Tax Code, investment companies with variable capital were exempted from paying tax on the part of the profits they realized from the net proceeds of their portfolio or the capital gains.

Also exempted are venture capital firms or equity investors and companies for the part of the profits coming from the net proceeds of their portfolio. This exemption is from fifteen (15) years from the date of creation of the company and subject to the following conditions; they must: 

• have at all times a minimum of 50% of the net value of their overall portfolio made up of company shares not listed on the stock exchange.

• attach to the declaration of results provided for in article 33 of the Code, a report making it possible to assess at the end of each year the 50% benchmark referred to above.

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Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer