Any government can benefit from the growth of its startup ecosystem. The ability of a government to create a peaceful dialogue between itself and startups in the locality will go a long way in determining the existence and growth pattern of the startup and the economic development of the country. Perhaps, this is what the government of Benin has considered before announcing it will provide additional tax incentives to startups in the digital services industry.
This policy 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.
The General Tax Code (CGI), will exempt startups from paying corporate income tax (IS) in the first two years of business activity and 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.
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).
- Startup must have received a label as defined by a decree issued by the Council of Ministers.
Recall that last year, the government of Benin under Article 146 of the Tax Code also introduced a set of new tax exemptions for investment firms in the country. The code stated that, 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.
The code also exempted venture capital firms or equity investors and companies for the part of the profits coming from the net proceeds of their portfolio.
It is expected that the General Tax Code will necessitate strategic incentives and interventions to accelerate the formation and sustained high-growth among startups in Benin Republic.