Benin government seeks to reduce dividend tax rates but may face challenges

By Moïse Gnakouri, Ph.D. Researcher in Tax Law, UCLouvain, Belgium

Benin’s tax administration chief announced in a 7 February interview that the government plans to reduce the tax rates on dividends paid by both listed and unlisted companies.

Hence, from 2019, the tax rate on dividends derived from unlisted companies will be reduced by 50%, i.e., from 10% to 5%. The tax on dividends derived from listed companies will be reduced, from 7 % to 5%, Benin’s tax administration chief, Nicolas Yenossi, said.

According to the Beninese government, the goal of this reduction is twofold. On the one hand, they intend to encourage foreign investors to invest in local Beninese companies and, on the other hand, they hope to incentivize local Beninese companies to go public and to initiate initial public offerings (IPOs).

However, when considering West African Economic and Monetary Union (UEMOA) community law, this measure raises some important questions. Benin is a member of UEMOA, along with Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo.

Article 3 of the UEMOA directive on the harmonization of the taxation of securities states that Member States must tax dividends from unlisted companies at a rate between 10% and 15%.

This measure, which is supposed to be applicable as from 2019, is clearly outside the scope of Community law. Member States or the UEMOA Commission may be able to challenge this provision as it constitutes an infringement of UEMOA law and as it can be considered harmful tax competition.

We can only wait and see what the Beninese government will do and whether or not they will take into consideration the UEMOA community law.