Benin: VAT on cross-border provision of digital services

The Benin Republic on 14 April 2023, published a circular implementing value added tax (VAT) on cross-border provision of digital services. The circular provides that covered nonresidents are required to comply with the rules within six months from publication of the circular. 

• The regime imposes VAT on the provision of “services of any kind carried out on Beninese territory through foreign or local e-commerce platforms” and “commissions received by local operators of e-commerce platforms on the occasion of sales of goods and services, carried out through their platforms on Beninese territory.”
• Goods are not covered and will remain subject to the traditional tax/customs procedure.
• An e-commerce platform means a digital tool that connects, remotely, by electronic means, with a view to selling a good or providing a service. The e-commerce platform can be operated either by an operator who connects vendors and customers, or by a vendor, for the distribution of its own products.
• Digital services are defined as services provided over the internet or an electronic network and the nature of which renders their provision essentially automated and involving minimal human intervention, and impossible to provide in the absence of information technology. Examples of digital services include:
  • The sale of digitized products in general, including software and modifications or upgrades to software
  • Services providing or supporting a professional or personal presence on an electronic network such as a website or web page and services automatically generated from a computer via Internal or an electronic network, in response to the entry of specific data by the recipient
  • The assignment for consideration of the right to offer for sale a good or service on an internet site operating as an online marketplace on which potential buyers make their submissions by automated procedural system and on which the parties are notified of a sale by electronic mail automatically generated from a computer
  • Internet Service Packages (ISP) of information in which the telecommunications component forms an ancillary and subordinate part (i.e., packages going beyond Internet access and including other elements such as content pages giving access to news, weather or travel reports)
  • Hosting of websites
  • Access to online debates
  • Automated distance learning

• Covered nonresidents may register using a simplified remote registration procedure via the website of the Benin Tax Administration (www.impots.bj).
• Once registered, nonresidents are automatically assigned a unique tax identifier (IFU) and an e-services portal membership number.

• The customer location may be determined by IP address, geolocation information, credit card or any other relevant information, or on the basis of other information collected by the nonresident in the normal course of its activities.           

• The regime applies only to sales made to individuals or entities not registered for VAT purposes in Benin (i.e., B2C sales).
• For sales made to business customers (i.e., B2B sales), the business customer is required to self-assess and remit the VAT due to the tax authority.
• The customer’s status may be determined by the customer self-declaring that they are a business.
• The nonresident seller will have an obligation to provide the tax authority on request, periodically, the list of its customers who have self-declared that they are a business and from whom VAT is not collected.

• There is no obligation on nonresidents to issue VAT invoices.

• It should be noted that the circular does not include any clear definition of a marketplace/platform operator as in other jurisdictions with similar regimes.
• The circular provides as follows:
  • For local marketplace operators, the VAT collection liability should fall on the local marketplace operator for transactions facilitated on behalf of nonresident vendors. For sales made by local vendors through a local marketplace, the local vendor is responsible for collecting and remitting the VAT.
  • In addition, the circular states that the commission earned by local marketplaces on sales made by nonresident vendors through the marketplace is subject to VAT.
  • For nonresident marketplace operators, the VAT collection obligation should fall on the nonresident marketplace operator when they collect the consideration for the sale.
  • The circular further clearly states that only the consideration received by the nonresident vendor using the marketplace is subject to VAT and the commission earned by the nonresident marketplace operator is not subject to VAT. 

• Penalty provisions in the general VAT law will apply, including a publication of a list of internet service providers and identifying compliant/non-compliant ones.              

For more information, contact a KPMG tax professional:

Philippe Stephanny | philippestephanny@kpmg.com

Chinedu Nwachukwu | chinedunwachukwu@kpmg.com