Depreciation and depletion
The rates of depreciation are not provided by the law. The rate is determined on the normal and predictable duration of use of the asset by taking into account normal wear and tear. In practice, there are standard rates for common assets. Accelerated depreciation can be applicable, subject to conditions.
There are no provisions in Senegal for goodwill.
Start-up expenses are deductible if justified and approved by the shareholders.
Interests on current account advances or loans from a shareholder (directly or indirectly) or a related party are subject to restrictions as to their deduction from taxable income.
There are two steps:
Deductibility of interest paid to related parties
The interests payable directly or indirectly to a related party (an entity belonging to the same group as the borrower) is limited to the ones calculated on 1.5 times the paid share capital of the borrower, within the limits of the base rate (4.2391% in 2021) plus 3 points and within a maximum of 15% of the ordinary profits, increased by the depreciation and provisions and the concerned interests.
The calculation of these limits is done for all interests paid to all related parties (directly or indirectly). Please note that such interests are deductible only if the share capital is fully paid up.
Deductibility of all interests
The deductibility of all interests (payable to related or unrelated parties) is limited to 15% of the ordinary profits, increased by the depreciation and provisions and the concerned interests. For this calculation, the non-deductible interests due to related parties are excluded and interest incomes deducted ('net interests'). This second 15% limitation does not apply if the ratio of net interests of the group is equal to or higher than its own net interests ratio.
The group ratio (consolidated level figures of the group) is equal to the interests due to unrelated parties on the ordinary profits, increased by the depreciation and provisions and the interests payable to unrelated parties. In such case, the deductible interests are calculated by applying the group ratio. This limitation does not apply in case the annual interests are to be paid by a group of companies residing in Senegal to non-related companies and are lower than XOF 50 million, provided that they are not due to companies established in a privileged taxation regime (taxation below 30%).
The deductibility of the interests paid to individuals are limited to the remunerations of the amounts that do not exceed the share capital. The GTC has provided a definition of the concept of interests, which means any expense related to debt securities of any kind, including payments in return for the granting of a pledge for the repayment of a debt obligation, that would be considered as deductible. This definition leads to a wide acceptance of the concept of interests, from a common remuneration of a loan to an inter-company financing.
There are no provisions in Senegal for bad debt.
Only payments made to specific chartered organisations are deductible, at a rate of up to 0.5/100 of turnover. On the contrary, payments made to non-chartered organisations are not deductible.
Fines and penalties
Fines and penalties are not deductible for CIT purposes.
CIT and the company tax on vehicles are not deductible.
Other significant items
Provisions are deductible if they correspond to a risk or a probable cost that is more than possible and leads to a decrease in the assets. Provisions for paid holidays and retirement compensation are not deductible.
Net operating losses
Tax losses may be carried forward to the next three years. Losses corresponding to the depreciation of assets can be carried forward indefinitely. The carryback of losses is not allowed.
Payments to foreign affiliates
Reasonable royalties, interest, and management service fees paid to foreign parent companies are deductible. Supporting documents (e.g. invoices, contracts) will be necessary to prove that these expenses are justified.