Recent changes to the General Tax Code (GTC)
Recent Finance Acts have added new provisions to the GTC.
Key changes of the law are discussed below:
Creation of a derogatory tax regime for the benefit of companies in the tourism and press sectors
Companies operating in the tourism and press sectors will benefit from an exemption from the payment of taxes and duties withheld from their employees' salaries. The benefits of the derogatory tax regime also extend to certain direct taxes:
- Minimum CIT;
- Local Economic Contributions;
- Tax on built properties;
- Tax on non built properties.
To benefit from this tax regime these companies will have to fulfil all their declarative obligations and relating to the taxes and duties exempted.
These measures will be applicable from October 1, 2020 to December 31, 2021.
New tax on dehydrated broths
In order to improve the level of public resources of the State of Senegal, a new tax on broths ("bouillon") has been introduced with the 2021 Amending Finance Law (Article 442 quater of the GTC).
The rate is 15% and the tax will apply to food broths produced or imported into Senegal, for direct use in cooking or seasoning.
Changes to the deductibility rules of reverse charge VAT
Where services performed by non-residents are VAT taxable in Senegal (under the rules of territoriality described above), VAT is paid to the tax authorities by the recipient of the services in practice through the reverse VAT mechanism.
Such VAT used to be deductible for the Senegal recipient of the services subject to the the general conditions of deductibility.
Amending Finance Law for 2021 has restricted the deductibility of such VAT: it is now deductible only if the services include a transfer of “savoir faire”. This term is yet to be defined by the authorities.
New reporting requirements
The provisions of Article 633 of the GTC applicable to legal persons and administrators or managers of trusts, etc., have been amended by Finance Act for 2021, in particular by introducing the concept of "beneficial owners" in order to apprehend the real owners of these legal persons or legal arrangements which may constitute vehicles for international tax evasion or avoidance.
From now on, legal entities established in Senegal as well as individuals or legal entities residing in Senegal who act as administrators or managers of trusts or other similar legal arrangements established outside of Senegal are required to identify their "beneficial owners".
Transfer of mining titles
Capital gains from the transfer of social rights realised abroad directly or indirectly related to mining or hydrocarbon rights in Senegal are now subject to corporate income tax (CIT) in Senegal.
The tax will be jointly payable by the company established in Senegal holding the mining or hydrocarbon rights if the company doesn’t appoint a representative for the payment of the tax during the registration in the month following the transfer.
Henceforth, the capital gain tax on real estate will apply on transfer of rights related to mining or hydrocarbons rights assimilated to real estate.
The transfer of social rights issued by companies located in Senegal or abroad and holding, directly or indirectly, interest on rights relating to mining or hydrocarbon rights in Senegal will be subject to transfer registrations duties under the same conditions as transfers of rights related to mining or hydrocarbon rights.
Contribution for hydrocarbon licence holders
Companies holding a hydrocarbon exploitation licence are subject to a 0.02% contribution on annual turnover instead of the contribution on added value on the share resulting from the joint exploitation of hydrocarbon fields governed by an agreement between Senegal and another state.
Exemption from value-added tax (VAT) for hydrocarbon licence holders
Exemption from VAT for hydrocarbon licence holders concerns imports, supplies and services carried out for the benefit of holders of a hydrocarbon or mineral prospecting or exploration licence, and their recognised subcontractors, throughout the period of validity of the licence or authorisation and its renewal, and during the development phase.
This exemption only covers activities directly related to petroleum operations as defined in the Petroleum Code.
A fine between 5 million Communauté financière d'Afrique (Financial Community of Africa or CFA) francs (XOF) and XOF 25 million and imprisonment between two and five years will be applicable to anyone who:
- Produces false documents or carries out any other fraudulent manoeuvre in order to benefit from a tax refund of any kind.
- Fraudulently organises or aggravates one's insolvency to evade tax on all or part of one's assets by increasing one's liabilities, reducing one's assets, or concealing all or part of one's assets.
Tax compliance levy
A 12% levy on imports by individuals or companies who do not regularly fulfil their reporting and payment obligations has been instituted to fight tax fraud.
New measures to support small and medium enterprises (SMEs)
SMEs now benefit from:
- An exemption from the minimum CIT for three years.
- An exemption from the employer tax for three years.
- The removal of the minimum fee of XOF 500,000 for minimum CIT, which can have a confiscatory effect on SMEs in a deficit situation.
- The reduction (from XOF 25,000 to XOF 10,000) of the registration fees for the creation of companies when the capital is equal to a maximum of XOF 100 million.