Senegal

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:

Introduction of a levy on insurance companies

This tax concerns insurance companies approved in Senegal, excluding reinsurance companies.

The rate of the tax is set at 1% of the insurance companies' turnover excluding taxes. However, for life insurance premiums, the rate is reduced to 0.5%. The tax is paid in installments within the first fifteen days following the end of each quarter of the calendar year, i.e. by April 15, July 15, October 15 and January 15 at the latest.

Reverse VAT on digital services provided by a foreign supplier

The Finance Act for FY23 has just established the taxation of digital services, by making digital services supplied by a foreign provider subject to reverse charge VAT.

Local companies must collect VAT and pay it on behalf of the foreign supplier, when the beneficiary of the service is an individual that is not subject to VAT.

It should be noted that failure by foreign suppliers to comply with the above obligations results in the suspension of access to their digital platforms, markets or online marketplaces used to conduct transactions on Senegalese territory.

Introduction of a new WHT on sale of hydrocarbons by non-resident entities

The Finance Act for FY23 has created a withholding tax on sales of hydrocarbons made in Senegal by non-domiciled persons.

The tax is equal to 0.5 francs per kilogram sold and is due by foreign companies that sell directly to local or foreign authorized importers the hydrocarbons they have in tanks built in Senegal.

The withholding is made by the oil stock holders and transferred to the competent collection office no later than the 15th of the month following the month of the withholding. If they fail to do so, they become personally liable for payment, in particular in the event of failure to withhold or insufficient withholding, under the conditions provided for in articles 188 to 190 of the GTC.

Increase in the tax rate from 40% to 43% for income/salaries exceeding XOF 50 million

The provisions of article 173 paragraph 1 have been modified by the Amending Finance Act for the year 2022.

Indeed, a new bracket liquidated has been added to the progressive scale at a rate of 43% applicable to annual taxable incomes in excess of XOF 50 million. The former provision limited the rate to 40% for the salary bracket of more than XOF 13,500,001. From now on, the limit is 43% for the salary bracket above XOF 50,000,000 CFA.

As the reform was implemented during the year, its application could still pose some difficulties. In principle, the law does not apply retroactively, except in exceptional cases, and this Act does not contain provisions expressly stating that the new scale applies retroactively from January 2022.

Therefore, it would be unwise to consider that application is immediate with an regularization since January 2022.

Free export company status 

The benefit of the free export company status is extended until 31 December 2024.

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:

• Corporate income tax (CIT).
• Minimum CIT.
• Local Economic Contribution.
• 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 relating to the taxes and duties exempted. 

These measures were applicable from 1 October 2020 to 31 December 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.

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 value-added tax (VAT)

Where services performed by non-residents are VATable in Senegal, VAT is paid to the tax authorities by the recipient of the services in practice through the reverse-charge VAT mechanism.

Such VAT used to be deductible for the Senegal recipient of the services, subject to 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 by introducing the concept of 'beneficial owners' in order to apprehend the real owners of these legal persons or legal arrangements that 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 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 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.

Penal sanctions

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.