Senegal: Global Tax Guide
Table of Contents
Legislation
Residence/Territorial Scope
Article 3 of the General Tax Code provides that subject to the provisions of double tax treaties, corporate income tax is payable on profits made in Senegal.
Profits from companies operating in Senegal are deemed to have been made in Senegal.
Permanent Establishment
Not included in the General Tax Code.
Entities Within Scope
Article 4 of the General Tax Code provides that joint stock companies and limited liability companies, with the exception of single-member limited liability companies where the sole shareholder is a natural person, are subject to corporate income tax.
The following are also subject to corporate income tax:
• civil partnerships, whatever their form, when they engage in an operation or operations of an industrial, commercial, agricultural, artisanal, forestry or mining nature. However, civil partnerships engaged in agricultural or artisanal operations may opt for taxation under the partnership regime;
• limited partners for the share of the corporate profits corresponding to their rights;
• the share of profits corresponding to the rights of the partners of joint ventures, including financial syndicates and companies of co-owners of ships, whose names and addresses have not been indicated to the administration;
• public establishments, State or local authority bodies, provided that they enjoy financial autonomy and engage in an industrial or commercial activity or in profit-making operations;
• legal persons domiciled abroad when they are beneficiaries of income from real estate in Senegal or capital gains from the sale of real estate located in Senegal or related rights or realise capital gains following the sale of securities or company rights held in companies governed by Senegalese law.
• capital gains resulting from the transfer of shares realized abroad relating directly or indirectly to mining or hydrocarbon titles in Senegal;
• investment companies with fixed or variable capital;
• consumer cooperative societies when they own establishments, boutiques or shops for the sale or delivery of foodstuffs, products or merchandise;
• cooperative societies and unions of cooperatives of industrialists, merchants and craftsmen;
• cooperative production companies;
• insurance and reinsurance companies, including those in mutual form;
De facto companies, economic interest groupings, general partnerships, joint ventures, limited partnerships, single-member limited liability companies where the sole shareholder is a natural person, professional civil partnerships and real estate companies may opt for the corporate income tax regime.
Article 5 of the General Tax Code provides that the following are exempt from corporate income tax:
• consumer purchasing groups which merely collect orders from their members and distribute in their depot stores the foodstuffs, products and merchandise that have been the subject of these orders;
• mutual agricultural credit unions;
• agricultural cooperative organizations and their unions;
• agricultural mutual insurance or reinsurance companies, as well as companies with a similar status;
• mutual benefit societies;
• rural development and supervision companies, provided that at least 80% of their resources are made up of public subsidies;
• private non-profit associations or bodies, foundations recognised as being of public utility, the public waqf as well as the waqf of public interest which benefits from a recognition of public utility;
• certain public establishments, bodies, local authorities and other non-profit legal persons governed by public law,
• housing cooperatives and groups, which proceed, on a non-profit basis, to the subdivision and construction of housing for the exclusive benefit of their members;
• mutual or cooperative savings and credit institutions established in accordance with the law regulating decentralized financial systems, with regard to their savings collection and credit distribution operations;
• investment companies with variable capital, for the part of the profits derived from the net income of their portfolio or from the capital gains they realize on the sale of the securities or shares forming part of this portfolio.
Investment companies
Investment companies with fixed capital are exempt from corporate income tax in respect of the part of the profits derived from the net income from their portfolio for the first three years after their creation.
Capital gains on the sale of securities held by these same companies are also exempt from tax when the securities sold have been kept in their portfolios for a minimum period of three years from the date of their acquisition.
Capital gains on the sale of securities reinvested in the purchase of other securities, within twelve months of the financial year of sale, are also exempt from tax, regardless of the length of time they have been in the company’s portfolio.
These exemptions apply to investment companies in which at least half of the net value of the total portfolio is composed, at any time, of shares in companies not listed on the stock exchange.
Corporate Income Tax Rates
Under Article 36 of the General Tax Code, the corporate income tax rate is 30% of taxable profits. Any portion of the taxable profit of less than one thousand francs is disregarded.
Minimum tax
Article 38 of the General Tax Code provides for a flat-rate minimum tax which is payable by all companies or legal persons which are loss-making or whose corporate income tax amount does not exceed the amount of the minimum tax.
Under Article 40 of the General Tax Code, the flat-rate minimum tax is due on the turnover before tax achieved in the previous year at a rate of 0.5%.In no case may the amount due be greater than 5,000,000 francs.
Article 39 of the General Tax Code provides that the following are exempt from the flat-rate minimum tax:
• companies that have started their first operations in the year preceding that of the tax and companies that have closed their first balance sheet during or at the end of that year, provided, in this case, that the financial year is not longer than twelve months;
• undertakings whose sole object is the publishing, printing or sale of periodicals;
• companies that have ceased all professional activity before 1 January of the tax year and are not subject to the Local Economic Contribution in the current year’s rolls;
• of mining or petroleum exploration permits during the validity of the research permit, including its renewals and during the development or investment phase, which may not exceed the periods provided for in the texts governing the sectors concerned. This exemption is also valid for a period of three years from that of the first production.
• new companies that are not part of the department in charge of large companies are exempt for a period of 3 years from their date of creation.
Tax on Excess Technical Provisions
Article 41 of the General Tax Code provides that a tax applies on excess technical provisions reintegrated into the taxable results of financial years subject to corporation tax as from 1 January 2013.
Under Article 44 of the General Tax Code, the tax is calculated at the rate of 0.33% per month elapsed between the end of the financial year in respect of which the initial provision or the additional allocation was made and the end of the financial year in respect of which the excess provisions were reinstated. However, the number of months corresponding to financial years in respect of which no corporation tax was due is disregarded.
The tax due is that calculated before deduction of tax credits.
Taxable Income and Allowances
Article 8 of the General Tax Code provides taxable profit is the net profit determined on the basis of the overall result of operations of all kinds carried out by companies and legal persons, including in particular the disposal of any part of the assets.
However, holders of hydrocarbon mining titles and companies associated with them are required, for their oil operations in Senegal, to calculate their tax result separately for each area of prospecting, exploration or exploitation of their upstream activities.
The net profit is made up of the difference between the values of the net assets at the end and at the beginning of the period the results of which are to be used as the basis for the tax, less any additional contributions and increased by the deductions made during the same period by the operator or the partners.
Net assets are defined as the excess of asset values over the total liabilities of third-party receivables, depreciation and justified provisions.
The income corresponding to receivables from customers or payments received in advance in payment of the price shall be linked to the financial year in which the goods are delivered for sales or similar transactions and the performance of services for the supply of services.
However:
• for continuous services remunerated in particular by interest or rent and for discontinuous services but with successive instalments spread over several financial years, as and when the performance is carried out;
• for works of the enterprise giving rise to complete or partial acceptance, on the date of acceptance, even if it is only provisional or carried out with reservations, or on the date of the provision to the contracting authority if it is earlier or on the drawing up of invoices for rights, memoranda, statements or attachments or any other document in lieu thereof.
Stock is valued at the cost price or at the daily rate at the closing of the financial year, if this price is lower than the cost price. Work in progress is valued at cost price.
Differences in the translation of foreign currencies and of claims and liabilities denominated in foreign currencies in relation to the amounts initially recognised are determined at the end of each financial year on the basis of the last exchange rate and taken into account in determining the taxable result for the financial year.
Capital Gains
Article 19 of the General Tax Code provides that capital gains from the sale of fixed assets during the course of operations are not included in the taxable profit for the financial year in which they were realised if the taxpayer undertakes to reinvest in fixed assets other than financial assets in the companies established in Senegal of which he or she is the owner, before the expiry of a period of 3 years from the end of that financial year, a sum equal to the amount of these capital gains added to the cost price of the items sold.
Capital gains realized on the sale of renovated or restored buildings in localities listed by decree are also exempt from corporation tax, provided that the taxpayer reinvests, a sum equal to the amount of capital gains added to the cost price of the items sold.
Mergers of companies and partial contributions of assets
Article 20 of the General Tax Code provides that capital gains, other than those realised on goods, resulting from the allocation of shares following the merger of public limited companies or limited liability companies are exempt from corporation tax.
The same applies to capital gains, other than those realised on goods, resulting from the free allocation of shares or shares, following the contribution by a public limited company or limited liability company, to another company constituted in one of these forms, of part of these assets, provided that:
• the company receiving the contribution has its registered office in Senegal;
• the contribution is in the form of a merger, a partial contribution or a division of the company.
Parent-subsidiary regime
Under Article 21 of the General Tax Code, the gross income from shareholdings of a parent company in the capital of a subsidiary company is deducted from the total net profit, less a share representing costs and expenses. This share is fixed uniformly at 5% of the gross proceeds of the holdings, but may not exceed, for each tax period, the total amount of costs and charges of any kind incurred by the participating company during that period.
This applies providing that:
• the parent company and the subsidiary company are, subject to corporation tax;
• the parent company has its registered office in Senegal;
• the shares or interest units held by the first company represent at least 10% of the capital of the second company.
The parent-subsidiary regime automatically applies to holding companies governed by Senegalese law constituted in the form of a public limited company or a limited liability company in which at least 2/3 of the fixed assets are composed of shareholdings that meet the conditions set out above. To benefit from the provisions set out in the preceding paragraph, these companies may only carry out the following activities, apart from the management of shareholdings:
• to provide services corresponding to the functions of direction, management, coordination and control of group companies;
• to carry out research and development activities for the sole benefit of the group;
• ensure the management of the group’s treasury.
Debt write-offs
Article 24 of the General Tax Code provides that debt write-offs granted by a company to another company in which it holds a shareholding is not taken into account for the determination of the debtor company’s taxable profits.
To benefit from this, the debtor company must undertake to increase its capital for the benefit of the creditor company by a sum at least equal to the debt write-offs. The capital increase must be carried out, in cash or by debt conversion, before the end of the second following financial year.
Participation regime
Article 25 of the General Tax Code provides that when the income from participations is not eligible for the parent-subsidiary regime above, the participating company is only subject to corporate income tax on the income on a representative share of 40% of the gross income from the participation.
Deductions
Taxable profit is established after deduction of all expenses that meet the following conditions:
• are incurred in the direct interest of the company or are connected with the normal management of the company;
• correspond to an actual charge and be supported by sufficient invoices or receipts;
• result in a decrease in the company’s net assets;
• are included in the expenses of the financial year in which they were incurred;
• contribute to the formation of a non-tax-exempt product based on profits.
Article 9 of the General Tax Code provides that deductible expenses include general expenses of any kind, personnel and labour expenses, and rent for buildings of which the company is a tenant.
Finance expenses
Law No. 2018-10 of 30 March 2018 provides that financial expenses, are deductible subject to the following limitations:
• the rate of interest paid to shareholders, partners or other persons with whom the undertaking does not deal at arm’s length or has a relationship of control, in respect of the sums which they leave or make available directly, or through an intermediary, to the company in addition to their share of the capital, whatever the form of the company, may not exceed the rate of advances of the Issuing Institute increased by 3 points;
• the interest referred to in the preceding paragraph is deductible only on condition that the capital has been fully paid up;
• the deduction of interest paid to natural persons is limited to the remuneration of the sums made available by those persons which do not exceed the amount of the share capital;
Interest paid to legal persons is not allowed as a deduction up to the amount of the interest which:
• remunerates sums made available that exceed one and a half times the share capital and;
• simultaneously exceeds 15% of the profit from ordinary activities plus the interest, depreciation and provisions taken into account for the determination of the same result.
This limitation does not apply to interest paid by companies not subject to corporate income tax to their partners if the latter are subject to income tax in Senegal in respect of this interest.
The total amount of net deductible interest due annually on all debts contracted by a company that is a member of a group of companies cannot exceed 15% of the profit from ordinary activities plus the said interest, depreciation and provisions taken into account for the determination of the same result. This does not apply to enterprises that are members of a group of companies composed solely of companies resident in Senegal.
It also does not apply:
• if the company demonstrates that the corporate group’s net interest expense ratio is greater than or equal to its own net interest expense ratio. The net interest expense ratio of the group is the ratio between the total amount of net interest of the group paid or payable by a company belonging to the group to persons who are not dependent on and who do not have control of one of the companies belonging to the group, and the consolidated ordinary profit of the group plus the net interest, depreciation and provisions taken into account for the determination of the same result.
• where the total net interest paid or due by the members of the group of companies resident in Senegal to persons with whom they deal at arm’s length or in control is less than CHF 50 million, unless the interest is paid or due directly or indirectly to a person established in a territory outside Senegal, whose tax regime is privileged.
Any interest that is not immediately deductible pursuant may be carried forward and deducted in subsequent financial years, up to a maximum of five years. This does not apply when interest is paid, directly or indirectly, to a person established in a territory outside Senegal whose tax regime is privileged.
Insurance premiums
Law No. 2018-10 of 30 March 2018 provides for a deduction for insurance premiums or contributions paid to insurance companies approved and established in Senegal or to the West African Monetary Union Pay-as-You-Go Pension Fund with Savings:
• in order to cover statutory end-of-career, death or retirement benefits acquired during the financial year. However, insurance premiums due to cover previously acquired rights are deductible in fractions of 20%, as of1 January 2013;
• relating to supplementary retirement pensions paid during the financial year in the form of an annuity or a lump sum, insofar as they do not exceed 10% of the beneficiary’s gross taxable salary.
However, in the event of payment in the form of a lump sum of the indemnity to the insured with at least ten years’ contributions, the insurer must deduct a withholding tax of 7.5% on the sums paid.
Depreciation
Article 10 of the General Tax Code provides for a deduction for depreciation of capital goods carried out by the entity, within the limits which are generally permitted according to the practices of each type of industry, trade or operation.
New equipment and tools of companies that meet both the two conditions may be subject to accelerated depreciation:
• be used exclusively for industrial operations of manufacturing, handling, transport, tourism, fishing, livestock and agricultural operations, or perform an anti-polluting function, provided in the latter case that the equipment has been approved by the competent ministerial department;
• be normally usable for at least five years.
For these equipment and tools, the amount of the first annual depreciation calculated on the basis of their normal period of use may be doubled, this period being reduced by one year.
The depreciation of capital goods other than residential buildings, construction sites and premises used for the exercise of the profession, acquired or manufactured by industrial enterprises may be calculated according to a reducing balance depreciation method. The rate applicable for the calculation of declining balance depreciation is obtained by multiplying the straight-line depreciation rate corresponding to the normal useful life of the asset by a coefficient set at 2 when the normal useful life is five years and 2.5 when that period is more than five years.
Provisions
Article 11 of the General Tax Code provides that the following are allowed as calculating taxable income:
• provisions made in order to meet clearly specified losses or charges which current events make probable, provided that they have actually been recorded in the financial statements for the financial year and are included in the statement of provisions.
However, provisions made to meet the payment of paid leave, gratuity or allowances due to the retirement of members of staff are not deductible;
• the provision made by banks, decentralised financial systems and financial institutions making medium- or long-term loans, as well as by companies engaged in land credit transactions, to deal with the particular risks associated with such loans or operations;
• technical provisions constituted by insurance companies, in accordance with the requirements of the Code of the Inter-African Conference on Insurance Markets (CIMA);
• the costs of inspection or major overhauls borne by maritime navigation companies approved by decision of the Minister for Finance;
• provisions made by the concessionaire of a public-private partnership agreement as provided for in the Law on Construction Contracts (CET) during thetax exemption period and resumption after this period;
• provisions, guarantees, funds set up by mining or oil companies in the operating phase for the restoration of mining sites or the abandonment of oil deposits, provided that the related sums are domiciled with the Caisse des Dépôts et Consignations.
Study and prospecting expenses
Article 13 of the General Tax Code provides that expenditure on studies and prospecting incurred with a view to setting up abroad a sales establishment or a directory information office and other general expenses incurred for the operation of the establishment or office during the first three financial years, may be allowed as a deduction.
Limitation on deduction of sums paid into a preferential tax regime
Article 18 of the General Tax Code provides that interest, payments and other proceeds from obligations, receivables, deposits and guarantees, royalties for the assignment or grant of operating licences, patents for inventions, trademarks, manufacturing processes or formulas and other similar rights or remuneration for services, paid or due by a natural or legal person domiciled or established in Senegal to natural or legal persons who are domiciled or established in a foreign which are subject to a preferential tax regime, or a non-cooperative country, are only allowed as deductible expenses if the debtor provides proof that the expenses correspond to actual transactions and that they are not abnormal or exaggerated.
Persons are considered to be subject to a preferential tax regime in a territory if they are not taxable there or if they are subject to taxes on profits the amount of which is more than half the amount of the tax on profits or income for which they would have been liable in Senegal.
Territories that do not comply with international standards on transparency and exchange of information in the field of taxation are considered to be non-cooperative.
Permanent establishments
For the purpose of determining the profit of a foreign legal person from a permanent establishment in Senegal, no deduction is allowed for sums that may be paid, other than the reimbursement of expenses incurred by the permanent establishment at the head office of the legal person or at any of its offices, as royalties, fees or other similar payments, for the use of patents or other rights, or as commissions for specific services rendered or for management activities or, except in the case of a banking business, as interest on sums lent to the permanent establishment.
Tax Losses
Article 16 of the General Tax Code provides that unutilised tax losses can be carried forward successively to the following financial years, until the 3rd financial year following the loss-making financial year.
Withholding Tax
Article 173 of the General Tax Code provides that a withholding tax applies at the following rates:
• 25% for the capital gains provided for capital gains from the sale of securities and company rights and stock exchange transactions carried out on a regular or speculative basis;
• 10%, for income from shares, shares and interest shares in companies subject to corporation tax;
• 13% for income from bonds. However, for income from bonds with a maturity of at least five years issued in Senegal, the rate is increased to 6%;
• 16% for other income from movable capital, in particular directors’ fees and other remuneration of directors, as well as income from debts, deposits and guarantees.
This rate is be reduced to 8 % for interest, arrears and other income from deposit accounts and current accounts opened in the accounts of a bank, a banking institution, decentralised financial systems, the Caisse des Dépôts et Consignations, a stockbroker, a securities dealer or a holding company.
Income from bonds, with a maturity of at least 5 years, issued in Senegal, is subject to a withholding tax of 6%, in full discharge of all other taxes.
For interest on registered or bearer cash certificates, the withholding tax is set at 20%.
Note that when the parent-subsidiary regime applies, dividends distributed by a parent company are not subject to withholding tax to the extent of the net amount of the income from the shares or interest units received from the subsidiary.
Amounts paid to third parties
Under Article 200 of the General Tax Code, a withholding tax applies on amounts paid by a debtor established in Senegal to natural persons resident in Senegal as remuneration for services of any kind provided or used in Senegal.
A debtor established in Senegal is defined as:
• any natural or legal person having his tax domicile in Senegal or having a permanent establishment or a fixed place of business there, in the context of the exercise of his professional activities;
• the State, public authorities and public establishments;
• diplomatic and consular representations, as well as international and similar organizations.
Application Circular No. 0000504 of 15 January 2016 provides that transparent legal persons are treated as natural persons.
The rate of withholding tax is set at 5% of the gross amount excluding tax of the sums paid or the products received, when the amount of the service indicated on an invoice is equal to or greater than 25,000 CFA francs.
Rental income
Article 201 of the General Tax Code also applies a withholding tax to the rent of premises leased by a debtor, to the rents paid by an individual tenant, as well as to the rents collected on behalf of third natural persons, by real estate agencies, property managers and real estate companies.
The rate of withholding tax is set at 5% of the gross amount of the rents received, excluding tax.
Withholding tax is not mandatory when the amount of the monthly rent for the same premises is less than 150,000 CFA francs.
Royalties/Services
Under Article 202 of the General Tax Code, withholding tax applies when the following are paid by a debtor established in Senegal to persons or companies subject to income tax or corporation tax, who do not have a permanent place of business in Senegal:
• sums paid as remuneration for an activity carried out in Senegal in the exercise of a profession;
• amounts received by inventors or by way of copyright and any other income derived from industrial or commercial property and similar rights;
• sums paid as remuneration for services of any kind provided or used in Senegal.
The rate of the withholding tax is set at 25% of the net amount of taxable sums paid to individuals and companies.
This net amount is determined by applying a 20% deduction to gross receipts.
Transfer Pricing
Article 17 of the General Tax Code provides that for the purposes of establishing the corporate income tax payable by enterprises which are dependent on or have control over enterprises situated outside Senegal, profits indirectly transferred to the latter either by increasing or decreasing purchase or sale prices, or by thin capitalization or by any other means, are incorporated into the taxable income. Indirect pass-through profits are determined by comparison with those that would have been realized at arm’s length or in the absence of control.
This also applies to the determination of the taxable profit in Senegal of a legal person carrying out its activity both in Senegal and abroad.
The condition of dependence or control is not required when the transfer is made with enterprises established in a foreign State or in a territory located outside Senegal whose tax regime is privileged, or in a non-cooperative country.
Relationships of arm’s length or control are deemed to exist between two companies:
• when one holds, directly or through an intermediary, the majority of the share capital of the other or in fact exercises decision-making power therein;
• when they are both placed, under the conditions defined above, under the control of the same undertaking or the same person.
CFC Rules
None