Corporate tax in Senegal

Summary

Corporate Income Tax Rate (%) 30 (a)
Capital Gains Tax Rate (%) 30 (b)
Branch Tax Rate (%) 30 (a)
Withholding Tax (%)
Dividends and Nondeductible Expenses 10 (c) (d)
Directors’ Fees 16
Interest 6 / 8 / 13 / 16 / 20 (d) (e)
Royalties from Patents, Know-how, etc. 20
Payments to Nonresidents for Certain Services and Activities 20 (d) (f)
Branch Remittance Tax 10 (d)
Net Operating Losses (Years)
Carryback 0
Carryforward 3

a) If the company does not derive a taxable profit for a given year, minimum tax applies. The minimum tax equals 0.5% of the turnover for the preceding tax year. For example, the minimum tax for 2016 is determined based on the annual turnover for 2015. The minimum tax may not be less than XOF500,000 or more than XOF5 million.

b) In certain circumstances the tax is deferred or reduced (see Section B).

c) See Section B for special rules applicable to certain dividends, and see Section C for a list of nondeductible expenses.

d) This rate may be modified by a tax treaty. See Section B.

e) The 6% rate applies to interest on long-term bonds. The 8% rate applies to bank interest. The 13% rate applies to interest on short-term bonds. The 20% rate applies to interest on deposit receipts. The 16% rate applies to other inter­est payments.

f) This tax applies to technical assistance fees and other types of remuneration paid to nonresident companies and nonresident individuals that do not have a permanent establishment in Senegal. The tax is calculated by applying a rate of 25% to a base of 80% of the remuneration that is paid.

Taxes on corporate income and gains

Corporate income tax. Senegalese companies are taxed on the basis of the territoriality principle. As a result, companies carry­ing on a trade or business outside Senegal are not taxed in Senegal on the related profits. Foreign companies developing activities in Senegal are subject to Senegalese corporate tax on Senegalese-source profits only.

Tax rates. The corporate income tax rate is 30%. The minimum tax (impôt minimum forfaitaire, or IMF) payable equals 0.5% of the turnover for the preceding tax year. The minimum tax may not be less than XOF500,000 or more than XOF5 million.

Capital gains. Capital gains are generally taxed at the regular cor­porate tax rate. However, the tax can be deferred if the proceeds are used to acquire new fixed assets in Senegal within three years or in the event of a merger (or similar corporate restructurings, such as a transfer of a business unit or a demerger).

If the business is totally or partially transferred or discontinued, only one-half of the net capital gain is taxed if the event occurs less than five years after the start-up or purchase of the business, and only one-third of the gain is taxed if the event occurs five years or more after the business was begun or purchased. This regime does not apply to a transfer of shares in an unlisted pre­dominant real estate company. A company is considered a pre­dominant real estate company if more than 50% of its assets consist of real estate.

Capital gains on sales or transfers of land and buildings are also subject to land tax (see Section D).

Administration. The tax year is the calendar year. Companies must file their tax returns by 30 April of the year following the tax year.

Corporate tax must be paid in two installments (each equal to one-third of the preceding year’s tax) by 15 February and 30 April. The 15 February installment may not be less than the amount of the minimum tax. The balance must be paid by 15 June.

Late payments are subject to interest at a rate of 5% of the tax due. Each additional month of delay results in additional interest of 0.5%.

Dividends paid. Dividends paid are subject to a 10% withholding tax.

Dividends distributed by a Senegalese parent company that con­sist of dividends received from a Senegalese subsidiary that is at least 10% owned are not subject to dividend withholding tax on the second distribution.

Unless otherwise stipulated in a double tax treaty, the profits real­ized in Senegal by branches of foreign companies that have not been reinvested in Senegal are deemed to be distributed and are accordingly subject to a 10% withholding tax.

Foreign tax relief. In general, foreign tax credits are not allowed; income subject to foreign tax that is not exempt from Senegalese tax under the territoriality principle is taxable net of the foreign tax. However, the tax treaty with France provides a tax credit for French tax paid on dividends.

Determination of taxable income

General. Taxable income is based on financial statements prepar­ed according to generally accepted accounting principles and the rules contained in the Accounting Plan of the Organization for the Harmonisation of Business Law in Africa (Organisation pour l’Harmonisation en Afrique du Droit des Affaires, or OHADA).

Business expenses are generally deductible unless specifically excluded by law. The following expenses are partially deductible or nondeductible:

  • Foreign head-office expenses, of which the deduction is limited to 20% of Senegalese taxable profits before deduction of for­eign head-office expenses (unless otherwise provided for by tax treaties)
  • The amount of interest paid to shareholders in excess of three percentage points above a standard annual rate set by the central bank and the amount of interest on loans in excess of the capital stock amount
  • Certain specific charges over specified limits
  • Taxes, penalties and gifts

Inventories. Inventory is normally valued at the lower of cost or market value.

Provisions. In determining accounting profit, companies must establish certain provisions, such as a provision for a risk of loss or for certain expenses. These provisions are normally deductible for tax purposes if they are related to clearly specified losses or to expenses that are probably going to be incurred and if they appear in the financial statements and in a specific statement in the tax return.

Participation exemption. A parent company may exclude from its tax base for corporate income tax purposes 95% of the gross dividends received from a subsidiary if all of the following condi­tions are met:

  • The parent company and the subsidiary are either joint stock companies or limited liability companies.
  • The parent company has its registered office in Senegal and is subject to corporate income tax.
  • The parent company holds at least 10% of the shares of the subsidiary.
  • The shares of the subsidiary are subscribed to or allocated when the subsidiary is created, and they are registered in the name of the parent company or, alternatively, the parent company com­mits to holding the shares for two consecutive years in registered form. The letter containing such commitment must be annexed to the corporate income tax return.

Tax depreciation. Land and intangible assets, such as goodwill, are not depreciable for tax purposes. Other fixed assets may be depreciated. The straight-line method is generally allowed. The following are some of the applicable straight-line rates.

Asset Rate (%)
Commercial and industrial buildings 3 to 5
Office equipment 10 to 15
Motor vehicles 20 to 25
Plant and machinery 10 to 20

In certain circumstances, plant and machinery as well as other assets may be depreciated using the declining-balance method or an accelerated method.

Relief for tax losses. Losses may be carried forward three years; losses attributable to depreciation may be carried forward indefi­nitely. Losses may not be carried back.

Groups of companies. No fiscal integration system equivalent to tax consolidation or fiscal unity exists in Senegal.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax; on goods sold and
services rendered in Senegal
18
Business license tax (patente), based
on the business rental value of tangible
assets and equipment and the number
of employees
Various
Registration duties, on transfers of real
property or businesses
1 to 5
Land tax, on capital gains resulting from
sales or transfers of land and buildings
5
Payroll taxes paid by the employer for
both Senegalese and foreign employees
3
Social security contributions
Paid by the employer on each employee’s
annual gross salary, up to XOF756,000
1 to 5
Regular pension, paid on each employee’s
gross salary, up to XOF3,072,000; paid by
Employer 8.4
Employee 5.6
Additional pension, paid on an executive’s gross salary, up to XOF9,216,000; paid by
Employer 3.6
Employee 2.4

Miscellaneous matters

Foreign-exchange controls. Exchange-control regulations exist in Senegal for financial transfers outside the West African Economic and Monetary Union (WAEMU). The exchange-control regula­tions are contained in the WAEMU 09/2010 CM Act, together with its appendices and the Central Bank of West African States (La Banque Centrale des Etats de l’Afrique de l’Ouest, or BCEAO) application decrees.

Transfer pricing. The Senegalese tax law contains specific transfer-pricing documentation requirements. Transactions between asso­ciated enterprises must be documented. Such documentation must include at a minimum a description of the terms of the trans­actions, the entities involved, a functional analysis and a detailed description of the chosen methodology to determine the applied transfer prices. The documentation must establish how transfer prices were determined and whether the terms of the intercom­pany transactions would have been adopted if the parties were unrelated. If such information is not available on request in an audit or a litigation, the tax authorities may assess the taxable income based on information at their disposal.

Treaty withholding tax rates

Senegal has entered into a multilateral tax treaty with the other member states of the WAEMU, which are Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo.

The principal provisions of this tax treaty took effect on 1 January 2010. Senegal has entered into bilateral tax treaties with Belgium, Canada, France, Italy, Mauritania, Mauritius, Morocco, Norway, Qatar, Spain, Tunisia and the United Kingdom.

The rates reflect the lower of the treaty rate and the rate under domestic tax law.

Dividends

%

Interest

%

Royalties

%

Belgium 10 16 10
Benin 10 15 15
Bissau Guinea 10 15 15
Burkina Faso 10 15 15
Canada 10 16/20 (a) 15
Congo 10 16 0
Côte d’Ivoire 10 15 15
France 10 15 15
Gabon 10 16 0
Italy 10 15 15
Mali 10 15 15
Mauritania 10 16 0
Mauritius 0 0 0
Morocco 10 10 10
Niger 10 15 15
Norway 10 16 16
Qatar 0 0 0
Spain 10 10 10
Togo 10 15 15
Tunisia 10 16 0
United Kingdom 5 10 10
Non-treaty countries 10 6/8/13/16/20 (b) 20

a) The 20% rate applies to interest on deposit receipts. The 16% rate applies to other interest payments.

b) For details, see footnote (e) to Section A.

Senegal has signed tax treaties with China, Lebanon, Portugal, Taiwan and the United Arab Emirates, but these treaties have not yet been ratified.