Senegal Personal Income Tax

Residents of Senegal are taxed on worldwide income. Nonresidents are taxed on their Senegalese-source income only.

Senegalese and foreign individuals are considered to be residents for tax purposes if they meet any of the following criteria:

  • They maintain a home in Senegal.
  • They reside primarily in Senegal.
  • They perform a professional activity in Senegal, unless the activ­ity performed is accessory (not the principal source of income).

Income subject to tax. The taxation of various types of income is described below.

Employment income. Taxable compensation consists of salary, bonuses, cash allowances and fringe benefits valued according to the tax rules on a lump-sum basis. Taxable salary reported by the taxpayer may not be lower than the amount calculated by the tax administration based on the taxpayer’s standard of living. The factors contributing to the taxpayer’s standard of living are valued according to a rate table established by decree.

The following income is exempt from tax:

  • Family or state allowances.
  • Specific allowances to compensate for professional expenses if they are not excessive.
  • Reimbursement for employment-related expenses, up to either XOF400,000 if annual turnover does not exceed XOF2 billion or XOF800,000 if annual turnover exceeds XOF2 billion (because the recently enacted tax law did not expressly abrogate the decree containing this rule, these thresholds probably still apply).
  • Legal severance payments and legal retirement benefits. The amounts of these items are determined based on the Senegalese labor law.
  • Death benefits.
  • Amounts paid in addition to agreed severance with respect to the end of an employment relationship resulting from a restruc­turing plan of the relevant company.
  • Capital gains realized on equity held by mutual funds approved by the Finance Minister.
  • Insurance premiums paid by the employer for coverage of sup­plemental retirement and health insurance, provided that they do not exceed 10% of the gross remuneration of the employee. This limit applies to both retirement and health insurance pre­miums taken as a whole.

A nonresident individual is taxable on income derived from ser­vices performed in Senegal.

In the absence of an applicable tax treaty, 20% withholding tax is levied on remuneration paid by a resident to a nonresident for any services provided or used in Senegal. This tax must be remitted by the Senegalese payer within 15 days following the payment of remuneration to the nonresident. The withholding tax is a final tax for nonresidents.

Self-employment and business income. Self-employment activi­ties are divided into commercial activities, agricultural activities and professional activities. Taxable income is determined accord­ing to specific rules applicable to each category of revenue. The revenues realized in different categories of revenues are aggre­gated and are subject to general income tax (see Rates).

Individuals are taxed on commercial income if they derive profits from activities in industry, commerce or skilled trades. Tax able commercial income consists of the net profit derived from all business activities carried on by the taxpayer, computed on an accrual basis.

Individuals are taxed on professional income from professional services, from non-commercial activities and from other occupa­tions and business activities not subject to special tax. Taxable professional income is the difference between income received for, and expenses incurred in, the performance of a qualifying activity. The cash basis of accounting is used.

Agricultural income includes profits realized by farmers, stock­breeders, fishermen and forestry operators. Taxable agricultural income and capital gains derived by agricultural businesses are determined based on the same methodology as taxable commer­cial income.

Investment income. Investment income, which includes dividends, interest pertaining to bonds and debentures and directors’ fees, is subject to withholding taxes at rates that vary based on the spe­cific type of income. Directors’ fees are taxed only if the payer company is established in Senegal.

Gross investment income (except dividends) is added to other taxable income, and the proportional tax paid constitutes a tax credit deductible from general income tax liability.

The rate of withholding tax is 10% for dividends, 13% for inter­est derived from bonds of less than five years, and 16% for direc­tors’ fees. The withholding tax on dividends is a final tax for individuals.

Certain types of investment income are exempt from taxation, including income from negotiable securities issued by the state or certain Senegalese banks. Interest derived from long-term bonds (five or more years) is subject to a final withholding tax at a rate of 6%.

Withholding tax at a rate of 20% applies to royalties paid to non­residents. This tax must be remitted by the Senegalese payer within 15 days following the payment of royalties to the nonresi­dent. Withholding tax is imposed on dividends and interest paid to nonresidents at the same rates applicable to such payments made to residents. The withholding taxes are final taxes for non­residents.

Taxation of employer-provided stock options. No specific rules apply to the taxation of employer-provided stock options. The Senegalese tax and social laws do not provide specific rules regarding the taxation of stock options. The granting of stock options is not a common practice in Senegal.

Capital gains. Capital gains realized in the performance of profes­sional, commercial and agricultural activities are taxed as ordi­nary income, with certain relief available. Capital gains derived from transfers of business fixed assets during the fiscal year are tax-free if the proceeds are reinvested during the following three years in a business carried on in Senegal and owned by the tax­payer.

Capital gains derived from sales of real estate are subject to vari­able tax rates. A 5% rate applies to the portion of a capital gain that does not arise from an act of the property owner.

Capital gains derived from transfers of public land are taxed at a rate of 10%.

An individual shareholder who sells to a third party all or part of his or her shares is subject to tax on one-third of the capital gains at a 25% rate if the individual or his or her spouse, descendants or ascendants held a position in the direction of the company during the preceding five years and have held at least 25% of the shares of the company during that period. Otherwise, one-half of the capital gains are taxable.

However, the above-mentioned rules do not apply to capital gains realized on the disposal of shares of companies if more than 50% of the companies’ value is derived from real estate, real estate rights, rights from leasebacks of real estate or shares of other real estate companies.

Deductions

Deductible expenses. The following expenses are deductible:

  • Employment-related expenses that are justified.
  • Mileage allowance, up to the limit allowed by the Finance Ministry. The current limit is XOF50,000 per month, which is subject to future amendment.

Personal deductions. The following expenses are deductible:

  • Arrears and pensions paid by the taxpayer, up to 5% of the tax­able income for personal income tax purposes. The deductible amount cannot exceed XOF300,000. This limit does not apply to arrears paid under court order.
  • Voluntary premiums for retirement pensions, up to 10% of sal­ary, allowances and benefits in kind.
  • Life insurance premiums, up to 5% of net revenue. The maxi­mum deductible amount is XOF200,000, increased by XOF20,000 per dependent child.
  • Interest paid on loans to acquire, maintain or repair the tax­payer’s principal residence in Senegal.

Business deductions. For each of the three categories of income, the following expenses are deductible:

  • General expenses incurred for business purposes. These include personnel and social security contribution expenses, rental and leasing expenses, finance charges and certain professional taxes, including business tax, license fees and tax on wages.
  • Depreciation expenses computed using the rates established by the tax administration.

Rates. Employees in Senegal are subject only to progressive income tax rates up to 40%.

Under the tax law, the progressive rates are applied to taxable income after deduction of a lump-sum amount representing retirement contributions. This lump-sum deduction equals 30% of taxable income, with an annual cap of XOF900,000.

The following are the amounts of the family allowances.

Taxpayer’s status Number of allowances
Single or divorced, without dependent children 1
Married without dependent children 1.5
Single or divorced, with one dependent child 1.5
Married or widowed, with one dependent child 2
Single or divorced, with two dependent children 2
Married or widowed, with two dependent children 2.5
Single or divorced, with three dependent children 2.5
Married or widowed, with three dependent children 3
Single or divorced, with four dependent children 3

Half of an allowance (0.5) is added for each additional dependent child for the benefit of each parent. If one spouse does not work, an additional half of an allowance (0.5) is granted to the other spouse. Each individual is limited to five family allowances.

The following are the progressive income tax rates.

Taxable income

Exceeding XOF Not exceeding XOF Rate

%

0 630,000 0
630,000 1,500,000 20
1,500,000 4,000,000 30
4,000,000 8,000,000 35
8,000,000 13,500,000 37
13,500,000 40

The tax is computed using the progressive tax rates based on the family status and number of tax allowances of each individual. After this computation, the tax law prescribes a tax-reduction mechanism for family charges. The tax law provides the follow­ing rates for the tax-reduction mechanism.

       
Number of allowances Rate Minimum Maximum
  % XOF XOF
1 0 0 0
1.5 10 100,000 300,000
2 15 200,000 650,000
2.5 20 300,000 1,100,000
3 25 400,000 1,650,000
3.5 30 500,000 2,030,000
4 35 600,000 2,490,000
4.5 40 700,000 2,755,000
5 45 800,000 3,180,000

Relief for losses. Losses may not be deducted from income from other categories, but may be carried forward for three years to offset income in the same category.

Inheritance and gift taxes

The worldwide net assets of a Senegalese resident are subject to inheritance and gift tax. Nonresidents are subject to inheritance and gift tax only on assets located in Senegal.

Gifts and inheritances are subject to tax at progressive rates, de­pending on the value of the assets transferred and the relationship between the donor or deceased and the recipients. The tax rate is 2% for the spouse and direct lineal ascendants and descendants and 10% for others. Certain deductions are also granted.

Under Senegalese succession law, parents must leave two-thirds of their estates to their direct lineal descendants.

Social security

Contributions. Individuals’ social security contributions are with­held monthly by employers and are computed on the basis of gross remuneration paid, including fringe benefits and bonuses. The following contributions are required.

 

Description Rate (%)
On annual salary of up to XOF756000, paid by the employer
Family allowances 7
Industrial accidents 1 / 3 / 5
Pension contributions, based on annual salary of up to XOF3600000, paid by:
Employer 8.4
Employee 5.6
Special executive contributions, on annual salary of up to XOF10800000; paid by:
Employer 3.6
Employee 2.4

Totalization agreement. To prevent double social security contri­butions and to assure benefit coverage, Senegal has entered into a totalization agreement with France, which applies for a maxi­mum period of three years.

Tax filing and payment procedures

Individual income tax on wages is withheld at source by employers. Employers must pay the withheld tax to the revenue authorities by the 15th day of the month following the month of payment of the remuneration.

Senegalese residents are generally required to file income tax returns before 1 May of each year, at which time employees must satisfy any additional tax liability. Individuals engaged in com­mercial, professional or agricultural activities whose financial year ends 31 December must file returns by 30 April.

An individual performing commercial, agricultural or profes­sional activities must make a first installment payment within the first 15 days of February and a second by 30 April, based on the income tax paid the preceding year. Each installment payment must equal one-third of the preceding year’s income tax. The bal­ance is payable by 15 June of each year.

Double tax relief and tax treaties

Foreign taxes paid may be deducted as an expense from taxable income.

Senegal has entered into double tax treaties with Belgium, Canada, France, Italy, Mauritania, Mauritius, Morocco, Norway, Qatar, Spain and Tunisia. Senegal ratified a tax treaty with the United Kingdom on 26 February 2015. This treaty is expected to enter into force on 1 January 2017, but this has not yet been confirmed.

Senegal is a member of the West African Economic and Monetary Union (WAEMU) together with Benin, Burkina Faso, Bissau Guinea, Côte d’Ivoire, Mali, Niger and Togo. Regulation No. 08/ CM/UEMOA institutes a tax treaty, which is effective from January 2009. The WAEMU tax treaty has abrogated (regarding relations between WAEMU countries) the West African Economic and Customs Community (CEAO) tax treaty and the Common African and Mauritian Organization (OCAM) tax treaty. However, the OCAM treaty continues to apply in certain countries, subject to reciprocity.

The treaties generally provide the following relief:

  • Commercial profits are taxable in the treaty country if a foreign firm performs its activities through a permanent estab lishment.
  • Interest is taxable in the state of residence of the beneficiary, but the state of source may apply a withholding tax in accor­dance with its internal law.
  • Employment income is taxed in the treaty country where the activity is performed, except in the case of a short assignment.

The treaties with Belgium and France provide that royalties and remuneration paid to a nonresident for services rendered in Senegal are taxable in the state of residence of the beneficiary, but the state of source may apply a withholding tax in accordance with the appli­cable regulations.

Under the WAEMU treaty, dividends are taxable in the treaty country where the beneficiary is resident, but are subject to with­holding tax in the treaty country where the payer is resident.