Senegal: Latest Transfer Pricing tax reform implementing Action 12 of the OECD BEPS project

Since the launch of the BEPS Project in 2012, Senegal has demonstrated its commitment by actively participating in international tax cooperation initiatives as a member of the BEPS Project Inclusive Framework Steering Group.

In Senegal, the reform process in the context of the implementation of measures stemming from the BEPS project accelerated in 2018, with consequent changes introduced in the Senegalese tax code.

These changes consisted of incorporating the recommendations from Actions 4 and 13 into Senegal’s general tax code. Thus, the 2018 tax reform focused on the implementation of better practices to limit the deduction of interest expenses on intra-group loans and on the institutionalisation of the transfer pricing statement and the provision of transfer pricing documentation to the Senegalese tax authorities in case of a tax audit.

In concrete terms, the latest Senegalese reform introduced by the law dated 22 December 2020 on the Finance Law for 2021 (new point 9 added to Article 31 of the General Tax Code) results in the institution of a new mandatory reporting regime for banks and financial institutions, insurance and reinsurance companies, as well as all other financial institutions holding accounts. These banking and insurance institutions mentioned above are now obliged to communicate to the tax authorities, according to the terms and conditions set out by regulation, all the information required for the application of the agreements concluded by Senegal allowing for an automatic exchange of information relating to financial accounts on tax matters.

This information specifically concerns income from movable capital, the balances of accounts opened with said organisations, the surrender value of bonds and capitalisation contracts and investments of the same nature of individuals and legal entities concerned, as well as any other income for which information must be communicated in accordance with the aforementioned agreements.

The aforementioned financial institutions and insurance companies must, in addition, transmit electronically to the tax authorities the information relating to the declarable financial accounts collected for the previous financial year, no later than 30 April of the following year.

Failure to comply with this new reporting obligation is heavily sanctioned with a fine of EUR 7,622 (XOF 5,000,000) per unreported account.

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