Senegal: After joining the Multilateral Convention, a Step forward in the Fight against Tax Evasion & Avoidance

More than 5 years after the signature of the Multilateral Instrument (MLI) on June 7, 2017, Senegal deposited its instrument of ratification of the Multilateral Convention on May 10, 2022. Overall, the ratification now covers 1,820 bilateral tax treaties around the world and 18 for Senegal.

With the ratification of this Multilateral Convention, which will enter into force on Septem­ber 1, 2022, the block of tax conventions for Senegal will be modified to integrate the recommended provisions of the Convention.

The ratification of the Multilateral Convention by Senegal is, after all, the confirmation of a strong political will to support and apply the anti-BEPS measures. As a result, Senegal’s tax arsenal has been strengthened for possible revenue optimization.

To know the real impact of the ratification of the Multilateral Convention on the bilateral Conventions against double taxation (DTC) signed by Senegal, it is necessary for a given bilateral convention to make a concordance analysis of the reservations and notifications of each of the two signatory states.

In this contribution, our approach is to have an overview of the various reservations made by Senegal. Indeed, Senegal has formulated some reservations notified to the OECD. These reservations concern 7 of the 39 articles of the MLI:

• i. One (01) full reservation on Article 3 applicable to all covered conventions signed by Senegal.
• ii. Three (03) reservations on provisions that Senegal considers already integrated in its signed conventions, namely: Article 6.1.a, Article 7.1.4 and Article 9.1.a of the multilater­al convention.
• iii. One (01) reservation regarding the right not to apply the second sentence of Article 16.2 to its covered tax treaties under certain conditions.
• iv. One (01) reservation of the right not to apply Article 17 to its Covered Tax Treaties, considering the reservation in Article 16.5. c. ii, on the basis that it intends to adopt, through bilateral negotiations, a treaty provision along the lines of Article 17.1 and the Contracting Jurisdictions reach agreement on that provision and on Article 16.5.c.ii
• v. One (01) reservation regarding the right not to apply Article 35.4 to its Covered Tax Treaties.
   

These reservations are motivated by the desire to give the maximum geographic scope to the MLI and to target the clauses that constitute real progress towards the objectives of the BEPS project.

The reservations are also motivated by the desire to ensure consistency and homogeneity in the application of international taxation in accordance with the famous saying “level playing field”. From this point of view, Senegal has decided not only to apply the Multilater­al Convention extensively but also to replace the current clauses of its conventions with those of the MLI, which will facilitate the work of consolidating bilateral tax treaties.

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