Since 2018, the Senegalese government has instituted reporting and documentary obligations in Transfer Pricing in accordance with the OECD BEPS actions 8-10, 12 and 13. However, it must be recognized that Transfer Pricing tax litigation is not yet abundant in Senegal, even though the regulatory framework is constantly being strengthened as a result of the various tax reforms that have already been discussed in previous issues of this newsletter. This situation in Senegal can be justified, partly, by the embryonic state of the current Transfer Pricing regulatory framework coupled with the lack of sufficient Transfer Pricing control skills.
However, it should be noted that the year 2022 marks an important turning point in the control of Transfer Pricing by the Senegalese tax administration. Indeed, we have witnessed what could be described as the "systematization" of tax audits limited to compliance with Transfer Pricing reporting obligations.
As a reminder, together with their corporate tax return, the taxpayers concerned are required to file a summary declaration on Transfer Pricing in accordance with the provisions of Article 31 bis of the Senegalese General Tax Code. Failure to comply with this obligation exposes them to a fine of XOF 10 million (EUR 15,245). However, until now, these failures were only identified and punished during the auditing of taxpayers' accounts.
This year, the Senegalese Tax Authorities have made the control of this reporting obligation almost systematic, resulting in the notification of penalty notices (procès-verbaux) addressed to almost all taxpayers who have failed to comply with their Transfer Pricing reporting obligations for the year 2021.
Thus, with the systematic application of penalties, not only does the tax administration reinforce the control exercised until now on Transfer Pricing, at the same time it reaffirms its commitment to properly implement the BEPS Actions 4, 12 and 13.
This new turn of events should lead taxpayers to increase their compliance with the Transfer Pricing tax regulations.
Similarly, the systematic application of tax penalties could prove to be a deterrent, especially as they are more severe for other Transfer Pricing reporting and documentation obligations. As a reminder, failure to comply with the above obligations is sanctioned as follows:
- For the country-by-country declaration: failure to file the declaration within the legal deadlines exposes the offenders to a fine of XOF 25 million (EUR 37,916.46) according to the provisions of the Senegalese General Tax Code.
- For the obligation for the audited taxpayer to present its Transfer Pricing documentation at the start of the accounting verification: the absence of this documentation (Master file and Local file) is sanctioned by a fine equal to 0.5% of the amount of the transactions of the documents or supplements in question which have not been made available to the administration after formal notice.
Read the WTS Global Transfer Pricing Newsletter here.
