21.02.2024

Senegal: Transfer Pricing in Senegal - the content of the Transfer Pricing documentation has finally been regulated and clarified

Transfer pricing in Senegal has taken a significant step forward in terms of aligning with international taxation norms, marked by the Minister of Finance's order on 1 August 2023, detailing transfer pricing documentation content. This advancement is in sync with Senegal's efforts to align its tax practices with international standards. The order coincides with the ECOWAS Directive C/DIR.6/07/23 adopted on 6 July 2023, aiming at harmonizing transfer pricing rules across Member States, with a compliance deadline set for 31 December 2026.

Key Elements of the Order:

1. Transfer Pricing Documentation content:

Master File (MF): The MF should encompass the group structure, its various business areas, details about intangible assets, financial activities, and the overall financial and tax status of the group.
Local File (LF): The LF requires specifics on the structure and areas of activity of the local entity, transactions with related entities, and comprehensive financial information.

2. Strategic importance and impact:

This move significantly elevates Senegal's stance on tax transparency, actively combating tax base erosion and indirect profit transfer.
By aligning with the ECOWAS directive, Senegal demonstrates its commitment to regional tax standards while addressing crucial issues in taxation.
The objective is to bolster national tax revenues by ensuring greater tax fairness, which is fundamental for fair competition among companies and the stimulation of the local economy.

3. Implementation challenges for companies:

Companies now face the significant challenge of conforming to these new regulations.
Compliance is critical to avoid stringent financial penalties.
The new order brings an end to a period of legal uncertainty, compelling companies to adhere strictly to the updated transfer pricing guidelines.

4. Penalties for Non-Compliance:

The Senegalese tax authorities are rigorously enforcing legal provisions related to transfer pricing, imposing penalties for non-compliance.
Discrepancies between the annual simplified Transfer Pricing return and full Transfer Pricing documentation will lead to challenges in transfer prices.
Failure to submit Transfer Pricing documentation at the beginning of a tax audit incurs a 0.5% fine on intra-group transactions.

Non-submission, non-updating, or submitting non-compliant documentation attracts penalties similar to those for not submitting Transfer Pricing documentation.

In conclusion, Senegal's new order on Transfer Pricing documentation, which reflects regional and international guidelines, signifies a decisive turn towards enhanced tax regulation. It underscores the country's dedication to verifying the compliance of its companies with Transfer Pricing rules, thereby contributing significantly to regional and global economic stability.

If you wish to these topics, please contact:

FACE Africa Tax & Legal

Author

El Hadji Sidy Diop

Managing Partner & CEO

Legal Adviser and Chartered Tax Expert

Senegal

View Profile

Article published in WTS Africa Quarterly Newsletter #1/2024

Recent tax developments in Africa

View publication

Articles you might be interested in

Senegal, in 2024, is a leading African investment hub, fueled by growth in energy, infrastructure, and agriculture. With political stability, modern infrastructure, and investor-friendly reforms, it provides access to ECOWAS and AFCFTA markets, offering tax incentives for sustainable investments.

Senegal: Exchange Control Insights

Recent tax developments on the continent.

WTS Global Africa Regional Newsletter #2/2025 now available

Adopted in line with the forecasts set out in the Initial Finance Act (PLFI), the Finance Act for 2025 introduces several major tax reforms aimed at modernizing tax administration and enhancing transparency.

Senegal: Overview of the main tax measures of the 2025 Finance Act

Recent tax developments from nine countries on the continent.

WTS Global Africa Regional Newsletter #1/2025 now available

Senegal is modernizing its VAT framework for digital services, aligning with global standards. This article outlines the key features of the VAT regime on digital services.

Senegal: The specificities of VAT on digital services in Senegal

Recent tax developments from nine countries on the continent.

WTS Global Africa Regional Newsletter #4/2024 now available

The Initial Finance Act (LFI) for 2024 implemented substantial modifications to the Senegalese General Tax Code (GTC) aimed at modernizing and harmonizing the tax framework.

Senegal: Major changes introduced in the Senegalese CGI by the Initial Finance Act (LFI) for 2024

Recent tax developments from eight countries on the continent.

WTS Global Africa Regional Newsletter #3/2024 now available

Senegal has adopted the new Environmental Code in 2023, which replaces the 2001 version, to address challenges arising from increased production activities, demographic pressures, and natural resource extraction.

Senegal: The Innovations of Law No. 2023-15 of 20 August 2023 on the Senegalese Environmental Code

In African economies, extractive industries are key, heavily regulated by authorities to maximize tax revenue, underscoring the importance of a clear "Permanent Establishment" (PE) concept, particularly in Senegal's expanding sector.

Senegal: The Concept of Permanent Establishment in Senegal's Extractive Sector

Recent tax developments from eight countries on the continent.

WTS Global Africa Regional Newsletter #2/2024 now available

Senegal: Transfer Pricing in Senegal - the content of the Transfer Pricing documentation has finally been regulated and clarified

Senegalese tax legislation references the arm's length principle since the 2018 Finance Act, particularly in Article 17, paragraph 1 of the General Tax Code, and provides for related party notion.

Senegal: Arm’s length principle in Transfer Pricing

For the benefit of the tax deductibility of credit losses enshrined in the IFL 2023, banking and financial institutions are required to meet certain substantive and formal requirements.

Senegal: The introduction of the deductibility of losses on doubtful or disputed debts through the initial finance law for the year 2023

Ensuring greater social justice in the distribution of the tax burden" is one of the objectives pursued by the Amending Finance Law (LFR) for the year 2022.

Senegal raises its personal income tax shield to 43%

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.

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

According to Decree No. 2021-928 of 8 July 2021, which established PROMAD, the basis for this levy is the customs value of eligible goods.

Senegal: The recent customs reforms of 20 December 2021

In Senegal, the Transfer Pricing provisions, largely inspired by the OECD Guidelines 2017, have been incorporated into the Senegalese General Tax Code.

Senegal: Implementation of Action 12 of BEPS project: a strengthened internal tax system

Senegal is currently implementing several BEPS action items into local tax laws. Our colleagues explain which actions have been implemented and how these changes will affect companies.

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

Within the framework of the OECD Convention on Mutual Administrative Assistance relating to Taxation, Senegal has signed the Multilateral Convention called MLI.