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