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

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.

The LFI for 2024 incorporates some changes aimed at expanding the tax base, achieving an equitable distribution of the tax burden, and ensuring the stability of tax revenues.

The real estate capital gains tax currently encompasses indirect transfers of immovable property, rights in rem, goodwill, and customer bases. Point 1 of article 556 of the GTC broadens the applicability of this tax to the specified disposals.

The government of Senegal is responding to digital challenges by strengthening legislation to implement VAT on digital services across all formats. A derogation from Article 355 of the GTC permits Senegal to impose taxes on foreign service providers for digital services delivered to Senegalese customers, whether through intermediaries or digital platforms.

The tax regime for alcoholic beverages and liquids has been revised to protect local industries and combat counterfeit alcohol imports. The tobacco tax is now applicable to derived tobacco products, as per Article 432 of the GTC, thereby reducing the risk to public health and the tax base.

Additional measures involve the revision of stamp duties applicable to administrative documents, including duplicates, which are currently established at 40,000 XOF for ordinary passports and 4,000 XOF for pilgrims' passports. A stamp duty of 2,000 XOF is implemented for the issuance of Apostille Certificates by the Ministry of Foreign Affairs.

Senegal has updated its country-by-country reporting framework to address base erosion and profit shifting, with new provisions introduced in Article 31b of the GTC. Failure to file, incomplete, or incorrectly within the specified timeframe carries a financial penalty of 25,000,000 XOF.

Article 223 of the GTC has been amended to permit taxpayers responsible for instalments on income derived from securities to apply excess payments towards taxes owed in subsequent years.

Furthermore, Article 444-3 of the GTC has been amended to prevent double taxation for individuals acquiring empty packaging for products they manufacture or sell, which are subject to this tax.

Senegal has revised its tax implications for foreign transfers of company shares related to Senegalese mining and hydrocarbon rights, aiming to reduce potential revenue losses. The revised wording of point 5-II of article 4 of the GTC stipulates that all such transfers are subject to taxation in Senegal.

The tax reform introduced by the 2024 LFI represents a significant advancement in the modernization and harmonization of the tax system in Senegal. The adjustments indicate the government's aim to align with international standards, such as OECD recommendations, and to respond to the expansion of the digital economy, all while ensuring the integrity of the country’s tax base.

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