A business may be conducted by individuals, Senegalese companies or branches of foreign companies.
A Senegalese company may be a joint stock company, a limited liability company or a single proprietorship in accordance with the Civil and Commercial Code. Minimum equity is FCFA 500 000 for joint stock companies and FCFA 2 million for limited liability companies with a minimum of seven shareholders that may be individuals, public bodies or companies. Specific regulations apply to public companies.
Limited liability companies or branches of a foreign company are the most common ways for operating a business in Senegal. Branches of foreign companies or branches as such and their liabilities are not limited to the extent of their local assets.
All limited liability companies and joint stock companies with equity in excess of FCFA 7 million have to appoint statutory auditors with a mandate renewed every three years. Statutory audits have to be conducted in accordance with generally accepted auditing standards.
Taxes on corporate income and gains
Senegalese companies are taxed on the territoriality principle. As a result, companies carrying on a trade or business outside Senegal are not taxed in Senegal on the related profits. Foreign companies with activities in Senegal are subject to Senegalese corporate tax on Senegalese-source profits only.
For 1994, the corporate income tax rate is 35% and the minimum tax payable is FCFA 500 000 (FCFA 1 million if annual turnover exceeds FCFA 500 million)
The profits realised in Senegal by branches of foreign companies which have not been reinvested in Senegal are deemed to be distributed and are therefore subject to a 16% withholding tax. This system is subject to treaty modification.
Capital gains are generally taxed at the regular corporate rate. The tax, however, can be deferred :
- if the proceeds are used to acquire a new fixed assets in Senegal within three years, or
- in the event of a merger (or other corporate acquisition)
If the business is totally or partially transferred or discontinued, only one-half of the net capital gain is taxed if the event occurs less than five years after the start-up or purchase of the business, and only one-third of the gain is taxed if the event occurs five years or more after the business was begun or purchased.
Capital gains on the sale or transfer of land and buildings are also subject to land tax.
- In general, foreign tax credits are not allowed, income subject to foreign tax which is not exempt from Senegalese tax under the territoriality principle is taxable net of the foreign tax. However, the tax treaty with France provides a tax credit for French tax paid on dividends.
- Taxable income is based on financial statements prepared according to generally accepted accounting principles and the rules contained in the National General Accounting Plan promulgated by the Senegalese Government.
- Business expenses are generally deductible unless specifically excluded by law. The following expenses are not deductible :
- foreign land office overhead limited to 20% of Senegalese taxable profits before deduction of foreign head office overhead (unless otherwise provided by tax treaties)
- the amount of interest paid to shareholders in excess of two percentage points above a standard annual rate set by the Central Bank and the interest on loans in excess of the capital stock amount
- certain specific charges over specified limits,
- taxes, penalties, gifts and most liberalities (payments that do not produce a compensatory benefit, such as excessive remuneration paid to a director)
In determining accounting profit, companies must establish certain provisions, such as a provision for risk of loss or for certain expenses. These provisions are normally deductible for tax purposes if they provide for clearly specified losses or expenses that are probably going to occur and if they appear in the financial statements and in a specific statement in the tax return.
Provision for equipment replacements is also allowed in accordance with the annual legal rate of Provision for Renewal of Equipment and Material (PRMO) index issued by the Ministry of Finance.
- Land and some intangible assets, such as goodwill, are not depreciable for tax purposes. Other fixed assets may be depreciated. The straight-line method is generally allowed at the usual rates, i.e. 5% for building and 20% for machinery and equipment. Accelerated decreasing depreciation is allowed in specific cases.
- There is no fiscal integration system equivalent to a consolidated filing position in Senegal.
- Dividends paid are subject to a 16% withholding tax except for French citizens resident in France (15%).
A parent corporation may exclude up to 95% of the net dividends received from a subsidiary if all of the following apply :
- The parent corporation and the subsidiary are either joint-stock companies or limited liability companies.
- The parent corporation has its registered office in Senegal and is subject to corporate income tax.
- The parent corporation holds at least 20% of the shares of the subsidiary.
- The shares of the subsidiary have been held by the parent corporation since the formation of the subsidiary or for two years in registered form.
Dividends distributed by a Senegalese parent company that consist of dividends received from an at least 20% owned Senegalese subsidiary are not subject to dividend withholding tax on the second distribution.
Other Significant Taxes
The table below summarises other significant taxes :
Nature of Tax Rate(%)
Internal turnover tax, a value added tax, on goods sold and services rendered 10 or 20
Business activity tax (patente), based onthe business rental value of tangible assets and equipment and the number of employees various
Registration duties, on transfers of realproperty or business 2 to 15
Land tax, on capital gains resulting fromthe sale on transfer of land and buildings 15
Payroll taxes, paid by the employee for a Senegalese employee 3 Foreign employee 6
Social security contributions Paid the regular pension, paid on each employee's gross salary up to FCFA 720 000 7 to 11
For the regular pension, paid on each employee's gross salary up to FCFA 2,4 million Employer 7,2 Employee 4,8
For the regular pension, paid on an executive'sgross salary up to FCF 7,2 million Employer 3 Employee 2
Under the “Investment Code” various incentives have been defined to encourage new investments.
Corporations may apply for various categories of priority status and corresponding tax exemptions. The priority status varies depending on the nature of the project and the level of investments (including free industrial zone facilities).
Exchange control regulations exist in Senegal for financial transfers outside the Franc Zone (a monetary zone including France and its former overseas colonies).
Visa is not required for citizens of most African Francophone countries, countries belonging to the European Union or South African citizens.
For all other countries the reciprocity rule generally applies. Visa formalities are fulfilled in the local Senegalese Embassy or the Ministry of Foreign Affairs in Dakar.