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Senegal Cracks Down on Non-Compliance in Finance

In a significant move towards aligning with international taxation norms, Senegal’s Minister of Finance has issued an order detailing the content of transfer pricing documentation. This development is in line with the country’s efforts to harmonize its tax practices with regional and global standards.

Harmonization Efforts

The order, which came into effect on August 1, 2023, coincides with the ECOWAS Directive C/DIR.6/07/23 adopted on July 6, 2023, aimed at standardizing transfer pricing rules across member states. Companies are required to comply by December 31, 2026.

Key Aspects of the Order

The order outlines two key elements:

  • Master File (MF): Requires companies to provide detailed information on:
    • Group structure
    • Business areas
    • Intangible assets
    • Financial activities
    • Tax status
  • Local File (LF): Demands specifics on the local entity’s:
    • Structure
    • Transactions with related entities
    • Comprehensive financial information

Consequences of Non-Compliance

Senegal’s move towards enhanced tax regulation is expected to bring significant consequences for companies that fail to comply. The country has introduced stringent penalties for non-compliance, including:

  • Fines of up to 0.5% on intra-group transactions
  • Penalties for submitting non-compliant documentation or failing to update records

Impact on the Economy

The new order is expected to boost national tax revenues and promote fair competition among companies in Senegal. By aligning with regional and international standards, Senegal demonstrates its commitment to combating base erosion and indirect profit transfer.

Action Required

As the compliance deadline approaches, companies operating in Senegal are advised to review their transfer pricing documentation and ensure that they meet the new requirements to avoid financial penalties.

For more information on tax and legal services, contact FACE Africa Tax & Legal.