Global transfer pricing guide

Transfer pricing - Senegal

01 Jan 20254 min read
This publication provides a high-level overview of Senegal's transfer pricing rules and outlines who to contact for expert guidance in this area.
Contents

Introduction to transfer pricing in Senegal

  • The Senegal TP rules are covered under the below articles in the General Tax Code:
    • Article 17 on the arm’s-length principle.

    • Article 31bis on the annual declaration of foreign related- party transactions.

    • Article 31ter on CbC reporting and Article 667-III.b on the CbC report fine.

    • Article 638 and 639 on the TP documentation obligation.

    • Article 9-2 on thin-capitalization in the context of certain intragroup financing. arrangements such as intragroup interest payments on debt.

    • Article 667-III.a on the annual TP return fines.

    • Article 667-III.c on the TP documentation fine.
  • Senegal is not a member of the OECD. However, it is a member of the inclusive framework.

  • As a member of the inclusive framework, Senegal is required to adopt the minimum BEPS standard (Actions 5, 6, 13 and 14).

  • The guides published in Togo also refer to the OECD Guidelines.

  • However, in practice the tax authorities do indicate in some audits that it is not bound by the OECD Guidelines in assessing the arm’s length nature of the intragroup transactions.
  • No mandatory Transfer pricing method to be applied as per the General Tax Code. However the obligation is that transactions shall be performed on arm’s length principal basis. In practice, Revenue authorities are eager to follow OECD TP methods recommended (even if they remain free to challenge it should they consider the one used not appropriate).
  • We understand that by Self-assessment you refer to automatic taxation. Automatic taxation may arise in the situation where the company does not comply with its filing obligations. Especially for Transfer pricing purposes, not having the local file for an entity that shall comply with it may trigger automatic TP adjustment.

Transfer pricing documentation

  • Article 638 and 639 of the General Tax Code outlines the TP documentation obligation of the taxpayer.

  • Taxpayers are required to prepare a master file, local file, CbC report and a TP return on an annual basis.

  • The master file, local file and CbC report must be prepared in according to the guidance provided in the OECD Guidelines and BEPS Action 13.

  • The master file and local file must be prepared from financial years opened after 1 January 2018.

  • Taxpayers that meet at least one of the following conditions are required to prepare TP documentation: 

    • Attained a turnover, excluding taxes or gross assets, of at least XOF5 billion, or

    • Directly or indirectly holds more than 50% of the share capital or voting rights of a company, located in Senegal or abroad, which generates a turnover, excluding taxes or holds gross assets, of at least XOF5 billion.

  • The content of the master file and local file must be in line with BEPS Action 13.

  • The master file and local file must be filed within 20 days following the tax auditor’s request of TP documentation.

  • CbC reporting must be prepared and filed annually for the below taxpayers:
    • Senegalese tax-resident company has been elected by the multinational group to file a CbC report.

    • The Senegalese tax-resident company that fails to provide evidence that another company of the multinational group has been designated as the company filing the CbC report; or

    • The Senegalese jurisdiction has been notified regarding a systematic failure to exchange the information.
  • lack of reaction to a request from the tax authorities;

  • documentation not filed;

  • documentation not available | produced or only partially produced.
  • A penalty of XOF10 million may be imposed for the failure to submit or late submission of the TP return.

  • The TP return is used as a risk assessment by the tax authority, therefore, a penalty of XOF200,000 may be imposed in terms of Article 667-II of the General Tax Code for the omission of information or incorrect disclosure.

  • A penalty of XOF25 million may be imposed for the failure or delay in submitting the CbC report.

  • The SRA may impose a penalty of 0.5% on the volume of the transactions that were not documented or are missing for TP documentation that is not provided within the 20-day period upon the tax authorities’ request.

  • In a case where there is an adjustment made by the SRA in the TP reassessment, the profit indirectly transferred qualifies as a deemed distribution of a benefit and is subjected to withholding tax at 50%.

Economic analysis and how to demonstrate an arm’s length result

  • The TNMM, CUP, RPM, PSM or CPM methods that are consistent with the methods recommended in the OECD Guidelines may be applied.

  • Senegal follows the guidance on comparability analysis that is outlined in Chapter III of the OECD Guidelines.

  • The SRA prefers the use of domestic comparables as they have a better illustrate the relevance of the comparability analysis due to their direct and close link to the controlled transaction.

  • The Senegal legislation allows the use of an arm’s length range and/or statistical measure for determining arm’s length remuneration.

Advance Pricing Agreements (APAs), dispute avoidance and resolution

  • The SRA allows taxpayers to apply for APA’s which could either a unilateral or a bilateral APA.

  • The APA application must be filled within six months before the beginning of the first fiscal year indicated in the APA request.

Exemptions

  • No specific exemption for companies within the scope.

Related developments

  • None.

Contact us

For further information on transfer pricing in Senegal please contact:

Mansour Gaye
Managing Partner

E mansour.gaye@sn.gt.com

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