For businesses operating within the country of Senegal, ensuring compliance and optimizing financial operations regarding its tax framework is an important strength and a sustainability factor. Among the most significant tax provisions are the Value-Added Tax (VAT) and Withholding Taxes, which impact businesses in diverse sectors. Our present article aims to provide a concise overview of these two tax systems, their application, and their importance in the broader economic landscape of Senegal. Understanding these taxes is mandatory for businesses looking to maintain regulatory compliance and optimize their financial strategies.

Value-Added Tax (VAT) in Senegal

VAT plays a key role in Senegal’s tax system, with the general rate set at 18%. However, the rate is lower for some sectors, such as tourism, which benefits from a 10% VAT rate. Furthermore, specific financial activities, including banking, money transfers, and currency exchange, are subject to a 17% special tax (called Tax on Financial Activities or Ex Tax on Banking Operations) instead of VAT.
From a legal standpoint regarding the tax code of Senegal, VAT applies to the supply of goods and services performed by a taxable entity if the good is delivered in the territory of Senegal or the beneficiary of the service delivered is in the territory too, and it also applies to imports. It means that when it comes to the place of taxation, for goods, it is where the goods are located at the time of supply, or in cases involving shipment, the place of departure for the goods. Services, however, are taxed based on where they are used or where the entity receiving the service is established.
It is important to note that some operations are expressly exempt from VAT by the Senegalese Tax Code. For example, goods under suspensive customs procedures, or those supplied as part of the investment phase under the National Investment Code, enjoy VAT exemptions (but for that one specific procedures need to be performed so the business can apply to benefit for an agreement to the National Investment Code.

Withholding Taxes in Senegal

Withholding taxes, commonly referred to as tax retentions, represent income tax collected by the payer before the recipient receives their income. In Senegal, withholding taxes apply to various forms of payments, like consulting services billed by a physical person who doesn’t have his company for example, with rates varying based on the nature of the transaction that are the following :

• 20% on services provided by non-resident individuals or foreign companies.
• 5% on services rendered by local entities not subject to Corporate Income Tax (CIT).
• 10% on dividends distributed to shareholders.
• 13% on bond interest.
• 8% on interest earned on bank deposits or guaranteed accounts.
• 16% on other revenue, such as interest on loans.

Double Tax Treaties often reduce withholding tax rates, particularly for international transactions, aligning Senegal’s tax policies with global standards such as the OECD regulations.

If you’re looking to dive deeper into any of the topics covered here, or need personalized advice, don’t hesitate to reach out to us for a consultation. Your tax strategy could be the key to unlocking greater financial success in Senegal and Africa.