The laws of Senegal are based on the civil law system. There is a set of legal codes establishing legal procedures voted by the national assembly or adopted by the government and applicable in different matters.

Senegal’s legal system consists of different levels of jurisdiction:

• courts of first instance of common law;
• courts of appeal, which are jurisdictions in charge of reviewing cases judged by the courts of first instance;
• the special courts or courts of exception, which do not have full jurisdiction and are only competent for cases that are listed by law;
• the Supreme Court, which is the highest court in the Senegalese judicial system, before which appeals may be filed for the analysis of legal issues in order to assess violations of the law by lower courts (except for matters that fall under the jurisdiction of the Common Court of Justice and Arbitration); and
• the Common Court of Justice and Arbitration of the Organisation for the Harmonisation of Business Law in Africa (OHADA) located in Abidjan, the jurisdiction of which concerns matters standardised by OHADA.

As a general rule, foreign investments do not require review or approval by national authorities except for the sectors listed below. However, a declaration for statistical purposes to the Directorate of Money and Credit of the Ministry of Finance is required for all foreign direct investment (FDI).

The Public Procurement Code and the Public-Private Partnership Law guarantee the free participation of foreign investors in international tenders, in accordance with the principle of equal treatment and non-discrimination. In addition to these principles, the Investment Code, in force since 2004, gives incentives to national and foreign investors, such as tax benefits, guarantees and administrative facilities.

In addition to this general framework, Senegal has signed a number of bilateral agreements on investment promotion and protection, which offer broader benefits than the Investment Code to investors who are nationals of states that are party to the agreements.

Please note that investors, regardless of their nationality, enjoy the same treatment as Senegalese natural or legal persons, and are subject to the same duties and obligations under the laws of Senegal, subject to reciprocity and without prejudice to measures that may concern all foreign nationals or result from the provisions of treaties or agreements to which the Republic of Senegal is a party.

Exception

Some sectors are subject to special rules and require administrative approval for certain investments and direct operations. These include the mining sector (Minister of Mines and Geology), hydrocarbons (Minister of Oil and Energy), banking (Ministry of Finance and the Central Bank of West African States (known as the “BCEAO”)), and telecommunications (Minister of Digital Economy and Telecommunications), etc.

Moreover, if an investor wishes to benefit from the particular advantages provided by the Investment Code, particularly in terms of taxation and customs, the investor must submit an application for approval to the National Agency for the Promotion of Investment and Major Works, known as “APIX”, or to the competent authority designated for this purpose.

Overview

Senegal is a politically stable, democratic country.

Economically, after a period of sustained growth over the past decade, the pandemic has dealt a heavy blow to the national economy, affecting vital sectors such as tourism, fishing, trade, education and transport, as well as the hydrocarbon sector, which contributes significantly to Senegal’s GDP.

The objective is to create a better economic environment for investors.

New Investment Code

With this in mind, a new Investment Code has been adopted in which the government has provided specific incentives to stimulate investment in key sectors, such as agriculture and agribusiness, fishing, livestock and related industries, manufacturing, tourism, mining and hydrocarbons, among others. Investment incentives include, but are not limited to:

• customs duty exemptions;
• VAT suspension;
• tax credits for qualifying investments that are deductible over time;
• greater investment protection; and
• free export company status for agricultural, industrial and telecommunications companies deriving at least 8% of their turnover from exports.

In other words, investment is supported by an attractive incentive policy based on legal, fiscal and customs measures that are regularly updated. Tax relief measures, guarantees and advantages are granted to investors through the new Investment Code, the free export enterprise regime and the build-operate-transfer (BOT) law. A modern one-stop shop centralises, facilitates and accelerates administrative formalities.

Recent Developments in the Regulation of FDI

As an important member of the West African Economic and Monetary Union (WAEMU) and the Economic Community of West African States (ECOWAS), and thanks to its strategic position, Senegal is a gateway to a large market of several million consumers located in Africa.

Numerous innovations have been introduced, such as the creation of one-stop shops for the incorporation of a company or for connection to electricity, the dematerialisation of customs procedures, the reduction of taxes for companies that invest, as well as the various tax incentives allowed by the Investment Code.

In addition, the government provides for the free repatriation of investment capital and returns, subject to compliance with the procedures in force, guarantees expropriation and provides for compensation for losses in the event of war, armed conflict or riots. Senegal is fully committed to improving its business climate to promote investment and private sector-led economic growth.

There do not appear to be any ongoing or planned changes in the economic/political/business climate or FDI regulations in the jurisdiction.

The Most Common Structures Used for Transactions

In Senegal, the most common structures used for transactions are:

• the limited liability company (société à responsabilité limitée, or SARL);
• the anonymous society (société anonyme, or SA); and
• the simplified joint stock company (société par action simplifiée, or SAS).

All of these can have only one shareholder, which simplifies the process considerably.

Structures Preferred for Acquisitions of Public Companies

In Senegal, Law No 90-07 of 26 June 1990 controls the process relating to the organisation and control of companies in the parapublic sector and the control of legal entities of private law benefiting from the financial assistance of public power.

A public company can take the form of a national society (société nationale) or a public limited company with majority public participation (société anonyme à participation publique majoritaire).

For the acquisition of this type of company, the use of a joint stock company, such as an SA or SAS, is recommended.

The foreign investor needs to be aware that a formal procedure is required for the acquisition of all public companies. This procedure differs depending on whether a majority or totality of shares will be acquired. In the latter case, it is a privatisation procedure, which is much more complex and constraining.

Key Considerations for a Foreign Investor in Selecting a Transaction Structure

In any foreign acquisition, the main issues are likely to be:

• the identity of the target (public or private, form of entity);
• the legal barriers depending on the structure and the sector;
• whether it is a merger or an acquisition; and
• the tax implications of the acquisition.

Transaction Structures Commonly Used for Acquisitions of Companies/Businesses Compared With Minority Investments

Whether it is for the acquisition of companies or businesses or for minority shareholdings, the acquirer may incorporate a company. In the case of minority stakes, the company may be wholly owned by the investor. In the case of the acquisition of a company or business, it may be appropriate for the investors to group together in a holding company and buy the company together through their holding company.

A foreign investor who wants to invest in Senegal has to take into account both domestic and regional regulations.

The OHADA Uniform Act on the Law of Commercial Companies and Economic Interest Groups

Senegal is a member of OHADA and is governed by the Uniform Act on the Law of Commercial Companies and Economic Interest Groups (AUSCGIE), dated 30 January 2014. When acquiring a stake in a company, the investor should first check the articles of association to ensure that there are no restrictions on shares.

The AUSCGIE provides that the articles of association can contain an agreement clause, a pre-emption clause, an exit clause and a non-dissolution clause.

For example, the transfer of shares in an SARL to third parties requires the prior authorisation of a majority of shareholders holding at least three-quarters of the share capital. In an SA or SAS, the transfer of shares to a third party, for companies not listed on a regulated market, may be approved in advance by the board of directors or the ordinary shareholders’ meeting. A pre-emption right can also be provided in the articles of association.

The articles of association can therefore prohibit the transfer of the company’s shares, although such a clause must not be for a period exceeding ten years.

Formal Procedure Required a Posteriori

After the acquisition, the foreign investor has to make a foreign investment declaration (déclaration d’investissements étrangers) a posteriori to the Directorate in Charge of External Finance and the BCEAO. This is a common procedure in the WAEMU, provided for by Article 10 of Regulation No 09/2010/CM/UEMOA.

The letter of declaration must be sent as soon as the transaction is carried out. At the latest, the declaration must be sent one month after the first date of receipt of part or all of the funds relating to it by the resident company in which the investment is made, or its representative (consulting firm).

The articles of association of the resident company, the constitutive acts of the company, the notarised declaration of subscription and payments, and the minutes of the general meeting authorising the opening of capital must be attached to the letter of declaration.

Particularities Depending on the Activity Sector

The following are a few examples of particularities that depend on the sector of activity.

In the maritime sector, under the current legislation, an SAS is not allowed to ask for approval as a customs agent and forwarding agent, and the share capital will differ depending on the activity. 

The banking and insurance sectors are separately regulated.

The sectors of natural resources and energy are open to foreign investment, but limitations are being put in place according to the nature of the activity carried out in the oil and gas sector. There is talk of following the example of local content in the hydrocarbons sector and applying it to the mining sector.

In Senegal, corporate law is governed by OHADA law and by the AUSCGIE dated 30 January 2014. Apart from the legal provisions of the AUSCGIE, the articles of association and the shareholders’ agreement are also sources of corporate governance.

The forms of society most chosen by the founders of companies in Senegal are:

• the SARL, which is the simplest of commercial companies;
• the SA, which can be organised with either:
1. a board of directors; or
2. a managing director; and
• the SAS – introduced in the AUSCGIE in 2014 – the articles of association of which freely provide for the organisation and operation of the company subject to certain mandatory rules.

The société en nom collectif or the société en commandite simple is one of a number of forms of society which are less used.

Finally, the AUSCGIE also provides the possibility to open a branch or a representative office.

The choice of the corporate form by the investors greatly depends, among other considerations, on:

• the purpose of the company – to comply with sector-related corporate requirements or perform operations such as bonds issuance;
• the financial commitments of the shareholders (which are limited in the SARL, SA or SAS); and
• the flexibility of the corporate organisation.

The AUSCGIE, the articles of association and the extra-statutory documents govern the legal relationship between a company and its minority investors. Minority investors have equal rights and obligations within companies to those of majority shareholders, which are mainly rights and obligations attached to the shares. Among other rights, there are information rights, voting rights and rights to dividends. Article 30 of the AUSCGIE also protects minority shareholders against all decisions taken by majority shareholders which go against the social interests of the company, and also against decisions which exclusively favour the interests of the majority shareholders.

These rights are regardless of whether it is a public or private company, as the AUSCGIE applies to both types of company.

The principles of equal treatment between foreign and Senegalese investors and non-discrimination were established by Article 9 of Law No 2004-06 of 6 February 2004 on the Investment Code.

However, certain sectors, such as the mining sector, the electricity/renewable energy sector, the hydrocarbons sector, and banking and finance are subject to special requirements in terms of approvals and/or authorisations for certain investments. An investment without approval could in these cases have damaging consequences for the investor in terms of administrative, pecuniary or penal sanctions.

Furthermore, WAEMU Regulation No 09/2010/CM, dated 1 October 2010, relating to financial relations in the WAEMU, provides that the constitution of foreign investments in a WAEMU member state must be declared for statistical purposes to the Directorate in Charge of External Finance and to the BCEAO, in the case of direct investments.

A direct investment is an equity investment of more than 10% in a target company where the threshold of ownership percentage is 10%. The declaration is made through a letter for the attention of the relevant administrative authorities.

Senegal is part of the WAEMU. It therefore has access to three major components of capital markets in the zone:

• The Public Securities Market: Any investor, regardless of their background, can make financial investments through authorised market intermediaries within the zone, in this market, which groups together eight issuers that are the member states of the WAEMU. It is an auction market.
• The Bourse Régionale des Valeurs Mobilières (BRVM): This is the stock exchange of the WAEMU zone. The shares listed on the BRVM are grouped into seven sectors – industry, finance, agriculture, services, transport, distribution and others.
• BCEAO shares.

The only forms of company that can access the markets through a public offering are SAs with representation in the WAEMU and with a share capital of XOF10 million or more.

Small-cap and mid-cap companies can, however, take out a loan with a bank, but the interest rates are often very high (around 14%).

Therefore, in order to increase their capital, the best solution for these companies is to integrate a new minority investor. They can also call upon the funds provided by the Senegalese government.

Regulations concerning capital markets in Senegal, as in other WAEMU jurisdictions, require issuers to publish all relevant information, enabling the public to form a judgement on the assets and liabilities, activity, financial situation and prospects of the issuer, as well as on the characteristics and purpose of the operation and the related rights, through the preparation of a prospectus, which is subject to the approval of the Regional Council for Public Savings and Financial Markets (CREPMF) before being distributed to the public.

It should be noted that the prospectus must be renewed at the beginning of each calendar year and submitted to the CREPMF. This prospectus must be widely published in the WAEMU territory by the issuer as soon as the visa is granted by the CREPMF and must be made available to the public at the CREPMF headquarters and at the member establishments of the operation’s placement syndicate.

Foreign investments in Senegal, as in other WAEMU member states, and transfers of investments between non-residents, are not limited. In order to keep statistics up to date, these operations must be declared to the Directorate of External Finance and, in the case of direct investments, to the BCEAO.

FDI in Senegal is subject to regulatory review of the fund, like any other company (see 7.1 Applicable Regulator and Process Overview).

Foreign investors structured as investment funds, SICAVs, etc (organismes de placement collectif en valeur mobilière, or OPCVM), must apply for approval with the WAEMU Regional Council for Public Savings and Financial Markets before starting their activity.

This application must include a letter of application, the financial situation of each promoter for the last three years, the draft prospectus, the custodian agreement, the certified financial statements of the management company and the custodian for the last three years, a five-year projection of the evolution of the number of securities and assets of the OPCVM, and letters of commitment in conformity with Articles 76 and 77 of the General Regulations. Depending on the legal form, other documents may be requested.

The transformation of an OPCVM or a change of legal form requires new authorisation.

According to the legal form of the OPCVM, the amount of the registered capital varies between XOF50 million and XOF250 million.

Existence of a Merger Control Regime

The following texts set up a merger control regime within the WAEMU:

• the Amended Treaty of the WAEMU;
• Regulation No 02/2002/CM/UEMOA of 23 May 2002 on anti-competitive business practices (“Regulation 02/2002”);
• Regulation No 03/2002/CM/UEMOA of 23 May 2002 on procedures (“Regulation 03/2002”); and
• Directive No 02/2002/CM/UEMOA.

Relevant Authority

The WAEMU Competition Commission (the “Commission”) is responsible, under the supervision of the Court of Justice, for applying the competition rules (Article 90 of the Amended Treaty).

The national competition structures have a general task to investigate and assist the Commission (Article 3 of Directive No 02/2002/CM/UEMOA).

The Commission has the power to take decisions. It may oblige companies or associations of companies and put an end to antitrust agreements.

However, the Commission may also find, of its own motion or at the request of the companies or associations of companies involved, that there are no grounds for it to intervene in respect of a concerted or anti-competitive agreement, decision or practice through a negative clearance (Articles 3 et seq of Regulation 03/2002).

Individual Exemption

The Commission may adopt, by way of an implementing regulation, exemptions by category for specialisation agreements, research and development agreements and technology transfer agreements (Article 6.2 of Regulation 03/2002). Indeed, the Commission may, through this exemption, declare as inapplicable the prohibition of anti-competitive practices under Article 88 of the Amended Treaty to the agreements cited above, on its own initiative or at the notification and request of the companies or associations of companies involved.

The individual exemption decision is granted for a specific period and may be subject to conditions and requirements.

Individual exemption process

In order to obtain an individual exemption decision (Article 8 of Regulation 03/2002), the following are entitled to submit a request or notification:

• any enterprise and any association of companies participating in agreements or concerted practices;
• any association of companies that engages in concerted practices having as their object or effect the restriction or distortion of competition within the WAEMU; and
• in accordance with Regulation 02/2002, the parties concerned and/or the member states to which they belong.

The following are also entitled to submit a request – any companies which are likely to hold, either alone or with other companies, a dominant position in the Common Market of the WAEMU or in a substantial part of it.

Individual exemption notification

Requests and notifications should be submitted using Form N. Ten copies and three copies of annexes (Article 9 of Regulation 03/2002) must be submitted to the Commission and a receipt must be delivered to the applicants and notifiers without delay (Article 10 of Regulation 03/2002).

Requests and notifications will take effect from the date of receipt by the Commission. However, where the request or notification is sent by registered mail, it will take effect on the date indicated by the postmark of the place of despatch (Article 11 of Regulation 03/2002).

Following a notification, the decision-making procedure is as follows:

• the Commission issues a short communication; and
1. within six months of the notification, the Commission may decide to grant a “negative certification” or an individual exemption; or
2. if it has doubts about the compatibility of agreements, decisions or concerted practices with those of the Common Market, the Commission may decide to initiate a contradictory procedure.

In addition, it should be noted that the individual exemption decision is granted for a fixed period and may be subject to conditions and obligations as provided by Article 7 of Regulation 03/2002.

The merger control regime does not involve a substantive overlap or competitive assessment of the investment.

The Commission may, by decision, impose fines on companies and associations of companies (between XOF500,000 and XOF100 million, or 10% of the turnover in the preceding business year of each of the companies participating in the infringement, or 10% of the assets of those companies).

The fine is without prejudice to remedies before the national courts relating to compensation for damage suffered.

The Commission may, by decision, impose penalties on companies and associations of companies (between XOF50,000 and XOF1 million per day of delay from the date it fixes its decision) to compel companies to put an end to anti-competitive behaviour (Articles 22 and 23 of Regulation 03/2002).

The Commission may also adopt interim measures and, in particular, an injunction to return to the previous state, the suspension of the practice concerned and the imposition of conditions necessary to prevent any potential anti-competitive effects.

If the Commission observes, on request or on its own initiative, an infringement such as a cartel or abuse of a dominant position, it can compel the companies and associations of companies involved to put an end to the infringement found.

Any member state of the WAEMU and any natural or legal person may submit a request to this effect.

Process

A complaint against an agreement, decision or practice may be brought before the Commission by any natural or legal person (Article 12 of Regulation 03/2002).

The Commission must initiate a contradictory procedure and adopt a decision within 12 months of its opening of the contradictory procedure. Silence from the Commission after this period is deemed to constitute an implicit decision of “negative certification” or individual exemption (Article 16 of Regulation 03/2002).

Sanctions

The Commission may, by decision, impose fines on companies and associations of companies of XOF500,000 to XOF100 million (Article 22 of Regulation 03/2002).

This decision is not of a criminal nature. Penalties imposed by the Commission will be without prejudice to actions before the national courts for compensation for damage suffered.

The Commission publishes its decisions taking into account business confidentiality (Article 29 of Regulation 03/2002). A judicial appeal is possible before the WAEMU Court of Justice to evaluate the legality of decisions taken by the Commission.

The action for evaluation of legality is open to member states and the Commission. It is also open to any natural or legal person against any act that adversely affects them.

The Court of Justice has unlimited jurisdiction to hear and determine actions brought against decisions by the Commission to impose a fine or periodic penalty payment. The court may amend or void the decisions taken, reduce or increase the amount of fines and periodic penalty payments, or impose specific obligations (Article 31 of Regulation 03/2002).

There does not appear to be any national security review regime applicable to FDI in Senegal. On the other hand, community texts of the WAEMU, of which Senegal is a member, provide for a declaration regime for statistical purposes to the Directorate of Money and Credit of the Ministry of Finance and to the Central Bank in the context of the constitution of foreign investments in a WAEMU member state (such as Senegal) and the transfer of investments between non-residents, as well as loans contracted by residents with non-residents. It should be remembered that this declaration obligation for statistical purposes only concerns direct investments (ie, sole participation, when it exceeds 10% of the capital of a company).

Declaration of Investment

The declaration of investment or the declaration of foreign borrowing takes the form of a simple letter sent against a receipt to the Ministry of Finance and to the Central Bank. It contains, on the one hand, for the constitution of a direct investment:

• the designation of the enterprise or company abroad or in the WAEMU member state in which the investment is to take place;
• the nature of the investment;
• the amount of the investment;
• the methods of financing;
• the deadlines for its realisation; and
• the reasons for and the effects of the investment envisaged.

On the other hand, a loan declaration contains:

• the name, address and professional activity of the borrower;
• the name and address of the lender;
• the date of the loan agreement or any document in lieu thereof (documents to be attached);
• the currency of account of the loan;
• the total amount of the loan, expressed in the currency of account;
• the duration of the loan and proposed repayment dates; and
• other information (eg, whether this is a consolidation of a previous loan, the amount of outstanding loans to the same or other foreign lenders, etc).

In practice, this declaration may be filed after the financing documents have been signed and the transaction has been completed, or after the funds have been disbursed.

The Ministry of Finance or the Central Bank is free to request additional information from applicants.

In order to constitute FDI in Senegal, it is necessary that the FDI relates to the purchase, creation or extension of businesses, branches or any other enterprise of a personal nature, all other operations that, isolated or multiple, concomitant or successive, have the effect of allowing one or more persons to take or increase control of a company carrying on an industrial, agricultural, commercial, financial or real estate activity, whatever its form, or to ensure the extension of such a company already under its control.

However, the only participation that is not considered to be “direct investment” is when it does not exceed 10% of the capital of a company. In other words, if the shareholding is less than 10%, the investment would not be considered as FDI and would not therefore be subject to the reporting requirement for statistical purposes described above.

As mentioned in 7.1 Applicable Regulator and Process Overview, the constitution of FDI in Senegal is subject to mandatory reporting for statistical purposes to the Ministry of Finance and Budget and to the Central Bank. These authorities may request additional documents or information from the applicant.

In the case of non-compliance with this mandatory formality, sanctions are provided for infringement of the regulation of external financial relations in accordance with Decision No CM/UMOA/020/12/2012 of 14 December 2012, adopting the draft uniform law on litigation of infringements of the regulation of external financial relations of the member states of the WAEMU.

Infractions

There are four such infractions:

• failure to comply with reporting obligations;
• failure to comply with prescribed procedures or required formalities;
• failure to produce the required authorisations; and
• failure to comply with the conditions attached to these authorisations.

Penalties for natural persons

Natural persons are punished by a prison sentence of one to five years and a fine of a minimum amount corresponding to the sum or value of the offence and a maximum of five times the said sum or value.

Penalties for legal persons

Legal entities other than credit institutions, on behalf or for the benefit of which an infringement of the regulations on external financial relations has been committed by one of their bodies or representatives, will be punished by a fine of a minimum amount corresponding to the sum or value to which the infringement relates and a maximum of five times the said sum or value.

The relevant authorities may have the ability to challenge the FDI, either before or after the investment is made, particularly in the event of non-compliance with applicable regulations. See 7.3 Remedies and Commitments.

Under the Investment Code of 7 May 2004, foreign natural or legal persons receive the same treatment as Senegalese natural or legal persons, subject to reciprocity and without prejudice to measures that may concern all foreign nationals or result from the provisions of treaties and agreements to which the Republic of Senegal is party. However, there are some exceptions.

Real Estate Transactions

Under Law No 76-66 of 2 July 1976 on the State Property Code (amended by Law No 85-15 of 25 February 1985 repealing and replacing Article 5(a) of the State Property Code), user rights or the purchase of real estate may be required for the implementation of FDI in Senegal.

This may involve being granted a real property right over land in the state’s private domain via the conclusion of an emphyteutic lease contract with the state. This real right is subject to obligations in terms of duration (a minimum of 18 years and a maximum of 50 years with the possibility of extension within the maximum duration of 50 years, and the possibility of renewal).

The granting of this right is subject to:

• an obligation to develop the land within a certain period of time;
• rent payable in advance and subject to revision;
• an obligation for the lessee to bear all the charges relating to the building and, in particular, to pay the land taxes and accessory taxes;
• an obligation to restore the premises; and
• the risk of termination (non-performance by the lessee of its obligations), if applicable, etc.

Agreements entered into by the lessee in violation of the provisions that may have been included in the lease deed pursuant to the second paragraph of the law in question shall be null and void by operation of law and shall result in the immediate termination of the lease without indemnity. If necessary, the lessee or any occupants on his or her behalf shall be evicted in the manner indicated in the law (by means of a simple emergency injunction).

Prior declaration system

Under Law No 2013-04 of 8 July 2013, which repealed Law No 1977-85 of 10 August 1977 and subjected certain real estate transactions to prior authorisation and instituted a system of prior declaration for transactions involving a building or a real estate right, a system of prior declaration is instituted for transactions involving a building or a real estate right.

The following transactions are subject to prior declaration:

• transfer for valuable consideration or free of charge;
• exchange with or without a balance;
• partition; and
• contribution to a company.

The declaration is filed with the Directorate of Registration, Domains and Stamps, before the filing of the deed which records the transaction. The request for registration of the transfer in the land register must be accompanied by a copy of the declaration, mentioning the number and date of the discharge.

Foreign Exchange Regulations

Regulation No 09/2010/CM/UEMOA of 1 October 2010 on the external financial relations of the member states of the WAEMU sets down specific requirements.

• Intermediation obligation: Foreign exchange transactions, capital movements (issuance of transfers and/or receipt of funds) and settlements of any kind between a WAEMU member state and a foreign country or within the WAEMU between a resident and a non-resident, may only be carried out through the intermediary of the BCEAO, the administration or the post office, an authorised intermediary or an authorised manual exchange agent.
• Obligation to transfer currency: Foreign currency held in a WAEMU member state must be transferred or deposited with an authorised intermediary or, where applicable, with the BCEAO, whether these assets belong to a resident or a non-resident.
• The principle of freedom, subject to the presentation of supporting documents to the intermediary concerned, in the context of current payments abroad.
• Obligation of domiciliation: Residents are obliged to domiciliate import and export transactions with an authorised intermediary.
• Foreign exchange authorisation submitted to the Ministry of Finance for the repayment of medium and long-term loans.
• Obligation for statistical purposes to the Ministry of Finance and to the Central Bank in the event of the constitution of foreign investments in a WAEMU member state, the transfer of investments between non-residents, loans abroad, repayment by purchase and transfer of foreign currency, or by crediting foreign accounts in francs or euros for any loan abroad, etc.

The Law on Bank Regulation (Articles 26, 76 and 80) sets out the following sanctions.

• Credit institutions that have contravened the provisions of the foreign financial relations regulations in force, relating to the reporting procedures, formalities and authorisations required, will be sanctioned by the constitution, at the Central Bank, of a non-remunerated deposit. The duration of the said deposit shall be no more than one month and its amount may not exceed 200% of the amount of the operations to which the defaults relate. In the event of delay in making the deposit, the provisions of Article 76 relating to interest on arrears shall apply.
• The Central Bank may impose, in addition to the sanction provided for above, a financial penalty, which shall be at most equal to the amount of the operation to which the irregularity relates. The corresponding sums shall be recovered on behalf of the Treasury.
• Any condemnation for infringement of the regulations on external financial relations automatically entails prohibition from:
1. directing, administering or managing a credit institution or any of its agencies;
2. engaging in any of the activities defined in Article 2, such as the receipt of funds from the public, credit transactions and the management of means of payment;
3. proposing to the public the creation of a credit institution; and
4. acquiring equity interests in the capital of a credit institution.

Any condemnation for attempting to commit or complicity in the commission of the offences listed above leads to the same prohibitions.

Credit institutions that have not repatriated the products of export income in accordance with the regulations on foreign financial relations in force may be required by the Central Bank to make a non-remunerated deposit corresponding to the amount not repatriated. In case of delay in the constitution of this deposit, the credit institutions concerned will be liable to the Central Bank for interest on arrears at a rate not exceeding 1%.

Specific Industry/Sector Restrictions

Communication sector

Under Law No 2018-28 on the Electronic Communications Code, the licences, authorisations, frequency-use authorisations, approvals and declarations referred to in the said law may only be granted to companies incorporated under Senegalese law or subscribed to by companies incorporated under Senegalese law.

Under Law No 2017-27 of 13 July 2017 on the Press Code, all press or audiovisual communication companies operating in the national territory must be incorporated under Senegalese law.

For the print media, the threshold for participation in the capital is set at 51% by one or more national public or private persons. In addition, the foreign company may not directly or indirectly hold more than 20% of the capital of a print media enterprise.

The capital of an audiovisual communications company must be held by at least one or more persons of Senegalese nationality up to 51%. It is forbidden for any legal entity, acting alone or in concert, to operate more than one radio service or one television service of the same nature or to take financial holdings of more than 20% in more than two companies holding different licences.

Any failure to comply with the provisions of the Press Code is punishable by a prison sentence of two to six months or a fine of XOF100,000 to XOF1 million, or both.

Extractive sector

Under Law No 2016-32 of 8 November 2016 on the Mining Code, no one may undertake or conduct a mining operation in Senegal without first obtaining a mining title. The granting of a mining permit entitles the state to a free 10% stake in the capital of the operating company for the life of the mine. The granting, renewal, extension, transformation, transfer or amodiation of mining exploration and exploitation titles are subject to the payment of fixed entry fees paid in a single instalment, to the payment of quarterly mining royalties, and to the payment of annual surface royalties. However, the investor in this sector is guaranteed free conversion and transfer of funds for their foreign personnel, free import and export, etc.

In the oil and gas sector – with the adoption of the law on local content – the sector is divided into three regimes of activity, including the exclusive and mixed regimes that fully or partially favour local companies. In this case, foreign investment is subject to control by the sector authority.

Contravention is punished by imprisonment for a period between one month and three years or a fine of between XOF50,000 and XOF25 million, or both, for any person who voluntarily provides inaccurate information with the purpose of obtaining a mining title or an authorisation or issues false declarations in order to reduce the taxable value of the extracted products. These penalties also apply to any person guilty of complicity in those offences.

Whoever undertakes, without authorisation, to carry out research works, mining or quarrying exploration in violation of the Mining Code is punished by imprisonment for a period of between one year and five years and a fine of between XOF5 million and XOF125 million.

Other sectors

In the maritime sector, only legal entities governed by the law of the WAEMU member state in which they intend to set up operations may become licensed customs brokers. In addition, the level of participation of WAEMU nationals in the capital of approved legal persons may not be less than 25%. In case of non-compliance, the applicable sanction is the refusal of access to the profession of customs agent.

Under Law No 2021-31 of 9 July 2021 on the Electricity Code, the activities of transport and management of the national electricity distribution network in Senegal constitute a state monopoly and are considered a public service of electricity. On the other hand, an investor may be entrusted by the state with the management of this public service by a public service delegation agreement. The activities of independent production and sale of electricity, as well as the import, export and storage of electrical energy, are regulated activities subject to obtaining a title of exercise. However, SENELEC still has a monopoly on the wholesale purchase of electricity until it is spun off as a holding company.

Any person who engages in a regulated activity without the necessary permit having been issued at his or her request shall be punished by a fine of between XOF5 million and XOF300 million.

Failure to make a prior declaration to the competent authority of a regulated activity is punishable by a fine of between XOF1 million and XOF5 million.

Companies with share capital, such as public limited companies, simplified joint stock companies and limited liability companies, are subject to corporate income tax. In principle, other companies may be subject to corporate tax by option.

The taxes applicable to companies doing business in Senegal may vary depending on whether the company is a capital company or a partnership established in Senegal, or a foreign company with no permanent establishment in the country.

For Capital Companies Established in Senegal

Companies established in Senegal must pay the following taxes, unless exempted.

Corporate income tax

Under Article 3 of the General Tax Code (GTC), corporate income tax is due on profits made in Senegal. Profits from companies operating in Senegal are deemed to have been made in Senegal. The corporate tax rate is set at 30% of taxable income. Legal entities domiciled abroad that receive property income in Senegal or capital gains from the sale of real estate located in Senegal or related rights, or realise capital gains from the sale of securities or social rights held in Senegalese companies, are subject to the same corporate income tax.

Flat-rate minimum tax (IMF)

There is a minimum tax known as the Impôt Minimum Forfaitaire (IMF). It is owed by all companies or legal entities that are in deficit or that have taxable income which does not allow them to generate corporation tax higher than the amount determined by a tariff set by the GTC. The IMF is due on the turnover, excluding tax, achieved in the year preceding the year of taxation, at a rate of 0.5%, without exceeding XOF5 million. New companies are exempt for three years from their creation.

The local economic contribution (CEL/VL and CEL/VA)

This is a tax imposed for the benefit of the local municipalities.

It is due from any individual who carries on a trade, industry or profession in Senegal and is subject, in addition, to a system of taxation of real profits. Employees are excluded from the scope of the CEL. Exemptions are provided for in the GTC.

The local economic contribution includes a contribution based on the rental value of the premises used for the exercise of taxable professions (CEL/VL) and a contribution on the added value generated during the year preceding the year of taxation (CEL/VA).

The CEL/VL rate is 15% for premises rented or occupied free of charge and 20% for premises, land and installations recorded as assets in the taxpayer’s financial statements. The CEL/VA rate is 1% of the added value generated during the previous financial year, with a minimum amount of 0.5% from the year preceding that of taxation.

Value added tax (VAT)

VAT is due in Senegal on supplies of goods and services made for consideration by a taxable person per se, as well as imports, provided they are located in Senegal. VAT is due in Senegal only if the beneficiary of the service is established in Senegal or if the service is used there. The GTC provides mechanisms for deducting and refunding the VAT borne under certain conditions.

Where applicable, VAT is due from the company at a rate of 18%.

Deduction from wages

This is the withholding tax on income from employment (rate between 0% and 40% with some deductions) and the Representative Tax on Minimum (with an annual tariff between XOF900 and XOF72,000). The company must withhold this tax and pay it to the public treasury monthly or quarterly. The flat-rate contribution payable by the employer is directly due from the latter at a rate of 3% of the payroll.

Withholding tax on amounts paid to third parties

This is a withholding tax that the company must make from the amounts it pays to natural persons living in Senegal, in compensation for services of any kind provided or used in Senegal. The rate is 5%.

Tax on the removal of household refuse

The tax on the removal of household refuse (TOM) applies to all properties, subject to the land contribution of properties built or temporarily exempted from this contribution, with the exception of factories and built properties located in municipalities or parts of municipalities where a household waste collection service does not operate.

The TOM rate currently applied in Dakar by the Tax Administration is 3.6%.

Property land contributions

Land contributions are of two kinds: the land contribution of built properties and the land contribution of undeveloped properties. The rate is 5%, unless tax is already paid for the former under the CEL/VL.

Current year’s municipal tax on advertising

The municipal tax on advertising applies to companies’ advertising devices.

The rate can vary from flat rates of XOF20,000 per square metre to fixed amounts of XOF500,000 per year. It is recovered by the municipalities and must be paid before 31 March of each year.

Registration duty and stamps

It should also be noted that a certain number of deeds concerning the company must be submitted to the registration formality.

The applicable fees vary according to the nature of the act (proportional or fixed fees).

Other taxes exist for specific sectors.

Other taxes and duties are applicable as withholdings. This is the case with withholdings from the payment of interest, dividends or royalties. See 9.2 Withholding Taxes on Dividends, Interest, Etc.

For Partnerships Established in Senegal

Partnerships are, in principle, free to choose whether they are subject to corporation tax (Article 4.III of the GTC).

If they do not take such an option, their profits will fall under the category of industrial and commercial benefits (benefices industriels et commerciaux, or BIC). These companies are deemed to be fiscally transparent and do not pay the tax themselves. It is the partners who are considered to be the immediate owners of the profits made and who are each subject to BIC for their part of the profits corresponding to these social rights.

For Non-resident Companies (Permanent Establishments)

In general, non-resident companies are taxed in Senegal for corporate tax if they have a permanent establishment in Senegal or its counterpart in domestic law in the absence of a tax treaty. In general, a company is recognised as having a permanent establishment when one of the following criteria exists:

• a fixed business establishment (or independent establishment in the absence of a tax treaty);
• a dependent agent with powers to engage the foreign company; or
• a complete business cycle (a criterion that only exists in domestic law).

For the rest, it should be noted that legal persons domiciled abroad and without a presence in Senegal are taxed on land income, and on capital gains from the sale of buildings located in Senegal, or rights relating thereto or to realised capital gains. Values following the transfer of social rights or securities held in companies are governed by Senegalese law.

It should be noted that branches are in principle subject to the same taxes and duties as those mentioned above for capital companies. Even so, Article 204 of the GTC provides for a 20% withholding tax which only targets foreign legal entities, a fraction of which, equal to half of the profits made in Senegal, has not been reinvested in the country.

Tax on Income from Securities (TIS)

The TIS withholding tax applies to income distributed by legal entities paying corporate income tax according to the GTC.

Legal entities subject to corporate income tax and distributing this income must also withhold tax at a rate of 10% and pay it to the Treasury.

Nevertheless, when the tax regime of the parent company/subsidiary is applicable, dividends distributed by the parent company are not subject to withholding tax up to the net amount of the shares or interest received from the subsidiary.

Income from shares, company shares and interest shares are subject to a 10% rate, while other income from movable capital is taxed at 16%.

Tax on Income from Receivables, Deposits, Guarantees and Current Accounts

Senegalese tax law provides a withholding tax that must be paid by the party paying interest. However, the GTC provides a number of exemptions.

The IRC withholding tax rate is 16%. A reduced rate of 8% is applied to interest and other current account income of banks, and holding companies fulfilling the conditions of Article 23 of the GTC and other similar bodies.

Royalty Tax or BNC Withholding Tax

The withholding tax on royalties, also known as the “BNC withholding tax” (non-commercial profits), must be levied by debtors established in Senegal on sums paid to natural or legal persons subject to income tax or corporation tax who have no permanent professional establishment in Senegal.

The withholding tax rate in this case is 25% of the net amount of taxable sums paid to natural and legal persons, knowing that this net amount is determined by applying a 20% deduction to the gross collection. With double-taxation treaties, this rate can be reduced.

All these withholdings may be subject to rate limitation or limitation in relation to the definition of their scope by the applicable tax conventions signed by Senegal.

Tax mitigation strategies in Senegal are diverse. In particular, there is the strategy of avoiding reclassification as a permanent establishment. Indeed, although most tax treaties reduce the scope of application of corporate tax in domestic law, investors tend to put all the necessary mechanisms in place to avoid being qualified as a permanent establishment. There is also the use of the intellectual property rights of the parent company in its relationship with the local subsidiary or branch. This scenario involves the formation of branded franchise agreements, allowing the foreign parent company to benefit from the profits of the local subsidiary. Another such strategy is the intra-group loan method, which allows for the transfer of large amounts of interest from the subsidiary to the foreign parent company. However, the effectiveness of this strategy is severely limited by the new provisions of Article 9.2 of the GTC, which limits the interest rates and the amount paid to shareholders. Finally, there is treaty shopping with the use of favourable tax treaties, such as the one with Portugal or the one with the United Arab Emirates, where the withholding tax rate on dividends or royalties can be as little as 5%. Another strategy is the implementation of a distribution key that allocates a significant portion of the procurement price to the foreign parent company in accordance with the distribution of functions performed.

Capital gains are not in principle exempt, and are subject to various taxes depending on their nature. Even in the presence of tax treaties, these capital gains are subject to taxation, except in certain specific cases.

However, certain provisions of the GTC establish tax reductions for investments. This is the case for the tax reduction for investment of profits in Senegal (Article 232 of the GTC), which generally concerns entities not subject to corporate income tax. There is also a partial exemption for capital gains arising from the sale of fixed assets during the course of business, particularly if the taxpayer undertakes to reinvest in Senegal under certain conditions. There is also a partial exemption for capital gains arising from the disposal of fixed assets at the end of the business or in the event of a partial disposal of the business (Article 259 of the GTC).

Blocker companies are not used in Senegal. However, certain investment vehicles with privileged tax status, such as investment companies (SICAFs and SICAVs), are used. They benefit from various privileges, in particular, exemption from tax on the part of profits derived from the net proceeds of their portfolio or from the capital gains they make on the sale of securities or shares forming part of this portfolio (Article 5.11 of the GTC).

In addition to the rules to combat transfer pricing, the GTC provides the administration with the broad power of re-qualification of legal acts and contracts made or concluded by taxpayers. Any transaction concluded in the form of a contract or any legal act, with the aim of concealing or covering up a realisation or transfer of profits or income, made directly or through intermediaries, will not be recognised as valid by the administration and may be cancelled.

This also applies to acts giving rise to lower registration fees or making it possible to avoid all or part of the payment of turnover taxes.

The administration can also have recourse to the theory of the abnormal act of management. Signed tax treaties also contain mechanisms to this effect.

Senegal has transfer pricing rules in its GTC that are regularly updated. For example, for the assessment of corporate tax payable by companies that are dependent on or control companies located outside Senegal, profits indirectly transferred to them by increasing or decreasing their purchase or selling prices, or by under-capitalisation or by any other means, will be included in the results recorded in the accounts.

The following will only be allowed as deductible expenses for tax purposes if the debtor provides proof that the expenses correspond to actual transactions and that they are not of an abnormal or exaggerated nature:

• the deduction of expenses for the determination of corporate tax, interest, arrears and other income from bonds, receivables, deposits and sureties;
• royalties on the transfer or grant of operating licences, patents, trade marks, manufacturing processes or formulas; and
• other similar rights or remuneration for services that have been paid by or are due from a natural or legal person domiciled or established in Senegal to natural or legal persons who are domiciled or established in a foreign state or territory outside Senegal and are subject to a privileged tax regime, or a non-co-operative country.

The legal person established in Senegal must keep documentation at the disposal of the Tax Administration to justify the pricing policy applied in the context of transactions of any kind with associated companies established abroad. This obligation applies to the legal person in certain conditions.

A declaration including the country-by-country distribution of the group’s profits and economic, accounting and tax aggregates is provided for a certain category of multinational company.

Senegalese labour law is mainly governed by national legislation and regulations, in particular Law No 97-17 of 1 December 1997 on the Labour Code as amended, its implementing decrees, ministerial orders, collective agreements and case law.

The collective agreements complete the social legislation. In Senegal, there are:

• interprofessional collective agreements applicable to all sectors of work;
• branch agreements which are relevant to branches of activities; and
• company agreements which engage employers and employees.

The texts and sources mentioned above are applicable to employers and investors wishing to carry out an employment activity in Senegal. There is also the Investment Code, the Oil Code, the law on local content and the regulation on free zones of investment.

According to Article L114 of the Labour Code, wages must be paid in the lawful currency of Senegal. The payment of all or part of a salary in kind is also prohibited, except in the case of the provision of housing, food or equipment useful for the proper functioning of the workers’ services.

The salary is constituted by the basic salary set by ministerial decree or by collective agreements, a transport allowance, extra pay (sursalaire) and additional salary, ie, bonuses, allowances and benefits of any kind. Social security contributions are paid in part by the employer and by the employee at the established legal rates.

According to Article L66 of the Labour Code, if there is a change in the legal situation of the employer, in particular by succession, takeover under a new name, sale, merger, or transformation of the business, all the employment contracts in force on the day of the change continue to exist between the new employer and the company’s personnel.

There is no legal obligation to inform staff representatives in the case of a change in the legal situation of the employer.

Intellectual property law is not an element in screening FDI in Senegal.

However, studies show that intellectual property law would benefit from being more flexible in the African Intellectual Property Organisation (Organisation Africaine de la Propriété Intellectuelle, or OAPI) area to allow for better technology transfer following an FDI.

Indeed, it has been observed that investments from abroad to less-developed countries (such as Senegal) do not benefit local populations in so far as they rarely result in the creation of locally owned companies (and, by extension, in the registration of trade marks, patents, etc).

No local (Senegalese) policy for screening FDI has been adopted to date in response to these studies.

Legal Framework

Senegal is a member state of OAPI. The protection of intellectual property in the OAPI space can be considered strong in so far as the holder of a title of protection of intellectual property registered in the OAPI space will be protected throughout the OAPI space (by the 17 member states).

The protection of intellectual property in the OAPI space covers on the one hand literary and artistic property, namely copyright and related rights. On the other hand, the protection covers industrial property (eg, patents, utility models, trade marks and service marks, topographies and plant varieties).

Enforcement Difficulties

There is no subject matter ineligible for protection, compulsory licensing, the secondary political authorisation required to obtain or enforce rights, or undue delays in the granting of rights.

However, counterfeiting (creating confusion between the original product and a counterfeit product to the detriment of the owner of the intellectual property rights), which is criminally punished and concerns all intellectual property rights, remains a problem due to the difficulties involved in implementing community regulation.

Legal Framework

In 2008, Senegal adopted regulation on the protection of personal data, namely:

• Law No 2008-12 of 25 January 2008 on the protection of personal data; and
• Law No 2008-11 of 25 January 2008 on cybercrime.

Extraterritorial Effect

This regulation is considered extraterritorial in so far as it is applicable to “any processing implemented by a data controller, established or not on the Senegalese territory, which resorts to means of processing located on the Senegalese territory, excluding the means which are only used for transit purposes on this territory” (Article 4 of Law No 2008-12).

Moreover, Law No 2008-11, which provides for criminal sanctions in the case of violation of Law No 2008-12, does not target the violation of the law by the “data controller”, but the violation by “any person”.

By extension, this regulation is therefore intended to apply to any person established in Senegal or outside of Senegal who uses processing means located on Senegalese territory, excluding means that are only used for transit purposes in this territory.

Enforcement

These laws are subject to strong enforcement. Indeed, it should be noted that the Commission for Personal Data (the regulatory authority for the sector in Senegal) is very active in issuing opinions on questions raised by public or private entities in relation to the regulations in force, or in sanctioning these same entities in the event of violation of the applicable regulations.