Senegal looks to reassure foreign investors
Since its peaceful transition to democratic government in 2012, Senegal, on the westernmost point of Africa, has been experiencing ‘seesaw’ fiscal legislation which has negatively impacted the business environment. More recently, the Government has been trying to reassure overseas investors through changes to the alternative minimum corporate tax (AMCT) – or impôt minimum forfaitaire (IMF).
From 2012 to 2014, the ceiling for the AMCT rose twice, from 1 million CFA francs (XOF) in 2012 to 5 million XOF in 2013, and then to 20 million XOF in 2014, representing a 20-fold increase in two years. Section 40 of the Senegalese tax code states, "The AMCT is due on the turnover net of taxes realised on the year preceding that of payment, at 0.5%. In no way can this amount be inferior to 500,000 XOF nor superior to 20 million XOF."
The flaw in this legislation, which is very unpopular in the business world, stems from a cultural misunderstanding of the difference between turnover and profit. Calculating the AMCT on turnover has a big impact on the bottom line of many companies, especially those in the commodities trade.
Rather than achieve its desired effect of maximising tax revenues, this legislation has caused many companies to cease operations in Senegal, while potential investors suddenly found it unwise to invest in the country. One foreign multinational, which had planned to expand its operations in Senegal, decided to cancel its lease on a property where its flagship showroom would have been, as a result of the unpredictable nature of fiscal legislation.
Two years of failed fiscal legislation has made many businesses wary of investing in the country. However, that seems to be changing, with the implementation in 2015 of the Emerging Senegal Plan (or Plan Sénégal Emergent) that aims to boost the economy and related legislation to achieve the country’s goals, including the recent reduction of the AMCT maximum to 5 million XOF. Furthermore, measures have been taken to strengthen the local agency in charge of all foreign investment, APIX, as well as to facilitate the incorporation process and registration arrangements with various government entities, such as the fiscal and social security administrations.
For more information, contact:
Papa Alboury NDAO
T: +221 33 869 79 79