05 October 2018 Senegal extends deadline for transfer pricing return filing under new transfer pricing provisions Senegal has ratified1 the Organisation for Economic Co-operation and Development's (OECD's) Multilateral Convention with respect to the Base Erosion and Profit Shifting (MLI). Accordingly, in line with Base Erosion and Profit Shifting (BEPS) Action 13 (Transfer Pricing Documentation and Country-by-Country Reporting), Senegal is required to amend its fiscal legislation to implement Country-by-Country (CbC) reporting as well as to strengthen its transfer pricing (TP) documentation requirement. In order to implement these new obligations, the Senegal Parliament approved law n°2018-10,2 which amends the existing General Tax Code adopted on 31 December 2012 (2012 GTC). The 2012 GTC already provided for TP documentation to be prepared and submitted upon request through a tax audit.
The annual TP return should contain general and specific information on the group of companies and the reporting entity such as transaction values, general description of the activities, general description of the TP policy of the group, information on loans, borrowings and other transactions carried out with related entities.
The TP return must be filed no later than 30 April of each year along with the Corporate Income Tax (CIT) return. It should be noted that the rule applies as of 1 January 2018. However, for this year – FY18 submission of FY17 transactions – the TP return template was not available in April. Accordingly, it was anticipated that the National Revenue Authority (NRA) would waive the penalties. However, the NRA has recently announced that for FY17, it has postponed the obligation to file the TP return to 31 October 2018. A TP return template has been drafted by the NRA and shared with tax advisers for comment. As a draft, the said TP return may be subject to some amendments but it is more likely to be very few of them. Accordingly, it is important to note that there is a possibility that the template may not be final by the 31 October deadline. Also, the filing has to be done electronically. The NRA has officially introduced the new TP regulation which fully complies with the BEPS Action 13 format and requires taxpayers that meet the gross turnover or gross assets thresholds mentioned above, to prepare Master File and Local File reports. The NRA has also provided a detailed note explaining the content of both documents, which are based on the content recommended by the OECD (Chapter V, Annex I and II). From a practical perspective, the documents have to be available on the first day of the tax audit and are to be provided to the tax authorities upon request. If the TP documentation is not available, or is not complete, during a tax audit, the taxpayer will have a 20-day period to provide the required documentation following the official written notice (mise en demeure). However, the taxpayer may request an extension of the said period which cannot exceed 25 days. If the TP documentation is either not provided or is incomplete, under the above deadline, a potential fine equal to 0.5% of the non-documented transactions may be imposed. The specific note issued by the NRA specifies that documentation may be considered incomplete in the case where "[…] it will make reference to general principles without justifying how they apply to the audited company." With respect to the CbCR, an implementing regulation has been issued for discussion with the tax community and relevant stakeholders in Senegal. The template seems to be consistent with the OECD guidelines. The CbCR only concerns legal entities established in Senegal:
CbCR is applicable starting from the current fiscal year 2018 and should be filed within the 12 months following the end of each fiscal year. Therefore, companies subject to CbCR have until 31 December 2019 to comply with these new legal provisions. Late submission of the said report will trigger a fine of XOF25 million. The NRA has been increasing its resources during the last few years with 25 auditors trained with OECD support. Therefore, it is expected that there will be more scrutiny on intercompany transactions going forward. Document ID: 2018-1979 |
