The Organisation for Economic Co-operation and Development (OECD) defines transfer pricing as follows “the prices at which a company transfers tangible assets, intangible assets, or renders services to associated companies”.”.
Intra-group transactions now account for almost two-thirds of world trade. The weight of cross-border operations therefore represents a major international tax issue for multinationals, but above all, for governments.
C’est dans ce contexte que l’OCDE sur l’initiative des leaders du G7, a lancé des travaux visant à développer des mécanismes de lutte contre l’érosion de la base d’imposition et le transfert indirect de bénéfices, notamment à travers une transparence accrue et l’harmonisation des pratiques fiscales. L’idée est de prévoir un cadre de contrôle plus étanche des opérations transfrontalières entre entités dites “liées ». Cette situation met les multinationales dans un état de veille permanente afin d’éviter une remise en cause de leurs pratiques commerciales dans le cadre de leurs flux intragroupes.
The tax treatment of intra-group transactions is a major issue for governments, and a challenge for multinationals seeking to secure the financial impact of their transactions.
- Transfer pricing issues for governments
L’érosion de la base d’imposition, souvent désignée par l’acronyme BEPS (Base Erosion and Profit Shifting), fait référence aux différentes stratégies utilisées par les entreprises multinationales pour réduire artificiellement leur assiette fiscale. Ces pratiques incluent le transfert de bénéfices vers des juridictions à faible imposition, par des moyens tels que la manipulation des prix de transfert, l’exploitation des différences entre les régimes fiscaux applicables dans différents pays, le recours à des structures financières complexes ou la surfacturation de services entre entités liées. En fixant leurs prix de transfert, les groupes opèrent des choix qui affectent de façon immédiate et directe l’assiette fiscale des États concernés par les transactions.
States must therefore ensure that companies based in their territory which trade with other related companies based abroad are properly remunerated for the transactions they carry out, and declare the fair share of profits to which they should be entitled in respect of activities carried out on their territory.
In order to ensure that tax bases in each country are as fair as possible, to avoid conflicts between different tax administrations and distortions of competition between companies, OECD member countries have adopted́s the principle of “arm's length price”for intra-group transactions. It means that the price charged between dependent companies must be the same as that which would have been charged on the market́ between two independent companies.
Although Senegal is not a member of the OECD, it adheres to its principles, which are enshrined in law. The General Tax Code (CGI) stipulates that intra-group transactions must be documented to justify the pricing policy applied. In practical terms, for tax purposes, it is required that the terms agreed by non-arm's length parties in their financial or commercial relationship be those that would be expected if the parties were dealing at arm's length (Articles 17 and 638 of the CGI).
In addition, this system is reinforced by Directive n° C/DIR.6/07/23 on the harmonization of transfer pricing rules, adopted by the Council of Ministers of the Economic Community of West African States (ECOWAS) at its 90th meeting.ème session, held on July 6 and 7, 2023 in Guinea Bissau. The purpose of the text is to harmonize transfer pricing rules in line with the latest international standards, and to improve legal certainty and the investment climate within ECOWAS.
L’enjeu est important pour le Sénégal dont les recettes fiscales occupent une place primordiale dans la constitution de son budget. D’ailleurs, dans le cadre de la loi de finances initiale pour l’année 2024, un objectif de 2.820, 66 milliards de FCFA a été fixé au titre des recettes fiscales. Ce qui justifie l’intérêt de l’Administration fiscale sur les transactions intragroupes et leur impact sur le budget de l’État. En effet, le sujet revêt une importance particulière en ce sens que l’Etat du Sénégal a mené au cours de la dernière décennie une politique dynamique de promotion des capitaux, notamment étranger à travers le Plan Sénégal Emergent (PSE). La mise en œuvre de cette politique a attiré des multinationales qui ont eu à réaliser des investissements importants dans des secteurs stratégiques tels que les infrastructures et services de transport, l’Energie, l’agriculture et l’agro-alimentaire, l’eau et l’assainissement, l’éducation et la formation, la santé.
- Challenges for multinationals
In a context where a conceptual and regulatory framework is being put in place, and the tax authorities are tightening their control, multinationals with subsidiaries in Senegal need to be careful in defining their transfer pricing policy and ensuring that it complies with the Senegalese regulatory framework.
2.1. The compliancé of transfer prices with the arm's length principle
To limit tax risks, multinationals must ensure that their transfer prices for all intra-group transactions are in line with the arm's length price as defined by the OECD. To do this, the company must carry out a documented analysis of the functions it performs and the risks it assumes (functional analysis), and identify the assets and resources used. It must then determine the method and price of intra-group transactions.
In addition, the choice of method and the extent of the evidence provided will need to be adapted to each specific situation.
2.2. Compliance with documentary and reporting obligations
In order to comply with tax regulations in force in Senegal, and to limit any tax risk relating to transfer pricing, Senegalese companies must meet certain documentary and reporting obligations.
2.2.1. Documentation of intra-group transactionsTransfer pricing documentation must be available within the company, but must only be provided when formally requested by the tax authorities, particularly when the latter initiate a general accounting audit.
In this case, the company may be granted a period of 20 days following formal notice. If the documentation is not complete or is not provided to the tax authorities within the aforementioned deadline, a penalty of 0.5% of the amount of the transactions concerned is due (art.667. III. c of the General Tax Code).
If the required documentation is not made available to the tax authorities on time, or is made available only in part, the tax authorities may claim an indirect transfer of profits and reconstitute the basis normally subject to corporate income tax.
2.2.2. Filing a simplified transfer pricing declarationThe annual transfer pricing declaration (article 31 of the CGI) applies to all companies subject to documentary obligations. It must be filed at the same time as the income tax return provided for in article 30 of the CGI, i.e. by April 30th of year N+1 at the latest. Failure to file is punishable by a fine of ten (10) million FCFA.
2.2.3. Submitting country-by-country declarationsThe country-by-country declaration (CBCR) includes a country-by-country breakdown of group profits and economic, accounting and tax aggregates, as well as information on the location and activity of the entities making up the group.
It must be filed within 12 months of the end of the financial year.
The entities covered by this declaration are Senegalese companies that :
- prepare consolidated financial statements ;
- directly or indirectly own foreign subsidiaries or branches; ;
- generate annual sales of ≥ 491 billion FCFA ;
- are not held by a Senegalese or foreign company required to file the «equivalent» CBCR.
