All the signs are telling you that the best next move for your company is to expand into Senegal. As a result, you need to assess the landscape and find out what your options are for setting up business in Senegal.
Senegal benefits from being part of number of regional bodies. It is a member state of OHADA (the English translation being “the Organisation for Harmonisation of Business Laws in Africa”), which provides a uniform system of business laws and implementing institutions for 17 countries in West and Central Africa. Senegal is also one of the 15 member states of the Economic Community of West African States (ECOWAS). ECOWAS was created to promote economic integration in the region and support trade through collective self-sufficiency. Further, Senegal is one of the eight member states of the West African Economic Monetary Union (WAEMU, or UEOMOA in French). These eight countries share the CFA Franc (XOF) as a common currency and WAEMU promotes greater economic competitiveness through open markets, the free movement of people and goods as well as the rationalisation and harmonisation of the legal environment. Understanding these groups is particularly relevant if you are looking at regional projects or trade options and advantages.
There are options for the form a new business will take in Senegal. It is possible to open a representative or a branch (subsidiary) office of your existing offshore enterprise. Branch offices are a way for companies to test whether the market can sustain them. As such, they are not a separate legal entity from the parent company and cannot be used as permanent model for doing business. They must be converted into a Senegalese company after two years.
For permanent business operations, the most common forms of Senegalese entities to be created are a société à responsibilité limitée (SARL, which is the equivalent of an LLC) or a société anonyme (SA, equivalent to a PLC). The process to establish either type of company is straightforward and takes about 10 days if all the required documents are available. It is relatively inexpensive.
Tax treaties exist between Senegal and a handful of nations but, whether or not a treaty exists, the principle is that tax will be payable in Senegal for work undertaken in Senegal. Companies will be subject to:
- Corporate Tax (30%);
- VAT (18%);
- an Annual Minimum Tax (0.5% of the turnover of the company in the previous year (but not less than 500,000 XOF and not more than 5,000,000 XOF) payable if the company’s operations do not make a profit); and
- Business Tax (this tax has fixed and proportional components that depend on the nature of the business and the annual turnover. It will be calculated in accordance with Articles 325 to 342 of the Tax Code.)
Senegal’s labour laws are codified and comprehensive, supportive of employee rights. Employers are advised to get advice when establishing employment contracts, to ensure a good understanding of employer obligations. Some key principles to bear in mind are that all contracts of employment must be in writing in French, there are contributions to be made by the employer to social security and pension schemes, appointments to some positions require approval from the Labour Office and there are laws relating to minimum wages and benefits for employees.
With respect to repatriation of income outside Senegal, this can be done freely. After payment of relevant taxes, the company may then repatriate profits, dividends and interests outside Senegal. The only requirement is that repatriation be performed through an approved intermediary, which includes the West African Central Bank, the Post Office, the Administration itself or other approved entities pursuant to the regulations.
Investors can also have confidence in the resolution of disputes that arise in their business transactions in Senegal. In addition to the OHADA institutional dispute resolution mechanism (CCJA), Senegal is party to the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards as well as the ICSID Convention for settling international investment related disputes. This means that businesses may elect to have any grievances heard through arbitral proceedings and do not need to rely on the local court system.
Dentons would like to thank Louisa Gibbs from Geni & Kebe (http://www.gsklaw.sn/) for this month’s contribution to the Africa section of the Dentons South Africa Newsletter. Louise discusses setting up business in Senegal.