All the signs are telling you that the best next move for your company is to expand into Senegal. So, as a result, you need to assess the landscape and find out what your options are for setting up business in Senegal.
There are some very useful background reports that will help you to understand the country’s investment climate. The World Bank’s Ease of Doing Business report gives prospective business operators a picture of the opportunities and challenges in undertaking a commercial venture in jurisdictions around the globe. In 2016, Senegal climbed three places in the ranking, helped by initiatives including streamlining processes to connect to electricity services, the introduction of laws regulating voluntary mediation of contracts and lowering the property transfer tax.
The Plan Senegal Emergent (PSE) is the government’s blueprint for development. This is also worth reviewing to determine whether your enterprise could benefit from some of the initiatives under the PSE.
You may also like to understand the regional context in which Senegal operates – it is a member state of OHADA (the English translation being “the Organization for Harmonization 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 8 member states of the West African Economic Monetary Union (WAEMU, or UEOMOA in French). These 8 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 rationalization and harmonization of the legal environment. Understanding these groups is particularly relevant if you are looking at regional projects or trade options and advantages.
Once you have conducted your due diligence and are ready to proceeds with establishing an in-country presence, there are different forms that your business in Senegal may take.
To start with, you may wish to open either a representative or a branch (subsidiary) office of your existing offshore enterprise. Branch offices are a way for companies to test if 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, we recommend looking at these two forms of Senegalese companies that can be created: A société à responsibilité limitée (SARL, which is the equivalent of a LLC) or a société annyme (SA, equivalent to a PLC).
The process to establish either type of company is straightforward and takes about ten 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 paid 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 – 342 of the Tax Code.)
New companies need employees. Senegal’s labor laws are codified and comprehensive, supportive of employee rights. It is wise to get advice when establishing employment contracts, so that you understand your obligations and entitlements as an employer. 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 Labor 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 though an approved intermediary, including 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.
More and more businesses are recognizing Senegal’s potential as a vibrant, stable country with good sea and road trade routes to other parts of Africa, Europe and, significantly, the USA. Indeed ECOWAS and the US Chamber of Commerce signed an MOU in September 2015 to launch the US-ECOWAS Business Initiative (USEBI). USEBI brings together West African and American companies who are working to increase two-way trade, remove or reduce commercial barriers and foster a better understanding of respective investment climates.
It is a great time, then, to be setting up business in Senegal.
