Senegal is an attractive investment destination in Africa, with a focus on its political stability, favourable investment environment, and ongoing reforms to attract foreign investors.
DP World's $1.1 billion has invested in a port construction project as a significant example of foreign investment in Senegal.
The country's long-term development plan, Plan Sénégal Emergent (PSE), aims to transform Senegal into a middle-income economy and a regional commercial, services, and transportation hub.
Senegal has seen a rise in foreign direct investment (FDI) in recent years, with China becoming the top source of FDI, followed by countries like France, Turkey, the United Arab Emirates, the UK, the US, Indonesia, and Morocco.
The World Bank projects strong GDP growth for Senegal, with estimates of 4.8% in 2022, 8% in 2023, and 10.5% in 2024. This positive growth outlook could further boost FDI and support the government's strategy of attracting investment in sectors such as oil and gas, renewable energy, mining, construction, financial services, agribusiness, tourism, manufacturing, and fisheries.
The International Fund for Agricultural Development (IFAD) is partnering with local firms to improve financial services for migrant workers and increase access to digital and financial services in rural areas. The oil and gas sector has a high potential with major projects like Sangomar and the Greater Tortue Ahmeyim liquid natural gas project, as well as the renewable energy sector with investments in wind power.
These are some tax credits and incentives related to corporate entities:
Foreign Tax Credit: Double Taxation Treaties (DTTs) may provide tax credits based on the relationship between Senegalese entities and their foreign partners. The specific process to enforce these tax credits, either in Senegal or abroad, is stipulated within each DTT. However, enforcing foreign tax credits locally in Senegal is rare.
Investment Code: The Investment Code applies to investments over XOF 100 million in various sectors such as production, processing, industrial, tourism, agriculture, and complex trade. The benefits of the Investment Code include exemption from customs duties, suspension of VAT payment for three years, and Corporate Income Tax (CIT) limitations. These tax benefits are integrated directly into the General Tax Code (GTC) and do not require administrative authorization.
Free Export Company Status: Agriculture, industry, and telecommunications companies with an exporting potential of at least 80% of their turnover may qualify for the free export company status. Companies that qualify enjoy advantages such as a reduced CIT rate of 15%, exemption from the Single Business Tax (CEL), exemption from registration and stamp duty for incorporation or bylaws change, and exemption from employer tax. This status has been extended until 31 December 2024 by the 2022 Finance Act.
Miscellaneous Incentives: There are various tax incentives available in Senegal. One example is the Special Economic Zone (SEZ), which is an area designated to host economic activities with a strong impact on economic growth, focusing on exports and encompassing industrial activities, agribusiness, ICT, tourism, medical services, port activities, and general services. Companies established within the SEZ benefit from a preferential tax regime, including a reduced CIT rate of 15% and exemptions from import taxes and duties and the CEL.
Mining and Petroleum Sector: Companies involved in the mining and petroleum sector may also benefit from tax incentives. These incentives may include exemptions from the CEL, employer tax, and Value Added Tax (VAT) under certain conditions.
However, there are some challenges and potential risks, including political uncertainty surrounding President Macky Sall's potential third term, income inequality, concentration of development in urban areas, and the need for skilled local labour. If progress stalls in Senegal, some investors may consider expanding into other regional markets.