SENEGAL: An Introduction

New Regulation 06/2024 on External Financial Relations

The new Regulation 06/2024 on the external financial relations of West African Economic and Monetary Union (WAEMU) member states modernises the Union's external trade framework, replacing Regulation 09/2010. It introduces essential clarifications, broadens the scope of definitions and puts in place mechanisms to strengthen the supervision and transparency of financial flows.

With 65 definitions, compared with 24 previously, this text clarifies key concepts such as portfolio investments (shareholdings of less than 10% of the capital) and international trading (transactions where the goods do not physically transit through WAEMU). The distinction between residents and non-residents has also been strengthened, making the legal framework clearer.

The regulation imposes clear obligations for the repatriation of funds:

• export earnings must be repatriated in full via accounts held with approved institutions; and
• financial income from foreign investments or loans is also subject to this requirement.

Transactions requiring prior authorisation are also clearly defined. Foreign investments continue to require the prior approval of the Minister of Finance.

Authorised institutions continue to play a central role in the domiciliation, repatriation and statistical monitoring of financial transactions. Payment institutions, introduced under Instruction 001-01-2024 on payment services, are helping to diversify financial services, but responsibilities for cross-border transactions remain with authorised intermediaries.

Thresholds are proposed in the draft instructions to be adopted shortly:

• XOF20 million for the compulsory domiciliation of exports and imports;
• XOF3 million for foreign currency allowances for travellers; and
• a one-year authorisation period would be provided for the accounts of natural persons resident abroad, and the authorisation period for the foreign accounts of resident legal entities would be adapted to the life of the project.

Despite these advances, there are still shortcomings, in particular the lack of deadlines for processing authorisations and the lack of clarification of the concept of “guarantee”, particularly with regard to Organization for the Harmonization of Business Law in Africa (Organisation pour l'harmonisation en Afrique du droit des affaires (OHADA)) security law, which could undermine the effectiveness of the framework.

New Decree 2024-847 on Chauffeur-Driven Vehicles

Senegal has adopted a regulatory framework for the activities of chauffeur-driven vehicles (voitures de transport avec chauffeur (VTCs)). The text, which will only come into force once it has been published in the Gazette, aims to guarantee fair competition while also meeting the requirements of modernising transport.

Digital platforms must now obtain compulsory authorisation, valid for five years and issued by the Directorate-General for Transport (Direction Générale des Transports et de Transport (DGTT)), and meet a number of criteria:

• 51% of the capital must be held by nationals;
• a deposit of XOF15 million in the Land Transport Development Fund (Fonds de Développement des Transports Terrestres (FDTT)); and
• a limit of 5,000 vehicles per platform.

VTCs must operate by reservation only and comply with strict standards. Vehicles must be equipped with a geolocation system, undergo technical inspections every six months and not exceed a set maximum age. In addition, drivers aged between 25 and 60 must hold a professional licence, renewable every three years.

The decree also introduces a system of fees for the platforms:

• a fixed annual fee; and
• a fee proportional to the number of journeys made, intended to fund the FDTT and support the modernisation of infrastructure.

By regulating the activities of VTCs, this decree seeks to protect the interests of traditional taxis while encouraging a transition to modern, digital transport services. This framework lays the foundations for fair and sustainable regulation of a fast-growing sector.

Draft Uniform Law on Banking Regulation in the WAEMU Region

Faced with global economic changes, WAEMU is undertaking a banking reform to protect public savings and ensure a stable financial sector. Although Benin has already ratified the law, it has not yet been transposed in Senegal.

This reform broadens the scope of regulation, introducing new financial services such as payment institutions, electronic money, Islamic banking and factoring. These changes offer solutions tailored to the specific needs of customers, such as digital transactions and short-term financing. The opening-up of the sector to foreign players, with the possibility of establishing representative offices, is stimulating competition and could encourage more innovative and accessible services. In addition, the strengthened legislative framework and increased supervision offer greater security and transparency while also facilitating financial inclusion, particularly for underbanked populations via dematerialised services.

However, this reform also presents challenges. The new legal requirements could lead to additional costs for financial institutions, passed on to customers in the form of higher fees. The entry of foreign players, while improving competition, could marginalise local banks, especially in rural areas, reducing the range of local services on offer. Activities such as Islamic banking require specific authorisations, which could delay their deployment. In addition, the increased complexity of the system may be an obstacle for some users, requiring financial education efforts to take advantage of it.

This reform modernises the banking sector and creates a more secure, competitive and inclusive environment, but it requires efforts to adapt in order to overcome the challenges associated with accessibility, costs and the complexity of the new regulatory framework. Adequate support will be essential to maximise the benefits for all users.

Introduction of VAT on Digital Services Provided by Foreign Taxable Persons from 1 July 2024

On 1 July 2024, Senegal introduced VAT on digital services and commissions received by non-resident online providers and operators of foreign digital platforms that have no facilities in Senegal. This measure, introduced by Decree No 10698 of 27 June 2024, replaces previous decrees and aims to broaden the tax base in order to increase public funding.

The 18% VAT rate applies to services such as audiovisual content, software sales, website hosting, e-learning, online advertising, data storage and processing and cloud storage services. The tax base is determined by the actual turnover of non-resident suppliers, calculated on the basis of consideration received or receivable.

To simplify the tax registration of foreign suppliers, the tax authorities are offering a remote registration procedure using an electronic form. The sole purpose of registration is to enable VAT to be declared and paid, without constituting a permanent establishment for other types of tax.

Foreign platforms must declare VAT quarterly, within the first 20 days, detailing the total amount excluding tax and the VAT collected from Senegalese customers. VAT is paid by bank transfer to the Senegalese Treasury. In the event of non-compliance with the declaration or payment obligations, the services of the ministry in charge of telecommunications may suspend access to the platforms, in addition to the tax penalties provided for in the General Tax Code.