VAT on Digital Services in Senegal: Key Rules and Compliance Requirements

Senegal has recently embraced the global shift toward taxing the digital economy, joining a growing number of African nations implementing VAT on digital services. As of July 1, 2024, non-resident digital service providers must now navigate Senegal’s VAT framework, marking a significant step in the country’s efforts to modernize its tax system and harness revenue from the booming digital sector.

Scope of VAT on Digital Services

Senegal’s VAT regime applies to the provision of digital services by non-resident providers to both businesses (B2B) and consumers (B2C) in Senegal. Digital services are defined as the supply of intangible goods or services carried out in an automated manner via electronic networks.

Examples of services in scope include:

• Streaming and downloaded media (e.g., movies, music, games)

• Online advertising and digital intermediation services

• Software-as-a-Service (SaaS) and cloud hosting

• E-learning and online publications

• Web hosting and data storage services.

The place of supply is deemed to be Senegal if the service is consumed or used there, determined by factors such as the customer’s address, IP address, or payment method.

VAT Rate and Registration Threshold

• VAT Rate: The standard VAT rate in Senegal is 18%, applicable to digital services.

• Registration Threshold: There is no registration threshold, meaning even a single sale to a Senegalese customer triggers the obligation to register for VAT.

Registration and Filing Process

Non-resident providers can register for VAT through a simplified online procedure via the Senegalese tax authority’s portal. Once registered, they are assigned a tax identification number and gain access to the online filing platform.

Filing Frequency: VAT returns must be filed monthly, with payments due by the 15th of the following month following the chargeable event.

VAT return must include the following information;

• The total amount, excluding tax of transactions concluded with customers established in Senegal during the month.

• The amount of VAT invoiced and collected from the customers established in Senegal.

Reverse Charge Mechanism for B2B Transactions

For B2B transactions, the responsibility for VAT shifts to the Senegalese customer under the reverse charge mechanism. This means the customer self-assesses and remits the VAT, relieving the non-resident provider of this obligation.

Invoicing Requirements: Invoices must include details such as the provider’s VAT registration number, buyer’s information, and the VAT amount applied.

Role of Intermediaries and Marketplaces

Digital platforms and marketplaces that facilitate transactions between suppliers and customers are considered intermediaries. Under Article 31 of Senegal’s Finance Act, these intermediaries are liable for collecting and remitting VAT on behalf of non-resident providers.

VAT on Costs:

The VAT borne by foreign service providers cannot be refunded in the absence of VAT collected in return in Senegal.

Penalties for Non-Compliance

Failure to comply with VAT regulations can result in severe penalties, including:

• Late Payment Penalties: 5% interest plus 0.5% monthly interest on overdue amounts.

• Suspension of Services: Non-compliant providers may face restrictions on accessing Senegalese markets or digital platforms.

Key Changes and Effective Dates

The VAT regime for digital services was initially set to take effect on April 1, 2024, but was postponed to July 1, 2024, to allow businesses more time to prepare.

Conclusion

Senegal’s VAT regime for digital services represents its commitment to modernizing tax administration and capturing revenue from the digital economy. Non-resident providers must adhere to registration, invoicing, and filing requirements to avoid penalties and ensure compliance. By understanding and implementing these key rules, businesses can navigate Senegal’s digital tax landscape effectively.

Source: DGID Senegal