Digital transformation is enabling multinational companies to operate without a physical presence in the countries where they do business. This poses a significant fiscal challenge for African economies. As a result, it is urgent to regulate the activities of these digitally-enabled multinational firms.

The Senegalese Directorate General of Taxes and Domains (DGID) recently announced the introduction of a digital services tax, effective from July 1st. This measure aims to tax the revenues of foreign digital companies and platforms operating in the country, in accordance with Article 355 bis of the General Tax Code (CGI).

The tax will apply specifically to online marketplaces facilitating transactions between suppliers and customers, platforms for downloading and streaming music, movies, and online games, as well as data storage and processing services via cloud and database management services. It will also cover online learning and teaching platforms, and content hosting services such as websites, images, and text. Digital giants like Google, Apple, Meta, Amazon, and Microsoft are particularly targeted by this tax.

The taxable base will be determined based on the actual revenue of non-resident suppliers or foreign digital platform operators, evaluated according to the consideration received or to be received. The VAT rate in Senegal is 18%, with a specific reduction to 10% for the hospitality and restaurant sectors, which have struggled since the Covid-19 pandemic.

This regulation, introduced by the new government, is expected to have a positive impact on the Senegalese economy by generating additional tax revenue for the state and contributing to a fairer business environment. It will also allow the country to better regulate the activities of foreign digital companies on its territory and ensure they contribute fairly to the Senegalese economy

Samira Njoya