10.07.2025

Senegal: Special Depreciation Regimes in the Extractive Sector in Senegal

Extractive industries involve large-scale investments in specialized, high-intensity equipment. Given the nature of these operations, traditional time-based depreciation models often fail to capture the economic reality of asset use. The production-unit depreciation method, which allocates depreciation based on the volume actually extracted, offers a pragmatic and more representative solution.

Unlike linear or declining balance methods, production-unit depreciation is grounded in the principle that asset wear correlates with actual usage. It is particularly relevant for mining equipment, offshore platforms, and industry-specific software, where operational intensity better reflects asset consumption than time alone.

In Senegal, the General Tax Code (GTC) does not explicitly mention this method. Nevertheless, Article 10 allows depreciation “generally accepted based on the practices of each type of industry.” In practice, the tax administration tolerates the use of production-unit depreciation in the extractive sector, provided certain conditions are met: the asset must be directly linked to extraction activities, its production capacity must be measurable, and the calculation methods must be thoroughly documented.

That said, this administrative tolerance - while useful - leaves room for uncertainty. In the event of a tax audit, there remains a risk of requalification or extra-accounting reintegration. This can impact the financial predictability of extractive projects, particularly for foreign investors seeking legal certainty and stability in tax rules.

Globally, this method is widely recognized, notably under IFRS standards and in many resource-rich jurisdictions. The absence of explicit recognition in Senegal’s GTC contrasts with broader efforts to modernize other areas of the fiscal framework.

Clearly codifying production-unit depreciation in the ongoing tax reform would not only provide legal certainty for current practices but also enhance Senegal’s attractiveness for large-scale extractive investments. It would reflect a tax policy better aligned with the operational realities of the sector, while offering tax authorities greater clarity and consistency in enforcement.

Such a reform would send a strong signal of Senegal’s commitment to a modern, transparent, and investment-friendly tax environment - one that supports both competitiveness and the long-term development of the resource industry.

If you wish to discuss these topics, please contact:

Face Africa Tax & Legal

Author

El Hadji Sidy Diop

Managing Partner & CEO

Legal Adviser and Chartered Tax Expert

Senegal

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