Massive sale of company shares in Senegal.

The sale of shares and the transfer of a business involve shares in the capital of a company. The capital is made up of the sum of the company's shares. At the time of a massive or complete transfer of a company's shares, the difficulty lies in determining the purpose of the transaction: is it the sale of the shares themselves or the transfer of ownership of the company's assets?

The interpretation of this transfer has important tax implications. According to article 472-V-1 of the CGI, the transfer of shares in commercial companies is subject to a duty of 1%, while transfers for valuable consideration of business assets are subject to a duty of 10% (article 472-I-1). Under the old legislation, business sales were taxed at 15%. This difference in tax rates is significant, especially when the amounts involved are high, illustrating the tax issues involved in large-scale transfers of company rights.

Requalification by the tax authorities :

The tax authorities should not automatically reclassify a large-scale sale of company shares as a sale of company assets. The administrative doctrine imposes cumulative conditions to allow this reclassification. Book IV of tax procedures stipulates that: "the qualifications given by taxpayers to the transactions and acts they carry out are not enforceable against the Administration, which is entitled to restore them to their true nature".

This doctrine, which has been reaffirmed on a number of occasions, states that the transfer of corporate rights on a massive scale may only be subject to the transfer duties applicable to business assets if the transfer results in the dissolution or absorption of the company or is accompanied by significant changes to the corporate pact within a short period of time. These changes include a change in the company's object, form, registered office or name, or a significant increase in capital. A single one of these criteria, such as a change in legal form, is not sufficient to characterise the creation of a new company.

The combination of these criteria makes it complex to reclassify the sale of company shares as a sale of company assets. The absence of automatic reclassification and the consideration of facts subsequent to the transfer of corporate rights protect taxpayers who are aware of these conditions against a tax reassessment, thereby increasing their legal certainty.

The case of the Entreprise Franche d'Exportation (EFE) :

Despite the generous exemptions from which it benefited, EFE was not exempt from transfer duty on 1% company shares. According to legal doctrine, the transfer of shares could be reclassified as a transfer of corporate assets if the criteria were met, resulting in taxation at the rate applicable to business assets. The exemptions granted to the EFE concerned only the EFE and not the purchaser of the share rights. The EFE was exempt from registration duties, but this did not apply to the transfer of its corporate rights.

For more information on the tax implications of the massive sale of company shares, please see our buying guide.