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Sierra Leone

Country Name: Republic of Sierra Leone
Currency: Sierra Leonean Leone (SLL)
Primary Tax Authority: National Revenue Authority (NRA)
Key Legislation:

  • Income Tax Act
  • Goods and Services Tax (GST) Act
  • Customs and Excise Act
  • Investment Promotion Act
  • Tax Administration Act

Fiscal Authority Allocation

Centralized Fiscal System:
Sierra Leone operates a centralized tax system, with the National Revenue Authority (NRA) responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), goods and services tax (GST), and customs duties.

Corporate Income Tax (CIT)

Standard Rate: 30%
Sierra Leone imposes a corporate income tax rate of 30% on the taxable income of resident companies and non-resident companies with a permanent establishment in the country.

Corporate Forms and Taxation:

  1. Resident Companies: Taxed on worldwide income.
  2. Non-Resident Companies: Taxed only on Sierra Leone-sourced income.

Exemptions and Incentives:

  • Investment Incentives: Under the Investment Promotion Act, Sierra Leone offers tax holidays, customs duty exemptions, and GST relief for companies investing in priority sectors such as agriculture, mining, tourism, and renewable energy.
  • Special Economic Zones (SEZs): Companies operating in SEZs benefit from tax exemptions, reduced CIT rates, and customs duty relief.

Goods and Services Tax (GST)

Standard Rate: 15%
Sierra Leone imposes GST at a standard rate of 15% on most goods and services. GST is applied to domestic production and imports.

Exemptions:
Certain goods and services, such as unprocessed agricultural products, healthcare, education, and financial services, are GST-exempt. Exports are zero-rated, allowing businesses to claim refunds on GST paid on inputs used to produce export goods.

Personal Income Tax (PIT)

Progressive Rates:
Sierra Leone applies a progressive personal income tax system to residents’ worldwide income and non-residents’ Sierra Leone-sourced income.

Resident Tax Rates for 2023 (Annual Income):

  • Up to SLL 6,000,000: 0%
  • SLL 6,000,001 to SLL 12,000,000: 15%
  • SLL 12,000,001 to SLL 18,000,000: 20%
  • Above SLL 18,000,000: 30%

Non-Resident Tax Rate:
Non-residents are taxed at a flat rate of 25% on Sierra Leone-sourced income.

Deductions and Allowances:
Deductions are available for pension contributions, social security payments, and certain personal allowances such as charitable donations.

Additional Mandatory Contributions

Social Security Contributions:
Employers and employees must contribute to Sierra Leone’s social security system, which covers pensions, healthcare, and other social services.

  • Employer Contribution: 10% of gross salary.
  • Employee Contribution: 5% of gross salary.

Withholding Taxes

  • Dividends: 10%
  • Interest: 15%
  • Royalties: 25%
    Sierra Leone imposes withholding taxes on payments to non-residents, including dividends, interest, and royalties. These rates may be reduced under double taxation agreements (DTAs).

Transfer Pricing Rules

Sierra Leone follows the arm’s-length principle for transactions between related parties. Companies with significant cross-border transactions must ensure that prices reflect market value. Transfer pricing documentation is required for large multinational corporations.

Special Tax Regimes

  • Special Economic Zones (SEZs): Companies operating in SEZs benefit from CIT holidays, GST exemptions, and customs duty reductions on imported machinery and inputs. The zones are designed to attract investment in manufacturing, agriculture, and tourism.
  • Investment Incentives: Sierra Leone’s Investment Promotion Act offers tax incentives for investments in sectors such as agriculture, mining, infrastructure, and energy, including CIT exemptions and customs duty reductions.

Other Taxes

  • Customs Duties: Sierra Leone imposes customs duties on imports, with rates varying from 5% to 20%, depending on the type of goods. Raw materials and machinery used in manufacturing may benefit from reduced or zero customs duties.
  • Excise Taxes: Excise taxes are levied on goods such as alcohol, tobacco, petroleum products, and luxury items.
  • Property Tax: Local authorities impose property taxes on land and buildings, which are assessed based on the market value of the property.

Double Taxation Agreements (DTAs)

Sierra Leone has signed several double taxation agreements (DTAs) with countries including the United Kingdom and South Africa. These agreements help reduce withholding taxes on cross-border income and prevent the double taxation of income earned in Sierra Leone and other jurisdictions.

Local Taxes

Local authorities in Sierra Leone may impose property taxes, business registration fees, and service levies. However, most significant taxes, including CIT, PIT, and GST, are centrally administered by the National Revenue Authority (NRA).

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed within six months following the end of the financial year. Personal income tax returns are generally due by April 30th. GST returns are filed monthly or quarterly, depending on the size of the business.

Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. The NRA charges interest at 1.5% per month on overdue taxes, with additional penalties for tax evasion or underreporting of income.

Recent Developments

Mining Sector Investment:
Sierra Leone’s economy is heavily reliant on the mining sector, particularly diamonds, gold, and iron ore. The government is offering tax incentives to attract further investment in the sector, including CIT holidays, VAT exemptions, and reduced customs duties on mining equipment.

Infrastructure Development:
To promote economic growth, Sierra Leone is offering tax incentives for infrastructure projects, including CIT exemptions and customs duty reductions for companies involved in road construction, energy, and telecommunications.

Renewable Energy and Sustainability:
Sierra Leone is encouraging investment in renewable energy, particularly solar and hydropower projects. Companies investing in renewable energy infrastructure may benefit from tax holidays, VAT exemptions, and customs duty reductions.

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