Sierra Leone Fiscal Guide 2020 - Baker Tilly International
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Sierra Leone Fiscal Guide 2020 01/06/2020 © Baker Tilly 1
Introduction: Sierra Leone Fiscal Guide
2020
Income Tax
Basis of taxation
Residents are taxable on worldwide income, subject to certain exemptions for foreign income. Non -residents are taxable
on any payments subject to withholding tax, and all Sierra Leone income. Temporary residents are taxable on Sierra Leone
income and any foreign income remitted to Sierra Leone.
Rates
R esident Companies
Co rporation tax (CIT):
- Basic rate 25%
Capital gains 30%
Rental income 10%**
Dividends 0%¹
Interest 15%²
Royalties 25%
Natural resource payments 25%
Payments to contractors 5%
National Insurance Levy 0.5% FA 2017
Non-Resident Companies
Co rporation tax( CIT):
- Basic rate 25%
Capital gains 30%
Rental income 25%***
Dividends 10%***
Interest 15%***
Royalties 25%***
Natural resource payments 25%
Payments to contractors 10%
National Insurance Levy 0.5% FA 2017
Management/Technical Service fees 20%
01/06/2020 © Baker Tilly 2
Basis of Taxation: Rates R esident individuals Income tax 0-30% Rental income 10%** Dividends 10%*# Interest 15%* Royalties 25% Natural resource payments 25%* Payments to contractors 5%* Payment to Professional Service Providers 10%* (Finance Act 2020) National Health Insurance Levy 0.5% (Finance Act 2017) * Tax is withheld at source. ** Subject to an allowance of 10% for repairs & maintenance and a tax free threshold of Le. 7,200,000. ¹ Dividends received by a resident company from another resident company are exempt from tax. ² Interest on government development stocks is exempt from tax. *** Final tax for non-resident companies Non-Resident individuals Corporation tax as for residents but only on Sierra Leone-source income: Income tax 25% Rental income 25%* Dividends 10%* Interest 15%* Royalties 25%* Natural resource payments 25%* Payments to contractors 10%* Payment to Professional Service Providers 10%* (Finance Act 2020) National Insurance Levy 0.5% (Finance Act 2017) Trust income 25%* *Tax is withheld at source. 01/06/2020 © Baker Tilly 3
Residents
An individual is a resident individual for a year of assessment, if work giv ing r ise to the income is carried on in Sierra Leone
t h at individual: irresp ective of wher e the contract of employm ent is signed or
payments made.
❑ Has their normal plac e of abode in Sierra Leone and is
present in Sierra L eone at any tim e during th e year of Fringe ben efits are taxed on the basis o f the lower of market
assessment; value and scaled valu es as provid ed under the Tax Act. The
❑ Is present in Sierra L eone for mor e than 182 days in a 12- rates of tax applicable on employment income ran ge from 0-
month period that commences or ends durin g the year of 30%, on a monthly basis as follows:
assessment; and
❑ Is an official of th e gov ernment of Sierra L eone post ed Chargeable Incom e Tax Rate
overseas during the year of assessment. Under Le 600,000 Nil
Next Le 600,000 15%
Tem porary residents Next Le 600,000 20%
Next Le 600,000 25%
An indiv idual that is resid ent (as per the t ests abov e) shall be Above Le 2,400,000 30%
treated as a t emporary r esident for the entir e tax year if that
individual: There is a tax free threshold of L e500, 000 per month for
allowances.
a) Is not a citizen or domiciled in Sierra Leone;
b) Does not intend to reside in Sierra L eone for more than Furthermore, an annual lump sum tax (known as payro ll tax) is
four years; and lev ied on all foreign nationals work ing in Sierr a Leone. The
c) At the end o f th e year, has not been resident in Sierra payroll t ax is pay able by th e employ ers o f the for eign nationals.
Leone for more than four years. The amount payable by emp loyer s per expatriate employ ee as
follows:
Individuals not domic iled in Sierra Leon e are deem ed to be
temporary residents if they are in the country for period C it izens from ECOWAS – L e 1,500, 000
exceeding 182 days in a tax year. No n -ECOWAS Citizens – L e 5,000,000
Individuals who r eceiv e on ly employm ent income, or are Sierra Leon e has a contributory Social Security schem e. The
subject to the nil rate of tax, are not r equired to file a tax total minimum contribution by both the employee and
return. The tax year runs to 31 Dec ember. How ever, employer is 15% of basic salary. Th e employ ee and employer
companies may choose any financial year end they wish, by contribute 5% and 10% o f the emp loyee’s basic salary
applying for a substituted financial year. respectiv ely. The amount is r emitted to the National Social
Security and Insurance Trust (NASSI T). The amount
Every taxpayer is r equir ed to file a tax return four months after contributed by the employee is granted as a deduction against
year-end or can r equest for an extension o f L e 5,000,000 to file his personal income tax.
a tax r eturn late. Th e r eturns must b e filed w ith a set of audited
financial statem ents, audited by a firm of accountants L eave allowance
recognised by the Commission er General o f National Rev enue
Authority, as w ell as other documents or supporting For indiv idual Income t ax, only leav e allowance in excess of the
documents required to support the tax return. gross monthly salary is subject to income tax at the existing
highest mar ginal tax rate (30% - effective January 2019), any
R esident individuals amount below the gross monthly salary is tax exempt.
Tax is applied on payments or b enefits ar ising from past, An indiv idual is non-r esident in Sierra Leon e if he or sh e do es
present or prospectiv e world-w ide employm ent including the not fulfil the definition of a “resident individual.”
following:
Non-resident individuals are subject to tax on employm ent
income der ived in Sierra L eone. The employm ent incom e of a
❑ Wages, salaries, commissions and bonuses; non-resid ent individual is det ermined in the sam e mann er as
❑ Gift s r eceived by an emp loyee in the course of that of a resid ent indiv idual. Emp loyment income of a non-
employment; resid ent is subject to tax at a flat rate of 25%. The tax is
❑ Allowances provid ed by the emp loyer for th e ben efit of imposed on the employ er as a withholding tax (WH T), pay as
the employee; and you earn (PAYE).
❑ Fringe ben efits paid by the employ er for th e ben efits of
employees or their family members.
Employment income is d eem ed to arise in Sierra Leon e if the 4
01/06/2020 © Baker TillyNon-resident individuals
Pensions and annuit ies pay able to non-r esidents are also subject I n heritances and donations
to withholding tax at 25%. A non-resident indiv idual is not
required to submit a tax r eturn wher e the non-resid ent’s only
income was employm ent income subject to withholding tax. In No estate duty is levied in Sierr a Leon e nor is a donation or gift tax
such cases the WHT is therefore a final tax. applied.
Cap ital gains tax Tr ansaction taxes
CGT is pay able on gain accruing to or der ived by a p erson or Go ods and services tax (GST)
company from the disposal of chargeable assets. The CGT rate is
30% of capital gains. Goods and servic es tax (GST) is lev ied on all goods and serv ices
supplied in Sierra L eone except exempt supplies. Goods and
Capital gain is defined as the exc ess o f the consider ation rec eiv ed services imported into Sierra Leone are also subject to GST.
or rec eivab le by a chargeable p erson from th e r ealization or
Su pply of goods
disposal o f a chargeable asset over the cost base at th e t ime of
disposal or r ealization. Ther e is howev er a CGT exemption of Le
3,600,000 per annum or transaction on chargeable gain realized. A supply of goods includes:
❑ Sale, exchange or transfer o f the right to d ispose
Tr ansfer pricing and thin capitalisation
of goods as owner;
Sierra L eone do es not have tran sfer pricing ru les. However, the
Commissioner of Income Tax can re-characterise a transaction or ❑ Ease, hir e or other right granted in r elation to
an elem ent o f a transaction or disr egard a transaction wh ich in his goods, inc luding a supply of goods under a
opinion was entered into as part o f a tax avo idance schem e which finance lease; or
would result or has resulted in less tax being paid. ❑ Anything deemed to be a supply of goods.
There ar e no specific thin c apitalization rules in Sierr a L eone.
Anything that is not a supply of goods or money is a supply of
However, there are restrictions on shareholder loans as follows: services and includes:
(i) The amount allowable in r espect of inter est
expense is restricted on lo ans from a
❑ The grant, assignm ent, terminat ion or surrend er o f
sharehold er or his associate to the extent o f a right;
interest on one half (50%) the excess of that ❑ Making available facility, opportunity or advantage;
loan over the shar eholder’s paid up shar e and
capital; ❑ Refraining from or toler ating an act ivity, a situation
or the doing of an act.
(i) In the case of m ining companies, the amount
allowab le in r esp ect of inter est expense is Tax able activity
restricted on loans from a shar ehold er or his
associate on total borrowing o f th e pay ing This includes anything done or undertak en during the
company to three times its p aid-up share capital.
commencement or t ermination of a t axable activity and is carried
Interest on the excess of the loan in this regard on continuously or r egu larly wh ether or not for profit. It involv es
is disallowed as a d eduction against taxable
or is intended to invo lve the supply of goods and serv ices to
profit. another person. It includ es a busin ess, trade, manufacture,
commerce or adventure in the nature of trade.
Any amount disallowed shall be treated as a deemed dividend.
Tax able supply
Ot h er taxes
A m ining royalty is levied ad valorem on the ex -mine pr ice of Except st ated under the law, a taxab le supply is a supply of goods
minerals as: and servic es m ade by a taxab le person for a consid eration, in the
course of h is business activities and includ es but is not limit ed to
the following:
❑ 5% precious stones;
❑ 4% precious metals; and ❑ Processing of data or supply of informat ion or
❑ 3% all other min erals except building and industrial similar service;
minerals. ❑ Supply of staff;
❑ Acceptance of a wager or stak e in any form of
betting, gaming including lott eries and gam ing
machines;
01/06/2020 © Baker Tilly 5Transaction taxes
❑ Making of gifts or loans of goods; lesser months exceeds Le350 million;
❑ Leasing or getting goods on hire; 2. The per son’s turnover exceeds one-th ird o f
❑ Appropriation of goods for personal use; the thresho ld (Le350 million in a p eriod of 4
❑ Sale, transfer, assignm ent or lic ensin g o f months ending on that day; and
patents, copyrights, tradem arks, computer 3. There ar e r easonable grounds to expect that
software and other proprietary information; the person will exceed the threshold (L e350
❑ Supply of power, heat, r efr igeration and million) in the 12-month per iod commencin g
ventilation; and on the following day.
❑ Supply of mining and drilling services.
A r egister ed p erson for GST, who c eases to make taxab le
supplies for a six-month period and who does not intend to
I m position o f GST make taxable supplies within a further consecutive 12-month
period shall apply for a cancellation of its registration.
GST is imposed on:
An application in the prescrib ed form shall be mad e to the
(a) A taxable supply; and Commissioner Gen eral w ithin 30 day s of the date on wh ich the
(b) A taxable import. person is r equired to r egister. The Commission er General will,
within 21 days o f the applic ation for r egistration, confirm a
The amount of GST chargeable on a taxab le supply or import is person’s r egistration with the issu e o f a GST registration
calculated by applying th e rate to the GST exclusive v alu e of certificate and a tax identification number.
the taxable supply or import.
Tim e of supply
The rate of GST applicable on taxable supply or import is:
A supply of goods and serv ices is made on the ear lier of the
1. If the supply or import is zero-rated - 0%; and time when:
2. If the supply or import is standard -15%.
a) An invo ice for the supply is issu ed by th e
The GST chargeable on a taxable supply is the liability of the supplier;
supplier and accounted for by the supplier to the tax b) Any consideration for the supply is received;
authorities, whilst the GST on imports is paid by the importer.
c) For a supply of goods; the goods ar e
If a non-resident principal mak es a taxable supply or import deliv er ed or made av ailable for co llection;
through a resid ent agent, the liability for GST lies with the and
agent. Howev er, if such supply is m ade by a principal, that is
d) For a supply o f servic e, th e services ar e
treated as resid ent and r egist ered for GST, the liability lies w ith
the principal resident under the GST Act and is defined as: performed.
a) Government entity or a local council;
A supply of goods under a hir e purchase agreement or finance
b) Person r esid ent in Sierra Leon e for the year in
lease occurs on the date the goods ar e m ade available under
question, for the purposes of the Income Tax the agreement or lease.
Act 2000;
c) A per son, other than an indiv idual, wh ich is P lace o f supply
formed or created under an enactment or is
managed and controlled in Sierra Leon e A supply of goods or serv ices is regarded as takin g place in
(whether or not that per son is r esident in Sierra Leone if:
Sierra Leon e for the y ear in question for th e a) The supplier is a resident; or
purposes of the Income Tax Act 2000); and b) The supplier is a non-resident and:
d) Any other person to the extent that th e • In the case of a supply of goods, the goods
person carries on a taxable activ ity in Sierr a supplied ar e located in Sierr a Leone at the
Leone. time of the supply; or
R egistration • In the case o f a supply or serv ices, the
servic es are physically per formed in Sierr a
A person is required to register for GST if: Leone by any person who is in Sierra Leon e at
the time the services are performed.
1. The per son’s turnover in a period o f 12 or
01/06/2020 © Baker Tilly 6Transaction taxes
Where goods that hav e been imported and are supplied to a
person before th e goods ar e entered for use w ithin Sierra
Leone, the supply is deemed to hav e tak en plac e outside Sierra
Leone.
Further, a rev erse charge of GST applies, wher e a non-resid ent
person supplies services to a taxable per son in Sierra Leone,
otherwise than through a resident agent, and the supply is not
taxable, but would hav e been taxab le if by a r esident, GST-
registered person.
GST Invoices (FA 2016)
Where ther e is improper use of GST invoic es, the Act imposes
a penalty of Le500,000 for any GST r egister ed person that
issu es a GST invoice that is not printed by the Nat ional
Revenue Authority or produced based on authorization from
the Commissioner General.
St amp and transfer duty
Stamp duties are levied on a w ide range of instruments and
documents at the rate o f 0.1% of the value o f the transaction.
These include agreements, bills o f exchange and promissory
notes, bills of lading, bonds, leases and power o f attorney
letters.
D o uble tax treaties and r educed rates
Country Dividends Interest Royalties
Qualifying companies (%) (%) (%)
Norway # 0 0
South Africa # # #
United Kingdom # 0
# Th ere is no reduction under the treaty, the domestic
withholding tax rate applies.
01/06/2020 © Baker Tilly 7Investment Information and Exchange
Control
I n vestment rules Tr ade and bilateral agreements
Member ship – W TO, ACP-EU Partn ership Agr eem ent,
The Investm ent Promotions Act was instituted to promote and
ECOWAS.
attract private investment, both domestic and for eign, for the
Bilat eral investm ent treat ies concluded with USA, Germany
development of value adding opportunities, export creation
and UK and is a signatory to the 1965 ICSID.
and employment opportunities.
Investments in arms and ammunition, m ilitary, polic e and
prison offic ers’ apparel and accoutrement ar e r estrict ed.
Therefore special approvals ar e r equir ed in ord er to inv est in
these areas.
I n vestment incentives
Incentives granted under the Investment Promotions Act
include:
❑
❑ Expatriate per sonnel w ith work perm its ar e
permitted to m ake rem ittances abroad
through a commercial bank;
❑ Profits and capital can be r epatriated w ithout
any restrictions; and
❑ Guarantees against expropriation of domest ic
or foreign private investments.
❑ An export lic ense is not requir ed for loc ally
produced goods except for precious miner als
and other materials as may be pr escrib ed Cu rrency of Sierra Leone - Bank of Sierra Leone Act 2019
from time to time;
❑ The personal effects o f an expatriat e work er
The currency of Sierra Leone shall continue to be the Leone.
issu ed with a work permit and his imm ediat e
family is exempted from customs duty; and The Leone shall be the currency for all accounting, financial
❑ Losses are carr ied forward for a period of t en reporting and official purposes in Sierra Leone and it shall be
(10) years. issued in banknotes and coins and prefixed by the sign "L e".
Prices for all transactions in Sierra Leone shall be indicated in
Ex c hange control
Leones. Except as otherwise provided in this Act, any person or
In order to improve transpar ency and effic iency in for eign institution who contravenes any provision of this Act or
exchange tran sactions and achiev e a mark et-det ermined Statutory Instruments made under this Act commits an
foreign exchange rat e, the Bank o f Sierra Leone (BSL) initiat es offence.
week ly auctions o f non-cash foreign exchange. While the
auction is primarily d esigned as a m echanism for the BSL to
efficiently inject foreign exchange into the m arket, it also
envisages a w indow for the sale o f foreign exchange by other
economic agents at market rates.
R esidence and work permits
All for eign citizens are requir ed to obtain work p ermits on
application to th e Ministry of Labour which will generally be
granted if it can be demonstrated that no local person is ab le
to do the job, however, all applicants should present valid
residential permits.
An n ual budget announcement
The Min ister of Finance generally announces the annual
Budget and Taxat ion Proposals in November each year for the
tax01/06/2020
year commencing on 1 January thereafter.© Baker Tilly 8Economic statistics
Economic statistics
Var iable D ec ember 2019
Prime Interest Rate 17.92
Exchange rate Le/US$) 9711
Inflation (end Period) 13.89
Inflation (Annual Av) 14.81
Nominal GDP (Le. Bn) - Projection 38,015
Nominal GDP (exc.Iron Ore(LeBn) - Projection 37,574
Travel information
Visa Requirements A visa is required to travel to Sierra Leone
from any country outside West Africa
Flights London and West African Neighbours
Inoculations Yellow Fever
C u rrency
The Leone (Le) which is equal to 100 cents.
L an guages
The official language is English, although a number of local
languages, such as Krio, are also spoken.
Official holidays
❑ New Year's Day - 1 January
❑ Maoulid-Un-Nabi - The Prophet’s Birthday* - Movable
❑ Armed Forces Day - 18 February
❑ International Women’s Day - 8 March
❑ Good Friday - Movable
❑ Easter Monday - Movable
❑ Independence Day - 27 April
❑ Eid-Ul-Fitr - End of Ramadan* - Movable
❑ Eid el-Adha - Feast of the Sacrifice* - Movable
❑ Christmas Day - 25 December
❑ Boxing Day - 26 December
*To be confirmed depending on appearance of the moon
01/06/2020 © Baker Tilly 9For enquiries on further/additional Baker Tilly SL Services please contact: Derrick Kawaley - Managing Partner T: +232 76 648987 E: dlkawaley@bakertilly.sl Isiaka Balogun – Tax Partner T: +232 79 462251 E: iabalogun@bakertilly.sl Clifford Marcus-Roberts – Senior Manager T: +232 76612961 E: crmarcusroberts@bakertilly.sl Baker Tilly and Baker Tilly International refer to the global network of member firms of Baker Tilly International Limited, each of which is a separate and independent legal entity. Baker Tilly International, a UK company limited by guarantee, does not provide services to clients. Services are delivered regionally and nationally by the member firms of the Baker Tilly network. Baker Tilly member firms are not members of one international partnership or otherwise legal partners with each other, nor is any one firm responsible for the services or activities of any other. Although some firms carry the Baker Tilly name, there is no common ownership among the firms or by Baker Tilly International Limited. Each member firm is organised under the laws of the territory in which it practices. Each firm is committed to achieving the highest level of quality within its respective marketplace and to striving for consistency in service quality and delivery across the globe by co-operating with other members of the network. However, in most parts of the world, the practice of accounting and auditing is governed by local laws and regulations which determine professional standards, qualifications and relationships between audit professionals and reporting entities, and it is influenced by local business practices and cultural attitudes. © 2019 Baker Tilly International Limited, all rights reserved. Baker Tilly International refers to the network of member firms of Baker Tilly International Limited, each of which is a separate and independent legal entity. Baker Tilly International provides no client services. 01/06/2020 © Baker Tilly 10
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