In an attempt to create greater ease in doing business, Sierra Leone has implemented the following tax regime.

Tax Regime Withholding of Tax at Source

Withholding Tax of 5% on Contracts:
Section 117 of the Income Tax Act of 2000 defines a contractor as a person engaged in the business of providing
 construction, transportation, management or any other service, under a contract where the primary purpose of
 the contract is the performance of services. It also includes any commission paid to a person in respect of services or any charge or fee paid for the provision of management services other than under an employment contract, and any payment for goods. Subsection (4) does not apply to payments made by a person to a contractor during a month in which the person pays a total of Le 500,000 or less to the contractor. The rate of tax for a contractor resident in Sierra Leone is 5% (five percent) on the gross amount. The rate of tax for a non-resident contractor is 10% (ten percent) on the gross amount.

Payments of Dividend (Section 118 of the Income Tax Act of 2000)
A resident company that pays a dividend shall withhold tax on the gross amount at the rate of 10% (ten percent)
 n the case of a person resident in Sierra Leone.  In the case of a non-resident person the rate is 10% (ten percent)

Payments of Interest (Section 119 of the Income Tax Act of 2000)
A person resident in Sierra Leone who pays interests shall withhold tax on the gross amount of the payment at
the rate of 15% (fifteen percent) for both resident and non-resident persons.

Payment of Rents and Royalties (Section 120 of the Income Tax Act of 2000)
A person resident in Sierra Leone who pays rent or a royalty shall withhold tax on the gross amount of the payment
at the rate of 10% with the Taxable Rental Income being arrived at by granting to the landlord
(as amended by the Finance Act of 2006):

(i) Non-Taxable Threshold of Le 1,500,000.00 in the aggregate; and
(ii) A Tax deductible allowance of 20% of the gross rental income that is in excess of the non-taxable threshold.
(iii) Individual tenants shall withhold tax on rents payable to non-resident landlords but not on rents payable
 to resident landlords.
(iv) Institutional tenants paying rent to either resident or non-resident landlords shall withhold tax on the
 rent payable.

Royalties (Section 120 of the Income Tax Act of 2000)
Royalties are charged at  25% for all categories of persons.

Payment of Pensions and Annuities (Section 121, Subsection 2 of the Income Tax Act of 2000)

A person resident in Sierra Leone, who makes any payment by way of a pension or annuity, whether in a lump sum or
by periodical payment, shall withhold tax on the gross amount of the payment at 15% for resident persons and 25%
for non-resident persons.

Natural Resource Payment (Section 122 of the Income Tax Act of 2000)
A person who makes any Sierra Leone natural resource payment to a person resident in Sierra Leone shall pay tax
at the rate of 25% for both resident and non-resident persons.

Failure to Withhold Tax (Section 129 of the Income Tax Act of 2000)
A withholding agent who fails to withhold tax as required by the Income Tax Act of 2000 shall be personally liable
to pay to the Commissioner the amount of tax which has been so withheld, but the withholding agent shall be entitled
to recover that amount from the payee.

Payment of Tax Withheld (Section 130 of the Income Tax Act of 2000)
Any tax that has been withheld or should have been withheld shall be paid by such agent to the Commissioner within
fifteen days of the end of the month in which it was or should have been withheld.

Penalty in Relation to Withholding Taxes (Section 152 of the Income Tax Act of 2000)
A withholding agent liable under section 129 for failing to withhold tax shall be liable to a penalty of 10% of
the amount of tax not withheld.

A withholding agent who fails to comply with section 130 shall be liable to penalties as follows:

(i) 10% if the due date of payment is exceeded by less than 30 days
(ii) 15% if the tax is paid 30 or more days after the due date
(iii) 20% if the tax is paid 90 or more days after the due date
(iv) 25% if the tax is paid 180 or more days after the due date

P.A.Y.E.
PAYE means Pay As You Earn.  It is a form of tax collection whereby tax is deducted from employee’s earnings
and paid periodically, usually monthly, to the Income Tax Department during the year in which income is earned.

P.A.Y.E. System
Tax on employment income is usually deducted at source under the P.A.Y.E. system which the law requires all
employers (agents) to operate.  Any tax that has been withheld or should have been withheld by a withholding
employer (agent) shall be paid by such agent to the Commissioner General within fifteen days of the end of
the month in which it was or should have been withheld (Section 130 of the Income Tax Act of 2000).

Any additional tax on other income and benefit in kind is usually collected by direct assessment made by the
Commissioner General. Benefits in kind are given estimated values and assessed as provided in Section 23 for
the year of assessment indicated. Income Tax or Pay-As-You-Earn (P.A.Y.E) is on schedule with rates of 0%,
20%, 25% and 30%.

Rates of Tax Applicable to Individuals Resident in Sierra Leone as 1st January 2005
The new rates with effect from 1st January 2005 are as follows:

Chargeable Income     Rates of Tax

Le 1,500,000 or under per annum   Nil
Next Le 3,000,000 per annum    20%
Next Le 3,000,000 per annum    25%
Excess over Le 7,500,000 per annum   30%

On a monthly basis the rates are as follows:

Le 125,000 or under per month   Nil
Next Le 250,000 per month    20%
Next Le 250,000 per month    25%
Excess over Le 625,000 per month   30%

The threshold on non-taxable allowance is Le 2,640,000.00 per annum or Le 220,000.00 per month.

Income Taxes
National Revenue Authority - (Income Tax Department)

Rates of Tax Applicable To Individuals Resident in Sierra Leone as From 1st January, 2005 - As s result of the recently successful negotiations between a delegation representing the Government and the Sierra Leone Labour Congress delegation, the following reduced tax rates are to be implemented with effect from 1st January, 2005.

 Chargeable Income     Rate of Tax

Le1, 500, 00.00 or under per annum     Nil
Next Le3,000,000.00 per annum      20%
Next Le3,000,000.00 per annum      25%
Excess over Le7,500,000.00 per annum     30%

On a Monthly basis the rates are as follows:-
Le125,000 or under per month      Nil
Next Le250,000 per month       20%
Next Le250,000 per month       25%
Excess over Le625,000 per month     30%

Also, the following tax-free allowances totaling Le2,640,000 per annum of Le220,000 per month formed part
of the tax concessions made by government:-

Meal Allowance       Le60,000 per month
Transport Allowance          60,000 per month
Rent Allowance         100,000 per month

Total Allowances         220,000 per month
Or 
Le220,000 x 12     =     Le2,640,000 per annum

TAX RATES

1. Corporate Tax     =  30%
2. Withholding Tax on Rent    =  10%
3. Message Tax     =  10%
4. Withholding Tax on Contract & Services  =  5%
5. Restaurant Tax     =  10%
6. Payroll Tax:-
 ECOWAS Countries:    =  500,000
 Other foreign nationals:    =  3,000,000

Corporate Taxes

Sierra Leone Corporate Tax Regime

Introduction

Corporate tax is administered by the National Revenue Authority (NRA), a body corporate operating under
the National Revenue Authority Act of 2000.  The main legislation regulating the taxation of corporate
entities in Sierra Leone are the Income Tax Act of 2000 as amended by Act No.6 of 2004 and the National
Revenue Authority Act of 2002.

Companies resident in Sierra Leone are chargeable to corporate tax on their worldwide income. Companies
are taxed separately from their shareholders.

Determination of Resident Company

A company is a resident company if it:

is incorporated or formed under the laws of Sierra Leone has its effective management and control in Sierra Leone, or
undertakes the majority of its operations in Sierra Leone.

A branch in Sierra Leone of a non-resident company is deemed to be a separate person who is a resident company.

Corporate Tax

A company’s liability to corporate tax is computed by reference to the adjusted profit
(otherwise known as chargeable income) made during an accounting period.

In ascertaining the chargeable income derived by a company during a year of assessment, all outgoings and
expenses incurred by the company during the year of assessment to the extent that expenses or outgoings were
incurred in the production of assessable income, are deducted.  However, capital expenditures are not deductible;
rather a relief of capital allowances are granted.

Companies are allowed to carry forward a loss indefinitely. A minimum chargeable income of 10% of turnover
(fifteen percent where accounts have not been kept) applies to all companies.  Where the books and records
of a company have been audited by a “reputable firm of accountants” and the Commissioner General is satisfied
that complete and proper records have been kept and that there have been no false, artificial or fictitious
transactions aimed at reducing the chargeable income, no minimum chargeable income will apply and assessment
will be on profit basis.

There is a single corporate tax of 30% on the chargeable income irrespective of the size of the company. However,
companies operating in the Mining Sector are required to pay thirty seven and one half percent, subject to any
additional tax on profits agreed between the Ministry responsible for mineral resources and the company concerned.

Every company is required to submit a budge estimate of the turnover of the business, and the chargeable income
(profit) at the beginning of its financial year. A provisional assessment is raised on the business based on
the estimate submitted. Payment is then made on a quarterly basis. Businesses are under an obligation to file
returns/audited accounts ninety days after the end of the accounting year. A normal assessment is then raised
and the company is served notice of assessment after an examination of the returns/accounts.

Income of companies incorporated in Sierra Leone which are involved in agricultural activity involving rice farming,
tree crop farming such as cocoa, coffee and oil palm are exempt from income tax for a period of ten years from the
commencement of the agricultural activity.