LiberiaTax Obligations Detailed

In Liberia, employers have various tax obligations and payroll responsibilities to fulfill, including income tax, social security contributions, and specific filing deadlines.

Employer Responsibilities

• Income Tax Withholding: Employers must withhold income tax from employee salaries monthly, based on a progressive tax system. The withheld tax must be remitted to the Liberia Revenue Authority (LRA) by the 10th day of the following month.
• Social Security Contributions: Employers and employees contribute to social security through the National Social Security and Welfare Corporation (NASSCORP). Current rates are 3% for employers and 4.75% for employees, calculated on the employee's total wages. Payment is due by the last day of the month. A portion of these contributions (6%) goes to the National Pensions Fund, while another portion (1.75%) is allocated to the Employment Injury Scheme.
• Tax Filing and Payment: Employers are responsible for registering, filing, and paying employer taxes and social security contributions to the appropriate authorities. Payment can be made via mobile money for all taxes. Filing annual income tax returns is typically due by March 31st each year. However, according to LRA, the filing deadline was extended to April 30, 2025 for the tax year 2024.

Employee Income Tax Rates

Annual income tax rates for resident individuals are as follows (amounts in Liberian Dollars - LRD):

• Up to 70,000 LRD: 0%
• 70,001 - 200,000 LRD: 5%
• 200,001 - 800,000 LRD: 15% + 6,500 LRD
• Above 800,000 LRD: 25% + 96,500 LRD

Non-resident employees are taxed at a flat rate of 15% on their Liberian employment income.

Other Taxes and Regulations

• Goods and Services Tax (GST): A 7% GST applies to most goods and services. Businesses exceeding an annual threshold of 5 million LRD must register for GST.
• Minimum Wage: As of January 2025, the public sector minimum wage is US\$150 per month. The private sector minimum wage is US\$0.68 per hour or US\$5.50 per day, as per the Decent Work Act.
• Working Hours: The standard work week is 48 hours, with a maximum of eight hours per day.

Additional Information

• Tax Year: January 1st to December 31st.
• Annual Leave: Employees are entitled to paid annual leave, starting with one week in the first year, increasing to two weeks after one year, three weeks after three years, and four weeks after five years.

This information is current as of February 5, 2025, and might change due to revisions in tax laws or regulations. It is always advisable to consult with the LRA or a tax professional for the most up-to-date information and specific guidance.

In Liberia, employers deduct various taxes and contributions from employee salaries, including income tax and social security contributions.

Income Tax

Income tax is calculated based on a progressive tax system with graduated rates. The rates for the 2025 tax year are as follows:

• Annual Chargeable Income (LRD) Up to 70,000: 0%
• Annual Chargeable Income (LRD) 70,001 - 200,000: 5%
• Annual Chargeable Income (LRD) 200,001 - 800,000: 15% (6,500 LRD plus 15% of the excess over 200,000 LRD)
• Annual Chargeable Income (LRD) Over 800,000: 25% (96,500 LRD plus 25% of the excess over 800,000 LRD)

Employers are responsible for withholding income tax from employee salaries monthly and remitting it to the tax authorities within 10 days of the end of the month. Non-cash benefits, like company cars or housing, are generally taxable, although some exemptions apply. For example, non-cash benefits not exceeding 100,000 LRD annually are exempt.

Social Security Contributions

Both employers and employees contribute to the National Social Security and Welfare Corporation (NASSCORP). The contribution rate for both is 4% of the employee's monthly gross salary. Employers deduct the employee's portion from their salary and remit both portions to NASSCORP. It's important to keep in mind that changes to the tax rates are possible with the Liberian 2026 budget proposal to replace Goods and Services Tax (GST) with a Value Added Tax (VAT), although details are yet to be confirmed.

Other Deductions

Other deductions from employee salaries may include:

• Other Statutory Deductions: No information available
• Voluntary Deductions: These might include union dues, health insurance premiums (if not covered by the employer), or contributions to retirement savings plans.
• Court-Ordered Deductions: Garnishments for debts or child support obligations.

Goods and Services Tax (GST)

As of February 2025, Liberia levies a 10% Goods and Services Tax (GST) on most goods and services. Businesses do not currently deduct input GST, which can lead to tax cascading. Note: Liberia plans to introduce a VAT system in 2026, replacing GST. Details of the transition and potential rates are still being developed as of today's date. This new regime aims to resolve issues arising from GST, like the inability for businesses to deduct input tax.

Important Considerations for Employers

It's crucial for employers in Liberia to stay updated on tax laws and regulations. Using an Employer of Record (EOR) can greatly simplify navigating complex payroll processes, ensuring accurate tax calculations and compliance. EORs handle all aspects of Liberian payroll, including tax deductions, social security contributions, and compliance with local labor laws. This allows businesses to focus on their core operations without the added burden of managing intricate payroll procedures in a foreign jurisdiction. Given the planned implementation of VAT in 2026, using an EOR becomes even more critical for managing the transition smoothly.

Liberia currently uses a Goods and Services Tax (GST) system but is transitioning to a Value Added Tax (VAT) system.

Current GST System (as of February 2025)

• GST Rate: The standard GST rate is 10%. There are also additional rates for specific goods and services.
  • A higher rate of 10% applies to hotel accommodations, international travel, and gambling. A 15% rate applies to telecommunications services.
• Exemptions: Certain goods and services are exempt from GST, including agricultural products, medical services, medical supplies or drugs, educational services, textbooks, foodstuffs, pharmaceutical or medicinal preparation, medical aids, goods for the relief of distressed persons, and specified raw materials.
• Registration Threshold: Businesses whose total taxable supplies or services equal or exceed L$3,000,000 in the last 12 months or are expected to exceed this amount in the next 12 months must register for GST.
• Filing and Payment: GST returns must be filed within 21 days after the end of each tax period (monthly). Payment is also due on this date. For imports, GST is payable upon arrival at the port of entry. Tax invoices must be issued within ten days of performing the service.
• Transition to VAT: Liberia is planning to replace its GST system with a VAT system by January 2026. The proposed VAT rate is 18%.

Future VAT System (effective January 2026)

• VAT Rate: The proposed standard VAT rate is 18%.
• Deductible Input Tax: The VAT system will allow businesses to deduct input tax, unlike the current GST system.

Please note: The provided information is based on the data available as of today, February 5, 2025, and is subject to change. Always verify with official government sources for the most up-to-date regulations.

Liberia offers several tax incentives to attract investment and stimulate economic growth.

Investment Incentives

Liberia provides various tax incentives under the Liberia Revenue Code and related regulations.

• Sectors Eligible for Incentives: As of July 7, 2017, qualifying sectors include tourism, manufacturing, energy, health services, real estate, transport, technology, agriculture (including poultry, horticulture, and the cultivation and processing of rubber and oil palm), exportation of sea products, and waste management. These sectors are eligible for exemptions from goods and services tax (GST) and import duties. Note that, as of June 17, 2024, the Ministry of Finance and Development Planning issued Administrative Regulation to define the qualifying sectors in more detail.

• Investment Thresholds: Investments between US$500,000 and US$9.9 million in prioritized sectors can benefit from incentives like asset and tax deductions, and exemptions from GST, customs duties, and income tax stamp fees. For agriculture and healthcare sectors, the minimum capital investment to qualify is US$50,000. Investments exceeding US$10 million require negotiating a concession agreement which becomes law.

• Additional Benefits: Approved projects might also receive support for securing loans, credit guarantees from the Central Bank, and preferential lease rates for land in government-owned industrial parks, along with tariff protection, and potential government procurement of project outputs.

Application Procedure for Incentives

• Submit the required documents to the National Investment Commission (NIC), including business registration, articles of incorporation, a business plan, tax clearance, and the business plan in both hard and soft copy.

• The NIC will conduct an economic evaluation based on value-added potential, job creation, Liberian participation, and the use of local materials. A recommendation is then sent to the Ministry of Finance and Development Planning for certification.

• The Ministry of Finance will approve or reject the request, and an investment incentive contract will be signed if approved. A minimum deposit of US$50,000 in a Liberian bank is required before an incentive certificate is issued (excluding hospital and educational investments). It's encouraged to source raw materials locally, and certain items like office supplies, furniture, and some vehicles are excluded from duty waivers.

Tax Measures & Proposed Changes

• Proposed VAT: Liberia plans to introduce an 18% value-added tax (VAT) by 2026, replacing the existing 10% goods and services tax (GST).

• Withholding Tax Increase: The 2025 budget proposes raising the withholding tax on consultancy services from 2% to 10%.

General Tax Information

Liberia operates a generally liberal business climate. While specific details on the broader tax system haven't been included in this overview, it's crucial for investors to understand the full scope of their tax obligations. Consulting with a tax advisor specializing in Liberian regulations is highly recommended. Also, the provided overview is current as of February 5, 2025, and might change due to legislative updates or policy revisions.