Sierra LeoneTax Obligations Detailed

In Sierra Leone, employers face several tax obligations for their employees, including payroll tax, PAYE (Pay As You Earn), and contributions to the National Social Security and Insurance Trust (NASSIT).

Payroll Tax

• Applicability: Levied annually on employers of non-citizen employees.
• Rates: Le500,000 for ECOWAS citizens and Le3,000,000 for non-ECOWAS citizens.
• Due Date: Payable by January 31st if the employee is present in Sierra Leone on January 1st. If employment commences after January 1st, tax is due within 14 days of the employment start date.
• Return Filing: Employers must file a payroll tax return when making the tax payment. Late filing penalties apply:
  • Large Taxpayer: NLe25,000 within 30 days, NLe50,000 after 30 days.
  • Medium Taxpayer: NLe12,500 within 30 days, NLe25,000 after 30 days.
  • Small Taxpayer: NLe1,250 within 30 days, NLe2,500 after 30 days.

Pay As You Earn (PAYE)

• Applicability: Deducted monthly from employee salaries and remitted to the National Revenue Authority (NRA).
• Rates: Progressive rates ranging from 0% to 30% of taxable income. The first Le300,000 is tax-free. Allowances up to Le220,000 per month are also exempt.
  • Le300,001 - Le600,000: 15%
  • Le600,001 - Le900,000: 20%
  • Le900,001 and above: 30%
• Due Date: Payment and monthly PAYE return filing are due by the 15th of the month following salary payment.
• Penalties for Late Payment:
  • 10% if paid within 30 days of the due date.
  • 15% if paid between 30 and 90 days of the due date.
  • 25% if paid after 90 days of the due date.
• Annual Return: An annual income tax return is also due within 120 days (four months) of the year-end.

National Social Security and Insurance Trust (NASSIT)

• Applicability: Contributory social security scheme.
• Rates: Total contribution is 15% of the employee's basic salary.
  • Employer Contribution: 10%
  • Employee Contribution: 5% (deductible from income tax).
• Due Date: Payable monthly by the 15th of the following month.

Other Taxes

• Corporate Tax Rate: 25% for resident and non-resident companies.
• Capital Gains Tax: 30%

Additional Notes:

• The official currency of Sierra Leone is the Leone (SLL). As of February 5, 2025, no new taxes are planned, but the government aims to improve tax administration and collection. The tax year aligns with the calendar year (January 1st to December 31st).
• This information is current as of February 5, 2025, and might be subject to change. It's recommended to consult with a tax advisor or the NRA for the latest updates.

In Sierra Leone, employers deduct Pay As You Earn (PAYE) tax, also known as Personal Income Tax (PIT), from employee salaries and remit it to the National Revenue Authority (NRA).

PAYE (Personal Income Tax)

The PAYE system follows a progressive tax structure, meaning higher earners pay a larger percentage of their income in tax. The first SLL 600 of an employee's monthly salary is tax-exempt. Any income above this threshold is taxed according to the corresponding tax bands. For example, if an employee earns SLL 800, the first SLL 600 is exempt, and the remaining SLL 200 is taxed at the lowest tax band rate. Allowances above SLL 500 are also considered part of taxable income.

Payroll Tax

Employers of foreign nationals in Sierra Leone pay an annual payroll tax. The amount is SLL 1,500,000 for ECOWAS citizens and SLL 5,000,000 for non-ECOWAS citizens.

National Social Security and Insurance Trust (NASSIT) Contributions

Both employers and employees contribute to NASSIT. Employees contribute 5% of their basic salary, while employers contribute 10%.

Tax Administration

Employers must deduct PAYE and NASSIT contributions from employee salaries each payday and remit them to the NRA by the 15th of the following month.

Tax Year and Filing

Sierra Leone's tax year aligns with the calendar year, running from January 1st to December 31st. Employers are responsible for year-end tax reporting, including filing necessary documentation with the NRA. Penalties apply for non-compliance, late filing, and late payment.

Tax Incentives and Exemptions

Various tax incentives and exemptions exist for specific sectors and investments. These can include exemptions on income tax, customs duties, and other taxes, and are generally aimed at promoting economic development. It is advisable to consult with the NRA or relevant government bodies for details about specific incentives or exemptions that may apply to your situation.

Fringe Benefits

Fringe benefits provided by employers, such as housing, vehicles, meals, and domestic staff are considered taxable income. These are typically taxed based on their market value or a scaled value as outlined in the Income Tax Act 2000.

It is important to note that this information pertains to the 2025 tax year in Sierra Leone. While no new taxes are expected for the current year, tax laws and regulations can change, so keeping up-to-date with the latest information from official sources is crucial.

In Sierra Leone, the Goods and Services Tax (GST) is levied at a standard rate of 15% on most goods and services, with specific exemptions and zero-rated supplies.

GST Rates and Scope

• Standard Rate: 15% applies to most goods and services.
• Zero-Rated Supplies: 0% GST applies to certain goods and services deemed essential, including exports, some educational materials, specific pharmaceuticals, and certain solar power supplies. Input GST can be reclaimed.
• Exempt Supplies: These are outside the scope of GST and include civil engineering and public works, along with specified basic necessities like rice, piped water, and essential medical services. No input GST can be reclaimed.

GST Registration

• Threshold: Businesses with a taxable turnover exceeding SLL 100 million (approximately US$ 4900 as of today's date) in any 12-month period must register for GST. This threshold was revised from SLL 350 million (approximately US$ 17,140 as of today's date) in 2022.
• Mandatory Registration: Certain businesses, regardless of turnover, must register. These include promoters of public entertainment and government entities making taxable supplies.
• Non-Resident Digital Suppliers: Non-resident suppliers of digital services to consumers in Sierra Leone are also required to register if their annual turnover exceeds SLL 350,000.

GST Filing and Payment

• Returns: Registered businesses must file monthly GST returns.
• Deadline: Returns and payments are due by the last day of the month following the reporting period.
• Electronic Filing: GST returns are filed electronically.
• Late Payment Interest: A penalty applies for late GST payments, calculated as a fraction of the central bank lending rate. However, no new taxes or tax increases are planned for 2025. Efforts will be focused on strengthening existing tax administration and collection.

Examples of Exempt Goods and Services

• Basic foodstuffs like rice
• Piped water
• Fuels
• Books and other educational materials
• Essential medical services and specified pharmaceuticals

This information concerning VAT/GST regulations in Sierra Leone is based on available information as of today, 05/02/2025, and might be subject to change due to legislative updates or revisions in tax policy.

Sierra Leone offers a range of tax incentives to attract investment and stimulate economic growth.

General Tax Incentives

• Income Tax Relief: Relief on plant, machinery, and equipment. A three-year grace period on import duties for new and existing businesses importing such items.
• Import Duty Relief: Lower rates for raw materials.
• Deductions: 100% deductions for research and development, training, and development of social services (schools, hospitals).

Sector-Specific Incentives

• Agriculture: 10-year income tax exemptions for rice and tree crop farming (cocoa, coffee, oil palm); duty-free import of agricultural inputs for five years. Three-year income tax exemption for poultry, livestock, and ruminant businesses with a minimum investment of USD 500,000 and 50% dividend payment over 10 years.
• Energy: Incentives include income tax exemptions, import duty exemptions, and GST exemptions. Duty-free import of photovoltaic system equipment and energy-efficient appliances for three years, subject to a minimum investment of USD 500,000, employment of at least 50 people, and adherence to international standards.
• Tourism: While previous tax relief for hotel construction has been repealed, the current incentive landscape is under review. A public-private partnership exists to engage private stakeholders in tourism development.
• Special Economic Zones (SEZs): Three-year corporate tax holidays and expedited government services (customs, immigration, registration).
• Other sectors: Incentives also exist for pharmaceuticals and infrastructure development. However, many duty and tax waivers have been suspended, pending a review and likely revision of the policy.

Application and Eligibility

As of November 2024, Sierra Leone is focused on broadening its tax base and improving tax compliance, meaning that existing incentives are under scrutiny and new fiscal terms outside established parameters are discouraged. The government is also moving away from reduced corporate tax rates and withholding tax rates for new investments and suppliers, respectively. It is, therefore, crucial to seek up-to-date information from the Sierra Leone Investment and Export Promotion Agency (SLIEPA) regarding the availability and specifics of incentives. Contact them at [email protected]. Additionally, the Duty and Tax Exemptions Act 2023 is now the guiding legislation, providing a structured and accountable framework.

2025 Tax Reform Focus

Sierra Leone's focus for 2025 is on strengthening tax administration and collection rather than introducing new taxes. Key initiatives include amending the Income Tax Act to extend the Minimum Alternate Tax (MAT) to all sectors, reviewing sectoral investment agreements to introduce sunset clauses for reduced corporate tax rates, enforcing the Extractive Industries Revenue Act 2018, and rationalizing duty and tax exemptions under the 2023 Act. These reforms aim to increase domestic revenue mobilization and reduce revenue leakages.

Further Information

The information provided here is a general overview, valid as of today's date, February 5, 2025. Tax laws and regulations are subject to change. Consulting with SLIEPA and legal professionals specializing in Sierra Leonean tax law is essential for obtaining the most current and accurate information relevant to your specific investment plans.