Liberia tax system: audit, reporting and optimization of taxation of Liberian companies and individuals: VAT, income tax and capital gains
Basic taxes (briefly)
|Corporate tax (in detail)||Income tax is levied at a rate of 25%. A minimum tax of 2% of the proceeds may also apply. For mining companies, companies in the oil sector - 30% (however, there are various benefits).|
|Capital gains tax. Details||Gains on the sale of assets are taxed at the normal corporate tax rate.|
|VAT. Details||GST is levied at 7% and 10% rates, 15% applies to telecommunications services.|
|Other taxes||Social contributions, Property taxes|
International tax agreement
|Denmark, Faroe Islands, Finland, France, Ghana, Greenland, Iceland, Netherlands, Norway, Portugal, Sweden, United Kingdom|
The income tax regime in Liberia has been stable since the year 2001 when The Revenue Code of Liberia (2000) was enacted. In 2011 however, there were some amendments with specific sections provided on petroleum and mining operators. Under Liberian Law as non-resident domestic corporations are not permitted to conduct business in Liberia and are not subject to Liberian tax.
Personal Income Tax
Income tax is levied in each Tax Year on the gross income of both resident and non-resident persons in Liberia. The gross income of resident persons includes all economic benefits regardless of source. The gross income of non-resident persons includes only those economic benefits having source in Liberia (i.e. the income must be derived from or accrued in Liberia). The taxable income of a person for a tax year is the aggregate of that person’s income for the year from economic benefits of whatever kind. Examples of economic benefits include income from each business, employment, interest, rents, royalties, dividends, payments received under a pension, retirement or annuity arrangement and gains on the disposition of property used in a business or held for investment. Personal tax is levied at the following rates:
The rate of tax applicable to a non resident individual is determined by the kind or description of economic benefits being sourced in Liberia. A non-resident employee would be taxed at the rate of 15% on employment income earned in Liberia. The tax year for individuals is the calendar year (January 1 to December 31). The employer deducts the tax and pays it to the Bureau of Internal Revenue (BIR) by the 10th day of the month following the month in which the deduction was or should have been made.
|Income, LIB$||Rate 0 - 70,000||0% 70,001 - 200,000||5% 200,001 - 800,000||6,500 + 15% Over 800,001||96,500 + 25%|
Corporate tax is levied on all income received by resident companies in Liberia. Corporate tax rate is 25%. Under Liberian Law as non-resident domestic corporations are not permitted to conduct business in Liberia and are not subject to Liberian corporate tax.
Capital gains tax
Capital gains are not taxed in Liberia.
Dividend received by a resident corporation from another resident corporation is exempt from tax. This will however not apply where the dividend received is by virtue of ownership of redeemable shares in the corporation paying the dividend or if the dividend is paid in a dividend stripping arrangement.
Carry over of tax losses
Net operating loss incurred in any particular year can be carried forward to a maximum of five years. The earlier losses will be relieved before the later losses. Carry forward of losses is permitted up to 5 years for general companies and 7 years for mining, petroleum and renewable resources entities. If within a period of three years there is a change of at least 50% in the underlying ownership or control of a company, no carry forward is allowed of any losses from prior periods as well as any concessions made as investment incentives.
The tax year is the calendar year unless otherwise granted by the Minister of Finance. The Minister may on a written application by a legal person (other than a trust for example) grant permission to use some other 12-month period as the tax year (fiscal year).
Withholding tax is levied on certain payments of an income nature to non-residents e.g. royalties, dividends, interest, fees. The standard rate is 15%. Non-resident companies are exempt from withholding tax.
Goods tax and Services tax is imposed on every taxable supply of goods by a registered manufacturer; every taxable importation of goods; and every supply of taxable services in Liberia by a registered services provider. The rates of goods and service tax payable on the various taxable supplies are as below:
|Type of supply||Rate Goods and services||7% Alcoholic beverages||10% Export of goods||0% Imported goods||7%, 10% or 0% depending on the type of imported goods Hotel services; Gambling services; Sale of tickets for international travel; Travel agency, etc.||10% Telecommunications services||15%|
Any person who carries on any business of manufacture or business of providing taxable services has an obligation to register as follows:
- At the end of any twelve month period where taxable supplies or services totaling LIB$ 3,000,000 or more was made; or At the beginning of any twelve months period where there are reasonable grounds to expect that taxable supplies or services totaling LIB$ 3,000,000 or more will be made.
GST tax period and returns
Every registered manufacturer and service provider shall file GST returns for each tax period (calendar month) within 21 days after the end of the period, whether or not any goods or service tax is due for such period.
Stamp duty is not levied in Liberia.
The annual cost of maintaining a Liberian corporation is $450, which includes the annual registration tax to the Government of Liberia of $150 and the Registered agent annual fee of $300. Annual fees are due on the anniversary of incorporation and are invoiced to the Corporation billing address, also referred to as address of record, as supplied at the time of incorporation. The billing address can be changed by a written request to the LISCR trust from the existing billing address.
Other taxes and duties
|Property Tax||collected annually by the Inland Revenue Department on all lands and houses in St. Lucia. Social security contribution||The employer’s monthly mandatory social security contribution is 3% of all elements of earnings whilst the employee’s contribution is also 3% of all elements of earnings.|
Transfer pricing: There is no specific regulation on transfer pricing in the RCL. However, the Minister of Finance has the power to adjust non arm’s length transactions between related parties to reflect the actual tax payable had the transactions between them been at arm’s length. Thin capitalisation : Deduction for interest payable to any person other than a resident bank is limited to the amount of interest income received plus 50% of taxable income excluding interest income. This also applies to mining and petroleum operators except that the interest carried forward does not expire.
Double Tax Agreements
Liberia signed a whole bunch of double tax agreements and tax information exchange agreements:
- 1 DTCs: Germany; 16 TIEAs: Australia, Denmark, Faroe Islands, Finland, France, Ghana, Greenland, Iceland, India, Netherlands, Norway, Poland, Portugal, South Africa, Sweden, United Kingdom.
Foreign exchange control
There are no exchange controls. Liberia has two national currencies, the Liberian dollar and the US dollar. The exchange rate between these two currencies is dictated by the market, although the Central Bank of Liberia does regularly intervene by selling/buying one currency against the other. Otherwise, exchange rates are strictly market determined. There is no remittance control, except that maximum cash allowable on the person or in the luggage of the traveler is US$10,000 (ten thousand US dollars) or its Liberian dollar equivalent.
There is no requirement to file accounts for any type of Liberian entity. The normal books of record of a legal entity and financial records should be maintained to reflect the entity’s financial status and to satisfy the obligation to disclose information to, for example, the shareholders. The records can be maintained in any location selected by the directors/managers and can be in paper or maintained electronically.
Generally speaking, Annual Return is a short review on the current state of the company, which is prepared by the company secretary annually. As a rule it includes the following information:
- Incorporation information (registration date, registered address); Information about directors and their resignation; Information about secretaries and their resignation; Information about registered capital, nominal value of shares and amount of issued shares; Information about shareholders and share transfer.
As non-resident companies are not allowed carry on trade and are exempt from taxation in Liberia, therefore they are not required to file tax returns.
Taxes of Liberia
|Min. rate for corporate tax||25%|
|Capital gains tax||Regular rate|