Overview & Incentives

Overview & Incentives

Sierra Leone is an investment friendly nation. The enabling environment has been created by government to ensure, investors are protected. The country is among the most business friendly countries around the world at present.

This is an encouraging development for a country that is making progress from the socio-economic and political fronts. The environment has been created wherein; investors could feel free and safe to take their investments into the country.

In its Post-Ebola Recovery Strategy, the GoSL sets out its objectives for restoringand strengthening trade and private sector activities. These are to:

  • increase the capacity of the professional wing of the Ministry of Trade and Industry and its role in coordinating all trade and business matters across the economy;
  • reduce interest rates to promote agriculture and small-scale business operations and the general development of the private sector
  • promote public private partnerships (PPPs) in the provision of public services.

Investment motivation

The Investment Promotion Act of 2004, primarily promotes and attracts private investments – both domestic and foreign, for the development of production and value adding activities, as well as to improve exports and create
employment opportunities.

Sierra Leone is determined to develop and the government has been making every effort to meet the development needs of its citizens. The Investment Promotion Act of 2004 provides a number of investment incentives, as a way of attracting investments into the country. Investment incentives such as
capacity building support, foreign exchange remittance, remittance of profit, guarantee of capital repatriation and of loan remittance and guarantee against expropriation – are protecting both domestic and foreign investments.

Insurance

Two World Bank affiliated risk insurance agencies operate in Sierra Leone: the African Trade Insurance Agency and the Multilateral Investment Guarantee Agency. Both agencies provide various kinds of insurance (including against political risk) to investors, suppliers and lenders.

Tax environment

The country’s progress over the years is also felt in its tax administration and the creation of better and efficient tax system. The introduction of the Automated System for Customs Data is a plus to the country’s tax environment. ASYCUDA is a computer software package that is used by Customs Administrations in many countries, in processing documents on export and importation of goods.

There are a lot of advantages attached to the system. It ensures fast clearance of goods; it accounts for revenue collected; it helps in the compilation of trade statistics; it makes trade more reliable, transparent and efficient -having an audit trail that will help in increasing the confidence of taxpayers in the systems of customs operations.

The system is a major component that has helped in migrating customs operations from the then manual system with a large number of tedious steps, to an automated system, which has today got rid of the bureaucracies that used to exist.  However, there are still challenges.

Another area of progress in the country’s tax environment is the merger, which has taken place, in bringing the Income Tax and the GST (Goods & Services Tax) under one body – the Domestic Taxes Department (DTD).

The introduction of the DTD takes into account components in the NRA’s (National Revenue Authority) Modernisation Plan, which generally aims at increasing effectiveness and accountability in the nation’s revenue collection agency. The DTD, Tax Experts say, will significantly improve on the delivery of services to taxpayers and stakeholders.

Fighting corruption and the provision of electricity

President Koroma’s government has taken the fight against corruption as core in the Agenda for Change. The institution responsible for fighting corruption has been given more prosecutorial powers. High profile cases of corruption have been prosecuted and won by the ACC (Anti Corruption Committee) with government not interfering in the operation of the institution.

Investment Incentives

Although Sierra Leone is an attractive market in its own right, the government offers added fiscal and financial incentives to investors. Many of them are sector specific.

  • Including the establishment of the first special economic zone operated by First Step at Newton near Freetown.
  • All investors can take accelerated depreciation of 40 percent for plants and equipment the first year and 10–15 percent for most other items. It also offers a loss carry-forward of 50 percent of the previous tax year’s taxable income.
  • Tourism sector investors pay a 15 percent corporate tax for the first five years of a new investment, unlike the 30 percent rate charged to most corporations.
  • Tourism enterprises are exempted from import duties for new construction, extension, or renovation, applicable to building materials, machinery, and equipment not easily acquired in Sierra Leone.
  • The sales tax is zero for plants and machinery, while others are 15 percent at entry and production.
  • The import duty for raw materials, plants, and machinery is 5 percent, and malaria and HIV drugs are exempted. The import duty for intermediate products is 10 percent, while it is 5 percent for vehicles up to four years old, 20 percent for those four to 10 years old, and 30 percent for those older than 10 years.
  • Export licenses are not required for locally produced goods (except gold, diamonds, and a few other goods designated by the government).

Other incentives

As incentives to foreign investors, Sierra Leone offers accelerated depreciation of 40 percent for plants and equipment the first year and 10–15 percent for most other items. It also offers a loss carry-forward of 50 percent of the previous tax year’s taxable income.

InvestO4Investors in the mining sector receive a 100 percent deduction for prospecting and exploration, a 40 percent deduction for the first year of production costs, 10 percent depreciation for research and development, and 10 percent amortisation of start-up costs. In addition, individuals can deduct 50 percent of qualifying investments, up to $150,000, from their personal taxes.

To encourage investment in rice and timber, a 10-year corporate tax holiday is granted to qualified investors.

Tourism investment may qualify for a five-year tax holiday, and tourism enterprises with up to six employees are exempt from the pay-as-you-earn tax for skills and expertise not readily available in Sierra Leone for the first three years of employment.In keeping with plans to promote export diversification and competitiveness, the government of Sierra Leone plans to establish export processing zones and agroprocessing units in suitable locations as well as an industrial and economic zone in Freetown.