An Overview of Tax Compliance in Liberia

Tax Compliance is a delicate process. Tax compliance has to be done timely, accurately, and efficiently to enhance business cash flow, integrity, and growth. Tax professionals prepare and review all tax returns and represent clients at tax assessments. Tax professionals guide their clients and keep them abreast with all the amendments in tax laws and regulations. Tax compliance is crucial for all taxable and non-taxable entities. Irrespective of the tax structure or reporting requirements, Enterslice helps you curb your tax liability while ensuring compliance with all reporting requirements and regulations.

Types of Taxes in Liberia

1. Corporate Income Tax: A corporate income tax at the rate of 25% is levied in Liberia. On top of it, a minimum tax of 2% is applicable on gross income. For mining and oil sector companies, a corporate tax rate of 30% is levied. Gains arising from the sale of assets are taxed at the rate of 25%. An exemption is provided to shipping companies on payment of corporate income tax. An annual fee depending on the net tonnage is imposed on the vessels registered in Liberian Registry.

Only the tax resident companies pay the corporate income tax in India. The companies not regarded as tax residents for the purpose of paying corporate income tax are as follows:

1. Companies that own a Liberian flag vessel.
2. Companies that conduct activities related to the operation, chartering, or disposition of a ship except for transportation exclusively within Liberia.
3. Companies engaged in withholding any Liberian tax on payments to non-residents.
4. Any other condition specified is met.

2. Income Tax: A progressive slab rate is applicable for computing tax arising from income. The slab rate applicable is as follows:

3. Goods and Services Tax: GST is levied on the supply of goods and services. GST is levied by a taxable person at the time of supply of taxable goods and services. The standard rate of GST levied on taxable goods and services is 7%. An obligation is cast on any person who carries on a business of manufacture or business of providing taxable services which exceed an annual threshold of LDR 5 million to register for GST.
4. Withholding Tax: A withholding tax is levied on the payments made to the resident as well as non-resident companies. However, the withholding tax is limited to certain classes of income such as dividend income, royalties, interest, natural resource payments, rental income, Management and consultancy fees, and contract services. The rates at which the withholding tax is applicable on different incomes are given in a tabular form below:

5. Employee Social Security (EE SS): Employees are obliged to pay 1.75% of their monthly gross remuneration towards social insurance.
6. Employer Social Security (ER SS): Employers are obliged to pay 3% of an employee’s monthly gross remuneration towards social insurance and workmen’s compensation at the rate of 1.75%.
7. Property Tax: A property tax is imposed on every property owner other than those who are exempted. Property tax is levied on both improved as well as unimproved land. The rate at which the property tax shall be imposed varies depending upon the description and location of the property. Generally, it is levied at the rate of 0.25% on residential property and 1.5% on commercial property. Further, vacant land within a city attracts a 5% tax, and other taxes such as farmland, building on public land, etc is levied.
8. Stamp Duty: Stamp Duty is imposed on various necessary papers and transactions such as agreements, promissory notes, bills of exchange, leases, etc. It is levied at rates ranging from 1% to 12.5%.
9. Excise Tax: In Liberia, Excise Tax is levied on goods having an effect on health, environment, or society. Excise Tax is calculated by applying the formula: Cost + Insurance + Freight (CIF) of imported goods. However, on alcoholic beverages, tobacco products, and ex-factory prices for locally manufactured goods, excise tax is calculated by the following formula: sum of cost + insurance + freight (CIF) + import duty, and ECOWAS Trade Levy

Tax Compliance Requirements

In Liberia, the tax year is the calendar year. Nonetheless, a different 12-month period may be considered as the tax year if prior authorization is taken from the Tax Authorities. A tax return is required to be filed by taxpayers within 3 months from the end of the tax year. An advance tax is required to be paid within 15 days from the end of each quarter of the taxpayer’s tax year. The rate of advance tax depends upon the turnover of the taxpayer and is as follows:

Tax E-filing portal

The Revenue Authority of Liberia launched the e-filing platform in March 2018. Initially, the e-filing platform was limited to corporate tax filings by large businesses. Later, in April 2018, the Revenue Authority also launched a mobile tax payment in collusion with banks and telecom providers.