FEATURES OF THE NEWLY ENACTED INVESTMENT PROMOTION

ACT 2004 OF SIERRA LEONE

 It provides information on the definition of incentives; investment, investors and the role of the Sierra Leone Export Development and Investment Corporation. (SLEDIC)

It states clearly that the Act shall not apply to investment in the production of arms and ammunition, military, police and prison officers’ apparel and accoutrement. The Act defines an investor as a natural person or legal entity, including companies, business associations, partnerships, sole proprietorships and other organisations constituted or otherwise duly organised under the laws of Sierra Leone to operate a business enterprise. It further states that Investment means the direct investment of foreign or domestic capital into a business enterprise in Sierra Leone. Under the Act, Incentives when used in relation to investment means the legal provisions designed to encourage investment and includes the conferment of any advantage in respect of particular investment.

 

 The Act encourages domestic and foreign investors to invest in any legitimate form of business enterprise. It seeks to promote and attract private investment for the development of production and value adding activities; to improve exports and provide employment opportunities; and generally to create an environment conducive to private investment and to provide for other related matters.

 SLEDIC is set up to facilitate registration of business enterprises, assist investors to obtain permits, licences, certificates or clearances, as the case may be, needed for the commencement of business, provide information to potential investors on matters relating to investment; assist potential investors in identifying joint venture partners in Sierra Leone; provide such other assistance as may be needed by an investor for the realization of his/her investment; and to do all such other things as may be necessary or incidental to the discharge of the functions conferred by the Act.

 

 Any person who wishes to invest in a business enterprise in Sierra Leone will be assisted by SLEDIC to obtain a business name registration certificate, business registration certificate, certificate of incorporation and business licence certificate. SLEDIC will ensure in cooperation with the relevant authorities, the facilitation of the relevant documentation referred to above within seven working days. Investors are therefore reminded that this is a service Government has agreed to provide and they should utilise it fully and effectively. SLEDIC is a one stop-shop which would assist an Investor to open a local bank account and to register with the Local Income Tax Office, which is now part of the newly established National Revenue Authority. Renewals of any Certificate can be handled by SLEDIC.

 

WHAT ARE THE INCENTIVES AND GUARANTEES OFFERED TO INVESTORS

 (a)     Government with assistance from its development partners shall provide to business enterprises a number of capacity building and special support programmes which may include business training, micro-finance (including support for bulk buying) and technical assistance; business incubator programmes; pre-qualification programmes for access to credit; credit registry  and registry of local enterprises for joint ventures.

 

     (b)  Foreign exchange remittance abroad through commercial banks is permitted for expatriate personnel with work permits, subject to such withholding tax obligations as are contained in the Income Tax Act 2000, if applicable.

 

      (c) Remittance of profits earned by a foreign investor from a business enterprise is allowed and guaranteed

 

 (d)-Proceeds received from the liquidation of a business enterprise and awards resulting from any settlement of disputes can be repatriated in respect of such business enterprise.

 

     (e) There is no restriction on the transfer of repayments of principal and interest on an arms length third party loan contracted outside Sierra Leone and registered with the Bank of Sierra Leone but interest payments due on such loans may be subject to the withholding tax obligations in the Income Tax Act 2000, if applicable

 

    (f) No private investment, whether domestic or foreigner shall be expropriated or nationalized in a direct or indirect manner, except in special cases specified by section 21 of the Sierra Leone Constitution which stipulates that the investment or other property shall be reasonably required for public purposes and the  prompt and adequate compensation shall be paid in the event of any expropriation or nationalization.

 

    (g) No export licence is required for the export of locally produced goods except gold, diamonds and such other goods or materials as may be prescribed from time to time.

 

   (h) Any business enterprise which requires expatriate labour should apply to the Ministry of Labour, Social Security and Industrial Relations for consideration in accordance with any enactment relating to labour matters.

 

  (I) Personal effects of an expatriate issued with a work permit and his or her  immediate family shall be exempt from customs duty under the first arrival duty waiver and concessions in force.

 

  (J) Government will take necessary steps to facilitate an investor’s access to land.

 

      Specific Incentives are Listed Below:-

 TABLE OF INCENTIVES

INCENTIVE SECTOR/ACTIVITY	CURRENT (ALL BUSINESS)	REVISED RATES APPROVED
CORPORATE TAX
All businesses	35%	Zone A-30%, Zone B-25%
Agriculture (tree and food crops) and Forestry (cultivation)	1st ten years exempt	1st ten years exempt
Agro processing (60% local input)	35%	1st ten years exempt
Agro processing (under 60% input)	35%	Zone A-20%, Zone B 10% (1st ten years)
Forestry (processing)	35%	Zone A 30%, Zone B 20%
Tourism	0% between 1-5 years	Zone A 25%, Zone B 20%
Losses write-off	Allowable, subject to maximum annual write-off of 50% of succeeding years profit.	Allowable, subject to maximum annual write-off of 50% of succeeding years profit.
IMPORT DUTY
-          raw materials -          Malaria and HIV Drugs	5% exempt	0%
-plant and machinery -generator for operations	5% 5%	0% 0%
Tourism (imports)	Duty free Concession for new construction, extension or renovation of an existing one, applicable to building materials, machinery or equipment that is not easily available in Sierra Leone for the period of construction or rehabilitation	1. Duty Free Concession for new approved construction, verified extension, restoration of tourist facilities and amenities, including renovation due to force majore, determined by the Tourist Board. This is applicable to imported materials for construction, furnishings and equipment, for 1st three years form start or to date of completion if less than 3 years.   2. 50% duty rate reduction for upgrading during 1st 12 months from start of work or to date of completion if less than 12 months.
- Intermediate Products	20%	20%
-Operational vehicles	0-4 yrs. 5% over 4 years-10 yrs. 20% above 10 years- 30%	0-4 yrs. 5% over 4 years-10 yrs. 20% above 10 years- 30%
SALES TAX
- Plant & Machinery	0%	0%
Others – at entry (advance tax	17.5%	10%
- at final assessment	17.5% (production over Le100m.)	17.5% all production
- vehicles	17.5%	17.5%
EXCISE DUTY	30% for petroleum, tobacco and alcohol	30% for petroleum, tobacco and alcohol
PAY ROLL TAX (per head per annum)   General                 Tourism	Non ECOWAS Le1,000,000 per head ECOWAS citizen – Le100,000           Exempt for non available skills- 1st three years of employment for up to six persons	Non ECOWAS Le1,000,000, per head ECOWAS- Le100,000   Exempt if  enterprise exports US$1M or more during the year.     Exempt for non available skills – 1st two years for up to three personnel
WITHHOLDING TAX (on profit repatriated)	10%	10%
INVESTMENT ALLOWANCE	5% on new purchase in 1st year	7.5% on new purchase in 1st year
CAPITAL ALLOWANCE	Pool system
Plant, machinery and equipment, including vehicles   Road Construction Costs, Community Water Supply & Electricity   Other tangible assets excluding buildings Industrial buildings Commercial Buildings Non commercial buildings	40%                 10% 15% 10% 5%	Initial 60%, Annual 20%     15%   20%       10% 15% 10% 5%
DOUBLE TAXTION (from other country with reciprocal agreement)	Relief granted on documented proof	Relief granted on documented proof
INCENTIVES FOR EXPORTS
Export/Excise Tax	Exempt for 75% output export	Exempt for 755 output export
EPZ		Special incentives to be enacted
Duty Drawback	Claimed on raw materials for goods exported	Claimed on raw materials for goods exported
Research and Training expenses (Capital investment only)		Initial allowance – 40%   Annual – 20%
Local Employment Allowance (No. of employees)		Under 51 – 2.5% of business income exempt from tax 51 to 100 – 5% Over 100 – 7.5%

 

ALL COMMERCIAL IMPORTS WILL BE SUBJECT TO ADDITIONAL 0.5% ECOWAS LEVY OF CIF VALUE FOR IMPORTS FROM NON-ECOWAS COUNTRIES.

 

PRESHIPMENT INSPECTION APPLICABLE TO ALL IMPORTS- 1.10% OF FOB VALUE

 

OTHER GUARANTEES TO INVESTORS

 

(1)          Where a dispute arises between an investor and the Government in respect of an investment in a business enterprise or in respect of an investment obstructed or delayed by Government, the parties will use their best efforts to settle such dispute amicably.

 

(2)          Where any dispute between an investor and the Government in respect of a business enterprise is not settled amicably, it may be submitted at the option of the aggrieved party to arbitration as follows:-

 

(a)                in accordance with the rules of procedure for arbitration of the United National Commission on International Trade Laws (UNCITRAL).

(b)                in the case of a foreign investor within the framework of any bilateral or multilateral agreement on investment protection to

which the Government and the country of which the investor is a national are parties; or

(c )      in accordance with any other national or international machinery 

           for the settlement of investment disputes as the parties may agree.

 

(3)          Where any dispute between an investor and a non-governmental body in respect of an enterprise is not settled amicably, and where no recourse is available through arbitration or previously established contracts or other legal instruments, then the matter shall be referred to the relevant legal authority within Sierra Leone for settlement, in accordance with the law binding such transaction.

 

Any person who, in the course of his official duties transfers or communicates proprietary information obtained from an investor to any other person to whom he is not authorised by any enactment or by the Ministerof Trade and Industry to transfer or communicate such information commits an offence and is liable on conviction, to a fine not less than three million leones or to imprisonment for a term not less than one or to both such fine and imprisonment.