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DOING BUSINESS IN SIERRA LEONE
Advantages and Disadvantages – Pros and Cons on Company Registration
- A Sierra Leone Limited Liability Company (Ltd) can be incorporated with just one shareholder and one director of any nationality and who can either be an individual or body corporate. Both the director and shareholder can be Sierra Leone non-residents
- Contrary to popular belief that Sierra Leone is a war torn country, especially fuelled by the 2006 movie “Blood Diamond”, the country is politically and economically stable with significant economic potential attractive to foreign investors seeking new opportunities.
- The Sierra Leone government recently reduced the number of procedures of starting a business hence shortening the registration timeline to at least 2-4 weeks and additionally abolishing the requirement for a minimum paid up capital at incorporation;
- Entrepreneurs looking to establish their businesses in Sierra Leone will benefit from bilateral trade agreements between Sierra Leone and other countries and enjoy duty free access to larger markets such as the United States under the African Growth and Opportunity Act (AGOA) treaty and the European Union through the Everything But Arms (EBA) treaty.
- Companies engaged in agricultural produce and services will enjoy an exemption from corporate income tax up to the year 2020. Additionally, 50% of dividends paid by such companies are exempted from withholding tax;
- Some of the incentives offered by the Sierra Leone government to foreign entrepreneurs include: i) A three year exemption from import duty for the importation of plant, equipment and machinery ii) 125% tax deduction on expenses on training and research, development and export promotion activities iii) 3 year tax exemption for foreign employees where bilateral agreements apply;
- The government of Sierra Leone recently established their first Special Economic Zone (SEZ) providing incentives to businesses including i) exemption from import and export duty ii) 3 year corporate income tax holiday iii) hastened government processes such as locational registration, immigration and customer services
- Sierra Leone is an ideal location for tourism based companies. This is due to the provision of the following major incentives to entrepreneurs investing in tourism in Sierra Leone;
- Exemption from paying corporate taxes for 5 years
- If companies hire less than 7 employees who have skill sets that are not widely available in country, then these employees are fully relieved from their pay-as-you-earn tax for the first 3 years of employment
- Lastly, the country serves as an ideal tourism destination due to its breath-taking flora and fauna as well as its vibrant culture. In 2019, tourism contributed to 5% of GDP. Therefore, there are massive untapped opportunities in this sector.
- Although the duration of starting a business in Sierra Leone has been significantly reduced to about 2-4 weeks, the process for obtaining business licences still remains lengthy and a major impediment to investing. Every company must obtain a general business licence and an additional sector specific licence for their intended operations;
- Another impediment to investing in Sierra Leone is the requirement for foreign investors to obtain self-employment or work permits as well as resident permits issued by the Ministry of Labour. These permits cost at least $2000 USD and the timeline of obtaining the same is at least 10-16 weeks
- The Republic of Sierra Leone lacks the requisite skilled work force critical for the smooth running of businesses and economic advancement. The total adult literacy rate still remains at a low 43% according to UNICEF
- Widespread corruption in Sierra Leone in both Public and Private sectors is an anomaly
- Branches of foreign companies in Sierra Leone will experience higher income tax rates compared to other legal entities. A branch is subject to a 10% tax applicable on repatriated income on top of the standard corporate income tax rate of 30%;
- Foreign entrepreneurs are most likely to face difficulties while hiring for their companies in Sierra Leone. This is mainly due to the low levels of productivity of the local workers which can be attributed to poor adult education levels of 48%. As a consequence, foreign employers are most likely required to hire expatriates which further imposes additional financial and administrative burden on them.