Liberia, Republic of

A business is generally granted a deduction for all expenditures that are incurred during the tax year that are wholly, exclusively, and necessary for producing income.

Depreciation and amortisation

An annual allowance for depreciation or amortisation of capital expenditure may be deducted for the physical or non-physical deprecation of depreciable property.

A pool depreciation method is used. Depreciable properties are divided into three categories accordingly:

Goodwill

Goodwill is recognised in the LRC as an intangible property and is depreciated on asset-by-asset basis and by the straight-line method over a 15-year period.

Start-up expenses

All expenses of a business necessarily incurred prior to commencement of commercial operation are subject to amortisation for specific industries.

Interest expenses

Deductions of interest payable to any person other than a resident bank are now limited to the amount of interest received plus 20% (previously 50%) of the taxpayers’ earnings before the deduction of interest, taxes, depreciation and amortisation (EBITDA) other than interest income. Mining, petroleum, and agricultural companies are subject to the rules above, but interest may be carried forward to the next tax periods with no expiration dates.

Bad debt

A business is permitted a deduction for bad debt that becomes uncollectible and charged off on the business book account, provided that the amount was previously included in gross income.

Charitable contributions

A deduction is allowed for charitable contributions given to a qualifying or registered charitable organisation. When the contribution is non-cash, a deduction is allowed for an amount not in excess of 15% of the business taxable income.

Bribes, kickbacks, and illegal payments

No deduction is allowed for bribes or other similar payments.

Fines and penalties

No deduction is allowed for any fines or penalties imposed by law.

Taxes

No deduction is allowed for amounts relating to Liberian or foreign income tax.

Net operating losses

If the taxpayer’s costs of producing income for a year exceed the taxpayer’s income, the excess loss is carried forward to the next tax year, and, if not fully absorbed by income of the business in that year, then to succeeding tax years; but no carry forward is allowed to years following the fifth succeeding tax year. For mining, petroleum, or agricultural companies, loss is carried forward for seven years.

Payments to foreign affiliates

Payments made to an affiliate are generally deductible for tax purposes subject to the arm’s-length principle. However, for mining, petroleum, and agricultural projects, payments to affiliates are deductible up to a limit of other operating expenses incurred for the tax period.

Payments made to foreign affiliates, such as dividends, interest, royalties, and service fees, are generally subject to withholding tax (WHT). The standard WHT rate is 15%.