Corporate Setup in Sierra Leone – Key Points
Sierra Leone offers a modern, efficient framework for incorporating a local company or registering a branch of a foreign corporation. Incorporation can be handled remotely, with all statutory requirements managed on the ground. Key parameters: • Shareholders: Minimum of two; both individuals and corporate entities are allowed. • Directors: Minimum of two; any nationality, but at least one resident in Sierra Leone and aged 40+. Nominees are available as a service. • Company Secretary: Mandatory – can be provided as a service. • Registered Office: Required in Sierra Leone (service available). • Capital Structure: Flexible – share capital can be tailored to the client’s needs. A foreign corporation may instead choose to register a branch, but for most structured planning, a locally incorporated Sierra Leone company is the more versatile option.
Tax Environment - High-Level Overview
The standard corporate income tax rate is 25%, with a reduced rate for qualifying manufacturing outside the Western Area. Dividends paid out of Sierra Leone are subject to 10% withholding tax, and various other payments (interest, royalties, contractors, rents) have specific withholding tax rates. Important features from a structuring perspective: • Capital contributions are not taxable. • Loan principal repayments are not taxable. • After-tax profits and capital can be freely repatriated. • Properly registered foreign loans (principal and interest) may be serviced without exchange control friction. These rules create a clear distinction between taxable income (e.g. dividends, profits) and non-taxable capital flows (capital injections and loan principal).
Recommended Structure – Foreign Parent, Sierra Leone Subsidiary
For most international clients, the recommended model is: Foreign Holding Company → Sierra Leone Company In this structure: The foreign holding company owns the Sierra Leone company as the majority (or sole) shareholder. Funding from the foreign parent to the Sierra Leone company is structured as: i. Capital contributions (increasing share capital or reserves), or ii. Zero-interest shareholder loans. Why this matters: a. Capital inflows are not taxed in Sierra Leone. b. Zero-interest loans do not create taxable income in Sierra Leone because there is no interest to trigger withholding or corporate tax. The Sierra Leone company can then use those funds to: Engage in offshore activities, Hold contracts or assets, and/or Conduct domestic operations (which, if profitable, are taxed in the normal way). When it comes time to move money out of Sierra Leone: i. Dividends from the Sierra Leone company to the foreign parent attract 10% withholding tax in Sierra Leone. ii. Repayment of shareholder loans (principal) is not taxed. Accordingly, where the objective is to minimize tax leakage, partners should encourage clients to prioritise loan repayments over dividends when repatriating capital.
Alternative Structure – Sierra Leone Parent, Foreign Subsidiary
It is also possible for a Sierra Leone company to be the parent of a foreign subsidiary. In that case: • Dividends from the foreign subsidiary to the Sierra Leone parent will normally be taxable income in Sierra Leone. • However, the foreign subsidiary can still fund the Sierra Leone parent via a zero-interest loan, which is not taxable in Sierra Leone. This is important: Even when the Sierra Leone entity is “on top” of the group, cash can still move into Sierra Leone in a non-taxable form by using zero-interest inter-company loans instead of dividends.
Practical Takeaways for Official Partners
Sierra Leone is best used as a structural node in a cross-border plan, rather than the main global profit centre. The ownership chain and funding flows matter more than the mere fact of incorporation. The most tax-efficient pattern is: Foreign entity owns the Sierra Leone entity. Capital and zero-interest loans flow into Sierra Leone. Loan repayments, rather than dividends, are used to send funds back out. Partners can safely present Sierra Leone as a jurisdiction where corporate law flexibility and clear tax rules allow for sensible international planning, while remaining fully compliant with local law.
- A company is incorporated in Sierra Leone in accordance with local law, with at least two shareholders, at least two directors (one resident and 40+), a company secretary, and a registered office.
- The company may be either:
- Preferred structure: A foreign holding company owns the Sierra Leone company. Funding from the foreign parent to the Sierra Leone company is provided by: Capital contributions (non-taxable), and/or Zero-interest shareholder loans (non-taxable).
- Inbound dividends to Sierra Leone from foreign entities should generally be avoided where the objective is to minimise corporate tax in Sierra Leone, as they may be taxable income.
- Zero-interest loans may be used in either direction (foreign → SL or SL → foreign) to move funds without creating taxable income in Sierra Leone, as long as no interest is charged.
- Outbound flows from Sierra Leone should, where tax minimisation is desired, prioritise loan principal repayments over dividends, given that dividends from a Sierra Leone company to a foreign shareholder attract 10% withholding tax.