Introduction

The Act, enacted recently, brings about significant changes in the tax landscape of Sierra Leone, particularly impacting the real estate sector. It introduces new regulations and amendments that real estate professionals must understand and comply with to effectively navigate the evolving sectoral terrain.

Real estate professionals can gain a strategic advantage by understanding and complying with the Sierra Leone Finance Act 2024, enabling them to make informed decisions, offer competitive pricing, and provide accurate advice to their clients. This knowledge can also help them avoid potential legal issues and financial penalties, ensuring their business’s sustainability and growth.

At Global Salone, we are committed to offering the leading real estate industry education platforms in Sierra Leone to enhance our client’s understanding of the global and local real estate markets.

The landscape of real estate transactions in Sierra Leone has recently undergone significant alterations with the enactment of the Sierra Leone Finance Act 2024. This comprehensive legislation introduces many changes that affect various stakeholders within the real estate industry differently. For instance, the amendments may alter how a broker evaluates a property’s value or how a lawyer advises their client on property acquisition. Investors might have to reconsider their investment strategies in light of the new tax regulations. Importers and exporters of building materials and members of the Builders Consortium may face operational costs and supply chain management changes due to altered import/export duties. Grasping these amendments and ensuring compliance with the new regulations is imperative for professionals operating in this sector to navigate the evolving financial terrain effectively. We have highlighted some of the significant changes the new finance act brought.

1. Stamp Duty Reversal

The recent amendment in the Finance Act has reduced the stamp duty back to 1% of the property’s conveyance value, down from the 2% rate set in 2023. This substantial reduction in stamp duty is a financial boon for the industry, enabling real estate professionals to offer their clients more competitive pricing and financial advice. It also ensures that clients know the decreased costs of purchasing property, which may stimulate market activity.

2. Taxation on Payments to Contractors

The Finance Act 2024 introduces changes regarding payments to contractors. Residents are now subject to a 5% tax, while non-residents face a higher rate of 10%. Additionally, amendments from the 2016 Finance Act reintroduce a 0.5% tax for free healthcare and impose a new 1% education tax on the supply of goods, services, and works. These tax obligations necessitate meticulous financial planning and compliance measures for professionals engaged in contracting activities.

3. Management and Professional Fees Tax

The Act elevates the tax rate on management and professional fees to 15% from the previous 10% outlined in the 2020 Finance Act. This alteration affects a broad spectrum of professionals, including lawyers, accountants, doctors, engineers, and tax consultants. Compliance requirements such as filing annual income returns and obtaining necessary licences or permits are paramount to avoid penalties, delays in document processing, and legal repercussions.

4. Withholding Tax on Rental Income

Withholding tax on rental income remains at 10% of the rent, with tenants responsible for withholding and remitting this amount to the National Revenue Authority (NRA). The Act introduces provisions for taxable rent income, graduated at percentages ranging from 15% to 30%. Property owners must adhere to specified 10% tax-deductible allowances for wear and tear and provide evidence of property maintenance and a clause in the tenancy agreement to ensure compliance with regulatory standards.

5. Real Property Taxation

Residents and non-residents alike face taxation on real property, with rates set at 10% and 15%, respectively. Capital Gain Tax (CGT) remains unchanged at 25%. This percentage is charged only to the taxable gains on the disposal income. Real estate professionals must understand the computation to advise their clients better during negotiations and filing returns.

6. Introduction of Excise Duties

A significant addition to the 2024 tax regime is the imposition of excise duties on cement and iron, set at 5% and 10%, respectively. Imported cement incurs additional 5% ( 10%) levies, potentially impacting construction costs and rental prices within the real estate sector.

7. Implementation of Land Tax

The Act maintains the land tax introduced in the 2021 Finance Act, with rates varying based on the location and type of land. Compliance with land tax obligations is essential for real estate professionals operating across different regions within Sierra Leone. Although this tax is yet to be operationalized, investors in large-scale land acquisitions must be aware of it.

8. Other Non-Tax Levies

Apart from tax adjustments, the Finance Act introduces various non-tax levies that affect the real estate sector, including fees for land plots, beach properties, and hospitality establishments such as hotels, guest houses, and restaurants. Awareness of these levies is essential for budgeting and financial planning purposes.