The Liberian Revenue Authority or LRA is set to introduce a new income tax pricing regulation aimed at reducing uncertainty for investors by July 1, this year. The new regulations will also help improve the collection of revenues in accordance with international good practice.
The move follows a 5-day policy meeting cohosted by the World Bank and the Liberian Revenue Authority or LRA co-hosted policy meetings and a capacity building workshop on Liberia’s new transfer pricing regulations from June 13-17, under the Improved Business and Investment Climate in West Africa Project. A meeting was also held with taxpayers to introduce the new regulations, explain their obligations, and to answer any questions. The new regulations, to be enacted on July 1, will reduce uncertaint “The Economic Community of West African States is committed to implementing programs that facilitate regional integration and making it work for private sector operators and the people of West Africa,” said Kalilou Traoré, ECOWAS Commissioner in Charge of Industry and Private Sector.
The new transfer pricing regulations will adopt the internationally accepted ‘Arm’s Length Principle’ for the purposes of determining the income and associated expenditure for transactions between related persons.
Under the new rules, the taxpayers are required to keep documentation to demonstrate their measure of taxable profit accords with the arm’s length principle. The taxpayers must also file a ‘transfer pricing schedule’ with the annual income tax return for the year in which the transactions take place. The rules are aligned with international standards and aim to protect Liberia against the erosion of its tax base and provide multinational enterprises with certainty of treatment, reducing the risk of double taxation.
The fact the European Union is financing this event is testimony of the importance we give to the promotion of the private sector as an engine for an economic and social development of West Africa. Our support to improving trade and investment conditions is a priority of the EU cooperation with the region,” said Tiina Intelmann, European Union Ambassador, Liberia.
The reforms in Liberia aim to remove potential national investment barriers, foster cross-border investment and regional integration in line with the ECOWAS Investment Policy Framework. They represent a significant step forward for transfer pricing regulations in West Africa, and will represent an example upon which other countries in the region will draw in developing their own local rules.
The project has worked closely with the Liberia Revenue Authority since April 2015, which was the beginning of country’s initiative to build an effective transfer pricing regime. Significant input and advice on the drafting of the new regulations and return schedule was provided. The authority was also assisted to create a transfer pricing team within an international tax unit. The officers of the newly established team will undergo an intensive training to equip them with skills and knowledge for the enforcement of the new rules. The LRA will be further supported under the OECD and UNDP Tax Inspectors without Borders initiative, which was initiated in Liberia in close cooperation with the World Bank Group.
“Liberia has enormous potential to strengthen competitiveness and increase investment flows, which can drive growth, reduce poverty, and deliver jobs to the country. The World Bank Group is pleased to be working with other development partners to support Liberia to improve their competitiveness,” said Frank Ajibola Ajilore, IFC Resident Representative for Liberia.
The Improved Business and Investment Climate in West Africa Project is a four-year initiative, funded by the European Union,that was launched in November 2014. The €7.7 million project seeks to support ECOWAS to improve investment policy in West Africa. It seeks to address a range of investment policy issues that constitute barriers for the private sector to invest efficiently across the region.