Liberia to Introduce VAT Regime in 2026, Replacing Current GST

December 10, 2024

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Liberia, a West African country, will undergo tax reform in the coming months and years. As President Joseph Nyuma Boakai, Sr. stated when presenting the Fiscal Year 2025 Draft National Budget (2025 Budget) to the National Legislature, the plan includes changing the indirect tax system.

The first steps towards that were made earlier this year, and the proposed 2025 Budget further confirms the intentions to replace the current GST regime.

2025 Budget Insights and the Establishment of VAT Regime

Liberia introduced the current GST regime in 2001, and the GST Act was amended twice in 2011 and 2016. The general GST rate is 10%, whereas a surcharge of 5% is added for telecommunication services, making the total rate 15%.

In 2024, the Ministry of Finance finished the Value Added Tax (VAT) White Paper and submitted it to the National Legislature. This led to the VAT's enactment in April. However, although the President put additional pressure on the National Legislature to implement the new VAT regime from January 2025, the implementation will have to wait.

The 2025 budget presented some key budgetary aspects, withholding taxes and VAT being the most significant. The government affirmed its plans to implement a new VAT regime in 2026, with a standard VAT rate of 18%.

The implementation of a new VAT regime will also mean the abolishment of the current GST regime and a change in applicable rates.

Conclusion

With the implementation of the VAT regime in 2026, Liberia will fulfill its obligations taken under the Economic Community of West African States (ECOWAS) VAT directive C/DIR.3/07/2023, adopted in August 2023. Under this Directive, all ECOWAS Member States have three years to implement the rules and regulations to meet VAT requirements.

However, it remains to be seen how the implementation process will go and whether the decision to replace the GST regime with the VAT regime will be postponed or carried forward.

Source: Ministry of Finance and Development Planning - Draft National Budget Fact Sheet FY2025, Ministry of Finance and Development Planning - President Boakai Presents FY2025 Draft, Ministry of Finance and Development Planning - Government Reports Success in Public Financial Management Reforms, PwC,

What is the current tax system in Liberia?

Liberia currently operates under a General Sales Tax (GST) regime, introduced in 2001, with a general rate of 10% and an additional 5% surcharge on telecommunications services.

When will Liberia implement the VAT regime?

Liberia plans to implement the VAT regime in 2026, replacing the existing GST system, as outlined in the 2025 National Budget.

What will be the standard VAT rate in Liberia?

The standard VAT rate will be 18%, as proposed in the upcoming tax reforms to replace the GST system.

Why is Liberia transitioning to a VAT system?

The transition to a VAT system aligns with Liberia's commitment to the ECOWAS VAT directive, requiring member states to implement VAT within three years of adoption.

What are the key differences between Liberia’s GST and the planned VAT system?

The GST system applies a general 10% rate (15% for telecom services), while the VAT system will impose a standard 18% rate and aims to align with regional ECOWAS standards.

What challenges might Liberia face in implementing the VAT regime?

The successful implementation of the VAT regime depends on legislative approval, administrative preparedness, and addressing potential delays, as seen with previous reforms.

VAT