AN ACT AMENDING
THE INVESTMENT INCENTIVE CODE
OF THE REPUBLIC OF LIBERIA

The Senate and the House of representatives of the Republic of Liberia Legislature assembled:

Recognizing the great benefits derived from the Open Door Policy of Liberia which provides for non-nationalization of private enterprise, free movement of capital including the repatriation of dividends and also of the capital originally invested in the case of change of ownership or termination of enterprise as well as facilitating the employment of the necessary foreign technical and managerial personnel together with unrestricted home transfer of saving of such personnel.

In compliance with the strategy of integrated national development oriented to a balanced development of the nation's human and natural resources, maximum participation of all the people in the national development effort and consequent widespread participation in the benefits of development is inevitable.

Recognizing industrial development as one of the essential means of achieving the fullest possible utilization of the nation's potentials through:

- employment generation at all levels,

- expansion and diversification of production,

- contribution to fastest possible economic growth, and

- improving the country's balance-of-payments position.

Being aware of the need for an active industrialization policy in order to achieve the above objectives, encouraging the establishment and expansion of industrial activities which:

o utilize to the highest possible extent Liberian manpower at all levels and contribute to advancing their skills through training scheme(on-the-job- at otherwise);

• utilize raw materials and products of Liberia origin to the maximum possible extent;

• utilize to a maximum extent ancillary activities available in the productive and service sectors of Liberia;

• Contribute to making Liberia independent of importation of basic necessities as far as it is economically feasible,

• Contribute to the expansion and diversification of liberia's exports;

• Contribute to wholesome distribution of employment opportunities all over the country.

Bearing in mind the intention of Liberia to expand trade relations and broaden economic- and more specifically, industrial - cooperation with other African countries; and

Convinced that the Investment Incentive Code adopted in 1966 has been a valuable instrument in stimulating industrial development and that further improvement in the light of present circumstances will make it more valuable in the future;

It is enacted by the Senate and the House of Representatives of the Republic of Liberia in Legislature:

Section 1:

That from and immediately after the passage of this Act, the Investment Incentive Code is hereby amended and the revised Code below recited word for word is hereby adopted as the Investment Incentive Code of the Republic of Liberia

INVESTMENT INCENTIVE CODE

Section 2 Definitions:

As used in this Act, unless the context or otherwise requires, the following terms shall mean:

Incentives - Certian Customs Duty, Income Tax and other benefits which the Government is to offer under this Act to a new and expanding business enterprises for the purposes of promoting the economic growth and development of Liberia.

Project Proposal - The final plan describing the planned operation, the required investment and containing projected balance sheet and profit statements. The project proposal also contains the incentives requested. The project proposal is submitted along with a draft Investment Incentive Contract as proposed by the Sponsor. When approved, the Project Proposal becomes a part of the Investment Incentive Contract.

Investment Incentive Contract - A Contract, supported by the approved Project Proposal, between the Government of the Republic of Liberia and the Sponsor of an Investment Project setting out the customs duty, income tax and other benefits (Incentives) granted by the Government of the Republic of Liberia in respect of an investment Project.

Approved investment Project - An Investment Project in respect of which an Investment Incentive Contract has been signed by the Government of the Republic of Liberia and the Sponsor. An Investment Project may become an Approved Investment Project whether the project is a completely new enterprise or the essential expansion of an existing enterprise where essential expansion shall mean an increase of existing facilities through an incremental investment amonting to at least 25% of the sum total of capital hitherto invested and associated with commensurate increase in employment.

Sponsor - one more person(s), partnership(s), corporation(s) or other entity (entities) or any combination wherefore that undertake, finance and operate an Apprived Investment Project in Liberia. The term Sponsor shall include sponsor or assignee if the assignment is made in accordance with Section 1 5 of this Act.

Approved Imports - Capital, plant and equipment, machinery and know-how imported for use in creation of the facilities for an Approved Investment Project; furthermore, raw materials, semi-finished products, auxiliary materials and other supplies required in the production processed of the final products. Goods which are being produced in Liberia in quality and price to goods intended to be imported as determined by the Government shall be excluded from Approved Imports. Goods considered by the Sponsor as Approved Imports shall be specified in the Project Proposal and in the case of existence of competing Local supplies, the onus of verifying insufficiency of such shall rest with the Sponsor and be detailed in the Project Proposal.

Section 3 – The Application of this Act:

Incentives may be granted to Sponsors undertaking Approved Investment Projects in Liberia, that:

- process, fabricate, manufacture finished and semi-finished goods from raw materials and/ or assemble finished goods from component parts, i.e.enterprises of the Manufacturing Sector.

Incentives may also be granted to Sponsors undertaking other Approved Investment Projects in Liberia, that belong to the Section of:

- Agriculture, Forestry and Fishing;

- Mining and Quarrying;

- Electricity, Gas and Water, to the extent that this is not contrary to the Public Authorities Law ;

- Building and Construction;

- Transport and Communication;

- Those sub-sectors of the service sector which provide technical services to the sectors listed in subsection (1) and in paragraphs (a) through (c) in the present subsection;

- Those sub-sectors of the trade and catering of the services sectors that provide services and supplies to Tourism.

An Approved Investment Project may be a combination of activities belonging to more than one of the Sectors and Sub-Sectors listed in sub-section (l) and (2) above.

All person or entities seeking duty, tax or other privileges as incentives for a new investment or investment into essential of existing businesses in Liberia shall do so under this Act provided that all rights and privileges which been granted to as well as obligations of enterprises doing business in Liberia prior to the enactment of this Act shall remain unaffected by the operation of this Act.

An Investment Incentive Contract shall be negotiated and signed by the Government of the Republic of Liberia with the Sponsor of an Approved Investment Project.

Section 4 – Condition

No enterprise shall be accorded the Approved Investment Project status, that is no Incentives shall be granted unless it satisfies the following conditions:

- Falls within the overall priority as established by the National Planning Council;

- Ensures the permanent employment of Liberians of all levels and carries out appropriate training schemes and, in case of expansion increase, employment and augment training activities in harmony with the volume of expansion;

- Leaves an option for Liberians to contribute to the enterprises by purchasing shares or otherwise participating in the ownership;

- Produces a local value added amounting to not less than 25% of the value of gross output,

- Takes its raw materials and other supplies of Liberian origin and imports only such items of which the local products is not available in sufficient quantity and/or its quality or price is not approximately equal with the intended imports as determined by the Government.

Section 5 – Incentives:

Enterprises that are granted Investment Incentive Contract shall be entitled to the following customs duty benefits in respect of the Approved Investment Project;

Approved Imports of machinery and equipment to be used in establishing the Approved Investment Project shall be exempt from import up 90% of the dutiable value of such imports. No exemption shall be made for construction material and spare parts on non-capital equipment. Any equipment with less than a three-year-life may be considered non-capital.

Approved Imports raw materials semi-finished products and other supplies used in the productive operations of the Approved Investment Project shall be exempt from import duty up to 90% of the dutiable value of such imports.

Approved Imports listed under paragraphs(a) and (b) above shall not be exempt from counselor fees.

Enterprises that are granted Investment Incentive Contract shall be entitled to the following income tax benefits in respect of the Approved Investment Project.

Profits reinvested into fixed assets shall be exempt from income tax exemption for reinvestment into housing for employees must receive prior approval from the Concession and Investment Commission (NIC).

All the remaining profits of the enterprise shall be exempt from 50% of the income tax that would be otherwise payable.

Enterprises that are granted Investment Incentive Contract shall be entitled to full rebate on import duties and full refund of income tax as well as excise tax paid by them in respect of manufactured goods exported from the production of the Approved investment Project.

Sponsors of Enterprises having Investment Incentive Contract in respect of an Approved Investment Project may be granted by the Government, upon application by the Sponsor in the Project Proposal, one or more of the following additional benefits.

- The lease of available land for plant site in government owned industrial park at a preferential rate during the term of lease together with all possible assistance by Government in making available other necessary infrastructural facilities;

- Support in sucuring loans and/or contribution to equity capital of pertinent Government agencies with priority given in this respect to small entrepreneurs;

- Reasonable tariff protection that has to be calculated so as to protect the local ex-factory price inclusive of excise tax, if any;

- Loss carry-forward provisions as regulated by the income tax law of Liberia;

- Accelerated depreciation and an initial depreciation as regulated by the income tax law of Liberia.

The Government and its agencies shall purchase products from the production of the Approved Investment Project, provided the quantities are sufficient and the quality and price of the products are equal to those intended to be purchased from elsewhere. The sufficiency of quantities and the similarity of quality and price of goods are to be determined by the Government of Liberia.

Furthermore, an indirect benefit flows from what is stipulated in paragraph (3) in Section 4, or this Act.

Section 6 – Period and degree of Incentives:

Incentives described in sub-sections (1), (2) and (3) as well as in paragraph (c) of sub-section (4), Section (5) shall be granted for a period not exceeding five (5) years.

The beginning of this period should commence from the date of arrival of the machinery and equipment at the port in respect of Incentives under Section 5, sub-section (1) and from the date when marketable production starts in respect of Incentives under Section 5, sub-section (2), (3) and in paragraph (e) of sub-section (4).
These two dates have to be specified in the project proposal and in the Investment Incentive Contract.

Other Incentives described in Section 5 but not specifically mentioned in sub-section (1) of this Section shall extend for the Investment Incentives contract.

The possibility of an extension of the Incentives period as described in sub-sections (1) and (2) above is regulated by Section l0 of this Act.

Certain Incentives may be granted fully or partially depending on the fulfillment by the Approved investment Project of certain national development strategy criteria: such as national development priority, location, employment, linkage effects. This applies to Incentives described in sub-sections (1) and (2) of Sections 5.

Section 7 – Obligations Under the Investment Incentive Contract:

The Sponsor of an Approved investment Project shall undertake the following obligations under an Investment Incentive Contract:

- To implement the project substantially as described in the Project Proposal and in compliance with the terms of the Investment Incentive Contract;

- To employ Liberian manpower and to select and train Liberians on a systematic basis in skills required at all levels in the Operation of the Approved Investment Project;

- To ensure that at any time of the implementation and the operation of the project the outstanding risk-bearing capital of its own shall not be less than one third of the borrowed capital, not taking into account a possible participation in stock by a public corporation or the Government of the Republic of Liberia.

- To permit such audits as are necessary to ascertain compliance with the terms of the Investment Incentives contract;

- To submit at the time of filling the annual income tax return and making application for tax refund, if any, to the Concession and Investment Commission;

Such reports makes it possible to judge, compliance or otherwise the terms of specific obligation detailed in the present section;;

• A copy of the latest balance sheet;

• A copy of the relevent profit and loss statement;

• A statement from the Chief Executive Officer of the Approved Investment Project on the compliance or lack of compliance with the term of the Investment Incentive Contract.

All reports submitted in accordance with paragraph (e) of the preceding sub-section shall be considered confidential and inviolate.

Section 8 – Application Form:

Application for Incentives shall be addressed simultaneously to the Chairman of the Concession and Investment Commission and to the Ministry responsible for the Sector in which the Approved investment Project is to operate. The application shall include the following:

- Name, address and biographical data of the sponsor;

- Banking references;

- Form of organization and domicile of the Sponsor' s business.

The project proposal, including the nature of the business, proposed general location; data proposed for commencement of operation; land, building, machinery and equipment required and their value; volume and value of materials and other supplies required and their proposed source of apply; manpower, required in the unskilled, skilled, technical, electrical, managerial and other categories and their proposed source or origin; estimate total investment into fixed and working capital and the initial amount of capitalization by class of stock and other liabilities; a proforma balance sheet and profit and loss account. All these data should be projected in respect of each of the five(5) years of operation.

The proposed dates for commencement of Incentives see sub-section (2) of section.

The Incentives required the period for which Incentives are required; the degree of Incentives as determined by sub-section (5) of Section (6).

A technical and economic feasibility report and an analysis of the benefìts of the Liberian economy in accordance with guidelines established by the Concession and Investment Commission.

The Ministry responsible for the Sector in which the Approved Investment Project is to operate shall mean:

- The Ministry of Commerce, Industry and Transportation in respect of Approved Investment projects listed in sub-section (l) and in paragraph (e) and (f) of sub-section (2) of section 3;

- The Ministry of Agriculture in respect of project in paragraph (a);

- The Ministry of Lands and Mines in respect of projects in paragraph (b);

- The Public Utilities Authority in respect of projects in paragraph (c);

- The Ministry of Public Works in respect of projects in paragraph (d).

In case a project is so combined that it falls into the category of more than one Sectors, the prescribed Ministry copy of the application should be submitted to the Ministry into whose purview the Sector falls is considered the main field of activity by the Sponsor simultaneously submitting additional copies with due cross-references to the other ministries concerned in accordance with the sub-section.

Section 9 – Procedure for granting Investment Incentive Contracts:

There shall be established the Concession and Investment Commission. Upon the submission of an application and a Project Proposal, the Secretariat shall evaluate the proposal taking into account the objectives of the Investment Incentive Act, the recommendations of the responsible Ministry and the likelihood that the proposed project will be able to continue profitable operations after the Incentive period comes to an end. If necessary, the Project Proposal will be revised. Upon receipt of a written evaluation of the Secretariat, the Concession and Investment Commission shall vote to either reject or accept the Project Proposal. If accepted, the Minister responsible for the Sector in question shall have an investment incentive Contract prepared with the Sponsor of the project.

If the application for an Investment Incentive Contract indicates that the total fixed capital for the proposed investment project is less than $2,000,000.00 the vote of the Concession and Investment Commission shall submit the Investment Incentive Contract for the signature of the Minister of Finance on behalf of the Government of the Republic of Liberia. Copies of the Investment Incentive Contract shall then be submitted to the Ministry of Planning and Economic Affairs.

If the application for an Investment Incentive Contract indicates that the total fixed capital for the proposed project is $2,000,000.00 or more, the Chairman of the Concession and Investment Commission shall submit the application with his recommendation, to the Chairman of the Executive Committee of the National Planning Council. The Executive Committee of the granting of the Incentives for the proposed project, and, if accepted, and Investment Incentive Contract shall be drawn up with sponsor. The Executive Committee of the National Planning Council shall authorized the Minister of Finance to sign the Investment Incentive Contract on behalf of the Government of the Republic of Liberia.

The Concession and Investment Commission shall be responsible for making an annual review of each Investment Incentive Contract and to make recommendations, if necessary, for cancellation of the contract to the Chairman of the Executive Committee of the National Planning Council under Section 12 of this Act.

The Secretariat of the Concession and Investment Commission shall prepare an annual report for the Executive Committee of the National Planning Council. The report shall be based on the information received under paragraph (e) of sub-section (1) of section 7, of this Act, and their opinion as to whether the operation of each project is substantially in compliance with their respective Investment Incentive Contracts.

A member of the Concession and Investment Commission or the Sponsor may appeal against a substantive decision of the Concession and Investment Commission on acceptance or rejection of the Project Proposal or a recommendation to cancel an Investment-in-Contract. The appeal be directed to the Executive Committee of the National Planning Council through its Chairman.

Section 10 – Extension of the Incentive Period:

It is the intention of this Act that no Incentives shall be granted to projects which will require further Incentives after the expiration of their Investment Incentive Contract.

Recognizing, however, that there may occur extenuating circumstances causing, for instance, unavoidable delays in beginning the production, and Investment Incentive Contract may be extended in part or in whole on the following conditions:

- That the extension shall be viewed as a prolongation of the total five (5) years of the normal Incentive Period;

- That no extension shall be made for a period longer than a maximum of two years;

- That an evaluation of the original Project Proposal, the actual operation, and the plan for the period of the extension indicates that the company will be able to operate without incentives after the expiration of the extension;

- That the extension be approved in the same manner as described in Section 9 so that the procedure described in sub-section (4) shall to all extensions regardless of the size of the investment.

- That only one extension can be given.

Section 11 – Penalties:

No improper use, such as sales or transfers to person or entities or use for activities not directly related to an Approved New Investment Project shall be made of any articles imported without duty pursuant to exemption under this Act. Upon evidence of such improper use the laws of Liberia pertaining to such violation shall apply.

Notwithstanding the provision of sub-section (1) of this Section, any articles imported without duty pursuant to a customs exemption under this Act may be sold, transferred or used far activities not directly related to Approved New Investment Project upon payment of the customs duties and other charges required to be paid on such articles if not exempted.

Section 12 – Cancellation of Investment Incentives Contract:

Applying the same procedure as on approval the same body that approved of a project proposal shall cancel an Investment Incentive Contract for any of the following reasons:

- Mis-representation, fraud or other illegal acts committed by the Sponsor of the Approved New Investment Project in obtaining the Contract;

- Misuse of the import duty exemption privileges;

- Liquidation of the investment;

- Failure to submit a report pursuant to paragraph (e) of sub-section (1) of Section 7, provided, however, that if the Sponsor submits the required report within ninety (90) days after receiving notice of default, the requirement shall be deemed to have been fulfilled;

- Failure to commence operations within the time stipulated in the contract, bearing in mind the stipulation of Section 10.

- Failure to fulfill their obligation under the Investment Incentive Contract as described in Section 7.

Section 13 - Appeals:

The Sponsor shall have the right to appeal to questions of fact or to the Circuit Court from an administrative decision under Section 11, and for reinstatements of a contract canceled under Section 12.

In lieu of an appeal to the Circuit Court, the Government and the Sponsor may agree and so state in the Investment Incentive Contract that the appeal from an administrative decision shall be submitted to arbitration according to procedures agreed between the parties, and the decision of the arbitrators shall be final.

An appeal or submission to arbitration under this Section of an Investment Incentive Contract the Cancellation of which would cause irreparable damage to the Sponsor.

Section 14 – Liabilities of Sponsor:

Where there are several sponsors of a New Incentive Project their liabilities to the Government under the Investment Incentive Contract shall be joint the several.