Section 18, The Finance Act, 2013

Section 95 of the Income Tax Act, 2000 is repealed andreplaced by the following new section– 95 (1) Where an arrangement exists between associated persons, the persons shall calculate their income and tax payable according to the arms length standard. . (2) The arms length standard requires associated persons to qualify, characterize, apportion and allocate amounts to be included or deducted in calculating income to reflect arrangements that would have been made between independent persons. (3) The Commissioner-General may by Statutory Instrument prescribe conditions on the application of and exceptions to this section and international guidelines that must be followed in applying the arm’s length standard. (4) Where, in the opinion of the Commissioner-General, a person has failed to comply with subsection (1), the Commissioner- General may make adjustments consistent with subsection (1) and in doing so the Commissioner-General may– (a) re-characterise an arrangement made between associated persons, including re-characterising debt financing as equity financing ; (b) re-characterise the source and type of any income, loss, amount or payment; (c) apportion and allocate expenditure based on turnover. (5) This section shall apply to an arrangement between a permanent establishment in Sierra Leone and its non-resident owner. (6) For the purpose of this section , “arrangement” means a transaction including a course of conduct, dealing or understanding, whether expressed or implied, whether or not enforceable by legal proceedings and whether unilateral or involving more than one person.”