Taxes in Somalia

The federal tax system is administered mainly by the Federal Ministry of Finance, its Directorate General of Revenue, the Inland Revenue Department and the Customs Department. Federal member state finance ministries and the Banadir Regional Administration also perform tax functions. Responsibilities and enforcement are not fully harmonized across Somalia. A business or individual may therefore need to check federal rules, the relevant federal member state requirements and local practice. Somaliland uses a separate tax system in practice, and Puntland has not joined the central federal and federal member state fiscal agreements described in the current research. The principal legal framework includes the Income Tax Act No. 37/2025, which took effect on 11 May 2025, its Income Tax Regulations dated 15 May 2025, the Revenue Administration Law 2019 and its 2024 regulation, the Sales Tax Law No. 2/1984 and later extensions, the Production Tax Law No. 3/1985, the Stamp Tax Law No. 6/1996, the Motor Vehicle Tax Law No. 4/1965, the Registration Tax Law No. 1174/1921 and the 2024 General Customs Regulations. Where older revenue websites show different income-tax brackets or corporate rates, the 2025 Act and its regulations take priority over those legacy tables. A resident taxpayer generally includes a person with a permanent home in Somalia, a Somali citizen without a full-year home abroad, a person present in Somalia for at least 183 days during a 12-month period, or a Federal Government or federal member state official serving abroad. Residents are generally taxed on worldwide income. A non-resident is generally taxed on Somali-source income and income connected with a Somali permanent establishment, meaning a sufficiently fixed business place. A fixed place may qualify as a permanent establishment after at least 90 days in a 12-month period under the current rules. For employees, monthly personal income tax rates are 0% on income from USD 0 to 100, 6% above USD 100 to 500, 12% above USD 500 to 1,500 and 18% above USD 1,500. The employer normally withholds and pays this tax. Current guidance indicates that an employee with one employment and no other relevant income will usually not need to file a separate annual return, but the employer must apply the payroll rules correctly. Published materials give different monthly remittance dates: the Income Tax Manual refers to the 15th of the following month, while the tax calendar lists the 25th of each month. The responsible revenue office should confirm the date for the particular filing period. Self-employed personal income is taxed annually at 0% on USD 0 to 1,200, 6% above USD 1,200 to 6,000, 12% above USD 6,000 to 18,000 and 18% above USD 18,000. Employment income does not receive business-expense deductions under these rules. Business and investment income can create separate registration and filing duties. The Personal Tax Regime is available only to a resident natural person with Somalia-source business income, average turnover of no more than USD 50,000 over three years, no partnership structure and an eligible activity. It does not cover certain professional activities or businesses dominated by rental income, and its quarterly payment is the higher of USD 37.50 or 1.5% of quarterly turnover. Resident corporations with annual turnover below USD 10,000 pay USD 150. Turnover between USD 10,000 and USD 50,000 is taxed at 1.5% of turnover, while turnover above USD 50,000 is generally taxed at 15% of profit. A non-resident corporation is generally subject to an 18% flat rate. A partnership is treated as tax-transparent, so its profit or loss is allocated among the partners. A trust or AMAANO is subject to a 26% rate. Companies should keep financial statements, invoices, payroll records, bank statements and an asset register. Operating expenses can be deductible, and losses may be carried forward, but deductions are capped at 95% of income and a minimum tax of 5% of income can apply even when the company reports a loss. Capital and private expenses are not deductible. Withholding tax, meaning tax deducted by the payer before an amount is paid, applies to several payments. Current rates include 5% on rent of immovable property, 10% on rent of movable property, 15% on capital gains, 5% on dividends, 10% on debt-claim or Murabaha profit, 15% on royalties and intellectual-property or licence payments, 10% on service fees and 5% on insurance or reinsurance. Dividends paid by one resident corporation to another resident corporation can be exempt where the recipient holds more than 12.5% for more than 365 days. Capital gains can arise from selling land, buildings, shares and other assets. The first USD 100,000 of gain on a primary private residence is exempt under the current framework. The Act-based rules use a 15% or 18% treatment when total chargeable income exceeds USD 18,000, although one manual example shows 10%. The Act and regulations should therefore control the calculation, with the inconsistency documented and clarified where necessary. Somalia uses Sales Tax rather than a VAT system. Published rates include 5% for imports, wholesale transactions, hotel activity, industrial products, water and electricity, education and health services and other companies; 15% for telecommunications; 25% for banks and express services; and 10% for supply-chain services. Later extensions cover additional businesses and services, including telecommunications, electricity, cable television and airline tickets. Electronic tax and mobile-money collection can involve a 5% deduction. Sales Tax returns are generally due on the first day of the following month under the tax calendar. Other taxes include Production Tax on domestic manufacturing and equivalent imports, generally payable within 10 days after the start of the month or when goods leave the factory; Stamp Tax on specified documents and transactions; Motor Vehicle Tax based on engine horsepower, with government, embassy and United Nations vehicles excluded and an additional 2% gratuity; and Registration Tax on specified transactions. Published examples include 3% on invoices, agreements, projects and house rent, 11% on real-estate registration, 1% on leases, 2% on new vehicles and 5% on company capital. The applicable rate depends on the transaction and the responsible authority. Importers and exporters may face import duty, import Sales Tax, export duty and import excise. The Somalia Customs Management System, known as SOMCAS, became fully operational in May 2025 at Mogadishu port and airport and in Kismayo. The earlier PCMIS system was switched off. Customs valuation moved to book-value valuation in August 2025, with a planned transition toward invoice-based ad valorem valuation and the East African Community Common External Tariff. Budget planning places that tariff transition from 2027 onward, so the applicable customs treatment should be checked at the entry point. Income from business or investment generally requires Form TR1 registration with the Inland Revenue Department. Somalia is developing a harmonized Taxpayer Identification Number across the federation through the SFMIS revenue-information system. Importers and exporters need separate SOMCAS registration. No reliable uniform fee for tax or taxpayer registration has been established in the available sources. The standard tax year runs from January through December, although an alternative tax year may be approved. Estimated annual tax is normally paid in four installments due on 31 March, 30 June, 30 September and 31 December. The annual reconciliation and return, together with any balance due, are generally due by 31 March of the following year. An overpayment may be refunded or carried forward as a credit. Tax-calendar dates also list the first day of the relevant month or quarter for rental tax, road tax and excise, and 1 April for corporate tax. The exact obligation depends on the taxpayer, tax type, authority and location. Digital enforcement is expanding. Point-of-sale systems operate in some Mogadishu restaurants and hotels, electronic Sales Tax and mobile-wallet reporting is used, and a January 2026 circular introduced mandatory digital revenue receipts. An ITAS tax-administration contract was signed in December 2025 with implementation planned within 12 months. During 2025, the authorities reported 27 investigations, 10 additional assessments and two legal referrals, alongside annual audits and civil penalties under the September 2024 regulation. The Revenue Administration Law and its regulations provide the general framework for objections and disputes, but the available public material does not establish one reliable nationwide table of objection deadlines, appeal bodies and procedural stages. A taxpayer should obtain the applicable notice, contact the responsible Revenue Office and verify the procedure with qualified local tax advice. A foreign tax credit may be available to a resident non-partnership taxpayer for foreign income tax, but treaty relief should not be assumed because no dependable Somalia double-tax treaty was established in the reviewed sources. Federal rules, federal member state practice, Somaliland rules and customs treatment at the relevant entry point must be checked separately.