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SOMALIA
We have a team of experienced professionals dedicated to supporting all your business requirements—ensuring smooth operations and full regulatory compliance. This strong foundation enables you to confidently establish and grow your business in Somalia with efficiency and assurance.
WHY SOMALIA?
Amongst all the countries in the African continent, Somalia, officially the Federal Republic of Somalia, is located in the Horn of Africa, boasting the longest coastline in mainland Africa. It is the 9th most populous country in Africa. The capital of Somalia is Mogadishu, which is the largest and most populated city, serving as a vital economic hub. The currency of Somalia is the Somali Shilling (SOS). The population of Somalia was estimated to be around 19 million in 2024. The neighbouring countries of Somalia are Ethiopia to the west, Djibouti to the northwest, Kenya to the southwest, and it borders the Gulf of Aden to the north and the Indian Ocean to the east. The official language of the country is Somali, while Arabic is also widely spoken. As Somalia is bordered by the Indian Ocean and the Gulf of Aden, it has several commercial seaports, notably Mogadishu, Berbera, and Bossaso, which are crucial for fulfilling the country’s trade requirements and serve as vital gateways for imported and exported goods.
The corporate income tax rate in Somalia is generally 30% for companies with annual figures above $30,000. However, the tax framework is continuously evolving as the country stabilizes. Establishing a business in Somalia has to be done with utmost care, keeping in mind the evolving laws of the country. The Somali government has been working on strengthening its legal and regulatory framework to attract foreign investment. There are excellent business opportunities in Somalia for new investors who are planning to start their business abroad. As Somalia continues its path towards stability and economic reconstruction, it is increasingly opening its doors to foreign businesses and investors.
ADVANTAGES
100% Foreign Ownership:
Companies registered in Somalia have access to 100% foreign ownership of their registered local company without the need for a local partner. As a foreign entrepreneur, you have complete ownership over the company’s operations, profits and decision-making power, which gives you unlimited freedom for your company.
Vast Untapped Resources:
Somalia boasts abundant marine resources, significant livestock potential, and promising oil and gas reserves, offering long-term investment opportunities.
Strategic Geopolitical Location:
Its extensive coastline and position in the Horn of Africa are strategically vital for maritime trade routes, offering potential as a regional logistics hub.
Reconstruction & Development Phase:
As the country stabilizes, there’s massive demand for goods, services, and infrastructure, presenting opportunities for early movers in a rapidly developing market.
Young and Dynamic Population:
A large and youthful population provides a growing labour pool and a potential consumer market.
Government Focus on Economic Revival:
The Somali government is actively implementing reforms and new laws, like the Investors and Investments Protection Law (2023), to attract and protect foreign direct investment.
High Demand for Basic Services:
Many sectors are underdeveloped, leading to high demand for essential services like electricity, internet, and modern healthcare, providing clear market entry points.
TAX REGIME
The Somalia Revenue Directorate (SRD) and Ministry of Finance are responsible for administering various taxes. It is actively engaged in modernizing its tax system with support from international partners like the World Bank and IMF.
Sales Tax (Goods and Services):
A standard rate of 5% applies to most goods and services, including electronic transactions. In August 2024, the Ministry of Finance implemented a “split payments” system where this tax is remitted directly at the time of sale.
Income Tax (Payroll Tax/PIT):
This is a progressive tax for residents, with rates ranging from 0% to 20% on salary income. Non-residents face a flat rate of 20%.
Corporate Income Tax (CIT):
A tax levied on business profits. Specific rates can vary based on the type of business/production, ranging from 5% to 35%.
Rental Income Tax:
A tax imposed on profit from renting property. Rates vary, with a progressive structure introduced in recent years.
Other Taxes:
This includes a variety of indirect taxes such as stamp tax (on agreements, invoices, etc.), motor vehicle tax (based on horsepower), and production tax.
SOMALIA COMPANIES
Sole Proprietorship:
Company registration in Somalia as a sole proprietorship is a company structure that is owned by a single individual. This company structure is the simplest type of business structure in Somalia. Foreign entrepreneurs in Somalia are allowed to establish a company as a sole proprietorship with 1 director as the owner of the company; they are also allowed to have 100% ownership of their company without the need for a local partner.
Public Limited Company:
Company registration in Somalia as a public limited company is when the company is allowed to list its shares to the public. This company structure in Somalia is best suited for big, established businesses that wish to raise capital from public investors. A public limited company is a separate legal entity, and its regulatory authority is the Company Law of Somalia under the Ministry of Commerce and Industry. It requires a minimum of 2 shareholders to form a PLC in Somalia.
Limited Liability Company:
Company registration in Somalia as a limited liability private company is a company structure where the liability of the companies is limited. This structure requires a minimum of 2 shareholders and 1 director of any nationality. It is one of the preferred choices for small and medium enterprises (SMEs). A limited liability company can be 100% owned by a foreign individual.
Branch Office:
Foreign companies can establish their business in the promising economy of Somalia as a branch office. It is not a separate legal entity and is an extension of the parent company where the management, operations, and business activities are overseen by the parent company. A branch office can be 100% foreign owned and enjoy full control of the company operations, profits and decision-making without the need for a local partner.
Non-Governmental Organizations:
The non-governmental organizations (NGOs) in Somalia are organizations that are working for non-profit, for the community rather than working to generate profit. These organizations are a group with two or more people and are at the regional or international level.
Somalia is an emerging country with a promising environment for all types of businesses. Business setup in Somalia is an excellent choice for global investors. Somalia also gained a global reputation for its resilience in rebuilding the nation after long issues of conflict, making it a strong contender for growth and investment. Somalia also gained a global reputation for its resilience in rebuilding the nation after long issues of conflict, making it a strong contender for growth and investment.
Contact Us
Get in touch with the right people to get the right help in setting up your business in Somalia.
enquiries@chandrawatpartners.com.