What is Value Added Tax?

Value Added Tax (VAT) is an indirect tax charged on the value added to goods and services at each stage of production and distribution. Businesses collect the tax from customers and remit it to the government, while eligible businesses can generally claim credits for VAT they paid on business purchases.
In Liberia, VAT is part of an ongoing tax reform. 

As of July 2026:
Liberia is still operating under the Goods and Services Tax (GST) system.
The standard GST rate increased from 12% to 13% on May 1, 2026.

The Government has announced that VAT is expected to replace GST from January 1, 2027, with a proposed standard VAT rate of 18%, subject to implementation under the new tax framework. 

Here's a simple example of how VAT works:
A manufacturer sells goods worth US$100.
If the VAT rate is 18%, the customer pays US$118.
The business collects the US$18 VAT and later remits it to the government, after deducting any eligible VAT it already paid on its own business purchases.

The main purpose of VAT is to generate government revenue to fund public services such as education, healthcare, roads, and security, while reducing tax cascading by allowing businesses to recover tax paid on inputs. Under the current GST system in Liberia, businesses generally do not receive the same input tax credit mechanism that exists under a VAT system.