Income Tax in Trinidad and Tobago
Personal Income Tax
Persons who are resident, ordinarily resident, or domiciled in Trinidad and Tobago are taxed on their worldwide income, whether or not such earnings are remitted to Trinidad and Tobago. A non-resident individual is taxed on income arising in Trinidad and Tobago, subject, where applicable, to the provisions of double taxation treaties (DTTs).
Personal income tax rates
The income tax rate for individuals with chargeable income less than TTD 1 million is 25%. For chargeable income in excess of TTD 1 million, the rate of tax applicable is 30%.
Business levy of 0.6% is applicable to sole traders and self-employed individuals having gross income or receipts in excess of TTD 360,000 per annum. It is payable if and to the extent that the business levy liability exceeds the individual’s income tax liability. It does not apply to income that is exempt from income tax and is not payable in the first three years following commencement of the business activity.
Individuals are considered temporarily resident for tax purposes if they are present in Trinidad and Tobago for more than 183 days in any calendar year.
A resident individual engaged in employment is assessable to tax on one's worldwide income. A non-resident individual engaged in employment in Trinidad and Tobago is taxed on income received for services performed in Trinidad and Tobago whether or not such income is received in Trinidad and Tobago. For tax purposes, the term 'income' includes all cash and non-cash benefits and allowances derived from employment, including the value of board and lodging provided by the employer.
Only gains on the disposal of a chargeable asset within 12 months of its acquisition are taxable. Excluded are gains on the disposal of any security in Trinidad and Tobago and gains on motor cars and household goods disposed of for TTD 5,000 or under. Taxable gains are included with other income and are taxed in the normal manner. Capital gains realised outside Trinidad and Tobago by resident aliens are not taxable.
Income arising outside Trinidad and Tobago and received by an individual who is resident but not domiciled in Trinidad and Tobago is taxable in Trinidad and Tobago only to the extent that such income is received in Trinidad and Tobago.
Dividends, excluding preference dividends, received from investments in resident companies are exempt from tax in the hands of resident individuals. Distributions received from a mutual fund established by a locally licensed trust are also exempt from tax in the hands of a resident individual.
Interest received by a resident individual on all classes of savings or other accounts with banks, financial institutions, or other forms of deposit-taking institutions is exempt from tax.
Deductions from Income
An employed individual is not entitled to any blanket or standard deductions in computing taxable income. Such an individual may claim a deduction only for unreimbursed travel expenses incurred wholly, exclusively, and necessarily in the course of employment.
A resident individual is entitled to a deduction in respect of the following:
· Tertiary education expenses, up to a maximum of TTD 60,000.
· Contributions to approved pension funds or annuity plans, up to a maximum sum of TTD 50,000.
· Capital expenditure on conversion of a house to an approved guest house.
· 100% covenanted donations to charitable organisations and sporting bodies, up to 15% of total taxable income.
A personal allowance of TTD 72,000 per taxpayer is granted.
A self-employed individual carrying on a trade, business, profession, or vocation may deduct those expenses incurred wholly and exclusively in the production of such income.
Promotional expenses incurred by professionals in the construction sector or persons employed in agriculture in the expansion of existing markets or the creation of new markets for the export of services or locally produced goods are deductible as an expense at 150% of the actual outlay.
Tax Return and Compliance
The tax year corresponds to the calendar year in Trinidad and Tobago.
Tax returns must be filed by 30 April of the year following the calendar or accounting year-end. An automatic six-month grace period is allowed, following which a penalty of TTD 100 accrues for every six months or part thereof that the return remains unfiled. Tax returns are filed for income earned in a calendar year (which coincides with the tax year) except in the case of a sole trader or partnership, where filing is done according to the accounting terminal date.
Resident individuals earning only employment income are not required to file a tax return.
Each individual must file a separate tax return. There is no provision for joint filing by husband and wife.
Payment of tax
Income tax is deducted at source on all employment income under the pay-as-you-earn (PAYE) system. Any shortfall of taxes deducted at source should be settled by the due date (i.e. 30 April following the year of income).
Corporate Income Tax
Corporation tax. Companies resident in Trinidad and Tobago are subject to tax on their worldwide income from all sources. Relief with respect to taxation suffered on foreign-source income in an overseas jurisdiction may be available under a double tax treaty. Nonresident companies engaged in business in Trinidad and Tobago are subject to tax on income directly or indirectly accruing in or derived from Trinidad and Tobago.
Rates of tax. For the 2017 year of income, corporation tax is chargeable at a rate of 25% on the first TTD1 million of taxable profits, while taxable profits in excess of TTD1 million are subject to corporation tax at a rate of 30%.
The Corporation Tax Act provides for a business levy to be imposed on the annual gross sales and receipts of companies, including branches of nonresident companies operating in Trinidad and Tobago. The rate of the business levy is 0.6%. The business levy is credited against the corporation tax liability. It is the final liability if the corporation tax liability is less than the business levy. Certain companies are exempt from the levy, including the following:
· Companies or statutory corporations exempt from corporation tax under any act
· Certain government corporations under the jurisdiction of the Public Utilities Commission or exempted by order of the President
· Companies subject to tax under the Petroleum Taxes Act
A company is not subject to the business levy for the first 36 months following the date of registration of its business or if its gross sales or receipts do not exceed TTD360,000 in the year of income.
The Miscellaneous Taxes Act provides for a green fund levy to be imposed on the gross sales and receipts of companies engaged in business in Trinidad and Tobago. The rate of the green fund levy is 0.3%. The green fund levy may not be credited against the corporation tax liability or claimed as a tax deduction in determining the company’s taxable income.
The corporation tax rate for companies engaged in the downstream petrochemical sector and related sectors is 35%. Companies engaged in upstream petroleum operations are subject to various taxes and imposts, of which the most significant are petroleum profits tax of 50%, unemployment levy of 5% and supplemental petroleum tax at rates based on the weighted average crude oil price. Upstream petroleum companies are also subject to a different system of tax administration.
Generally, the profits from a long-term insurance business of an assurance company that is subject to tax are the profits derived from the investment of its Statutory Fund.
The rate of corporation tax on the profits from a long-term insurance business for the 2017 year of income is 15%. However, if such profits are transferred to the shareholders’ account, such transferred amounts are subject to tax at a rate of 25%.
Capital gains. Capital gains are generally not subject to tax. Depending on the class of asset and the nature of the company’s business activities, however, the profit or loss on depreciable assets disposed of after being held for more than 12 months may require a balancing adjustment (see Section C).
Short-term capital gains are profits on the disposal of assets within 12 months of their acquisition. Although these gains are of a capital nature, they are generally subject to tax. Profits derived from the partial disposal of an asset within 12 months of acquisition are also subject to tax. For the 2017 year of income, the applicable rates are 25% on the first TTD1 million and 30% on the amount in excess of TTD1 million.
Administration. The tax year is the calendar year. Tax is calculated on the profits for the accounting period that ends during the tax year. For each quarter, a company is required to pay a green fund levy installment, as well as either a corporation tax or business levy installment, whichever is greater. The quarterly payments must be made by 31 March, 30 June, 30 September and 31 December in each tax year. Quarterly payments of corporation tax are determined based on the taxable income for the preceding accounting period. Business levy and green fund levy installments are based on the actual gross sales or receipts of the company for the relevant quarter. The business levy calculation excludes income that is exempt for corporation tax purposes such as dividends received from Trinidad and Tobago resident companies, but the green fund levy calculation takes into account such income.
If the current year’s profits exceed the preceding year’s profits, a company must pay by 31 December the sum of the tax liability on the preceding year’s taxable profits plus 80% of the increase in tax liability over the preceding year. Annual tax returns must be filed by 30 April in the year following the tax year, and any balance of tax due is payable at that time.
If the balance of tax due is not paid by the 30 April deadline, interest accrues at a rate of 20% on the outstanding amount beginning on 1 May. A grace period to 31 October is granted for the filing of the tax return. If the return is not filed by 31 October, a penalty of TTD1,000 accrues beginning 1 November for each six-month period or part of such period that the return remains outstanding.
Dividends. Dividends received from nonresident companies out of profits not derived from or accruing in Trinidad and Tobago are subject to tax. Dividends received by resident companies from other resident companies are tax-exempt.
Dividends paid to nonresident companies and individuals are generally subject to a withholding tax of 10%. The rate is reduced to 5% if the recipient is a corporation owning 50% or more of the voting power of the distributing company.
Double tax relief. Bilateral agreements have been entered into between the government of Trinidad and Tobago and the governments of certain other countries to provide relief from double taxation. These agreements assure taxpayers that their trade or investment in the other countries is free from the deterrent of double taxation. Relief from double taxation is achieved by one of the following two methods:
· Exemption or a reduced rate on certain classes of income in one of the two countries concerned.
· Credit if the income is fully or partially taxed in the two countries. The tax in the country where the income arises is allowed as a credit against the tax on the same income in the country where the recipient is resident. The credit is the lower of the Trinidad and Tobago tax or the foreign tax on the same income.
Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.