Personal Income Taxation in Trinidad and Tobago

Why do we pay tax ? To fund government activities and public services, for example: Infrastructure such as roads and highways. Health care such as public hospitals and health clinics. Education such as schools and libraries. Security services such as the Coast Guard, Police Service and the Army. Salaries of government workers.

Categories of Taxes Payable Four major categories of taxes payable: On earnings (PAYE) On purchases (VAT) On property (Land and Buildings Tax) On wealth (Capital Gains)

The Inland Revenue Division The IRD is the collector of all taxes on behalf of the Government of Trinidad and Tobago. DIRECT TAXES Income Tax/Corporation Tax Health Surcharge Business Levy Green Fund Levy (partnerships & companies) INDIRECT TAXES E.g. Value Added Tax

Compliance Requirements - Individuals Apply for an Individual Income Tax File Number also known as BIR File Number. This is required on taking up employment for the first time. Give BIR Number to your employer. Complete a Tax Declaration Form 1 (TD1) and give to your employer: On commencement of new employment At the beginning of each year (before February 28th) On a change of deductions and allowances

Compliance Requirements - Individuals (continued) If necessary, file an income tax return by April 30th of the year following the year in which you earned the income.

Who is required to file? The following persons are required to submit tax returns: Companies and Unincorporated Associations whether or not their profits are exempt from Tax. Partnerships, Trusts, Joint Ventures. Individuals in receipt of income from trade, business or practice of any profession or vocation from any source other than emoluments. Self–employed individuals every year in which he has business activity, whether or not he generates a profit or loss.

Who is required to file? If you are an individual in receipt of Emolument Income or a Pension ONLY, you are not required to submit a return.

Types of Income Emolument Income: generated from the employer–employee relationship e.g. Salaries and wages Overtime and bonus payments Perquisites (perks) such as motor vehicles, housing etc. Commissions, stipends, director’s fees, travelling etc. Retiring allowances or pensions

Types of Income Non-Emolument Income: Derived from trade or business e.g. Profits Sales Receipts Private professional practice Short-term capital gains Royalties

Employee or Self-employed? It is more cost effective for some employers to hire persons on contract for jobs. IRD may determine that “contractors” are actually “employees” and subject to PAYE, NIS and Health surcharge deductions by the “employer”. A employee has a contract OF service with an employer. A person is considered to be self-employed if he has a contract FOR service.

Employee or Self-Employed? What determines the difference? Does the person: work from home? use his own equipment? hire his own workers? take financial risk? profit from sound management? control his working schedule offer exclusive service or able to offer services to others? Can the person refuse to accept a particular job? Is the person entitled to paid sick and vacation leave? Can person delegate the work?

Computing Tax Emolument earners pay income tax through a system of Pay as You Earn (P.A.Y. E.) Income tax and health surcharge are deducted from earnings on a monthly basis by the employer. Withholdings are remitted to the B.I.R. by the 15th of the next month.

Computing Tax Income tax is calculated based on the chargeable income multiplied by the tax rate (25%) Chargeable income = total income – (personal allowance + other tax deductions)

Penalties – Late Filing The late filing of tax returns by the emolument earner ONLY, no longer attracts penalty. However, the late filing of tax returns by the non-emolument earner still attracts penalties. The tax return is due on 30th April, of the year following the year of income. A penalty of $100.00 is imposed only on persons required to file a Return if the Return is filed after 31st October, of the year following the year of income, and thereafter for every six months or part thereof that the Tax Return remains outstanding.

Penalties and Interest – Late Payment Income Tax Payment due by 30th April of the year following the year of income. For any balance unpaid by 30th April: 25% penalty 20% interest per annum on the sum of principal and penalty effective 1st May of the year following the year of income.

Penalties and Interest – Late Payment NIS: 25% penalty 15% interest. Interest accrues one month after the month in which NIS was payable i.e. if both the principal and penalty are outstanding one month after the due date for principal, interest will accrue on the sum of the principal and penalty

Penalties and Interest – Late Payment Health Surcharge: Unpaid balances: 25% penalty 20% interest from the due date until the date of payment.

Health Surcharge Health Surcharge is payable by: - every employed person who pays or is liable to pay contributions under the National Insurance Act; Exemptions: - under the age of sixteen (16) years - sixty (60) years and over - whose only source of income is pension - who are in receipt of NIS Benefits

Health Surcharge Where the TOTAL INCOME averages less than $469.99 per month, the rate is $4.80 per week – i.e. $62.40 per quarter Where the TOTAL INCOME averages over $469.99 per month, the rate is $8.25 per week – i.e. $107.25 per quarter

Tax planning Tax Planning is the process to legally reduce or eliminate the payment of taxes. Tax planning operates within the spirit and intention of the law and is one of the areas used to assist in building wealth. Tax avoidance on the other hand is also a legal process to reduce or eliminate the payment of taxes but is considered to be abusive of the spirit, if not the letter of the law. Tax evasion is illegal and occurs when taxpayers attempt to deceive authorities by knowingly reporting less tax payable what the law obligates them to pay.

Reducing your tax payable File a Tax Declaration Form 1 (TD1) with your employer to claim tax deductions and allowances Deductions and allowances available (2015): Deduction / Allowance Limit (2015) Personal Allowance $60,000, $72,000 for persons > 60 Contributions paid to approved employer pension plan, NIS (70%) and registered deferred annuities $50,000 Tertiary Education Expenses $60,000 per household Mortgage interest for first-time home owners $25,000 Alimony/maintenance payments Under court order

Reducing your tax payable TD1s are to be submitted directly to the employer when there are claims only for : Personal allowance National Insurance contributions and Contributions to company’s group pension plan (approved) For other deductions TD1s are to be approved by the Inland Revenue Division before submission to employer. If necessary, file an income tax return by April 30th of the year following the year in which you earned the income.

Reducing your tax payable Additional deductions are available for: Investment in Tax-free savings bonds (max $5,000/year for 5 years) Covenanted donations (limited to 15% of total income)

Deed of Covenant A tax deduction is allowable for an individual or company who makes payment(s) to a Charitable Body/Institution/Fund by means of a Covenanted Donation. This deduction is equal to 15% of Total Income. (Companies and Individuals) Covenanted Donation means Payments made to a charity under a deed of covenant in favour of - (i) a sporting body of persons as Defined in Section 6(2) of the Corporation Tax Act and approved by the President in writing; (ii) an ecclesiastical, charitable or educational institution of public character approved by the President in writing; (iii) the Children's Life Fund established under the Children's Life Fund Act 2010

Computing Tax - Income

Computing Tax - Deductions

Computing Tax Payable

Computing Health Surcharge

Tax Credits Venture Capital 25% of Investment Purchase and Instal. 25% of cost up to of a CNG Kit a max. of $10 000 Purchase of Solar water 25% of cost up to Heating equipment a max. of $10 000 for household use