The Tax System, Corporate Taxes & Tax Assistance

  • The Tax System

    Principal Taxes The principal taxes in Trinidad and Tobago are income tax, corporation tax, business levy, various petroleum taxes, value added tax (VAT), withholding tax and customs and excise duties.

    Other taxes include stamp duties, road traffic licence fees, local real estate taxes, and betting and gaming taxes. No inheritance or gift taxes are levied, and there are no death duties.

    The Tax System At A Glance

    Income Tax 35% highest rate
    Corporation Tax 35% on chargeable profits
    Business Levy 0.4% on gross sales
    Petroleum Taxes 50% petroleum profits tax, 5% unemployment levy, Supplementary Petroleum
    Tax - 15% Land Operations and 55% Marine Operations
    Value Added Tax (VAT) 15% on sales
    Withholding Tax Maximum 15% on dividends, maximum 20% on other payments
    Customs and Excise Duty Common external tariff

    Basic Legislation

    There is a wide range of tax legislation including:

    • Income Tax Act
    • Corporation Tax Act
    • Value Added Tax Act
    • Petroleum Taxes Act
    • Income Tax (In Aid of Industry) Act
    • Unemployment Levy Act
    • Income Tax (Employment) Regulations
    • Double Tax Treaties
    • Hotel Development Act
    • Fiscal Incentives Act

    Amendments to the tax laws are made each year with the passing of the Budget and Finance Act. Generally, the legislation requires voluntary compliance.

    Powers of The Board of Inland Revenue

    The Board of Inland Revenue has wide statutory powers including:

    • To request all such information as is required in order to be satisfied that the taxpayer has fully complied with the law
    • To enter the taxpayer's premises and carry out searches
    • To require that books and records are kept for at least 6 years
    • To garnishee any amounts which are outstanding after due notice has been given to the taxpayer
    • To undertake civil or criminal legal action for any wilful offence or neglect by a taxpayer

    Administration

    Tax laws are administered by the Board of Inland Revenue which is headed by a Chairman and comprises four commissioners, each dealing with different areas. The Board is also responsible for the administration of VAT.

    The Board of Inland Revenue is not usually prepared to give advance rulings on taxation matters.

    Tax Year

    The tax year for a business usually corresponds to the twelve months ending with its accounting year. Special rules operate on the commencement and cessation of business and when a company changes its accounting year end.

    Tax Returns

    A tax return must be submitted on a form issued by the Board of Inland Revenue by 30 April of the year following that in which the business accounting year ends. There is no statutory requirement for the financial statements accompanying the return to be audited. They must, however, be prepared on an accruals basis. Any other basis would require the approval of the Board of Inland Revenue. Books and records must be kept in English, maintained in Trinidad and Tobago, in Trinidad and Tobago currency.

    Assessment and Audit

    The system is one of self-assessment. However, the Board of Inland Revenue may audit every taxpayer at its discretion. The audit is carried out after an assessment has been made. Any adjustments resulting from the audit are then incorporated in an amended assessment. The Board has the power to reopen assessments at any time within six years from the end of the tax year in question.

    All returns filed with the Board of Inland Revenue are initially scrutinised to ensure completeness and then passed for processing. Thereafter, returns are classified and selected for examination. After examining a particular return, the Board may assess additional tax liabilities which would be reflected in an assessment notice. If this is not disputed, the tax must be paid within 30 days (of the date of the notice).

    Disputes and Appeals

    If an assessment is disputed, a company may object in writing within 15 days of the service of the notice of assessment. The Board of Inland Revenue has two years in which to determine the objection, otherwise it is deemed to be determined in the tax payer’s favour.

    When an objection is disallowed, the company may, within 28 days of being notified of this decision by the Board of Inland Revenue, lodge an appeal with the Registrar of the Appeal Board. The Appeal Board is a superior court of record, and accountants may not represent their clients before it. Appeals are heard in camera, and the burden of proof rests with the appellant. Decisions of the Appeal Board are final on questions of fact, but an appeal can be made to the Court of Appeal and, thereafter, to the Privy Council on questions of law.

    Any tax which becomes payable following the determination of an appeal must be paid within 30 days of the Appeal Board's decision.

    There are no special commissioners to act as a buffer between the Board of Inland Revenue, the taxpayer, and the Appeal Court, and litigation is expensive. The amount of tax in dispute is therefore relevant when deciding what action to take in any disagreement with the Board of Inland Revenue.

    Penalties and Interest

    When any of the taxes on companies is not paid by the due date through the company's default, interest is charged on the overdue amounts, at 15 percent per year. Interest on overdue tax is not a deductible expense in arriving at taxable income.

  • Corporate Taxes

    Resident Companies

    A resident company is liable to taxation on its worldwide income (including short-term capital gains). A company in this context is any corporate body or unincorporated association but does not include a partnership. A company is considered to be resident in Trinidad and Tobago if its "mind or management" is ordinarily situated there. Whether this test is satisfied is determined by the facts in each case. Mind or management is not necessarily situated where the directors meet. The place of incorporation is irrelevant.

    Non-resident Companies

    A non-resident company is liable to tax only on income arising in or derived from Trinidad and Tobago, including the continental shelf. The question of where income arises or is derived from sometimes poses problems as source of income is not defined.

    If the company carries on a trade or business in Trinidad and Tobago, the tax applying to its Trinidad and Tobago-source income (whether or not directly connected with the business) is corporation tax or business levy (except companies in the first year following their registration) whichever is higher. A company is automatically deemed to be carrying on a trade or business in Trinidad and Tobago if it has an office, place of business, branch, or agency there. Branch profits (after deducting corporation tax) are subject also to a withholding tax, unless reinvested to the satisfaction of the Board of Inland Revenue otherwise than in the replacement of fixed assets. Dividends received by a non-resident company carrying on a trade or business are subject to a final (definitive) withholding tax in its hands in place of the other company taxes.

    If the company does not carry on a trade or business in Trinidad and Tobago, its tax liability on local-source income is settled by final withholding taxes (see Withholding Taxes). Corporation tax does not apply.

    The rules described above may be modified by double taxation agreements (tax treaties).

    Close Companies

    Special rules exist for close companies, which may be broadly defined as companies under the control of their directors or under the control of five or fewer persons. In principle, the Board of Inland Revenue may direct a close company to distribute as dividends any profits that are not required for the current needs and future development of the business and that may be distributed without detriment to the company's existing business. In practice, it is very difficult for the Board to invoke this provision. In addition, various types of payments made by a close company to its directors and shareholders may be regarded as distributions of profit rather than as deductible expenses.

    Tax Treatment of Partnerships

    A partnership is not a chargeable entity for income tax purposes, although a partnership return must be filed showing the allocation of the partnership profit or loss among the partners. Each partner is liable for income tax on his own share of the profit.

    Joint Ventures

    A joint venture is treated in the same way as a partnership for tax purposes. Companies wishing to cooperate in some joint activity must use a joint venture as they are not permitted by law to enter into partnerships.

    Taxable Income and Allowable Deductions

    The taxable income of a resident company is all its income (including short-term capital gains), wherever arising and whether or not remitted to Trinidad and Tobago, after deducting exempt income and allowable expenses and outgoings.

    Dividends

    Dividends received from a resident company, other than preference dividends on shares issued before 31 January 1966, are exempt from corporation tax.

    Dividends received by a resident company from a non-resident company are included in income subject to corporation tax gross of any foreign withholding tax that may have been deducted. A credit for the withholding tax and, in some circumstances, foreign tax on the profits out of which the dividend was paid may be available against corporation tax payable on the dividend.

    Capital Gains

    Profits from the disposal of fixed assets are subject to corporation tax only to the extent that they represent a recovery of tax depreciation allowances previously deducted or where the profit is a short-term capital gain.

    A short-term capital gain is a gain, broadly computed as the excess of proceeds over cost, on the disposal of an asset within 12 months of its acquisition. Short-term capital gains on the disposal of loans, shares and similar securities are exempt. Other capital gains (e.g. from the disposal of real estate) are also exempt. A short-term capital loss may be set off only against short-term capital gains arising in the same year or in subsequent years. It may not be set off against other income, and other losses may not be set off against short-term capital gains.

    Inventory Valuation

    Inventories are generally valued at the lower of cost, on the first-in, first-out basis, or net realisable value. The last-in, first-out method is not acceptable. However, any method of inventory valuation that accords with sound accounting principles and that is consistently applied will be acceptable.

    Exempt Income

    Apart from dividends received from resident companies and exempt capital gains, exempt income also includes income exempted under tax incentive legislation such as the Fiscal Incentives Act 1979 (described under Tax Incentives) and income exempted under tax treaties.

    Exchange Fluctuations

    The accounting treatment of exchange gains and losses is normally in accordance with that recommended by International Accounting Standard 21. Gains or losses on long-term assets and liabilities are usually treated as capital items, neither allowed as a deduction nor taxable in the current tax computation.

    Allowable Deductions

    Expenses and outgoings must be wholly and exclusively incurred in the production of the company's income in order to be deductible.

    Depreciation

    Depreciation charged in the annual financial statements is not deductible for taxation purposes. It is replaced in the computation of taxable income by initial and annual wear and tear allowances. The rates of annual wear and tear allowances are generally in line with depreciation rates used commercially.

    Wear and tear allowances must be calculated on the reducing balance basis on actual cost, except for private motor vehicles, the cost of which is limited to TT$100,000. Indexation for inflation is not permitted.

    Machinery and Equipment

    This category includes not only manufacturing machinery and equipment but also such items as office equipment, furniture, fixtures and fittings, vehicles and ships.

    Some manufacturing companies are, under the Income Tax (In Aid of Industry) Act, entitled to an initial allowance of 50 percent of cost for machinery and equipment in the year of acquisition. For companies engaged in the production of petroleum, petrochemicals, or sugar the rate of allowance is 20 percent, no allowance is given to iron and steel manufacturers. All companies carrying on a trade, business, or profession are entitled to annual wear and tear allowances on their machinery and equipment, calculated according to the declining-balance method. In the first year, the initial and annual allowances are calculated on cost. Thereafter, annual allowances are calculated on the balance of cost after deducting the allowances previously granted. With effect from 1st January, 1995 additions to fixed assets will be pooled in various categories and will not have to be separated for disposals and calculation of allowances on each asset. In all cases a higher rate is applicable.

    The rates of annual wear and tear allowances are not set out in the legislation, but the following are approximate rates that are acceptable to the Board of Inland Revenue:

      Former Rate New Rate
    Class A 2-10% 10%
    Class B 4-25% 25%
    Class C 26-33% 33%
    Class D 33%+ 40%

    The seventh schedule to the Income Tax Act details the assets which fall into each class.

    Very broadly the classes are:-

    • A - Furniture
    • B - Plant and machinery
    • C - Heavy equipment
    • D - Aircraft

    Industrial Buildings

    Companies carrying on specified types of business are entitled to a 10 percent initial allowance and a 2 percent annual wear and tear allowance for expenditure on new industrial buildings and structures. In the case of petroleum operations, the rate of the annual allowance is 5 percent. The annual allowance is calculated on the basis of cost before deducting the initial allowance, using the straight-line method. Industrial buildings include factories, warehouses, and housing for workers as well as other buildings provided for their welfare, such as sports pavilions. The specified types of business are listed in the Income Tax (In Aid of Industry) Act. They include a reasonably wide range of manufacturing industries, rum distilling, sugar refining, breweries, mines, oil wells, and sawmills.

    The purchaser of a second-hand industrial building cannot claim an initial allowance. A straight-line annual allowance is given instead, for the remaining assumed life of the building, on its price to the purchaser or an amount equal to the original cost when new, if this is less.

    If the business carried on by a company is not one of those specified in the Income Tax (In Aid of Industry) Act, only buildings that are used exclusively for housing machinery and equipment used in the company's business qualify for wear and tear allowance. An annual allowance is granted in this case of 2 percent, using the straight-line method, or 5 percent, using the declining-balance method. No initial allowance is available.

    With effect from January 1, 1995 new buildings used in the production of income (i.e. industrial and commercial and rental properties) will receive a 10% wear and tear allowance.

    Land

    The cost of land is not depreciable for tax purposes.

    Intangibles

    Expenditure on acquiring patent rights, trademarks, and goodwill must be capitalised. Only companies carrying on businesses scheduled in the Income Tax (In Aid of Industry) Act may depreciate such expenditure for tax purposes. Research and development expenditure is deductible in the year in which it is incurred, whatever the type of business, although very substantial expenditures may be written off over a longer period.

    Balancing Allowance or Charge

    If an asset that has qualified for tax wear and tear allowances is sold at a price less than its tax written-down value, a balancing allowance is deductible equal to the deficiency. Tax written-down value is the initial cost of the asset less tax wear and tear allowances, but not investment allowances, previously deducted. Conversely, if disposal proceeds exceed the tax written-down value, the excess (called a balancing charge), up to the amount of the tax depreciation allowances previously deducted, is taxed as part of the profit for the year. Where machinery and equipment is replaced, a balancing charge arising on the sale of the original assets may be deducted from the tax-depreciable cost of the replacement assets instead of being taxed in the year in which it arises. No balancing charge may be deemed to arise on the disposal of an industrial building if it has been used for more than 50 years.

    When an asset is transferred between affiliated companies, balancing allowances and charges may be avoided if both companies make an appropriate election (see Groups of Companies).

    With effect from January 1, 1995 assets will be pooled (see machinery and equipment) into categories and will not have to be separated for disposals. There will therefore be no resulting balancing charge or allowances.

    Revaluation of Assets

    A revaluation of fixed assets has no tax consequences. The surplus on revaluation is not taxable, and tax wear and tear allowances continue to be calculated on the basis of original cost, not enhanced asset values.

    Taxes

    Rates (real estate tax) are deductible. Corporation tax and business levy are not deductible, nor are foreign income taxes except to the extent that they exceed the limit for credit relief under the unilateral provisions of a tax treaty.

    Formation and Start-up Costs

    These costs are not tax deductible.

    Interest and Royalties

    No deduction is allowed for interest paid unless the recipient is liable to local tax thereon or specifically exempt under the Income Tax Act or some other law. In the case of interest paid by a company to a non-resident lender, no deduction will be allowed unless the company has accounted for and paid to the Board of Inland Revenue the withholding tax due on such interest, whether at the standard rate or a reduced rate prescribed by a tax treaty.

    There are no thin capitalisation rules in Trinidad and Tobago, that is, rules restricting the amount of interest that may be deducted when a company's ratio of loan to share capital exceeds prescribed limits, except where the interest is paid to an overseas parent or fellow subsidiary.

    Interest treated as a distribution is not deductible.

    Royalties are deductible provided the Board of Inland Revenue is satisfied that they are wholly and exclusively incurred in the production of the company's income and, where paid to a non-resident, the relevant withholding tax has been paid over.

    Management Charges

    In the case of management charges paid to a non-resident company or person, the deductible amount is normally restricted to the amount of those charges or 1 percent of the paying company's total outgoings and expenses (excluding the management charges and tax wear and tear allowances), whichever is less. The withholding tax due on such management charges must also have been paid to obtain any deduction.

    There are no specific limitations on intercompany management charges when both companies are resident, although the Board of Inland Revenue has power to disregard what it considers to be artificial transactions.

    Bad and Doubtful Deb

    ts
    Bad debts actually written off and specific provisions against doubtful debts are deductible provided that the debts concerned arise from the company's trade. Subsequent recoveries are taxed as income in the year of receipt. Loans are not generally regarded as debts arising from a company's trade except in the case of financial institutions such as banks.

    General provisions, as a percentage of accounts receivable or in any other form, are not deductible.

    Tax-free Reserves

    Reserves arising from the revaluation of fixed assets are tax free, as indicated earlier under Depreciation, but are not readily distributable. Otherwise, transfers to tax-free reserves are not generally permitted, with a few exceptions for particular industries such as the hotel industry.

    Repairs and Maintenance

    Provisions for expenditure on the maintenance of buildings, machinery, and equipment are not deductible. Such expenditure is deductible when incurred.

    Employees' Remuneration

    There are no statutory limits on the amount of remuneration that may be paid to employees. Payments to an employees' profit-sharing plan approved by the Board of Inland Revenue are deductible. The Board may not approve such plans unless they meet a number of specific requirements. Employers' contributions to an approved pension fund for employees and the state social security scheme are deductible. Provisions for severance pay may not be deducted. The expenditure is allowed when actually incurred.

    Legal Expenses

    Legal expenses relating to operating matters, such as the recovery of debts and wage disputes, are fully deductible. Expenses relating to matters of a capital nature, such as company formation, issues of share capital, and transfers of real estate, are not tax deductible.

    Charitable Donations

    Donations are deductible only if made under binding Deeds of Covenant. Qualifying donations are deductible in aggregate up to a limit equal to 15 percent of the company's annual income.

    Business Rents

    These are deductible.

    Entertainment

    Expenses for entertainment and business meals are 75 percent deductible.

    Transactions with Related Parties

    When business transactions between a non-resident company and a resident company over which it exercises substantial control have been so arranged that the resident company earns no profit from the transactions concerned or less than it might normally be expected to earn, the Board of Inland Revenue may regard the profit shifted abroad as taxable income of the non-resident company subject to tax in Trinidad and Tobago. The tax is collected from the resident company as if it were an agent of the non-resident company.

    The Board also has a general power to disregard any artificial or fictitious transactions that reduce the amount of tax payable by any person and to assess the parties involved accordingly.

    Distributions

    In general, distributions are never deductible in computing taxable income. Dividends payable or paid are the main example of distributions. Exceptionally, preference dividends paid on shares issued before 31 January 1966 are deductible. Other examples of distributions include interest paid on securities issued to a non-resident parent or fellow subsidiary company (subject to double taxation agreement provisions) and interest paid on securities at more than a reasonable commercial rate or at a rate varying according to the company's results.

    A parent company in this context is one owning directly or indirectly at least half of the paying company's share capital or voting power.

    In the case of a close company (as defined earlier under Basic Principles), interest paid to a shareholder who is also a director is treated as a distribution unless he is a full-time executive director and his shareholding is 5 percent or less. Directors' remuneration in the form of fees is treated as a distribution to the extent it exceeds prescribed limits. Directors' remuneration, whether paid as fees or executive salary, is treated similarly if it exceeds an amount considered fair and reasonable by the Board of Inland Revenue.

    Tax Treatment of Losses

    For corporation tax purposes, a company's ordinary trading losses may be carried forward and set off against the first available future profits (excluding short-term capital gains), without time limit. Losses may not be carried back.

    Special rules apply to short-term capital losses as explained earlier under Capital Gains.

    Unrelieved losses of one company may not be transferred to, and carried forward by, another company in the case of a corporate reorganization. There are rules, however, as in some countries, preventing a company from carrying forward its own losses after ownership of the majority of its shares changes hands, unless approved by the Board of Inland Revenue as not being for the purpose of avoiding tax.

    Groups of Companies

    The law does not permit any form of consolidated tax return nor are there any other provisions permitting the transfer of losses from loss-making to profit-making members of the same group of companies.

    For tax purposes, when fixed assets are transferred between affiliated companies, generally they will be deemed to be sold at their open market value if this differs from the actual sale price. However, in order to eliminate a potential balancing charge, a transfer between affiliated companies may be deemed to take place at the tax written-down value, provided the transferor and transferee company jointly elect for this treatment in writing to the Board of Inland Revenue. This election does not affect the computation of short-term capital gains.

    Taxation of Branches of Foreign Companies

    The taxable profits of a branch of a foreign company in Trinidad and Tobago are computed in generally the same manner as those of a locally incorporated company. However, charges from a head office abroad to its branch for interest, royalties, and the like will not be deductible unless the charges are for payments actually made to third parties that can be related to the branch.

    Some tax incentives, such as the tax holiday for approved enterprises under the Fiscal Incentives Act 1979 and the exemption of profits attributable to exports outside the CARICOM area (export allowance), are available only to a locally incorporated company and not to a branch. The profits of a branch are automatically subject to withholding tax unless reinvested to the satisfaction of the Board of Inland Revenue, whereas those of a locally incorporated company are subject to withholding tax only if actually remitted abroad as dividends.

    Corporate Tax Rates

    The standard rate of corporation tax is 35% percent. The rate is 55 percent for oil companies, comprising corporate tax at 50% and unemployment levy at 5%.

    Investment income derived by an insurance company from investments of the statutory fund required for long-term insurance business is subject to corporation tax at 15 percent. Profits transferred to the shareholders' account after an actuarial valuation are taxed at the standard rate.

    A standard rate of business levy at 0.40 percent is applied to the gross sales or receipts. A business pays the higher of the business levy liability or the corporation tax liability but not both.

    Reorganizations

    No provisions exist that permit assets to be transferred tax free between companies in the course of a corporate reorganization or losses to be transferred between the companies involved. Relief from stamp duty is available when not less than 90 percent of the issued share capital of one company is being acquired and the consideration is not less than 90 percent of the shares of the other company.

    Payment of tax

    Corporation tax is payable quarterly in advance during each tax year based on the taxes payable for the previous year. Business Levy is payable on the estimated gross sales or receipts of each quarter. The balance of tax due, if any, must be paid by 30 April of the year following the tax year, that is, by the same due date for filing the return. A company must ensure that at least the prior year plus 80% of any increase is settled by quarterly instalments to avoid interest.

    Underpaid instalments and late payments are subject to interest at 15% per annum which is not tax deductible.

  • Paying Your Taxes - Tax Assistance

    In order to pay taxes, all individuals, whether they are self-employed or employed by someone else, must have a BIR file number. Please follow the link below to apply for a BIR file number. You may contact the following locations for tax assistance between the hours of 8:00 am and 4:00 pm, Monday to Friday, except public holidays.

    You may also obtain tax assistance by visiting the Arima or Couva District Revenue Office on the first Wednesday of every month, or the Point Fortin District Revenue Office on the third Wednesday of every month between the hours of 8:00 am and 12 noon. Payment also can be made at the Cashiers' Unit at the addresses below between the hours of 8:00 am and 4:00 pm, Monday to Friday, except public holidays. Payment can also be made at any district revenue office.

    Taxpayer Assistance Section
    Inland Revenue Division
    Trinidad House
    St. Vincent Street
    Port of Spain
    Trinidad
    Tel. (868) 623-2981/7106 ext. 201 and 204

    Taxpayer Relations Section
    Inland Revenue Division
    Trinidad House
    St. Vincent Street
    Port of Spain
    Trinidad
    Tel. (868) 623-2981/7106 ext. 321, 323-7

    South Regional Office
    Inland Revenue Division
    52 Cipero Street
    San Fernando
    Trinidad
    Tel. (868) 657-6057/5775

    Tobago Regional Office
    Inland Revenue Division
    Sangster's Hill
    Scarborough
    Tobago
    Tel. (868) 639-2410/2538

    Request For Taxpayer Assistance / Teletax

    Persons can have their queries answered via the telephone simply by calling at The Taxpayer Assistance Section at :- 623 2981 or 623 7106 ext 201 / 204

    The Taxpayer Relations Section at 623 2981 or 623 7106 ext 321 / 323 /324 – 327

    TAX RELATED SERVICES are also available monthly at the ARIMA, SAN-FERNANDO and POINT FORTIN DISTRICT REVENUE OFFICES EVERY FIRST , SECOND and THIRD WEDNESDAY RESPECTIVELY.

    Tax Evaluation of Non-Residents

    Individuals and companies are required to register with the Inland Revenue Division (IRD) and obtain a Board of Inland Revenue (BIR) file number before taking up employment or starting operations in Trinidad and Tobago. Non-residents must visit the International Tax Unit of the IRD for evaluation and to determine their tax liability in Trinidad and Tobago. A non-resident is a person who is employed or a company that is operating in T&T for a period of less than 183 days in any year. Non-residents are subject to tax on their total income unless they qualify under a specific legal exemption. Non-residents are not entitled to tax deductions. The International Tax office is located at:

    International Tax Unit
    Inland Revenue Division
    4th Floor, Trinidad House
    St. Vincent Street
    Port of Spain
    Trinidad, West Indies
    Tel. (868) 623-1211-4
    Opening hours: 8:00 am to 4:00 pm, Monday to Friday except public holidays

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