Tax laws in Trinidad and Tobago

Income tax law

Income tax in Trinidad and Tobago is payable for each year of income on all income accruing in or derived from T&T, regardless of whether the individual is a resident or not. The tax is assessed at a flat rate of 25% on the individual’s income.

Where a loss from a trade, profession or vocation arises in any year of income, the loss can be offset against other sources of income for that year, except against short-term chargeable gains or income from employment. Trade losses cannot be offset against income from a profession or vocation. An unrelieved loss can be carried forward indefinitely.

Income that is exempt from tax includes interest payable to a resident individual on accounts with a financial institution, dividends paid by a resident company to a resident individual, distributions from qualifying unit trust businesses to resident individuals, and interest from bonds issued in T&T.

Test of Residence

A person resident in T&T is also liable for tax on income arising outside of the country. A person who is not ordinarily resident or not domiciled in T&T is liable for tax only on income remitted to T&T. An individual is resident in a year of income if he or she is in the country for 183 days or more in that year.

Calculating Income

In calculating income chargeable to tax for a year of income, the only expenses that are deductible in that year are those wholly and exclusively incurred in the production of the income. Expenses are disallowed where they are intended to be employed as capital or payments from which no withholding tax was deducted.

The 2% of management charges paid to or for the benefit of a non-resident person or company is tax deductible. Management charges include charges made for the provision of management services, personal services or technical and managerial skills, head office charges, foreign research and development fees, and other shared costs charged by the head office. Other deductions and allowances may also be applied to determine chargeable income.

Business Levy

The Business Levy is a tax charged at a rate of 0.2% on gross receipts or gross sales where these did not exceed TT$200,000 ($30,840) in the preceding year. Income exempt from tax is not included in the gross sales or receipts. The levy is payable at the end of each quarter. A person is liable only to the Business Levy or income tax liability, whichever is higher. A person is not liable for the Business Levy in the first three years after the commencement of business.

Withholding Tax

Withholding tax is imposed on distributions and payments arising in T&T payable to all non-resident persons, including companies. Payments include interest, discounts, annuities, rental, royalties, professional fees, and management charges, including outlays for providing personal services and technical managerial skills. Distributions include dividends, distribution of assets, and branch profits remitted or deemed to be remitted, except to the extent that the branch in question has reinvested, to the satisfaction of the board, such profits or any part thereof within T&T (other than in the replacement of fixed assets).

Chargeable Gains

The Capital Gains Tax is restricted to gains arising from capital assets (both tangible and intangible) that have been disposed of within 12 months of their acquisition. A significant exemption from the charge is available for gains on securities disposed of in T&T.

Income from Employment

Employment income includes salaries, wages, bonuses, stipends, commissions or other amounts for services, directors’ fees, retiring allowances or pensions arising or accruing in or derived from or received in T&T. In addition, directors or employees are assessed for tax on monetary allowances and benefits in kind received concerning employment. These monetary allowances include traveling, telephone, entertainment, housing, or any other allowances paid to the director or employee.

Benefits and facilities to a director or employee that are not subject to tax include expenses incurred in providing any pension, annuity, lump sum, gratuity, or similar benefit to be transferred on death or retirement. The only expenses deductible from an employee’s employment income are travelling expenses incurred in performing his or her duties or maintaining means of transport to perform such duties.

Termination Payments

Where an employer is liable to pay an employee an amount by way of severance pay upon termination of employment because of redundancy of the position or by reason of ill health, the first TT$300,000 ($46,260) is exempt from tax. The exemption applies to retirement benefits paid to an employee who, among other requirements, is at least 60 years old and to payments not otherwise chargeable to tax. Any amount in excess of the exempted amount is taxed at the average tax rate paid by the employee for the year immediately preceding the year of termination.

Corporation Tax

Corporation tax is charged on the chargeable profits of companies or unincorporated associations. The tax is 25% on chargeable profits, the same rate as the income tax rate, with some exceptions. Income is computed the same way as income tax, as many provisions of the Income Tax Act apply to the Corporation Tax Act. All allowances and deductions available to individuals are available to companies or unincorporated associations. The following are some of the differences.

Small & Medium-Sized Enterprises

In the case of a company that is publicly listed as a small and medium-sized enterprise (SME), the tax rate is 10% for the first five years from listing on the T&T Stock Exchange and 25% thereafter. An SME-listed company means an SME listed on the T&T Stock Exchange, namely a company whose:

• Minimum capital base comprising its issued share capital, retained earnings and amounts transferred from such issued share capital or retained earnings to a reserve account, is TT$5m ($771,000);
• Maximum capital base comprising its issued share capital, retained earnings and amounts transferred from such issued share capital or retained earnings to a reserve account, is TT$50m ($7.7m); and
• Minimum number of shareholders is 25 members.

Exempt Income

Categories of income that are exempt from tax include:

• Distributions other than preference dividends received by a company from a resident company.
• Profits of an investment company.
• Profits accruing to a venture capital company.

Test of Company Residence

A resident company is a company controlled in T&T, whether or not it is incorporated within the country or engaged in trade or business in T&T.

Business Levy Threshold

The Business Levy applies much the same way for individuals, except that the threshold is TT$360,000 ($55,512).

Green Fund Levy

The Green Fund Levy is charged at a rate of 0.1% on gross sales or receipts of all companies and partnerships carrying on business in T&T, whether or not such company is exempt from the Business Levy. The levy cannot be offset against other taxes and cannot be claimed as an expense.

Value-Added Tax

This tax is charged on commercial supplies made by a registrant at 15% on standard-rated goods and prescribed services and 0% on zero-rated goods and prescribed services. The threshold for registration by a business is TT$360,000 ($55,512) per year. Value-added tax (VAT) is ultimately borne by the consumer or unregistered customer. Certain supplies are exempt.

A registrant must pay over any excess of output VAT charged by him over input tax charged to him. Registrants are usually assigned a two-month VAT period. Where input VAT exceeds output VAT in a given period, the registrant is entitled to a refund of the amount in excess.

Stamp Duty

Stamp Duty is levied on several instruments, including:

• Conveyance or transfer of any stock or funded debt or shares of any company or corporation.
• Conveyance or transfer on sale of any property.

Where the property includes a dwelling house, the first TT$850,000 ($131,070) of the property’s value is exempt. Where the property does not include a dwelling house but is residential, the first TT$450,000 ($69,390) is exempt.

• Mortgage, bond, debenture, covenant or bill of sale.

Double Taxation

A person who derives income from a source in one country but is a resident of another may be taxed in both countries unless a treaty exists between the countries to reduce or avoid such double taxation. T&T has double taxation treaties with the member states of CARICOM, the US, Canada, India, Norway, the UK, Brazil, France, Italy, Sweden, Spain, China, Germany, Luxembourg, Switzerland and Venezuela. Where there is no treaty between the countries, a unilateral relief is available of up to one-quarter of the tax paid in the foreign jurisdiction