WHAT YOU NEED TO KNOW: YOUR TAXES
Are you aware of how the tax system works in Trinidad and Tobago? Do you know the different types of taxes? Or when you’re required to pay or file your taxes?
The truth is, many of us don’t familiarize ourselves with this information because we believe it isn’t relevant to us. But, what if you started a business? Are you required to pay corporation taxes? How does it really work?
The main types of taxes in Trinidad and Tobago are Personal Income Tax, Health Surcharge, Corporation Tax, Value Added Tax (VAT), Business Levy, Green Fund Levy, and Stamp Duty. (There are other miscellaneous taxes that businesses pay).
Individuals pay Income Tax and Health Surcharge. All individuals who are resident and domiciled in Trinidad and Tobago are required to pay Income Taxes on their worldwide income. All taxpayers in Trinidad and Tobago are entitled to a personal allowance of TT$72,000 per year. This means that your first $72,000 earned for the year is non-taxable. If you earn $72,000 or below for the year, you do not pay income taxes. The excess income (that is after your first $72,000), if below TT$1 M is charged at a rate of 25%. Chargeable/taxable income over $1 M is taxed at a rate of 30%.
Health Surcharge is a tax that is charged on employment. Individuals who earn a weekly income above TT$109 pay a health surcharge rate of $8.25 per week. Individuals who earn a weekly income below $109 pay a health surcharge rate of $4.80 per week.
Trinidad and Tobago uses a Pay As You Earn (PAYE) tax system. This means that your employer is responsible for deducting your taxes from your salary and paying them to the government on your behalf.
Those who are self-employed are required to file a tax return form at the end of the financial year. (These forms are available on the Ministry of Finance-Inland Revenue Division website- http://www.ird.gov.tt/forms).
Trinidad and Tobago resident corporations (legal entities separate and distinct from their owners) are subjected to Corporation Tax on their worldwide income. Non-resident companies who conduct business in Trinidad and Tobago are only subjected to corporation tax on the income accruing either indirectly or directly in Trinidad and Tobago. The standard corporation tax rate in Trinidad and Tobago is 30% on corporations’ profits.
VAT is imposed on the selling price of goods and services. Any individual or business making and selling commercial products with an annual sales turnover over TT$500,000 must register for VAT. VAT is charged at a rate of 12.5% on goods and services, with a few exemptions.
A Business Levy is a tax imposed on the gross sales of a business, whose turnover is more than TT$360,000 per year and is payable quarterly at a rate of 0.6%.
Green Fund Levies enable grants to be made to community groups and organizations, primarily engaged in activities relative to remediation, reforestation, and conservation of the environment. The Green Fund Levy is charged at a rate of 0.3% on all sales of all companies and partnerships engaging in business in Trinidad and Tobago. This is also paid quarterly.
Stamp Duty is a tax that is paid when engaging in certain transactions that require legal documents, such as, buying real estate or homes, acquiring shares or seeking a mortgage. Different rates are charged depending on the transaction. However, it is usually a percentage of the transaction that you are undertaking. For example, the sale of residential properties over TT$1.5 M is subject to the following stamp duty rates:
● For every dollar of the first $400,000, after $1.5 M — 3%
● For every dollar of the next $500,000–5%
● For every dollar, thereafter — 7.5%
As with personal income tax, the attorney or company transacting the business will prepare the documents that need stamping and make the payments on your behalf.
To pay taxes, all individuals, whether self-employed or employed by someone else, must have a BIR number. All employers must have a BIR file number and a PAYE number. (The procedure to obtain these will be discussed in further posts).
We all pay taxes. Let’s make it our business to be informed!
