CORPORATE TAXES
SIGNIFICANT DEVELOPMENTS
The government has made the following changes in the Income Tax Act.1. The income of a resident now includes income derived from outside the Solomon lslands.2. Income for both residents and nonresidents now includes income from any source whatsoever.
3. Income from business for a nonresident now includes income from any source whatsoever.
4. Carryforward of tax losses is limited to five years.
5. The maximum turnover tax is increased to SBD$20,000.
6. now include commissions, whether on sales or Professional services otherwise.
7. The Customs and excise Duty Act has been amended to reduced the number of duty rates from 19 to 5. The rates are 5% 10% 20% 40% and 70%.
8. The goods tax rates have been increased from 12% to 15% for imported goods and from 5% to 10% for locally manufactured goods.
9. The sales tax rate has been increased to 10%
TAXES ON CORPORATE INCOME
The corporation tax rates are as follows.
%
Resident corporations incorporated locally 35
Corporations incorporated overseas 50
Local income taxes/ None.
CORPORATE RESIDENCE
Crporations are classified for tax purposes as either resident or
nonresident. Under the companies Act there is a classification of private
company but for income tax purposes this distinction is not recobnized. A resident corporation is incorporated in the Solomon lslands if either it has its central management and control in the Solomon lslands or its voting power is controlled by shareholders resident in the Solomon lslands. The distinction between resident and nonresident corporations is important in that nonresident corporations are subject to tax only on their Solomon lslands income. The distinction also affects the rate of tax (see above). A company incorporated outside the Solomon lslands, even though it may be carrying on business only in the Solomon lslands is also liable to tax at 50%. Corporations may be classified as prescribed companies under the investment Act if the investment is likely to provide
significand benefits to the Solomon lslands economy. Such companies are granted a tax holiday.
OTHER TAXES
Turnover tax/ A turnover tax on loss companies and low-profit companies applies to income derived after January 1,1991 and has the following features.
1. The tax is an income tax and is charged at the rate of 0.5% of income if gross income less allowable deductions (chargeable income) is nil or a loss; the normal corporate tax on chargeable income (35% resident, 50% nonresident)is the lesser of 0.5% of gross income or SBD$ 20.000.
2. The tax does not reduce the total of losses carried forward.
3. The tax is final and is not offset against normal corporate tax levied after losses are recouped.
4. The tax does not apply to companies receiving tax incentives, tax losses carried forward or dividends paid.
Sales tax (VAT)/ A comprehensive Sales Tax Act was introduced , effective August 1990. The Minister has the power to add to the schedule of taxable
items. The tax rate is 10%. Taxable services include the following.
Telephone services Computer services
Restaurant services Hire/lease of vessels and
aircraft
Tickets for overseas travel Hire/lease of plant
machinery, equipment
Video and video tape renta
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