INDIVIDUAL TAXES
SIGNIFICANT DEVELOPMENTS
The Solomon Islands government has introduced the following changes.
1. The income of a resident has been amended to include income derived from outside the Solomon Islands.
2. The income of both residents and nonresidents has been amended to include income from any other source whatsoever.
3. The definition of income from employment has been extended to include any perquisites or other benefits whatsoever.
TERRITORIALITY AND RESIDENCE
An individual who was present in the Solomon Islands for period or periods exceeding in the aggregate six months of the tax year is deemed to reside in the Solomon Islands for income tax purposes.
GROSS INCOME
Employee gross income/Employee gross income includes wages, salary, leave pay, sick pay, payment in lieu of leave, fees, commissions, bonus, gratuity, or any other allowances or perquisites or other benefits. Most benefits in kind are taxable, including the value of free or subsidized housing, vehicles supplied by employers, and education allowances paid by employers. There are no concessions for short-term residents.
Capital gains and investment income/There is no capital gains tax. Short-term residents are not subject to tax on capital gains and investment income from outside the country.
DEDUCTIONS
Business deductions/Individuals are allowed work-related deductions for transport, entertaining or other expenditure where the Commissioner is satisfied it was necessarily incurred in gaining income.
Nonbusiness expenses/Interest on maximum borrowings of SBD20,000 for a principal residence in the Solomon Islands can be deducted. Medical expenses and education fees for a child receiving full-time education above SBD100 and contributions for life insurance or pensions that exceed 5% of income are also deductible.
Personal allowances/Individuals are allowed a basic exemption of SBD5,200 regardless of whether they are single or married.
Tax credits/Tax credits are given to resident individuals for withholding tax deducted. The basis of assessment of foreign income and the calculation of available tax credits is the same as for corporations. The Solomon Islands tax payable is computed as the average rate applicable to total income.
OTHER TAXES
Social security taxes/A National Provident fund provides social security benefits to residents on retirement. Employers are required to contribute 7.5% of employees' salaries or wages; employees are required to contribute 5% (minimum). Income tax deduction apply to these contributions (within limits), and proceeds on retirements are tax-free. Expatriate employees
are required to contribute unless approval to contribute to a nonresident scheme has been granted. Benefits withdrawn on final departure from the Solomon Islands are tax-free.
Local income taxes/There are no local income taxes, but local Councils are permitted to charge a head tax on individuals, which is known as the basic rate. Employers are required to withhold this tax from employees' salaries and wages and to account to the Council by June 30.
TAX ADMINISTRATION
Returns/December 31 is the standard year-end, but an alternative date may be adopted by business taxpayers. Provisions do exist to aggregate the income of married individuals in certain circumstances.
Payment of tax/A PAYE system of taxation applies to all income from employment or services rendered.
TAX RATES
Resident individuals are subject to tax only on taxable income accruing in, derived from, or received in the Solomon Islands. Income tax rates are the same for residents and nonresidents.
A PAYE system of taxation applies to all income from employment or service rendered.
The tax payable on total income less personal exemptions and deductions is as follows.
TAXABLE INCOME TAX ON MARGINAL
OVER NOT OVER COLUMN 1 RATE
(COLUMN 1)
SBD 0 SBD 15,000………………… SBD 0 11
15,000 30,000…………………
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