MAJOR DEVELOPMENTS
Significant provisions of the Finance Act 1997, include:
q Reduction in the rates of business levy;
q Removal of a number of savings tax shelters and tax credits.
INCOME TAXES ON CORPORATIONS
1. Rates
The standard corporate tax rate for resident and nonresident
corporations is 35%. The rate is 55% for companies whose profits are assessed to tax under the Petroleum Taxes Act. The tax rate is 15% on the long-term insurance business of an insurance company, except, if the profits are transferred to the shareholder account, a corresponding amount of the profits of the accounting period ending in the year of
income in which the transfer is made is chargeable at the rate of 35%. In computing the chargeable income of insurance companies, deductions of up to 20% of the net premium income from property business in the year of income are allowed for transfers to catastrophe reserve funds.
A tax credit equal to 15% of the chargeable profits is granted to the following companies:
q An approved small company;
q An approved company carrying on business in a regional development area;
q An approved activity company.
In the case of an approved company carrying on business in a regional development area and of an approved activity company, the tax credit is granted for a period of five years, from January 1 of the year in which the certificate of approval was issued.
Business Levy. Companies assessed to corporation tax are also assessed to a tax known as the business levy?on gross sales or receipts for each year of income at the rate of 0.33%. Companies in the first year following their registration are exempt, as are companies exempt from corporation tax, such as hotels, the Deposit Insurance Corporation, the Agricultural Development Bank, public utilities companies owned by the state, and companies subject to tax under the Petroleum Taxes Act.
A company liability to tax is the higher of the business levy or the corporation tax. If the company is liable for both corporation tax and business levy, the corporation tax can be credited against the business levy.
The business levy is payable on the gross sales or receipts of each quarter ending on March 31, June 30, September 30, or December 31.Free Zone Companies. Generally, companies engaged in manufacturing in a free zone or in activities involving international trading in products or services are exempt from corporation tax on their profits.
2. Local Income Taxes
None.
3. Capital Gains Taxes
There are no capital gains taxes in Trinidad and Tobago. However, short-term capital gains are deemed to be income and are chargeable to tax. Such gains are defined as chargeable gains accruing on the disposal of an asset within 12 months of its acquisition or the reacquisition of an asset within 12 months of its disposal. Assets include options, debts and incorporeal property generally, currency other than that of Trinidad and Tobago, and any form of property created by the vendor or otherwise owned without being acquired.
A loss accruing on disposal of an asset which would be taxable as a short-term capital gain may be allowed against a short-term capital gain of the same year or, to the extent that it cannot be fully utilized, carried forward and set off against short-term capital gains of future years. Capital losses cannot be utilized to reduce income from any trade, business, profession, or vocation.
4. Branch Profits Taxes
Branches of foreign corporations are subject to corporation tax at the full rate on profits accruing in or derived from Trinidad and Tobago. Profits, less taxes, of a nonresident company carrying on trade or business through a branch or agency are deemed to be remitted in full and, therefore, are liable to withholding tax (see item 17) except to the extent that the profits have been reinvested in Trinidad, other
than in the replacement of fixed assets.
5. Foreign Tax Reliefs
Residents of Trinidad and Tobago receiving income from foreign sources are entitled to a foreign tax credit under double taxation arrangements, reciprocal relief, or unilateral relief provisions. Where double taxation arrangements exist (see item 17), taxpayers resident in Trinidad and Tobago for the relevant year of assessment are entitled to a tax credit in Trinidad and Tobago for the tax payable in that other
country on income arising there.
Unless a double taxation relief treaty applies, unilateral relief is allowed to residents of Trinidad for income tax paid on income in the other country which is also subject to Trinidad and Tobag
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