COMPANY TAX REGIME IN TRINIDAD AND TOBAGO
It is important to note that petroleum companies involved in production and refining operations in Trinidad and Tobago operate under a separate tax regime from other companies. This note is therefore divided into three major sections. The first discussing taxes that are not specifically related to the petroleum activities mentioned above, the second to those which relate solely to those petroleum activities and the third relating to taxes of general application that apply in both cases and other miscellaneous matters.
TAXES WHICH APPLY TO COMPANIES OTHER THAN THOSE ENGAGED IN PETROLEUM PRODUCTION AND REFINING
Corporation Tax and Business Levy
Companies carrying on a trade or business in Trinidad and Tobago, will be subject to charges of corporation tax and business levy pursuant to the Corporation Tax Act, Chap 75:02 (“the CTA”). Corporation tax is charged at the rate of 25% on the first TT$1,000,000 of a company’s chargeable profits and chargeable short term capital gains and 30% thereafter. For the purposes of computing a company’s chargeable profits all expenses wholly and exclusively incurred in the production of the income are deductible except where specifically disallowed by the CTA. Losses are allowed to be brought forward but not back. Any disbursements or expenses that are not monies wholly and exclusively laid out or expended for the purpose of producing income are not deductible. A 35% rate applies for various companies involved in certain downstream petroleum and petro-chemical activities. There also various benefits and variations available to Small and Medium Enterprises listed on the Trinidad and Tobago Stock Exchange and approved small companies. In addition there are a range of capital allowances that can be accessed under the Income Tax (In Aid of Industry) Act Chap. 85:04. Special provisions also apply for the purposes ascertaining the chargeable income and applicable tax with respect to Insurance, Shipping and Air Navigation Companies.
Business levy is charged on the gross income of a company for each year at the rate of 0.6%. Gross income here means all income received in the ordinary course of business before allowing any deductions for business expenses. The company is entitled to a tax credit against its business levy liability for a year of income of any payment made in respect of its corporation tax liability for that year up to a maximum of its business levy liability. Therefore where the corporation tax liability exceeds the business levy liability, a tax credit to the maximum of the business levy liability will be granted and only the corporation tax will be paid. Where the business levy liability exceeds the corporation tax liability the corporation tax liability along with the excess business levy liability is payable.
No liability for business levy accrues in respect of gross sales giving rise to exempt income under the CTA or gross sales not exceeding a specific threshold per annum. Further business levy is not to be charged until the expiry of three years from the date of registration of a corporation which was registered after January 1, 1999.
Green Fund Levy
Green Fund Levy is charged at the rate of 0.3% of the company’s gross income, that is, all income received in the ordinary course of business before allowing any deductions for business expenses. It applies even if the business is exempt from business levy. Green Fund Levy cannot be credited against corporation tax or business levy and so is an additional tax.
TAXES RELATING SPECIFICALLY TO COMPANIES ENGAGED IN PETROLEUM PRODUCTION AND REFINING
Petroleum Profits Tax
Petroleum Profits Tax is payable at the rate of 50 percent (except for deep water operations which attract a 35 per cent rate). Petroleum Profits Tax is the petroleum equivalent to Corporation Tax and so outgoings and expenses (other than capital allowances) determined in accordance with normal income tax principles are deducted (as well as Supplemental Petroleum Tax paid for the period, Petroleum Impost, Production Levy and Royalty) from profits in order to determine chargeable income. In addition there are a range of capital and other allowances as well as incentives for various types of petroleum projects that can be accessed under the Petroleum Taxes Act itself as well as under the Income Tax (In Aid of Industry) Act, Chap. 85:04.
Supplemental Petroleum Tax ("SPT")
SPT is charged on gross income from the disposal of crude oil. The only deduction permitted is the royalty (including overriding royalty) paid pursuant to a licence or sub-licence. SPT was originally designed as a windfall profits tax and became payable when the weighted average annual crude oil price exceeded specific threshold prices on a sliding scale increasing with the price of crude and depending on the type of licence or PSC held, but present world prices exceed the threshold.
Petroleum Production Levy
This is levied and charged on every person in respect of any production business carried on by the producer. The total levy from all producers is used to pay a subsidy to traders in the petroleum marketing business and each producer’s share of the levy is pro-rated in accordance with its percentage of the total country’s production. The maximum charge that can be made is 4 per cent of gross income from the production of crude oil. Small producers with a daily average production of 3500 barrels or less are exempted.
Every holder of an exploration and production licence is obliged to pay a petroleum impost in respect of petroleum won and saved at rates per barrel of crude oil and per mscf natural gas specified by the Minister of Energy. The applicable rate varies and is usually published on an annual basis.
Unemployment levy is payable at the rate of 5 per cent of taxable profits of a person for a current financial year. Unlike Petroleum Profits Tax no relief is given for losses brought forward.
Royalty payments, though not strictly speaking a tax, are payable in respect of production of crude oil and natural gas from State lands or marine areas under an exploration and production licence. The royalty payments are calculated as a percentage of the Field Storage Value of the net petroleum won and saved from the licensed area. The rates in force range from 10 – 12.5 percent.
Green Fund Levy
Green Fund Levy (which was already discussed above) also applies to companies engaged in petroleum operations.
Tax Paid Production Sharing Contracts
Most Production Sharing Contracts are “tax paid” with all or most income/profit based taxes being paid by the Minister out of his share of the production.
TAXES OF GENERAL APPLICATION AND OTHER MISCELLANEOUS MATTERS
Value Added Tax ("VAT")
VAT is imposed at the rate of 12.5% on the value of certain imported goods and on the value of certain goods and services supplied in Trinidad and Tobago. Where a supplier will be supplying goods and services to a value in excess of $500,000.00 per annum such supplier is required to register as a VAT Trader for the purposes of the VAT Act, Chap. 75:06. VAT-registered businesses can deduct VAT that they pay when purchasing goods and services for the business from the VAT that they collect from customers. If the amount of VAT that a business pays is more than they collect, the VAT registered business can, subject to meeting certain requirements, claim the excess in their VAT returns as a refund. Certain goods and services are specifically exempted from VAT and others are zero rated (that is, VAT is chargeable at the rate of 0%).
These are levied at varying rates on customs entries in respect of imported goods according to classification in the Common External Tariff which is contained in a Schedule to the Customs Act, Chap. 78:01. The value for the assessment of customs duties (and VAT on imports) is normally the C.I.F. (Cost Insurance and Freight) Value of the goods at the time of import. There are exemptions in relation to specific goods. Further relief from customs duty pursuant to the Fiscal Incentives Act Chap. 85:01 may also be obtained in appropriate cases.
Section 50 of the Income Tax Act, Chap. 75:01 also imposes withholding tax at varying rates of up to 15% in relation to certain payments, distributions and deemed profits made from Trinidad and Tobago to non-residents. This may be reduced/mitigated by an applicable double-taxation treaty.
This tax is levied pursuant to the Stamp Duty Act, Chap. 76:01 at varying rates on instruments of all types including deeds of conveyance, mortgage, assignment, debentures, leases, insurance policies, annuity policies and share transfers.
Pay As You Earn, National Insurance and Health Surcharge
Employers are required to withhold Income Tax, Health Surcharge and National Insurance contributions from salaries paid to employees and to remit them to the Board of Inland Revenue and the National Insurance Board.
Free Trade Zone and Fiscal Incentives
Various forms of tax relief may be applied for and obtained under the Trinidad and Tobago Free Zones Act, Chap. 81:07 and under the Fiscal Incentives Act, Chap. 85:01. Both statutes require that certain pre-requisites be satisfied before a company can become eligible for the tax relief benefits they confer.
Other Miscellaneous Taxes
Other taxes include Financial Services Tax (15%), Hotel Accommodation Tax (10%), Online Purchase Tax (7%), and Insurance Premium Tax (6%). Lands and Buildings Tax and Municipal Corporations Tax were traditionally charged but the statutory provisions imposing these taxes have been replaced by a new Property Tax regime. There was an initial moratorium on the collection of the Property Tax which expired on December 31, 2015 and the Government has signaled an intention to start levying and collecting this tax, though the applicable assessable values of property and rates of tax have not been finalized.