Small Businessmen Booklet

8/13/2019 Small Businessmen Booklet

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Your Tax Dollar$ Build

Tr ini dad & Tobago

Inland Revenue Division

Trinidad House

St. Vincent Street

PORT OF SPAIN

TEXT PREPARED BY INLAND REVENUE

2012


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(i)

MISSIONST TEMENT

To Promote and Foster Voluntary Compliancewith the Tax Laws and Regulations by:Providing quality customer service andeducation

Improving our employees welfare, knowledge,skills and attitudes

Applying the Tax Laws effectively and

efficiently with fairness and integrity within anatmosphere of mutual respect.

Inland Revenue Division hanging the way we interact with people

visit us at our websitewww.ird.gov.tt

Telephone: 623-2981 ext. 321 431 432Fax: 624-3903

(ii)

Ministry of FinanceInland Revenue ivision

This booklet serves as a guide to the Small

Business Person and in no way is it intended to

be a substitute for the tax laws of Trinidad & Tobago.

It briefly outlines the rights and responsibilities

of the small business person. This term includes

the sole trader, proprietor, self-employed individual

and partners within a partnership.
http://www.ird.gov.tt/http://www.ird.gov.tt/http://www.ird.gov.tt/


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(iii)

YES, YOUare a Small Businessperson!!!!!!

Vendor

Accountant

Medical Practitioner

(iv)

Attorney

Partnership

Mechanic


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(v)

Designer

Hair Consultant

Caterer

(vi)

CONTENTS Page

Initial Contact with the Inland Revenue Division 1Registration

Definitions 2

Total IncomeAllowable DeductionsChargeable IncomeEmployerEmployeeEmolument Income

Business Records 3 Purchases Book Sales Book Record of Expenses

Stock Sheets Wages and Salaries Book Debtors and Creditors Ledgers Asset Register

Income 6Types of Income Rent Dividends Capital Gains

Business Expenses 9

Wear and Tear Rates (Seventh Schedule) 11

Balancing Charge/Allowance 18CalculationsAcquisitionsDisposalPrivate use of an asset


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(vii)

CONTENTS Page

Other Deductions/Allowances 20Human Resource DevelopmentPromotional Expenses

Deductions as a Resident Individual 21

Computation of Chargeable Profit 22

Taxes 22 Income Tax

Tax payment on both Non-Emolument andEmolument Income

Business Levy

Green Fund Levy Health Surcharge

Other Taxes 29Withholding Tax 29Rates of Withholding Tax w.e.f. 01.01.08Relief in Cases of Double TaxationHotel Accommodation Tax 31DefinitionsTax Authority

Final Statements 34

Loss Relief 34

Who Should File 35

PAYE System 36

The Income Tax Audit 36

Objection of Assessment 37

(viii)

CONTENTS Page

Penalties Under the Income Tax Act 38

Administrative

Specific OffencesGeneral penaltyOther Measurers


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INITIAL CONTACT WITH THE INLAND REVENUE DIVISION

Registration- The small businessperson including the partners in a

partnership and the partnership should register for the following at the

Registration Unit of Inland Revenue Division:

BIR Number-(Individual)(a) Submit a copy of the Certificate of Registration the RegistrarGeneral(if a Trade Name is registered) and a completed applicationform.A file number will be assigned after the taxpayer is interviewed andprovides all pertinent data. This number, unique to the taxpayer,will be issued to him once and should be quoted in allcommunications with the Inland Revenue Division. This number isalso used when making payments in respect of quarterly instalmentof Tax, Business Levy and Health Surcharge for the smallbusinessperson.

BI R Number-(Partnership)

(b) Where the business is to be conducted as a partnership ,thepartnership is also required to have a BIR file number,which can be obtained by submitting the completedapplication form, a copy of the Certificate of Registration anda list of the names, addresses and file numbers of all partners.(Each partner is required to have a BIR file number. If thereis none the procedure at (a) above applies.)

PAYE Number-

(c) If you are going to employ staff, you are also required tohave a PAYE Account No. Where possible this number

should be applied for at the same time as the BIR

number. This number is to be used when remittingdeductions made in respect of PAYE and Health Surchargefrom the salary/wages of your employees. This number isdifferent from the sole proprietors Board of Inland Revenuefile number (it will be preceded by the letters PYE).

VAT Number-

(d) Where the gross annual income/sales of the business exceeds$360,000, the person must register for Value Added Tax(VAT). See our booklet Guide to Value Added Tax fordetails.

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DEFINITIONS

Total Income means the aggregate amount of income under Section 5 ofthe Income Tax Act before allowing any deductions other than those underSection 10, 11, 16 and Income Tax (In Aid of Industry) Act.

Allowable Deductionsmeans any deduction allowed in accordance withthe Income Tax Act in determining a persons chargeableincome.

Chargeable Income for the purposes of a person, whose sole source ofincome is from an office or employment, means the total emoluments of the

person for the year of income less the appropriate deductions and exemptionsgranted under the Income Tax Act.

Employer means any person paying emoluments whether on his ownaccount or on behalf of another person to an employee, and shall be deemedto include any person paying emoluments whether on his own account or on

behalf of another person, to the holder of an office.In relation to an employee or officer, employer means the person fromwhom the employee or officer receives his remuneration.

Employee means any person, not being the holder of an office,in receiptof emoluments.

Emoluments means all salary, wages, bonus, overtime, remuneration,perquisites, including value of board or lodging, stipend, commission or otheramounts for services, directors fees, retiring allowances or pensions, arisingor accruing in or derived from or received in Trinidad and Tobago and which

are assessable to income tax, but shall not include any salary or share ofprofits arising from a trade, profession or vocation carried on by any personeither by himself or in partnership with any other person.


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BUSINESS RECORDS

The Income Tax Act [Section 116(i)] requires every person engaged in anytrade, business, profession or vocation to keep proper records and books ofaccounts, including records of annual inventory (stock).These records must be kept-

*in the English Language*at the place of business or at the residence of the proprietor*in T&T currency*in such a form that provides necessary information that enables theBoard to determine the correct tax liability.

If a proprietor finds it necessary to keep his records at a place other than hisbusiness place or residence, he must apply to the Board of Inland Revenue forprior approval. The Board will not give approval for the records and booksof accounts of a business to be kept in any country other than Trinidad andTobago.

Where a person fails to keep adequate records, the Board may require him tokeep such books and accounts and records which it may specify and that

person is required to comply.

Required Records for each financial Period

(1)Purchases BookUsed to record all purchases (stock) for the business.

(2)Sales BookUsed to record all business sales on a daily basis.

(3)Record of ExpensesUsed to record details of all business expenses (other than purchases)incurred.

Expenses, which relate to the proprietors private affairs, must notbecharged against the profits of the business.[See page 11]

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Example: If rent/mortgage is paid by a proprietor for a property, whichhe uses both for operating a business and as his private residence, only

that portion of the rent applicable to the business venture is

deductible as an allowable expense for income tax purposes.

No deduction shall be allowed from the income, in respect of rentalpayments incurred for the purposes of the production of incomeunlessinformation relating to such payments and to the payeeis furnished to theBoard in a form approved by the Board. The relevant schedule on theTax return must also be completed. Other such expenses includeTelephone, Electricity and Motor Vehicle.

(4)Stock SheetsAn inventory of items of stock on hand may be prepared periodicallyduring the year, but must be prepared at the end of the financial period.

The stock on hand that has been counted should be valued on the basis oflower of cost or net realisable value.

The method of stock valuation should be consistent, as the value ofclosing stock will become the figure for opening stock in the succeedingyear. If the method of valuation is changed at any time during the

accounting period, the Board will require both opening and closing

stocks to be valued on the new basis.

(5)Wages and Salar ies BookA record of salaries and wages paid to employees, including casualworkers, must be kept. Where salary is paid in cash, the employeesshould certify in a salary record book or pay sheet that they received theemoluments stated. A record of Income Tax, Health Surcharge and NISdeductions must be kept.

Employers are also required to keep on file TD1 Forms/Certificates ofApproval submitted by all their employees. These should show allallowable (approved) deductions.


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Proprietors salary:Salary paid to the proprietor of a small business isnot allowed as a deduction for income tax purposes. Where the

proprietor of a business makes such a deduction, the amount will beadded to the net profit.

Spouses salary: Salary paid to ones spouse who is employed in thebusiness is an allowable expense, provided that the amount paid isreasonable for the type of duty performed.

(6)Debtors and Creditor s LedgersLedgers which show transactions with debtors and creditors.

(7)Assets RegisterRecord of all assets owned by the business. This will show(i) in the case of acquisitions- a description of the asset,

serial number etc. and

the date and cost of acquisition;(ii) in the case of disposals- the date of disposal andproceeds of disposal.

The information in this register will be useful in computing Wear and Tear atthe end of each income year.

Where plant and machinery or a building used exclusively to house such plantand machinery is acquired on or after 1/1/95, the asset is required to be placedinto one of the four classes, A, B, C, or, D in accordance with the 7thscheduleand Wear and Tear is to be computed on the value of the assets in the pool atthe rate applicable to that class.

With effect from January 01, 2006 assets acquired prior to 1995 must beplaced into a class specified in Schedule Seven and the relevant percentagerate must be applied to the written down value to date to determine the Wearand Tear Allowance on such assets.Also effective 2006, Wear & Tear Allowance is allowed at the rate of 10 %on the reducing balance of the capital expenditure incurred in the constructionof or improvement to a building/structure completed on or after 1/1/95 andused in a trade, business, profession or vocation for the production of theincome

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INCOME

Types of I ncome

There are two types of income-

EmolumentSee Definitions on page 2.

Non Emolument I ncome This is derived from trade or business. Itincludes profits from trade/business, professional practice; royalties, rentsdividends, short-term capital gains etc. (Section 5 of the I ncome Tax Act

refers)

RentsUnless an exemption from income tax has been granted for rental income bythe Minister responsible for Housing, the income from rents, premiums andother profits from the letting of property is taxable income.

Where approval of the Minister responsible for housing has been granted, theexemption as to rents shall apply only where the monthly rental income inrespect of-

(a) an unfurnished letting is $750 or less;(b) an unfurnished letting, in connection with

which services are provided, is $825 or less;(c) a furnished letting is $900 or less;(d) a furnished letting, in connection with

which services are provided, is $975 or less.

The exemption with respect to the above-mentioned rents is void where themonthly rental exceeds the above-mentioned levelsin any month of the yearwhether payable to the owner or to any other person.

Fur nished L etting, means a house rented with furniture consisting of astove, a refrigerator, and bed and living and dining room furniture.

Serviceincludes any utility for which the landlord pays the supplier of thatutility.


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(iii) Any expense incurred in establishing, preserving ordefending his title to, or to a right over, the asset;

(iv) Costs wholly and exclusively incurred on the disposal ofan asset, e.g. legal fees and agents fees. Losses underthis head should also be declared by completion of therelevant schedule of the Income Tax Return. Such lossesmay be set off against capital gains in the same year ofincome. Any excess of losses over gains is notdeductible from other sources, but may be carriedforward to be set off against capital gains in subsequentyears.

TYPES OF INCOMEThe Small Businessperson is generally charged tax each year on his non-emolument income subject to the provisions of the Income Tax Act.

The person who receives both Non- Emolument and Emolument Income maybe required to pay tax on both types of income.

Where the NonEmolument income exceeds 25% of the total income, theperson is required to pay quarterly instalments on such income.

The Small Business Person must include the income received from all

sources on his annual income tax return.

BUSINESS EXPENSES

A Small Business Person is allowed business expenses as a deduction in orderto calculate his chargeable profit/income. Business expenses are the expensesincurred in the production of the income of the business, therefore the

personal and private expenses of the Small Business Person are not allowedin determining the chargeable profit/income of the business.

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Business Expenses may include, but are not limited to, the undermentioned:

Accounting Charges LicencsesAdvertising Management Charges

Travelling Expenses Bad DebtsRents Paid Interest, Bank ChargesElectricity Stationery/PostageEntertainment Wages & SalariesWASA Rates Wear & TearInsurance Premiums *Motor Vehicle operating ExpensesTelephone * (75% of these expenses are allowed)

Rental/I nterest on Mortgage LoanWhere a person carries on a business at his place of residence and incurs anexpense for rent or interest on a mortgage loan for acquiring the property, he

is entitled to claim a business expense for rent or interest on Mortgage in theratio of the use of the property comparing business to residential use.

* Expenditure on repairs is only allowed where the repairs undertakenpertains to the area used for business purposes.

Lands and Bu ildi ngs Taxes

Claims for Mortgage Interest paid will not be allowed without proof ofpayment of Lands and Buildings Taxes for that year.

Wear & Tear

Wear & Tear is allowed as a Business Expense. It allows the individual towrite off the cost of the asset over it life cycle. The rates accepted areoutlined.

NB. The wear and tear allowance will not be granted unless the Board issatisfied that Land and Building taxes have been paid for that year.


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The Seventh Schedule is reproduced for your guidance.

(Sec. 11A of the I.T.A.)

SEVENTH SCHEDULE

CLASS A (WEAR AND TEAR RATE) 10%

Adding Machines and CalculatorsManual 10Billiard Tables 10BoatsBarges 10BoatsLighters 10BoatsMotor 10BoatsPontoons 10BoatsPunts 10BoatsRowing and Sailing 10Brick-making PlantWalls and Windbreak 10

Buildings (Housing machinery)Industrial 10Buildings (Housing machinery)Other 10Building, structures and improvements thereon completed on or after1stJanuary, 1995 10Industrial building structures under the Income Tax (In Aid of Industry)Act acquired prior to 1stJanuary, 2006. 10Calculating MachinesHand-operated 10Cameras 10Cash registersManual 10CigaretteManufacturing Machinery 10CigaretteTools and Equipment 10

Cigarette PapersCutting and Folding Plant 10Coffee Manufacturing 10CylindersGas 10DentistsFittings 10DentistsInstruments 10Dictaphones 10DoctorsInstruments 10Filing Cabinets 10Fire Extinguishers 10Fixtures and Fittings 10FurnitureHousehold 10

Hydraulic Jacks 10

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Ice Company PlantRefrigerator 10IrrigationWater Supply 10Lighters 10Medical PractitionersInstruments 10Medical PractitionersRadium Plaques and Needles 10

Motor Boats 10Newspaper EquipmentLinotype metal 10Newspaper EquipmentStereos and Blocks 10Newspaper EquipmentType 10Office Machines and EquipmentAddressograph 10Office Machines and EquipmentCash Registers 10Office Machines and EquipmentDictaphones 10Office Machines and EquipmentProof MachinesBanks 10Office Machines and EquipmentTelephones 10PBX Systems 10Photography Equipment 10

Poultry FarmersEggboxes and Fillers 10Poultry FarmersEgg Grader 10Radio Transceiver Sets 10Road-making PlantUtensils for drawing 10Safes 10ScalesWeighbridge 10

CLASS B (WEAR AND TEAR RATE) 25%

Accounting Machines 25

Adding Machines and CalculatorsElectrical 25Adding Machines and CalculatorsManual 25Aerated Water PlantBottling Plant 25Air-conditioning EquipmentLarge General Unit 25Air-conditioning EquipmentSingle Units 25AircraftCommercialNew 25Arc and Gas Welding Plant 25Automotive Equipment 25Bakers Plant 25Beverage Coolers 25BicyclesMotor 25

BicyclesOrdinaryCommercial 25


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Billiard Tables 25Biscuit-making Plant 25BoatsBarges 25BoatsLaunches 25BoatsLighters 25

BoatsMotor 25BoatsPontoons 25BoatsPunts 25BoatsRowing and Sailing 25BoatsSloops and Streamers Ocean-going 25BoatsTugs 25BoilersEngines, Shafting 25BoilersGeneral Binding Machinery and Plant 25Boilers 25Bookbinding Plant and MachineryBoilers 25Boot and Shoe-makingBoilers 25

Boot and Shoe-makingBox (Cardboard) Manufacturers Machinery 25Boot and Shoe-makingGeneral Plant and Machinery 25Boot and Shoe-makingMotor Vans and Lorries 25Brewery Plant 25Brick-making PlantGrog Crusher 25Brick-making PlantRailway Siding 25Brick-making PlantTraxcavator 25Brick-making PlantTunnel Kilns and Dryers 25Brick-making PlantWalls and Windbreak 25Bucket ElevatorQuarrying 25Buildings (Housing machinery)Industrial 25

Buildings (Housing machinery)Other 25Calculating MachinesElectrical 25Calculating MachinesHand-operated 25Cameras 25CaravansMobile Site Office 25Carpets (Cost over $500.) 25Cash registersManual 25Cement and Concrete TileManufacturing Plant 25CigaretteManufacturing Machinery 25CigaretteTools and Equipment 25Cigarette PapersCutting and Folding Plant 25

Clothing and MillineryManufacturing Plant 25

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Clothing and MillineryOther Plant 25Clothing and MillinerySewing Machines 25Coconut Oil Manufacturing Plant 25Coffee Manufacturing 25Cold Stores and Ice ManufacturingIce Cans 25

Cold Stores and Ice ManufacturingMachinery and Plant 25CompressorsAir and Oxygen Types 25CompressorsAmmoniaHorizontal 25CompressorsAmmoniaVertical 25Concrete Mixers 25Confectioners Machinery 25Containers-makers Plant 25Copra 25Cotton Knitting and Spinning Plant 25CylindersGas 25DentistsCarpets 25

DentistsElectric Motors 25DentistsFittings 25DentistsFurniture 25DentistsInstruments 25DentistsPlant 25Dictaphones 25Dies 25Diesel Engines and Motors 25Distillery Plant 25DoctorsInstruments 25Dredges 25

Drying Kilns 25DumpersQuarrying 25Electrical Fittings 25Elevators and Lifts 25Engineering Works 25Filing Cabinets 25Fire Extinguishers 25Fixtures and Fittings 25FurnitureHousehold 25FurnitureOffice 25Ice Company PlantCoils 25

Generators 25


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Road-making PlantRollers and Steam 25Road-making PlantService Cars 25Road-making PlantSpecial Tools 25Road-making PlantUtensils for drawing 25Rum Refinery Plant 25

Safes 25ScalesWeighbridge 25Sea-craft 25Sewing Machines 25Ship-building Plant 25Shop Fittings 25Steel Barrels 25Stone Crushing Plant 25Sugar IndustryBoilers, Auxiliaries, Steam Piping 25Sugar IndustryDistilling Plant 25Sugar IndustryDrainage and Irrigation Plant 25

Sugar IndustryFactory 25Television Sets 25Transformers 25Typewriters 25Vacuum Cleaners 25Vulcanizing Machine 25Water Coolers 25Water Tanks and Pumps 25Weighbridges 25Welding Units 25Wireless Sets 25

CLASS C (WEAR AND TEAR RATE) 33.3%

Rate%

Aerated Water PlantBottles and Cases 33.3Agricultural MachineryTractors, Ploughs, Harvesters, etc. 33.3Audition UnitStation and Testing Equipment 33.3Bulldozers 33.3

CranesElectrical or otherwise 33.3

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CranesGantries 33.3Cutlassing Machine 33.3Farming Equipment 33.3Forklift Trucks 33.3Rigs (Oil) 33.3

Road-making PlantJitney 33.3Road-making PlantSpray Trucks 33.3Computers 33.3

CLASS D (WEAR AND TEAR RATE) 40%

AircraftEngine PropsRotable Spares 40AircraftSecond-hand 40

BALANCING CHARGE/ALLOWANCE

Calculations

Whenever an asset on which Wear and Tear has been allowed during thecourse of its usage, is sold or disposed of at a price above or below thewritten-down value, a balancing charge or allowance, as the case may be,arises.

Effective 1/1/98 Balancing Allowances shall not be made until there are noassets left in the pool. Balancing Charges shall not be made until the value inthe pool results in a credit balance.

Acquisitions

In computing Wear and Tear Allowances, the value of acquisition of plant ormachinery in a year of income shall be added to the written down valueofthe plant and machinery in the pool.


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Disposal

Where disposals are made during a year of income, the value of the plant andmachinery disposed of shall be deducted from the written down valueof the

plant and machinery however:

(i) in the event of a sale, the amount deducted shall be theproceeds of the sale of the plant and machinery or

(ii) in event of loss or destruction of plant or machinery, theamount deducted shall be the money received by way ofinsurance or compensation.

Pri vate Use of Asset

Where the asset is used for both business and private purposes, the pool mustbe debited with the cost of the asset equivalent to its business use. Where an

asset is disposed of, the pool shall be credited with the same percentage beingapplied to the proceeds of disposal up to the original cost of the asset.Where assets are brought to the business from private use, the value to beapplied will be the market value.

If an asset from the business is appropriated for private use, the amount(credited) deducted from the pool will be the market value.

In the case of any other event resulting in the cessation of interest in anyplant/machinery, the amount to be deducted from the pool shall be the marketvalue of the said item.

In no circumstances shall the amount credited to the pool exceed the originalcost of the said Plant and Machinery.

Assets acquired prior to 1995 and not incorporated into a pool will be subjectto balancing allowances/charges on an individual basis (up to 2006).

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OTHER DEDUCTIONS/ALLOWANCESA person may, where applicable, also qualify for the following deductions and

allowances as outli ned in the I ncome Tax Legislation.

Human Resource Development (up to 2006)

A deduction for Human Resource Development became effective from

January 1, 1999. A deduction shall be allowed in ascertaining thechargeable income of a person who has income from trade or businesswhere expenses are reasonably incurred in the training and retraining ofhis employees up to 150% of the expenditure.

Promoti onal Expenses

Effective 1/1/94 individuals involved in Trade/Business who haveincurred promotional expenses which were wholly and exclusivelyexpended in order to promote the expansion of existing foreign marketsfor the export of goods produced in Trinidad and Tobago and shipped incommercial quantities, are entitled to a deduction equivalent to 150% of

the promotional expenses actually expended. This also applies toAgricultural Produce manufactured/produce in T&T.

A person entitled to this deduction is not allowed anotherdeduction under Section 10 (Profit and Loss Account) in respectof the same promotional expenses.

Promotional Expenses allowable are those incurred in respect ofgoods produced in Trinidad and Tobago. They are in respect of: -

advertising in foreign markets;

providing promotional literature for overseas distribution;

the participation in trade fairs, trade missions and similarpromotional activities;

overseas travel for the purposes of conducting promotionalactivities;

providing free samples and technical information on products;

inviting buyers to Trinidad and Tobago;

the recruitment of specialist sales personnel, operating in foreignmarket for a maximum of two years.

conducting foreign market surveys.


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This deduction does not apply to

expenses incurred in petroleum operations;

expenses incurred in the export or the expanding of the export ofgoods/services or agricultural produce manufactured or produceto the following countries

Antigua, Barbados, Belize, Dominica,Grenada, Guyana, Jamaica, Montserrat,St. Kitts-Nevis, St. Lucia St. Vincent.

DEDUCTION AS A RESIDENT INDIVIDUAL

In addition to the business expenses, the Small Business Person is entitled toall other allowable deductions of the resident individual. These include

deductions for:

Personal Allowance Pension Contribution/Annuity Premium Alimony/Maintenance Payment

First Time Home Owner Deduction (acquisition with effect fromJanuary 1, 2011)

Tertiary Education Expenses (for external students only wef 2006) Deeds of Covenant There are also some Tax Credits

~ Venture capital

~ Installation of CNG Kit~ Purchase of Solar Water Heating Equipment for household use

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COMPUTATION OF CHARGEABLE PROFITSIn calculating the chargeable profits, a small businessperson is entitled todeduct all expenses wholly and exclusively incurred in the production of thatincome, from his total income/sales.

All expenses claimed must be supported by proof of the expenditure eg.bills/receipt. Expenses that relate to the proprietors private use must not becharged against the profits of the business.

ExampleCalculation of Chargeable Profit

Total Income/ Sales $375,000Less: Business Expenses $195,000

Net Profit $180,000

Less: Personal Allowance $ 60,000Tertiary Education $ 50 000Approved Annuity $ 12,000

Chargeable Income/Profits $ 58,000

TAXES

The Small Businessperson is required to pay his taxes to the Board of InlandRevenue in quarterly instalments each year. The types of taxes paid by thesmall businesspersons are-

Income Tax

Business Levy

Health Surcharge

Green Fund Levy (Partnerships)

Late payment of all taxes will attract interest at the rate of 20% per annumfrom the due date to the date of payment.


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INCOME TAX

This tax is charged on the chargeable profits of the business. It is calculatedafter allowing for Tax Deductions and Credit (if applicable) for the relevantincome year.

The basis of calculating the estimated amount payable in the current year isapplying the tax rate to the chargeable income/profits of the previous yearthen divides it into four quarters.These payments are to be made on or before

March 31 September 30June 30 December 31

in each year of income.

Where, by the end of the fourth quarter, instalments paid are less than the taxliability disclosed in the tax return, (of the previous years) interest shall becharged on the difference between:

(a) The tax liability on the chargeable income of the previousyear of income plus 80% of the increase in the tax liability ofthe current year on the previous year of income; and

(b) The total amount paid by the end of the fourth quarter.

Where the estimated chargeable income for a year of income exceeds or islikely to exceed the chargeable income of the preceding year of income, a

person shall make quarterly payments on the basis of the income in thecurrent year.

Example:

Calculation of quarterly instalment (2012)

Chargeable Profit (2011) $150,000Less: Personal Allowance 60,000

Estimated Chargeable Income $ 90,000Tax on Chargeable Income of $90,000

$90,000 x 25% $ 22,500Estimated Tax PayableQuarterly tax payable $22,500 $ 5,625

4

The amount of $5625 is payable on or before March 31, June 30, September

30 and December 31, 2012.

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Where a taxpayer is of the opinion that his business will produce an estimatedchargeable income less than the chargeable income of the previous year, hemay apply to the Board of Inland Revenue for a revision of his estimatedchargeable income and the amount of tax he is required to pay by quarterlyinstalments.NOTE:

Where he is of the opinion that the estimated chargeable incomeis likely to exceed or exceeds the chargeable income of the preceding

year, the quarterly instalments must be paid on the estimated chargeable

income of the current year of income.

TAX PAYMENT ON BOTH NON-EMOLUMENT AND EMOLUMENT

INCOME

An individual, who is in receipt of both non-emolument income, (such asgains or profits from the operation of a trade or business, including incomefrom partnerships or from the practice of a profession,) and emolumentincome (i.e. salary, wages, etc.), is required to pay tax by quarterly

instalments, where the non-emolument income is more than 25 per centof the total income.

Example 2012

Emolument Income 7000 x 12 $ 84,000Estimated non-emolument income(Profits) $ 50,000Estimated Total Income $134,000Less - Personal Allowance $60,000

- Pension&NIS Contr. $ 7,500 (67,500)Chargeable Income $ 66,500Tax on Chargeable Income

$66,500 x 25%Total Tax Liability $ 16,625

NB: Non-emolument income is more than 25% of total income.

If we assume that the taxpayer is currently charged to tax on his emolumentincome, the quarterly installment to be paid

= Profit from non-emolument income x 25%= $50,000 @ 25% - $12,500

Amount payable by quarterly instalments $12,500 = $3,1254

NOTE: The difference in the tax liability and the quarterly instalment wouldhave been deducted by the employer via the PAYE System.


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It is due and payable to the Board of Inland Revenue on a quarterly basis on or before:

March 31 June 30,September 30 December 31

in each year of income.

In ascertaining the gross sales or receipts of a quarter an estimate of the salesfor the last 1-3 days of the quarter may be required.Where estimation is made and the actual sales of that quarter exceed theestimated figure, the short payment must be paid by the end of the quarterimmediately following that quarter in which the sales or receipts wereestimated.

I nterest on short payments or l ate payments.

Where a company, which is liable to the quarterly payment of the Green Fund

Levy, pays less than 90% of its liability at the end of the quarter; interest ischarged at the rate of 20% per annum on the difference between the 90% ofthe liability and the amount paid.This interest shall accrue from the end of the quarter in which the liabilityoccurred to the date of payment.

N.B: In ascertaining the Chargeable Profits of a company, no

deduction is allowed for any payments made to this Fund.

Overpayment of the Green Fund Levy

Where the Board of Inland Revenue is satisfied that a company has overpaidthe levy in any quarter, the company is entitled to a refund of the excess tax

paid.

However, instead of making a refund, the Board may otherwise choose toapply the excess tax against any future liability and notify the companyaccordingly.

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NOTE:(i) The Green Fund Levy shall be under the care and

management of the Board of Inland Revenue.(ii) Company means an incorporated body, unincorporated

association and includes a partnership.The partnership must therefore pay this levy using the

partnership BIR Number.

HEAL TH SURCHARGE

Health Surcharge shall be charged and is payable

a. by every employed person who pays or is liable to pay contributionsunder the National Insurance Act; and,

b. by individuals other than employed persons who are liable to

furnish a return of income.

The following are exempt from the Health Surcharge provision

(i) individuals under the age of 16 years;

(ii) persons who have attained the age of 60 years;

(iii) persons whose only source of income is from pension.

The rates at which the Surcharge payable are

(i) Employed persons whose monthly emolumentsare more than $469.99 per month or weeklyemoluments more than $109.00 - $8.25 per week.All other employed persons - $4.80 per week.

(ii) Individuals, other than employed persons, whosetotal income for the year averagesmore than

$469.99 per month - $8.25 per week. All other

individuals - $4.80 per week.


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NOTE:A distribution is:

(a) any dividend paid by a Company including a CapitalDividend. It extends to a dividend paid by a Company out ofa realised capital surplus;

(b) any other distribution of the assets of a company (whether incash or otherwise) in respect of shares of the Company,except so much as represents the repayment of share capital,or is equal in amount or value to any new consideration givenon the distribution.

Withholding Tax must be deducted (without deductions for expenses)from the gross income received in respect of Rentals, Royalties,Management Charges for the provision of personal services andtechnical and managerial skills, premiums (other than premiums paidto Insurance Companies and Contributions to pension funds andschemes), other annual or periodic payments, interest on any debt,mortgage or other security and such other payments as may from timeto time be prescribed.

* Details re: Belize, Jamaica and St. Lucia may be obtained from theWithholding Tax Section of the Board of Inland Revenue.

HOTEL ACCOMMODATION TAX

Definitions

Hotel means a building or group of buildings occupied together,comprising not less than six bedrooms for the purpose of providing hotelaccommodation for reward.

Hotel Accommodation means sleeping accommodation ad services andfacilities ancillary thereto provided in a hotel for its guests, not being personsresident in the hotel under a contract of service.

Hotel Operator means a person who, either by himself or through anagent or servant carries on the trade or business of operating a hotel.

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Tax Authority

The Tax Authority shall be the Board of Inland Revenue which, in respect ofthe collection and recovery of the tax, shall have all the powers as it has inrelation to Income Tax under the Income Tax Act, Act No.5 of 1995.

A tax called an Hotel AccommodationTax shall be charged on the proceedsof the letting of hotel accommodation by an hotel operator at the rate of ten

per cent (10%) of the proceeds of such letting, and collected by an hoteloperator.

Hotel Accommodation Tax is payable notwithstanding that the hotel is anapproved hotel for the purposes of the Hotel Development Act, or isotherwise exempt from any other taxes, charges, impositions or levies byvirtue of any other written law.

The room tax shall be charged on the full amount of the proceeds of theletting without any other deduction or allowance than is authorized orallowed.

The hotel operator is accountable to the Tax Authority for the tax and shallpay the tax on or before the last day of the monthfollowing that in whichthe tax is collected.

Where the hotel operator fails to remit the tax, the hotel operator is liable forthe payment of the amount of the tax due, in addition to interest on suchamount at the rate of fifteen per cent per annum from the due date.

Monthly Hotel Accommodation Tax Returns are mailed to the HotelOperators. This is to be completed and submitted by the 15thday of the nextmonth. The top portion is retained by the BIR and the bottom portion isstamped and returned to the taxpayer.


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MINISTRY OF FINANCEInland Revenue Division

Hotel Accommodation Tax Return

Hotel Accommodation Tax Returns are due on or b efore the 15th of the month following the month of deduction.Please allow 4 days for postal delivery.

Amended Personal Information ChangeBIR No.

Hotel Tax Id:

Period Ending:

Name of HotelAddressTelephone #

Hotel Operator Name:Hotel Operator Address:Hotel Operator BIR#:Hotel Operator Telephone #:

General Declaration

I hereby certify that the information given in this return is true and correct.

__________________ _________________ _________________SIGNATURE JOB TITLE DATE

MINISTRY OF FINANCEInland Revenue Division

Hotel Accommodation Tax Return Acknowledgement

BIR No.

Pay As You Earn

Period Ending:

Taxable Proceeds:

10% Tax:

15% Annual Interest:

Amount Payable:

$

$

$

$

Taxable Proceeds:

10% Tax:

15% Annual Interest:

Amount Payable:

$

$

$

$

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SPECIMEN OF MONTHLY RETURN

Name of Hotel

Address

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FINAL STATEMENTS USED ON FILING INCOME TAX RETURNAt the end of the trading year, final statements of accounts must be preparedin order to determine the profits or losses from the business.

The information from these final statements must be submitted to the Boardof Inland Revenue when the Income Tax Return is filed.

Taxpayers who derive income from trade, business or profession mustcomplete the schedules on the Tax Return Form.

Trading, Profit & Loss Statement: This is the result of the trading, businessor professional activity during the year.

Balance Sheet: This is the financial position of the business at the end of thefinancial year or accounting terminal date approved by the Board of InlandRevenue.

LOSS RELIEF

Where the amount of a loss incurred in a year of income from any trade,business, profession or vocation carried on by any person either solely or inpartnership is such that it cannot be wholly set-off against his income fromother sources for the same year, it shall, to the extent to which it is notallowed against his income from other sources for the same year, be carriedforward and set-off against what would otherwise have been his chargeableincome for succeeding years.

However, no loss incurred by a person in any year of income from any of the

following:

(i) Farming, agriculture, forestry, fishing or other primary activity.

(ii) The operation of mines or the exploitation of natural or mineralresources.

(iii) Any other trade or business.

shall be set off in that year or any succeeding year against:


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Board, however, is charged with the responsibility for collecting the correcttax payable by each taxpayer and must maintain a system to monitor taxpayerinformation relating to income and expenses.

If, during the course of audit, the auditor realizes that a taxpayer hasneglected to include valid claims, this will be drawn to the taxpayersattention and the necessary adjustment will be made to the taxpayers benefit.

When his return is selected for audit, the taxpayer is informed of the date andtime of the audit. Where the date and time appointed by the Board isinconvenient, the taxpayer may request a change.

An Audit may be conducted at the offices of the Inland Revenue Division orat the Taxpayers place of business. The Board will determine the type ofaudit to be conducted and inform the taxpayer of the information which must

be made available to the auditor.

OBJECTION OF ASSESSMENT

The Income Tax Act requires the Board of Inland Revenue to make anassessment on every person who is liable to tax after such a person delivers atax return to the Board.

If a person disputes the assessment made, he may apply to the Board by anotice of objection, in writing, to review/revise the assessment, stating thegrounds for such request.

The request for the objection must be done within 15 days from the date ofservice of the assessment.

The Board may accept a notice of objection outside of the time limit if it issatisfied that there is a reasonable excuse for making the application late.

In reconsidering the assessment, the Board has the right to request additionalinformation from the person disputing the assessment and to inform the

person in writing of the results of its reconsideration.

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If a person refuses to supply the Board with the additional information itrequest, the Board may deem the original assessment to be final andconclusive.

Where the Board fails to determine an objection made within 24 months afterthe service of the notice of objection, the objection shall be deemed to have

been determined in the favour of the person who disputed the assessment.

PENALTIES UNDER THE INCOME TAX ACT Ch. 75:01

There are three categories under the Income Tax Act, Ch. 75:01:

(i) Administrative Penalties(ii) Specific Offences(iii) General Penalty

1. Administrative non compliance with requirementsof the Act or Regulations

2. Specific Offences on summary conviction in respect ofparticulars offences committed under theAct.

3. General Penalty. Imposed on summary convictionfailure to fulfil requirements of the Act.

Administrative

Sec. 76 S.S. (6) Failure to furnish a return of income for the yearof income 1987 and subsequent years. Any personwho fails, neglects or refuses to furnish a return ofincome for the year of income 1987 and subsequentyears after six (6) months from the time required tofile the return, shall thereafter in addition to anyother penalty provided under this Act, be liable to a

penalty of $100. for every six (6) months or partthereof during which such failure, neglect, or refusalcontinues.


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Sec. 77(2) (ii) Any person who, after beingrequired by the Board to make areturn, fails or neglects to do sowithin the specific time, whether ornot he is liable to tax;

Sec. 97(2) (iii) Any person who fails to furnish theBoard with a schedule of incomewithin a specified time;

Sec. 97(4) (iv) Any person who, without lawfulexcuse, refuses or neglects to attendor give evidence or to produce booksor other documents or who wilfullygives false evidence; and

Sec.117(5) (v) Any person who

(a) Fails to give to the Board anyinformation as required by thissection; or

(b) Fails to produce for theinspection of the Board anyrecords which he may berequired by the Board to

produce.

Other Measures

In addition to the general penalty and administrative penalty on the failure toremit P.A.Y.E. deducted, interest is charged at the rate of twenty per cent(20%) per annum on the amount outstanding plus the penalty from the day onor before which he was required to make the payment to the day payment.

Sec.103(1) Late payment of Income Tax outstanding at April 30.Interest is charged on Income Tax outstanding at April 30,from May 1 to the day of payment at the rate of twenty percent (20%) per annum.

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Sec.103(2) Late payment of Tax by Quarterly Instalment. In additionto the interest payable under subsection (1) where any person

being required by this Act to pay a part of instalment of taxhas failed to pay all or any part thereof as required, he shallon payment of the amount he failed to pay, pay interest oftwenty per cent (20%) a year from the day on or beforewhich he was required to make the payment or the

beginning of the period in respect of which he becomes liableto pay interest thereon under subsection (1) whichever isearlier.

Section 79 Section 79 of the Act is amended by deleting subsection (3B)and substituting the following subsection:

3B. Where a person to whom subsection 3A applieshad paid quarterly instalments which amount to lessthan the tax liability disclosed in the return of theyear of income, such person shall, with effect from1st January, 1992, pay interest under section 103 onthe difference between

(a) the tax liability on the chargeableincome of the previous year ofincome plus 80% of the increase in thetax liability of the current year on the

previous year of income; and

(b) the total amount paid by the end of thefourth quarter.


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NOTES

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NOTES

Documents

Small Businessmen Booklet