Guyana Corporate Tax Guide

Guyana

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Georgetown GMT -4

EY +592 225-2835

The Pegasus Hotel Suite 100

Seawall Road, Kingston Georgetown Guyana

Principal Tax Contact

 Gregory Hannays

+1 (868) 822-5501

Mobile: +1 (868) 688-7462

Email: gregory.hannays@tt.ey.com

International Tax and Transaction Services – International Corporate Tax Advisory

Colin Ramsey

+1 (868) 822-5016

Mobile: +1 (868) 785-0082

Email: colin.ramsey@tt.ey.com

Gail Marks +592 225-2835

Mobile: +1 (592) 601-7071

Email: gail.marks@tt.ey.com

A. At a glance

Corporate Income Tax Rate (%)

25/40/45 (a)

Short-Term Capital Gains Tax Rate (%) 25 (b)

Capital Gains Tax Rate (%) 20 (b) Branch Tax Rate (%) 25 (a)

Withholding Tax (%)

Dividends 20 (c)

Interest 20 (c)

Royalties from Patents, Know-how, etc. 20 (c) Technical Fees 20 (c) Branch Remittance Tax 20 (d)

Net Operating Losses (Years)

Carryback 0

Carryforwards Corporation Tax Unlimited (e)

Capital Gains Tax 24

(a) The 25% rate applies to noncommercial companies. Commercial companies are taxed at a rate of 40% of income, or 2% of turnover, whichever is lower, subject to the approval of the Commissioner-General of the Guyana Revenue Authority (GRA). Telephone companies are taxed at a rate of 45%. See Section B.

(b) See Section B. (c) These withholding taxes apply to payments to companies and individuals not engaged in trade or business in Guyana. (d) This tax applies to deemed remittances of profits to the overseas head office. (e) See Section C.

B. Taxes on corporate income and gains

Corporate income tax. Companies resident in Guyana are subject to tax on their worldwide income from all sources. Relief with respect to taxation suffered on foreign-source income in an

overseas jurisdiction may be available under a double tax treaty. Nonresident companies engaged in business in Guyana are subject to tax on income directly or indirectly accruing in or derived from Guyana.

Rates of tax. Noncommercial companies or companies engaged in noncommercial activities are taxed at a rate of 25%. Any company that does not fall within the definition of a commercial company is regarded as a noncommercial company, including manufacturers and service companies.

Commercial companies or companies engaged in commercial activities are taxed at a rate of 40% of chargeable income. A com mercial company is a company with at least 75% of its gross in come derived from trading in goods not manufactured by it. Commercial companies include commission agencies, banks and insurance companies carrying on insurance business other than long-term insurance business.

If 40% of chargeable income is less than 2% of turnover, the commercial company is required to pay up-front corporation tax at a rate of 2% of turnover (minimum tax). If the GRA is satisfied with the company’s calculation of chargeable income, the GRA allows the company’s tax liability to be limited to 40% of chargeable income, and any excess minimum tax paid may be carried forward and offset against future corporation tax liabilities with certain restrictions.

Telephone companies are subject to corporation tax in Guyana at a rate of 45%.

An advance corporation tax at a rate of 10% must be deducted by the payer from gross payments made to a nonresident company with respect to goods and services if the nonresident company is engaged in a trade or business in Guyana. The advance corpora tion tax is creditable against the nonresident company’s ultimate corporation tax liability.

Capital gains. Capital gains tax is payable at a rate of 20% on the net chargeable gain of a person accruing or arising in Guyana or elsewhere, regardless of whether it is received in Guyana, on the change of ownership of property, subject to certain exceptions. In general, if capital allowances were taken with respect to an asset being disposed, the capital gain is the amount by which the value of the consideration received exceeds the cost of or acquisition value of the asset, less any capital allowances taken with respect to the property. In certain sectors, a disposal may give rise to a balancing adjustment, which may be subject to corporation tax and may affect the amount of applicable capital gains tax.

Capital losses may be carried forward for 24 years.

If an exemption from property tax is granted, a concomitant ex emption is granted for capital gains tax with limited exceptions.

Short-term capital gains from the disposal of assets within 12 months of their acquisition and from the disposal of assets 25 or more years after their acquisition are exempt from capital gains tax. However, short-term capital gains are subject to corporation tax.

Administration. The tax year is the calendar year. Tax is calculated on the profits for the accounting period that ends during the tax year. For each quarter, a company is required to pay a corporation tax or minimum tax installment, whichever is lesser. The quar terly payments must be made by 15 March, 15 June, 15 September and 15 December in each tax year. Quarterly payments of corpo ration tax are determined based on the taxable income for the preceding accounting period. Minimum tax installments are based on the actual gross sales or receipts of the company for the relevant quarter. The minimum tax calculation excludes income or receipts that are exempt for corporation tax purposes, such as dividends received from Guyana resident companies.

Annual tax returns must be filed by 30 April in the year following the tax year, and any balance of tax due is payable at that time. In general, audited financial statements must be filed with the an nual tax returns. The Commissioner-General may allow a com pany to file its tax returns with draft financial statements. However, the audited accounts must be filed on or before 31 December of the year in which the returns are due to be rec ognized as being filed on a timely basis.

Failure to file a tax return attracts a penalty of 10% of the amount of tax assessed, while failure to file a nil tax return or a tax return that discloses a loss attracts a penalty of GYD50,000. If the bal ance of tax due is not paid by the 30 April deadline, a penalty is payable equal to 2% of the unpaid tax for each month, or part thereof, that tax remains outstanding. Interest is also payable at a rate of 18% per year.

Dividends. Dividends received from nonresident companies are subject to tax. Dividends received by resident companies from other resident companies are exempt from tax.

Dividends paid to nonresident companies and nonresident indi viduals are generally subject to a withholding tax of 20%.

Double tax relief. Bilateral agreements have been entered into be tween the Government of Guyana and the governments of certain other countries to provide relief from double taxation (see Section F). Relief from double taxation is achieved by one of the following two methods:

• Exemption or a reduced rate on certain classes of income in one of the two countries concerned.

• Credit if the income is fully or partially taxed in the two coun tries. The tax in the country in which the income arises is al lowed as a credit against the tax on the same income in the country where the recipient is resident. The credit is the lower of the Guyana tax or the foreign tax on the same income.

C. Determination of taxable income

General. The assessment is based on financial statements pre pared according to international accounting standards, subject to certain adjustments.

To be deductible, expenses must be incurred wholly and exclu sively in the production of income. Deductions for head-office expenses paid by a Guyana branch to a nonresident head office or to a nonresident associate or subsidiary company, or by a Guyana

resident company to a nonresident parent or associate company, may not exceed 1% of the sales or gross income of the payer.

Inventories. Inventory may be valued at cost or market value, whichever is lower. A method of stock valuation, once properly adopted, is binding until permission to change is obtained from the GRA.

Bad debts. Trading debts that have become bad and that are proven to be so to the satisfaction of the GRA may be deducted in determining taxable income. In addition, doubtful debts are deductible to the extent that they have become bad during the year. If these debts are subsequently collected, they are consid ered to be income subject to tax in the year of recovery.

Tax depreciation (capital allowances). Depreciation is calculated on the depreciated value of fixed assets at the beginning of each accounting year.

Capital expenditure incurred on plant, machinery or equipment or any building housing machinery owned by the taxpayer or in curred with respect to machinery and equipment that the taxpayer has the full burden of wear and tear qualify for capital allowances under the declining-balance method or straight-line method. However, if the latter method is used, a maximum of 90% of the cost of the asset may be depreciated.

The following are the applicable rates for assets acquired on or after 1 January 1992.

Asset Rate (%)

Aircraft 33.3 Boats 10 Buildings (housing machinery) 5 (on cost) Buildings used for providing services and warehousing 2 (on cost) Furniture and fittings 10 Motor vehicles 20 Office equipment Electronic 50 Other 15 Plant and machinery 20

For new equipment for industries harnessing alternate energy through wind, solar, water and biomass technologies, capital ex penses are written off within two years.

Separate capital allowances are available with respect to the petroleum and mining sectors. Capital allowances may be claimed on petroleum capital expenditure in the petroleum sector at a rate of 20% per year on a straight-line basis. In addition, in the diamond and gold mining sector, capital allowances may be claimed on exploration and development expenditure at a rate of 20% per year on a straight-line basis. Other sectors are also granted specific initial and annual allowances.

Relief for tax losses. Losses carried forward can be written off to the extent of half the taxable income for the tax year. The unre lieved balance can be carried forward indefinitely. No loss car ryback is allowed.

In the petroleum sector, corporation tax losses may be written off to the full extent of the taxable income for the tax year. Similarly, the restriction on the ability to set off the full extent of losses against taxable income does not apply to commercial companies liable to pay minimum tax.

Groups of companies. No provisions for group relief exist.

D. Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)

Value-added tax (VAT); applies to most products supplied and services rendered in Guyana; imports of goods are also subject to VAT; certain imports of services are also subject to VAT under the VAT reverse-charge mechanism; companies and other businesses are required to register for VAT if their turnover exceeds a stipulated threshold as specified in the Value-Added Tax Act (currently GYD15,000,000 [approximately USD75,000] a year)

Standard rate 14

Certain items, including specified exports 0 Property tax; payable on the net property of a company in excess of GYD40 million; the tax is payable on the amount by which the aggregate value of all movable and immovable property of a person exceeds the aggregate value of all debts owed

On the first GYD40 million of net property Nil For every dollar of the next GYD20 million of net property 0.50

For every dollar of the remainder of net property 0.75 Premium tax; payable on insurance premiums (other than for long-term insurance) paid to a foreign company

A foreign company that has not established a place of business in Guyana 10

A foreign company that has established a place of business in Guyana 6

E. Miscellaneous matters

Foreign-exchange controls. The Guyana currency is the Guyana dollar (GYD).

Guyana has a floating exchange-rate regime. Profits may be repa triated without the approval of the Central Bank of Guyana. However, certain restrictions are imposed with respect to the set tlement of local transactions in foreign currency and the borrowing of funds in a foreign currency. Permission is also required to establish a foreign-currency account.

Debt-to-equity rules. In general, no thin-capitalization rules are imposed in Guyana. However, if a local company pays or accrues interest on securities issued to a nonresident company and if the local company is a subsidiary of the nonresident company or a fellow subsidiary with respect to the nonresident company, the

interest is treated as a distribution and may not be claimed as a deduction against the income of the local company.

F. Treaty withholding tax rates

The following table lists the withholding tax rates under Guyana’s tax treaties. If the treaty rates are higher than the rates prescribed in the domestic law, the lower domestic rates apply.

Dividends Interest Royalties % % %

Canada 15 25 10 Caribbean Community and Common Market (a)

Antigua and Barbuda 0 15 15

Barbados 0 15 15

Belize 0 15 15

Dominica 0 15 15

Grenada 0 15 15 Jamaica 0 15 15

St. Kitts and Nevis 0 15 15 St. Lucia 0 15 15 St. Vincent and the Grenadines 0 15 15 Trinidad and Tobago 0 15 15

United Kingdom 10/15 (b) 15 10 Non-treaty jurisdictions 20 20 20

(a) The listed countries have ratified the Caribbean Community and Common Market (CARICOM) double tax treaty.

(b) The lower rate applies if the recipient and beneficial owner of the dividends is a company that owns 10% or more of the voting power of the distributing company.