Trinidad and Tobago Corporate Tax Guide

Trinidad and Tobago

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Principal Tax Contact

Gregory Hannays

+1 (868) 622-1364 Mobile: +1 (868) 688-7462 Email: gregory.hannays@tt.ey.com

International Tax and Transaction Services – International Corporate Tax Advisory

Wade George

+1 (868) 628-5185 Mobile: +1 (868) 788-0670 Email: wade.george@tt.ey.com Gregory Hannays

+1 (868) 622-1364 Mobile: +1 (868) 688-7462 Email: gregory.hannays@tt.ey.com

A. At a glance

Corporate Income Tax Rate (%) 30 (a)

Short-Term Capital Gains Tax Rate (%) 30 (b) Branch Tax Rate (%) 30 (a)

Withholding Tax (%) (c)

Dividends 3/8 (d)

Interest 15 (e)

Royalties from Patents, Know-how, etc. 15 (e) Branch Remittance Tax 3 (f)

Net Operating Losses (Years)

Carryback 0 Carryforward Unlimited

(a) A business levy and a green fund levy are also imposed. Companies licensed to carry on “banking business” or the “business of banking” under the Financial Institutions Act (these terms are defined identically under the act) are subject to a corporation tax rate of 35%. The rate for companies engaged in the downstream petrochemical sector and related sectors is 35%. Upstream petroleum operations are taxed under a separate regime. See Section B. (b) See Section B. (c) These withholding taxes apply to payments to nonresidents only.

(d) The 3% rate applies to dividends paid to corporations owning 50% or more of the voting power of the distributing company. The 8% rate applies to other dividends.

(e) Applicable to payments to companies and individuals.

(f) Applicable to deemed remittances of profits to overseas head office.

B. Taxes on corporate income and gains

Corporation tax. Companies resident in Trinidad and Tobago 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 Trinidad and Tobago are subject to tax on income directly or indirectly accru ing in or derived from Trinidad and Tobago.

Rates of tax. For the 2022 year of income, corporation tax is chargeable at a rate of 30%.

The Corporation Tax Act provides for a business levy to be im posed on the gross sales and receipts of companies for the calen dar year, including branches of nonresident companies operating in Trinidad and Tobago. The rate of the business levy is 0.6%. The business levy is credited against the corporation tax liability. It is the final liability if the corporation tax liability is less than the business levy. Certain companies are exempt from the levy, including the following:

• Companies or statutory corporations exempt from corporation tax under any act

• Certain government corporations under the jurisdiction of the Public Utilities Commission or exempted by order of the President

• Companies subject to tax under the Petroleum Taxes Act

A company is not subject to the business levy for the first 36 months following the date of registration of its business or if its gross sales or receipts do not exceed TTD360,000 in the year of income.

The Miscellaneous Taxes Act provides for a green fund levy to be imposed on the gross sales and receipts of companies engaged in business in Trinidad and Tobago. The rate of the green fund levy is 0.3%. The green fund levy may not be credited against the corporation tax liability or claimed as a tax deduction in deter mining the company’s taxable income.

The corporation tax rate for companies engaged in the downstream petrochemical sector and related sectors is 35%. Companies engaged in upstream petroleum operations are subject to various taxes and imposts, of which the most significant are petroleum profits tax of 50%, unemployment levy of 5% and supplemental petroleum tax at rates based on the weighted average crude oil price. Upstream petroleum companies are also subject to a differ ent system of tax administration.

For companies licensed to carry on “banking business” or the “business of banking” under the Financial Institutions Act (these terms are defined identically under the act), a 35% rate applies.

In general, profits from a long-term insurance business of an as surance company that is subject to tax are the profits derived

from the assets supporting liabilities to Trinidad and Tobago policyholders, as required under Section 83(2) of the Insurance Act, 2018. Such profits are credited to the policy account and included in the insurance reserves reported pursuant to Section 145 of the Insurance Act, 2018.

Insurance companies carrying on insurance business other than long-term insurance business are generally taxed on the same basis as ordinary companies and are subject to corporation tax at the standard rate of 30%.

The rate of corporation tax on the profits from a long-term insur ance business for the 2021 year of income is 15%. However, if such profits are transferred to the shareholders’ account, such transferred amounts are subject to tax at a rate of 25%.

In the case of a Small and Medium Enterprise (SME) company that is listed on the Trinidad and Tobago Stock Exchange, a 0% rate applies for the first five years from listing, while such SME listed company will be subject to tax at 50% of the standard rate for the next five succeeding years and thereafter at the standard tax rate. A SME listed company is also subject to business levy and green fund levy at a 0% rate for the first five years from list ing, at 50% of the standard rates of business levy and green fund levy for the next five succeeding years and thereafter at the stan dard rates of business levy and green fund levy.

Capital gains. Capital gains are generally not subject to tax. Depending on the class of asset and the nature of the company’s business activities, however, the profit or loss on depreciable assets disposed of after being held for more than 12 months may require a balancing adjustment (see Section C).

Short-term capital gains are profits on the disposal of assets within 12 months of their acquisition. Although these gains are of a capital nature, they are generally subject to tax. Profits de rived from the partial disposal of an asset within 12 months of acquisition are also subject to tax. For the 2022 year of income, the applicable rate is 30%.

Administration. The tax year is the calendar year. Tax is calcu lated on the profits for the accounting period that ends during the tax year. For each quarter, a company is required to pay a green fund levy installment, as well as either a corporation tax or business levy installment, whichever is greater. The quarterly pay ments must be made by 31 March, 30 June, 30 September and 31 December in each tax year. Quarterly payments of corporation tax are determined based on the taxable income for the preceding accounting period. Business levy and green fund levy install ments are based on the actual gross sales or receipts of the com pany for the relevant quarter. The business levy calculation excludes income that is exempt for corporation tax purposes such as dividends received from Trinidad and Tobago resident companies, but the green fund levy calculation takes into account such income.

If the current year’s profits exceed the preceding year’s profits, a company must pay by 31 December the sum of the tax liability on the preceding year’s taxable profits plus 80% of the increase in tax liability over the preceding year. 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.

If the balance of tax due is not paid by the 30 April deadline, inter est accrues at a rate of 20% on the outstanding amount beginning on 1 May. A grace period to 31 October is granted for the filing of the tax return. If the return is not filed by 31 October, a penalty of TTD1,000 accrues beginning 1 November for each sixmonth period or part of such period that the return remains outstanding.

Dividends. Dividends received from nonresident companies out of profits not derived from or accruing in Trinidad and Tobago are subject to tax. Dividends received by resident companies from other resident companies are tax-exempt.

Effective from 1 January 2022, dividends paid to nonresident companies and individuals are generally subject to a withholding tax of 8%. The rate is reduced to 3% if the recipient is a corpora tion owning 50% or more of the voting power of the distributing company.

Double tax relief. Bilateral agreements have been entered into between the government of Trinidad and Tobago and the governments of certain other countries to provide relief from double taxation. These agreements assure taxpayers that their trade or investment in the other countries is free from the deterrent of double taxation. 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 where the income arises is allowed 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 Trinidad and Tobago 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. The deduction for business meals and entertainment expenses is limited to 75% of actual ex penses. Deductions for management charges (now more broadly defined) paid to a nonresident company may not exceed 2% of the payer’s total expenses, exclusive of such charges, capital allow ances and expenses not allowed under the Corporation Tax Act.

Donations made under a registered deed of covenant to an ap proved charity that are actually paid during the year of income are deductible, up to a maximum of 15% of the total income of the company (as defined in the law).

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 Board of Inland Revenue.

Bad debts. Trading debts that have become bad, and are proven to be so to the satisfaction of the Board of Inland Revenue, may be deducted in determining taxable income. In addition, doubtful debts are deductible to the extent that they have become bad dur ing the year. If these debts are subsequently collected, they are considered to be income subject to tax in the year of recovery.

Tax depreciation (capital allowances)

Depreciation (wear-and-tear) allowances. Depreciation is calcu lated on the depreciated value of fixed assets at the beginning of each accounting year.

Industrial buildings qualify for a depreciation allowance of 10% under the declining-balance method. Buildings completed before 1 January 1995 that are used in retail or wholesale trade or as office buildings or rental properties are not entitled to any depre ciation allowances, unless they are used exclusively to house plant and machinery and the amounts claimed for the deprecia tion allowance are reasonable.

Capital expenditure incurred on the construction of a building or structure completed on or after 1 January 1995 and capital improvements made to buildings or structures on or after that date qualify for a 10% depreciation allowance under the declining-balance method.

Other assets are depreciated using the declining-balance method. The depreciation rates vary depending on when the assets were acquired. The following are the applicable rates for assets acquired on or after 1 January 1995.

Asset Rate (%)

Office equipment 30 Motor vehicles 30

Computers 33.3

Plant and machinery Light 30 Heavy 30 or 33.3

Rigs 33.3

Aircraft (secondhand) 40

Balancing adjustments. Proceeds from disposals of assets are deducted from the residual value of the pool for that particular class of assets. Under the pool system, balancing charges arise if the value in the pool results in a credit balance, and balancing allowances arise only on the disposal of all of the assets in a par ticular class.

Initial allowance. A 10% initial allowance is granted on acquired industrial buildings that are used in manufacturing. Machinery and equipment used in manufacturing also qualify for an initial allow ance at a rate of 90%. The rate of the initial allowance is reduced to 20% for plant and machinery used in the production of sugar, petroleum or petrochemicals or in an industry enjoying conces sions under the Fiscal Incentives Act.

The initial allowance reduces the asset’s value for purposes of depreciation in subsequent periods.

Relief for losses. Losses carried forward can generally be written off to the full extent of taxable profits for the tax year. Effective

from 1 January 2020, companies engaged in the upstream energy sector are only able to claim loss relief of up to 75% of taxable profits. The unrelieved balance can be carried forward indefi nitely. No loss carryback is allowed.

Groups of companies. Under the provisions of the Corporation Tax Act, a company within a group of companies (surrendering company) may surrender its current year trading loss (exclusive of capital allowances) to another company (or companies) within the same group (claimant company). The claimant company may then claim a deduction with respect to the trading loss against its tax able profits.

To qualify for group relief, both the surrendering company and the claimant company must be resident in Trinidad and Tobago. Two companies are members of the same group if one is a wholly owned subsidiary of the other or both are wholly owned subsid iaries of a third company. The surrendering company and the claimant company must be members of the same group throughout the respective accounting periods of each of the companies. If the claimant company and the surrendering company do not have coterminous year-ends, the amount of the current year losses available for setoff and relief is restricted to the accounting period that is common to both the surrendering company and the claim ant company.

The claimant company may claim group relief if it has used all of its available capital allowances and offset its loss brought forward from the prior year(s) of income against its current year taxable income. The amount of the trading losses that any one claimant company may claim as a deduction is limited to 25% of the tax that would have been payable by the claimant company had the relief not been granted.

Any unrelieved current year losses of the surrendering company may be carried forward indefinitely and be written off against its future taxable income.

D. Value-added tax

A value-added tax (VAT) applies to most products supplied and services rendered in Trinidad and Tobago. The standard rate of VAT is 12.5%. A 0% rate applies to certain items, including exports. Imports of inputs by highly capital-intensive manufacturing corporations are exempt from VAT if the corporation is declared an approved enterprise under the Fiscal Incentives Act.

Companies and other businesses are required to register for the tax if their turnover exceeds a stipulated threshold as specified in the Value Added Tax Act. The VAT threshold is TTD500,000 a year.

The Value-Added Tax Act allows the tax authorities to offset VAT refunds against any other tax liability, such as corporation tax or income tax.

E. Miscellaneous matters

Foreign-exchange controls. Trinidad and Tobago has a floating exchange-rate regime. Commercial banks and licensed

foreign-exchange dealers set the exchange rate. Residents may hold foreign currencies for their own account. Profits may be repatriated without the approval of the Central Bank of Trinidad and Tobago.

Debt-to-equity rules. In general, no thin-capitalization rules are imposed in Trinidad and Tobago. 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, or a fellow subsidiary in relation to, the nonresident company, the interest is treated as a distribution and may not be claimed as a deduction against the profits of the local company.

F. Treaty withholding tax rates

The following table lists the withholding tax rates under Trinidad and Tobago’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 % % %

CARICOM treaty (f)

Antigua and Barbuda 0 15 15

Barbados 0 15 15

Belize 0 15 15

Dominica 0 15 15

Grenada 0 15 15

Guyana 0 15 15 Jamaica 0 15 15 Montserrat 0 15 15

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

Brazil 10/15 (h) 15 15

Canada 5/15 (d) 10 10

China Mainland 5/10 (c) 10 10 Denmark 10/20 (c) 15 15

France 10/15 (d) 10 10

Germany 10/20 (c) 10 (a) 10

India 10 10 10

Italy 10/20 (c) 10 5

Luxembourg 5/10 (g) 7.5/10 (e) 10

Norway 10/20 (c) 15 15

Spain 0/5/10 (i) 8 5

Sweden 10/20 (c) 10 (a) 20

Switzerland 10/20 (d) 10 10

United Kingdom 10/20 (c) 10 10

United States 10/25 (d) 15 (a) 15

Venezuela 5/10 (c) 15 10

Non-treaty jurisdictions 3/8 (b) 15 15

(a) The rate applies to interest paid to banks and financial institutions. Interest paid to other recipients is taxed at 15%.

(b) See footnote (d) to Section A.

(c) The lower rate applies if the recipient is a corporation owning 25% or more of the voting power of the distributing company.

(d) The lower rate applies if the recipient is a corporation owning 10% or more of the voting power of the distributing company.

(e) The lower rate applies to interest paid on deposits, commercial debts and borrowings from banking enterprises.

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

(g) The lower rate applies if the recipient is a company holding directly at least 10% of the capital of the distributing company.

(h) The lower rate applies if the recipient is a company holding directly or indi rectly at least 25% of the capital of the distributing company.

(i) The 0% rate applies if the recipient is a company holding directly at least 50% of the capital of the distributing company. The 5% rate applies if the recipient is a company holding directly at least 25% of the capital of the distributing company.