Embed Size (px)
Citation preview
Inland Revenue
Division
Trinidad House
St. Vincent Street
PORT OF SPAIN
TEXT PREPARED BY INLAND REVENUE
2011
Know Your Income Tax
YOUR TAX DOLLAR
TRINIDAD AND TOBAGO
IRD Mission
To improve Voluntary Compliance by:
- Providing quality customer service and education;
- Improving our employees’ wellbeing, knowledge and skills;
- Enforcing the tax law effectively and efficiently;
In an environment of integrity, fairness and mutual respect.
CONTENTS
Page
Introduction … … … … … … … … 1
Definitions … … … … … … … … 1
Chargeable Income … … … … … … 1
Employee … … … … … … … 1
Employer … … … … … … … 1
Emoluments … … … … … … … 1
Allowable Deductions … … … … … 1
Office … … … … … … … … 1
Total Income … … … … … … … 2
Board of Inland Revenue File Number … … … … … 2
Non-Resident Individual … … … … … … … 2
Responsibilities of the Employee … … … … … … 3
Submit TD 1 Form to Employer … … … … … 3
Submit TD 1 Form for BIR Approval … … … 3
Submit BIR File No. to Employer … … … … 3
Responsibilities of Employer … … … … … … 4
Deduct Taxes from Emoluments … … … … … 4
Remit Taxes to B.I.R. … … … … … 4
Issue Pay slips … … … … … … 4
Submit PAYE/Health Surcharge Monthly Return … … … 4
Issue TD.4 Certificates … … … … … … 4
Keep Records … … … … … … … 5
Responsibilities of BIR … … … … … … … 5
Declaration of Emoluments, Deductions and Allowances … … … 5
Tax Declaration Form (TD 1 Form) … … … … … 5
Approval by the BIR … … … … … … 6
When is BIR Approval not required … … … … … 6
Tax Deductions and Allowances … … … … … … 7
Personal Allowance … … … … … … 7
Tertiary Education Expenses … … … … … 7
Allowance for First-time Home Owners … … ... … 7
Contributions to Approved Pension Fund/Scheme
Deferred Annuity Plans & NIS … … … … … 7
Alimony/ Maintenance Payments … … … … … 8
Deed of Covenant … … … … … … 8
Tax Credit … … … … … … … 8
Guidelines for Approval of TD 1 Form … … … … … 9
How to compute P.A.Y.E. … … … … … … 11
Retirement or Death … … … … … … 12
Use of Tax Deduction and Calculations … … … … 12
Benefits-In-Kind … … … … … … … 13
TD4 Certificates … … … … … … … … 14
Completion of TD 4 Certificates … … … … … 15
Specimen of TD 4 Certificate … … … … 16
Completion/Issuance of IT 76 Certificate and
Summary Forms … … … … … … … 17
Health Surcharge … … … … … … … 17
Garnishee Order … … … … … … … 18
Monthly Return … … … … … … … 19
Specimen of Return … … … … … … … 20
Payment and Accounting for Tax … … … … … … 21
Acceptance of Payments by the Bank … … … 21
Accounting for Tax deducted and Keeping
Records … … … … … … … … 22
Severance Pay and Computation … … … … … … 22
Redundancy … … … … … … … 23
Retirement Severance Benefit … … … … … 23
Severance – Ill Health … … … … … … 23
Calculations … … … … … … … 25
Ex Gratia payments … … … … … … 27
Retirement Benefit Payments – Public Sector … … … 27
Contract Gratuity … … … … … … … 28
2006 – 2011 Tax Rates … … … … … … … 29
Penalties under the Income Tax Act … … … … … 30
1
INTRODUCTION
The Pay-As-You-Earn System (PAYE) was introduced in Trinidad and Tobago in
1958. The legislation relating to its operation is contained in the Income Tax Act,
Chap. 75:01, and the Income Tax (Employment Regulations 1957 (Act 77/57) as
amended by Income Tax Act 13/68; Government Notice 76/76 and the Income Tax
(Employment) (Amendment) Regulations, 1989, the system entrusted responsibility
on the employee, employer and the Board of Inland Revenue.
P.A.Y.E. is not a method of assessment of Income Tax. It is the system by which
tax is withheld from emolument Income (The PAYE System).
Therefore it is necessary for the employee to submit a TD 1 Form to the employer.
(see TD 1 Form on pg. 3).
Definitions
“Allowable Deductions” means any deduction allowed in accordance with the
Income Tax Act in determining a person’s chargeable income.
“Chargeable Income” for the purpose of a person, whose sole source of income is
from an office or employment, means the total emoluments of the person for the year
of income less the appropriate deductions and exemptions granted under the Income
Tax Act.
“Employee” means any person, not being the holder of an office, in receipt of
emoluments.
“Employer” means any person paying emoluments whether on his own account or
on behalf of another person to an employee, and shall be deemed to 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 from whom the
employee or officer receives his remuneration.
“Emoluments” means all salary, wages, bonus, overtime, remuneration, perquisites,
includes value of board or lodging, stipend, commission or other amounts for
services, directors fees, retiring allowances or pensions, arising or 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 of profits arising from a trade,
profession or vocation carried on by any person wither by himself or in partnership
with any other person.
“Office” means a position not being an employment or place, entitling the holder
thereof to a fixed or ascertainable stipend or remuneration and includes the office of
a Minister of Government, the Office of a member of the Senate or the House of
2
Representatives of Trinidad and Tobago, a member of the municipal or Regional
Corporation and any other office, the holder of which is elected by a popular vote or
is elected or appointed in a representative capacity and also includes the position of a
company director.
N.B. Although the holder of an office is not an employee, the holder of an office is
subject to Tax under the PAYE System.
“Total Income” means the aggregate amount of income under Section 5 of the
Income Tax Act before allowing any deductions other than those under Section 10, 11,
16 and Income Tax Act (In Aid of Industry) Act.
Board of Inland Revenue File Number
Every employee or office holder is required to furnish his employer with his Board of
Inland Revenue File Number and the employer must record this number on the
certificate (TD. 4 Certificate) he issues to the employee by the last day of February of
the year following the year of income.
According to Section 119 of the Income Tax Act, any person who –
(a) Being an employee or an officer and who, with the intent to deceive,
furnishes his employer under section 76B of the Income Tax Act Ch.
75:01 with a Board of Inland Revenue File Number which is not his own.
(b) Being an employer, and who knowingly or recklessly records under
section 76B of the Income Tax Act Ch. 75:01, a Board of Inland
Revenue File Number of an employee or officer which is different from
the number furnished by that employee or officer.
is guilty of an offence, and in addition to any penalty provided is liable on summary
conviction to a fine of fifty thousand dollars ($50,000) and to imprisonment for three
years.
Non-Resident Individual
An individual under 60 years, who is non-resident in Trinidad & Tobago and is in
receipt of emolument income arising in Trinidad & Tobago, is subject to tax under the
PAYE System.
Such an individual is not eligible for any deductions/tax credit including the Personal
Allowance.
3
Therefore the total amount of income earned in Trinidad and Tobago is taxable
whether or not it is received here.
Where the non-resident individual is 60 years and over and receives income which
accrues or derived in Trinidad and Tobago, the person is entitled to a personal
allowance. The allowance was introduced in 2004 at $40,000 and increased to
$60,000 in 2006.
Responsibilities of the Employee
1) Submit TD 1 Form to the Employer
To ensure the correct amount of PAYE is deducted from emolument income,
each employee must submit a TD 1 Form to his employer –
The day on which he/she takes up employment
Within seven (7) days of a change in allowable deductions
When required to do so by the Board of Inland Revenue
2) Submit TD 1 Form for Board of Inland Revenue Approval
It is the responsibility of the employee to ensure that the Board of Inland
Revenue approves his/her TD 1 Form, where necessary.
3) Submit BIR File Number to Employer
Each employee must give his/her Board of Inland Revenue (BIR) file
number to the employer.
Where the employee does not have a file number, an application for one
must be completed using the application for BIR Number form together
with a copy of a valid ID and a job letter or TD 4 Certificate (or
completed return).
These are submitted for processing at the Registration Unit, Queen
Street, Port of Spain.
This can be done through the employer or individually.
N.B. Each employee should ensure that –
(a) He obtains a TD 4 certificate (original and duplicate) from his employer
on or before the last day of February following the year of income.
(b) The correct amount of tax is deducted from his/her salary/wages.
4
Responsibilities of the Employer
1) Deduct taxes from emoluments The employer has the responsibility to deduct taxes from the emoluments (salary,
wages, etc.) of his employees in accordance with the P.A.Y.E. Regulations each
time a payment is made – weekly/fortnightly/monthly. The employer should
ensure that he receives a TD1 Form from the employee to accurately determine
the amount of tax to be deducted.
2) Remit taxes to Board of Inland Revenue The total amount of taxes deducted from the emoluments of employees must be
remitted to the Board of Inland Revenue using the PAYE/Health Surcharge
Monthly Return on or before the 15th
day of the month following the month in
which the deductions were made (eg. Deductions made in January must be
remitted by the 15th
February).
An employer who fails to deduct and remit the amount deducted from his
employees, after the statutory date will be liable to –
(i) *A penalty of 25% of the deduction or $40.00 whichever is greater and
interest on both the amount deducted and the penalty at the rate of
20% per annum from the due date to the date of payment.
(ii) A fine of thirty thousand dollars ($30,000.00) or imprisonment for two
(2) years or both, upon summary conviction.
* The 25% penalty came into effect from 1/1/2008 and is not to be treated
retroactively.
3) Issue Payslip
The PAYE Regulations require the employer to give a statement of emoluments
paid and the taxes deducted for each pay period (payslips).
4) Submit a PAYE Monthly Return
The employer is required to submit the monthly return when remitting the taxes
deducted.
5) Issue TD. 4 Certificates
At the end of the year during which tax was deducted (including Health
Surcharge), but no later than the last day of February of the following year, the
employer must:
(i) Issue the original and one (1) copy of the TD.4 Certificate to
each employee showing total emoluments paid during the year
and the total tax and other amounts deducted;
5
(ii) Forward to the Board of Inland Revenue one (1) copy (triplicate)
of the TD. 4 Certificate of each employee and TD. 4 Summary
(original & duplicate) showing the total emolument paid and the
total tax deducted during the year. The relevant forms may be
obtained from the Board of Inland Revenue (P.A.Y.E. Section).
(iii) Keep for his records a copy of the TD. 4 Certificate (quadruplicate)
of each employee and a copy of the TD. 4 Summary.
6) To keep records of employees’ earnings
The employer must keep records of employees’ earnings and tax deducted
therefrom, and makes them available for inspection by the Board, (Penalty
applicable for non-compliance $15,000 and/or 2 years imprisonment).
The Responsibilities of the BIR
(i) To provide Tax Deduction Tables and Instructions for ensuring correct
deduction of taxes.
(ii) To provide literature and guidelines to ensure the proper administering
of the system.
(iii) To offer assistance whenever necessary or requested.
Declaration of Emoluments – Deductions and Allowances
Tax Declaration Form (TD 1 Form)
A TD 1 Form is a form that is designed solely for the purpose of making the
appropriate deduction of tax from emoluments. The Form requires the taxpayer’s
Board of Inland Revenue file number, Electoral Identification Card number and
signature.
All source of income are declared and claims for tax deductions are made on
this form.
Since the information is necessary for the correct amount of tax to be deducted, each
employee, on taking up employment, MUST submit a Tax Declaration 1 Form to his
employer –
(a) On the date of commencement of his employment;
(b) Within seven (7) days, if there is a change in his tax
deductions/allowances;
(c) When required to do so by the Board of Inland Revenue.
6
Where an employee has more than one employment or in receipt of both pension and
salary or wages, details of each source of emolument income must be stated separately
on the same form.
In such case, the Board of Inland Revenue must approve the TD. 1 Form. (The Board would advise each employer separately to the tax to be deducted)
Approval by the Board of Inland Revenue
Where an employee has any or all of the following claims for deductions, he/she is
required to present a TD 1 Form for the Board approval:
(i) Tertiary Education Expenses (relates to institutions situated outside of
T&T except Public Regional Institution)
(ii) First Time Home Ownership (homes acquired with effect from January
01, 2011)
(iii) Contributions/Premiums paid towards –
an Approved Pension Fund/Deferred Annuity Plan
(iv) Alimony/Maintenance payments
(v) Venture Capital Tax Credit
Where an employee fails to submit a Tax Declaration (TD 1 Form), the employer
may deduct taxes without allowing any deductions. The effect of this is that the tax
deducted will be in excess of the amount which would normally have been deducted if
a declaration form had been filed.
This method of deducting tax should also be used where –
(i) Overtime is paid to an employee and his/her tax deduction was already
applied to determine tax on the salary.
(ii) A bonus is paid to an ex-employee.
(iii) Emoluments are paid to a non-resident individual who is 60 years and
under.
When Is The Board of Inland Revenue Not Required To Approve a TD 1 Form?
Where a person has the following deductions only, the Board does not require the TD
1 Form to be approved – Personal Allowance, NIS and Company’s Approved Pension
Fund/Scheme.
7
Tax Deductions/Allowances
To determine the chargeable income that would be subject to tax, a resident
individual is entitled to the following allowances, deductions and tax credits:
1. Personal Allowance
A Personal Allowance of sixty thousand dollars ($60,000) – with effect
from 2006.
2. Tertiary Education Expenses
(a) Reasonable expenses incurred in respect of tertiary education by the
taxpayer for self, spouse or child/children of both spouses at an
institution situated outside of T&T except a public regional institution.
These expenses include – Tuition, Exam Fees, Books, 1 return airfare,
Accommodation, etc.
This claim is limited $60,000 and may be claimed in such proportion as
may be determined by both spouses. ($18,000 up to 2007).
3. Allowance for First Time Home Owners
An individual who acquires a home for the first time with effect from
January 1, 2011, by way of purchase or construction, is allowed a deduction
of up to $18,000, on the cost of this home, for the first five (5) years of
acquisition. Where ownership is shared, the aggregate amount allowed is
$18,000.
4. Contributions
(a) Contributions to an Approved Pension Fund Plan/Scheme.
Contributions made under the Retiring Allowances(Legislative
Services) Act.
(b) Premiums paid under –
An Approved Deferred Annuity Plan
TISP (Republic Bank)
Future Cash (RBTT Bank)
SAFE (Scotia Bank)
Retirement Provider (FCB)
(c) N.I.S.
70% of the annual contributions made in accordance with the National
Insurance Act.
Where a taxpayer contributes to the Widows and Orphan Fund (this is
usually the male appointed Public Servant) deduction allowed is
100% of this contribution and 70% of the difference between this
contribution and the N.I.S. deduction.
8
Total deduction in respect of item 4(a)(b) & (c) is limited to $30,000 (with effect
from 2009).
5. Alimony/Maintenance Payments
This is a payment made to a spouse or former spouse under a Deed of
Separation or Court Order.
This deduction shall not be allowed unless the spouse or former spouse in
receipt for such alimony/maintenance is chargeable to tax under the Income
Tax Act Ch. 75:01.
6. Deed of Covenant. (With effect from January 01, 2011)
Payments made to a charity under a deed of covenant in favour of
- a sporting body of persons as defined in Section 6(2) of the
Corporation Tax Act and approved by the President in writing;
- an ecclesiastical, charitable or educational institution of public
character approved by the President in writing;
- the Children’s Life Fund established under the Children’s Life
Fund act 2010.
This claim is equal to the amount donated but limited to 15% of total annual
income.
(Not to be included on TD1 Form).
7. Tax Credits
Venture Capital
The Venture Capital Tax Credit is equivalent to 25% of the investment in any
Venture Capital Company. The tax credit is offset against the tax on
chargeable income thereby reducing the tax liability. Where this tax credit
exceeds the tax on chargeable, the excess tax credit may be carried forward to
the following year(s), until it is exhausted.
CNG Kit and Cylinder (with effect from 1/1/2011)
A tax credit equal to 25% of cost of CNG Kit and Cylinder purchased and
installed in his motor vehicle.
This credit is limited to $10,000.
Solar Water Heating System (with effect from 1/1/2011)
A credit equal to 25% of cost of solar water heating system equipment
purchased for household use.
This credit is limited to $10,000.
NB: All tax credits are offset against the tax on chargeable income.
9
Guidelines to be followed when
submitting a TD 1 Form for Approval
With effect from January 2009 when a TD1 Form is approved by the Board of Inland
Revenue, a Certificate of Approval for PAYE Tax Deductions is issued to the
employer.
The certificate shows:
An approval letter will be issued to the employer identifying –
- The Employer’s name, address and PAYE Account Number
- The Employee’s name and BIR#
- The Employee’s Total Allowances and Credits
- The Expiration date of the TD1 Form
- The Board of Inland Revenue Stamp
- Date and Signature of an IRD Officer
Complete one (1) TD1 Form and submit to the Inland Revenue Division for
approval together with the following documents for the relevant claims-
1. Tertiary Education Expenses - Copy of letter of acceptance from the Educational Institution showing
the course and duration of studies,
- Proof of payment of expenses,
- Statement showing all expenses claimed.
2. First-Time Home Owner - Letter for Financial Institution confirming first time acquisition, date of
acquisition and address of property.
- Completion certificate if property was constructed.
- Lands and Buildings Tax Receipt.
- Sworn affidavit, if property was built without mortgage.
3. Approved Pension Fund/Plan/Schemes - Salary deductions slip for the most recent pay period, identifying
pension contribution.
4. (i) Approved Deferred Annuity
- Policy Statement showing that the policy is in force and paid up to date.
- Where the Board approved the policy, the following words must be
marked on the statement –
„THIS PLAN IS APPROVED BY THE BOARD OF INLAND
REVENUE‟
10
(ii) Tax Incentive Savings Plan (T.I.S.P.) - Republic Bank
Royal Future Cash - RBTT
Scotia Assured Future Earnings (S.A.F.E.) - Scotia Bank
Retirement Provider - FCB
- Receipt showing payments made in previous year.
- Where the Board approved the policy, the following words must be
marked on the statement –
„THIS PLAN IS APPROVED BY THE BOARD OF INLAND
REVENUE‟
5. Alimony/Maintenance - Original Copy of Court Order, Decree or Registered Deed of Separation.
(The Income Tax File Number of the recipient is also required).
- Copy of receipt of payments made in previous year.
For Common-Law Relationships –
- Copy of receipt of payments made in previous year.
- Sworn affidavit stating that the union, which produced the child/children,
was a common-law relationship established under the Co-habitational
Relationship Act.
6. Venture Capital Tax Credit
- Certificate from the Venture Capital Company showing investment
made.
7. Income from two or more sources
Where the taxpayer has income from two or more sources, he must submit a
TD 1 Form to the Board for approval together with pay slips of salaries paid
to date for the current year. A TD 1 A (directive) will be issued to the
respective employers, advising of the amount of tax to be deducted from each
source of income for the current year.
THE BOARD OF INLAND REVENUE MAY REQUEST ADDITIONAL
INFORMATION OR DOCUMENTS, IF CONSIDERED NECESSARY,
TO EFFECT THE APPROVAL OF THE TD 1 FORM.
Where there is doubt concerning any claim or the procedure to be followed, please call
the following Sections for clarification:
Taxpayer Services
Telephone Number 623-2981 Ext. 201/204/520
or
Taxpayer Relations Section
Telephone Number 623-2981 Ext. 321, 323-6
11
How to Compute P.A.Y.E
Under the Income Tax (Employment) Regulations every employer shall deduct tax
from the payment of emoluments to any employee or holder of an office. Taxable
emoluments are those arising or accruing in or derived from or received in Trinidad
and Tobago. In accordance with the PAYE Regulations, the employer is required to
make deductions from salary or wages.
Only the Board has the authority to reduce or amend the tax deductions of an
employee in the case of a dispute.
The Board will determine the amount to be deducted in the following cases:
(a) Where payment is made at other than regular weekly, fortnightly, monthly
or annual intervals, e.g. persons paid on a commission basis only;
(b) In the case of casual or seasonal workers, where tax was deducted using to
the Tax Deduction Tables for the six(6) months during which they were
employed and therefore the total tax would far exceed their liability
calculated on an annual basis;
(c) Where the Board decides that the class of employee or nature of the
emolument is such that it makes the application of the Tax Deduction
Tables impracticable;
(d) In the case of an employee with more than one employment.
Tax should not be deducted from emoluments in the following cases:
(a) Where persons who are exempt from tax receive the emolument
income,
(b) Where the emoluments are pensions earned outside Trinidad and
Tobago,
(c) Where a resident individual or non resident individual 60 years and
over is in receipt of total annual income of $60,000 annually and under,
ie –
Weekly - $1154.00
Fortnightly - $2308.00
Monthly - $5000.00
(d) Where the emoluments are paid outside of Trinidad and tobago to an
employee outside of Trinidad and Tobago;
(e) Where the payment is made in respect of domestic services performed
in a residence where the employee sleeps or eats when in Trinidad and
Tobago.
12
In all other cases the employer will use the information on the Tax Declaration
Form (TD. 1) submitted by the employee together with the Income Tax
Declaration Tables or the stipulation made by the Board of Inland Revenue to
determine the amount of tax to be deducted at each pay period.
Where a taxpayer works for short or irregular periods, the employer has to be
much more vigilant in ensuring that the correct PAYE deducted. In such
circumstances, to avoid under deductions of tax, the employer should consult with
the Board of Inland Revenue.
The Board of Inland Revenue’s approval is also necessary where an employee
takes up employment late in any income year and would not earn in excess of
$60,000, but the employer is uncertain as to whether there is other employment
income.
EMPLOYERS MUST NOT ACCEPT ANY INSTRUCTIONS FROM EMPLOYEES
TO REDUCE OR CEASE THE DEDUCTION OF TAX FROM THEIR INCOME.
Retirement or Death When an employee retires and a pension is paid, tax must be deducted in accordance
with the PAYE Regulations. Retirees who receive other income, in addition to their
pension, must include such income on a TD 1 Form to be approved by the Board to
determine the correct amount of tax to be paid from each source of income.
When an employee dies, tax is to be deducted from the emoluments due to the
deceased person, as if he was alive.
When an employer dies or there is a change in employer, the person assuming control
of the business must continue to deduct taxes from the employees.
Use of tax deductions (on TD 1 Form) and calculation of Tax To determine the tax deducted from an employee’s income, the employer must
consider the deductions on the TD 1 Form (approved where necessary) that the
employee would have submitted.
The formula is as follows –
Total Annual Income – Total Deductions = Chargeable Income
Chargeable Income x Tax Rate = Tax on Chargeable Income (tax liability)
Tax Liability
* Pay Periods = Tax per pay period
* Weekly paid employees – Divide annual tax by 52
* F/nightly paid employees – Divide annual tax by 26
* Monthly paid employees – Divide annual tax by 12
13
Examples
(a) Weekly paid wages and benefits - = $ 1,500.00
Annual emolument $1,500 x 52 = $ 78,000.00
Deduct Total deductions (as shown on TD 1 Form) = $ 61,933.00
Chargeable Income $78,000 - $61,933 = $ 16,067.00
Tax liability = $16,067 x 25% = $ 4,016.75
Weekly tax = $4, 016.75
52 = $77.25
(b) Fortnightly paid wages and benefits = $ 4,000.00
Annual emoluments - $4,000 x 26 = $ 104,000.00
Deduct Total deductions (as shown on TD 1Approval) = $ 65,000.00
Chargeable Income - $104,000 - $65,000 = $ 39,000.00
Tax liability = $39,000 x 25% = $ 9750.00
Fortnightly tax = $9750
26 = $375.00
(c) Monthly paid salary and benefits = $ 11,500.00
Annual emoluments - $11,500 x 12 = $ 138,000.00
Deduct Total deductions (as shown on TD1Approval) = $ 90,000.00
Chargeable Income - $138,000 - $90,000 = $ 48,000.00
Tax liability = $48,000 x 25% = $ 12,000.00
Monthly tax = $12,000
12 = $1,000.00
Benefits-In-Kind
The provision of Sections 133-141of the Income Tax Act state that where a company
pays expenses on behalf of its directors/employees or grants allowances or benefits
to any such director/employee, the amount paid or granted shall be treated as a
perquisite (BIK) of the office/employment and included as income of the
director/employee. (See our Booklet – Expenses, Allowances and BIK for more
information).
14
TD 4 Certificates
Employers must note the following:
(1) Total taxes shown on the TD. 4 Certificate as deductions must agree with the
total P.A.Y.E. remitted to the Board of Inland Revenue for the Income Year.
(2) Total emoluments shown on the TD. 4 Summary must agree with the pay
records of the business and with the total of the TD. 4 Certificates attached to
the Summary.
Under the following circumstances every employer is under an obligation to deduct tax
(where applicable) and issue a TD 4 Certificate:
(a) Change of Employment
If an employee changes his job, the former employer will cease to deduct tax.
The new employer would now deduct tax on the basis of a new Certificate of
approval for PAYE tax deductions submitted to him by the employee or by
instruction from the Board.
(b) Death of the Employee
Where an employee dies and emoluments are due to him after his death,
deductions are to continue as if he were alive.
(TD 4 Certificates must be sent to his Legal Personal Representative by
the 15th
day of the month following the month in which he died).
(c) Death of Employer
If an employer dies (but his business continues) his Legal Personal
Representative must continue to make PAYE deductions.
(d) Change of Ownership-Business
If a business changes hands, the new employer is responsible for the PAYE
deductions.
(e) Cessation of Business
If an employer ceases to carry on business he must, within one month after
cessation, issue TD 4 Certificates to all employees from whose emoluments
any tax was deducted.
Where a business ceases operations, PAYE deductions, which had not yet
been remitted to the Board, must be paid to the Inland Revenue Division
within seven days after cessation of the business.
15
(f) Retirement of Employee If an employee retires and is given a pension, such retirement shall not be
treated as a cessation of employment for the purposes of the PAYE
Regulation if the emoluments are paid by or on behalf of the same
person both before and after the retirement.
If the pension is paid by a person other than the former employer, (e.g.
Trustee) the pensioner must provide the other person with a certificate of
approval for PAYE tax deductions for the purpose of tax deductions and the
Trustee must give TD 4 Certificates to the retiree on the appointed date.
Where retroactive payments are made, these payments must be included on
the TD4 Certificate in Box 7. Completion of the TD 4 Certificate
All TD 4 Certificates must bear the official name, address, stamp, BIR and P.A.Y.E.
File number of the Employer. They should also bear the N.I.S. Number and Board
of Inland Revenue File Number of the Employee and should be initialled by the
officer with such delegated responsibility.
Where applicable, the following information must be inserted in the appropriate
boxes on the TD 4 Certificate:
(1) Total deductions (as shown on the TD 1 Form).
(2) Weeks employed for the year.
(3) Remuneration before deductions.
(4) Commissions.
(5) Taxable Allowances (Form IT 76. See page 18)
(6) Other Taxable Allowances. (e.g. Travelling allowance for which no
dispensation is granted).
(7) Income relating to previous year(s) paid in current year.
(8) Savings Plan withdrawals of Contributions made by Company.
(9) Gross Earnings. (Total of boxes 3-8)
(10) Non-Taxed Allowances and Benefits. viz.:-
(i) Employers Contribution to Approved Fund/Contract (This refers to
payments made by the employer in accordance with Section 134(6)
of the Income Tax Act ONLY).
NB: Employees do not contribute to this plan.
(ii) ONLY Travelling allowances for which the Board has approved a
dispensation.
(11) Approved Pension Fund Plan/Approved Deferred Annuity Plan
(Employees contributions).
(12) National Insurance deducted.
(13) Income Tax deducted. (PAYE)
(14) Health Surcharge deducted.
(see Specimen of TD 4 Certificate on next page)
16
TD4 - 2011
TD
4 S
upplem
entary
(Rev
ised)
GO
VE
RN
ME
NT
OF
TH
E R
EP
UB
LIC
OF
TR
INID
AD
AN
D T
OB
AG
O
BO
AR
D O
F IN
LA
ND
RE
VE
NU
E
RE
TU
RN
OF
EM
OL
UM
EN
TS
PA
ID A
ND
PA
YE
DE
DU
CT
ED
Em
plo
yees N
ote –
Atta
ch o
rigin
al o
nly
to In
com
e Tax R
eturn
20
11
PL
EA
SE
TY
PE
OR
PR
INT
IN B
LO
CK
LE
TT
ER
S
PL
EA
SE
RE
AD
INS
TR
UC
TIO
N S
HE
ET
CA
RE
FU
LL
Y
Num
ber o
f Week
s for w
hich
Health
Surch
arge w
as Ded
ucted
(14)
Health
Surch
arge C
alculatio
n
(8)
Sav
ings P
lan
With
draw
als of
Contrib
utio
ns
mad
e by
com
pan
y
(1)
Total
Ded
uctio
ns
Em
plo
yee’s B
IR F
ile Num
ber
EM
PL
OY
EE
’S N
AM
E A
ND
RE
SID
EN
TIA
L A
DD
RE
SS
(9)
GR
OS
S E
AR
NIN
GS
(3 –
8)
(2)
Week
s
Em
plo
yed
Em
plo
yee’s N
IS N
um
ber
Num
ber o
f Week
s at $8.2
5
Em
plo
yer’s
Contrib
utio
n
To A
ppro
ved
Fund/
Contract –
Sect. 1
34
(6)
(10)
BIR
Appro
ved
Non
-taxed
Allo
wan
ces
and B
enefits
(3)
Rem
uneratio
n
Befo
re
Ded
uctio
ns
EM
PL
OY
ER
’S N
AM
E A
ND
AD
DR
ES
S
(4)
Com
missio
ns
Em
plo
yer’s P
AY
E F
ile Num
ber
Trav
elling –
Disp
ensatio
n o
nly
Num
ber o
f Week
s at $4.8
0
(11)
Em
plo
yee’s
Contrib
utio
n to
Appro
ved
Pen
sion
Fund P
lan/S
chem
e
(5)
Tax
able
Allo
wan
ces
(IT 7
6)
(12)
Natio
nal
Insu
rance
Ded
ucted
Trav
ellin
g
(6)
Oth
er Tax
able
Allo
wan
ces
Em
plo
yer’s B
IR F
ile Num
ber
EM
PL
OY
ER
’S S
TA
MP
AN
D IN
ITIA
LS
Oth
er
Health
Surch
arge
Ded
ucted
(13)
Inco
me
Tax
Ded
ucted
(PA
YE
)
(7)
Inco
me relatin
g to
prev
ious y
ear(s)
paid
in cu
rrent y
ear
17
Completion/Issuance of I.T. 76 Certificates and Summary
The Income Tax Act Ch. 75:01 and the Income Tax (Employment) Regulations
require an employer who pays allowances or expenses on behalf of an employee
or provide an employee with benefits in kind, to furnish such an employee with
particulars in respect of these payments/benefits. The particulars must be
included on the Form IT 76 prescribed by the Board of Inland Revenue for this
purpose.
This form is to be prepared in triplicate. One copy (original) is to be given to the
employee; one copy (duplicate) is to be submitted to the B.I.R. together with the
original IT 76 Summary; and one copy (triplicate) is to be retained by the
employer for his records.
The IT 76 Summary must state the names of all the employees in respect of
whom IT 76 Certificates were completed.
NB. These forms, the IT 76 Certificates and Summary are to be submitted
together with the TD 4 Certificate and Summary to both the employee
and the Board of Inland Revenue on the appointed day (last day of
February of the year following the income year).
A person who fails to make the return within the time specified is guilty of
an offence and may be prosecuted.
Health Surcharge Health Surcharge is a tax, which is charged on income.
Finance Act 14/87 transferred the responsibility for the due administration,
computation, collection and recovery of health surcharge from the National
Insurance Board to the Board of Inland Revenue.
Health Surcharge is charged and payable: -
(a) By every employed person who pays or is liable to pay contribution
under the National insurance Act; and
(b) By individuals other than employed persons who are liable to
furnish a return of income (self-employed)
Individuals who are exempt from the payment of health surcharge are those:
♣ Under the age of sixteen (16) years
♣ Sixty (60) years and over
♣ Whose only source of income is pension
18
Rates of Payment
Health Surcharge is payable at two (2) rates as follows:-
- Where the monthly/weekly income is more than $469.99/$109.00
respectively – the rate is $8.25 per week.
- Where the monthly/weekly income is less than $469.99/$109.00
respectively – the rate is $4.80 per week.
Method of Payment of Health Surcharge
♣ The employer must make this payment after deducting the correct amount
from the emoluments of his employees at each pay period.
This amount is payable to the Board on or before the 15th
day of the month
following the month in which the deduction was made.
Health Surcharge is payable in cash or by certified cheque and must be
accompanied with the PAYE/Health Surcharge Monthly Return.
Penalties for late/non-payment of health surcharge
♣ Employed Persons An employer who fails or neglects to deduct health surcharge and or remit to
the Board is guilty of an offence; and in addition to the amount not deducted
and or remitted is liable to a penalty of 25% of such amount and interest at
the rate of 20% on both the outstanding amount and penalty from due date of
payment.
NB Health Surcharge deductions must be included on the TD 4 Certificate.
(Box 14).
Garnishee Order
Where a taxpayer (including an employee) has outstanding taxes and refuses
or neglects to make payments to liquidate this arrears, the Board of Inland
Revenue can enforce collection using various methods empowered by the
Income Tax Act.
One of these methods is the issuing of a Garnishee Order.
A copy of the Garnishee Order is also sent to the taxpayer.
Section 112 of the Income Tax Act enables the Board to instruct the employer
via a Garnishee Order to deduct arrears of taxes from emolument of the
delinquent employee for a specific period.
19
This arrears is deducted in addition to any tax which is due under the PAYE
System. A deduction under a Garnishee Order must be remitted to the Board of
Inland Revenue at the end of the month in which the deduction was made.
This payment must not be included in the monthly PAYE deductions. A
separate PAYE Remittance Form must be used.
Information in respect of the Garnishee Order must include:
~ Garnishee Order No.
~ Name of Employee
~ BIR No. of Employee
~ Current Remittance
~ Amount Remitted to Date
N.B. Deductions made via a Garnishee Order MUST NOT be included on the
TD 4 Certificate for the respective year of income.
Monthly Return - PAYE/Health Surcharge
Every registered employer would receive a monthly PAYE/Health Surcharge Return
in the mail.
The employer is required to submit this return along with PAYE/Health Surcharge
deducted from emolument at any of our payment centres on or before the 15th
day of
month following the month of deductions.
If an employer does not receive a Return in the mail he can request one, in writing,
from any of our Regional offices.
An employer shall submit only one(1) Return for a filing period (month).
Therefore, if more than one payment is made for a period; all the payments must be
totaled and entered on the Return.
Failure to submit a Return for any month means that the respective payment would
be suspended.
20
PYE-00004231
31-OCT-2011
JOHN DOE
3 BENCH PARK
WOODFORD SQUARE
PORT OF SPAIN
PYE-00004231
31-OCT-2011
JOHN DOE
3 BENCH PARK
WOODFORD SQUARE
PORT OF SPAIN
21
Payment and Accounting For Tax
All taxes deducted must be paid by the employer to the Board on or before the
stipulated date, i.e. 15th
day of the month following the month in which the
deductions were made.
Where a person ceases business, the tax must be paid within seven (7) days after the
cessation of the business.
All queries and payments can be made to:
Head
Office (POS):
Inland Revenue Division
Office Collections Victoria Courts
Cor. Queen & Edward St.
Port of Spain
Telephone:625-0895
Fax:623-0426
Arima Regional
Office:
Inland Revenue Division
Prince Street Arima
Telephone: 667-7639
Fax: 667-5589
San Fernando Regional
Office:
Inland Revenue Division
Taxpayer Services 52, Cipero Street
San Fernando
Telephone :657-5000 Ext 106
Fax: 657-6057
Tobago Regional
Office:
Inland Revenue Division
Sangster’s Hill Scarborough
Tobago
Telephone: 635-1420
Fax: 639-2538
Payments can also be made at the following District Offices:
Chaguanas - #20 Ramsaran Street, Chaguanas
Couva – railway Road, Couva
Pt.Fortin – Teshier Road, Point Fortin
Siparia – High Street, Siparia
Sangre Grande – Damarie Hill, Guaico
Princes Town – Naparima Mayaro Road, Princes town
Rio Claro – Naparima Mayaro Road, Rio Claro
Acceptance of Payment by the Bank
The Royal Bank of Trinidad and Tobago, through all its branches, has entered into an
agreement with the Government to accept, from the employer, payment of monthly
PAYE and Health Surcharge remittances deducted from employees.
The Bank will accept payment made –
(a) On pre-validated computerized forms received in the mail. Where no pre-
validate form is available the employer must make payments directly to the
Board;
22
(b) By certified cheque, except where the employer is an account holder of the
Branch;
(c) Over the counter during normal hours and by way off the Bank’s “Fast
Service 24”;
(d) Where the amount received agrees with the amount shown on the
PAYE/Health Surcharge Monthly Return;
(e) And issue as a receipt the smaller segment of the official form with its
(Bank’s) official stamp affixed. The larger segment will be sent to the Board;
(f) Not later than the due date. i.e. The Bank will not accept late payment nor
collect penalty and interest.
This system has been devised in an effort to assist the taxpayer to expedite payments.
It is advisable to take advantage of this convenient method of effecting payments.
Accounting for Tax Deducted and Keeping Records
When an employer makes any payment of emoluments to an employee or holder of an
office from which tax is deducted as required by the Regulations, he shall furnish the
employee or office older with particulars of the payment including particulars of the
gross emoluments for the pay period and the amount of tax deducted there from in such
form as may be approved by the Board (Payslip).
The Board may, in its discretion, exempt in writing any or all employers from
complying with the provisions of this regulation in respect of such classes of
employees or office holders as the Board shall think fit, and such exemption may at
any time be revoked by the Board.
Every person who makes any payment of emoluments to an employee or holder of an
office (from whose emoluments tax is deducted) must keep, to the satisfaction of the
Board, a record of emoluments paid to each employee and tax deducted from each
payment. Upon request, all records relating to the payment of emoluments and taxes
must be made available for inspection by the Board at the premises of the employer.
Severance Pay and Computation
Severance Pay refers to a lump sum payment made to an employee, under a contract of
emolument, in respect of past services where the –
(i) Employee’s position is made redundant, or
(iv) Employee’s services were terminated due to ill health.
23
Payments made to an employee by reason of voluntary resignation would not
qualify as severance pay.
Requirements for processing of Severance Approvals for Employees –
Prior to the payment, the following information must be supplied to the
Taxpayer Services II (P.A.Y.E. Section) in writing, on a Company‟s letterhead:-
a) Redundancy-
1) Employee’s name
Date of Birth
Address
Contact Number
BIR Number
Post of Employee
2) Date of start of employment
3) Copy of Employment Contract (with details of permanent employment)
4) Date of Severance
5) Amount of Severance
6) Reason for Severance
7) Computation of how severance amount was calculated
8) PAYE number of company
9) Individual Termination letters
In addition to the general requirement at (1) – (9) the following information is
needed in respect of the specific severance areas listed below:
b) Severance payment to be classified as Retirement Severance Benefit (i) Employee must be 60 years of age (copy of Birth Certificate and
Affidavit)
(ii) Letter from National Insurance Board stating the employee has
retired from insurable employment.
(iii) Letter from the company stating whether the employee is part of
the
company’s pension plan.
c) Severance payment due to Ill Health (i) Original Letter from Medical Doctor stating the nature of the
illness and whether or not the employee is able to continue to
work.
24
(ii) Photocopy of the relevant section from the Company’s Terms and
Condition of employment or the Trade Union Agreement covering
severance payment.
(v) Details of computation.
With respect to payments connected with termination of employment or office
which would not otherwise be chargeable to tax:-
(a) Where payments are to be made to a spouse, relative or dependant – the
names of the spouse/relative/dependant and the circumstances under
which the payment is to be made to him/her and
(b) Where payment is in the form of a valuable consideration other than
money – details of the consideration, the dates it is to be given and
evidence of its value at that date.
It should be noted that where a payment is made to a spouse or any relative or
dependant of a person who holds or has held an office of employment, the
payment shall be treated as if it were made to that person (the employee).
It is important that this information be forwarded to the Board for determining
the nature of the payment and the rate at which tax is to be deducted.
N.B Tax deducted from a Severance payment is not PAYE. A separate
TD4 Certificate with the details of the Severance Pay only, must be
prepared and issued to the Board of Inland Revenue and the employee.
The words „SEVERANCE PAYMENT‟ should be clearly marked on this
TD 4 Certificate.
The first $300,000.00 received by an employee as Severance Pay upon
termination of employment where the position has become redundant or on
grounds of ill health is exempt from tax under the Income Tax Act.
The amount in excess of that which was exempted is to be taxed at the
average rate of tax paid by the employee for the year immediately
preceding the year in which the employment is terminated.
NB: The average rate of tax is computed by the Board of Inland Revenue as
follows:
Tax Payable x 100
Chargeable Income
25
Example: No. 1
2011: Total Severance Pay received … $449,000.00
Less Statutory Limit (Exempt) … $300,000.00
Chargeable at Average Rate … $149,000.00
Taxpayers Chargeable Income for 2010 was $63,500.00
Tax payable on $63,500.00
= $63,500 @ 25% = $15,875.00
= $15,875.00
Average rate = 2010 Tax Payable x 100
2010 Chargeable Income
= $15,875 x 100 = 25%
$63,500
Tax on Severance Pay excess = $149,000 at 25%
Tax Payable = $37,250.00
Example: No. 2
(Employment was terminated in 2009. Severance was received in
2011).
2011 – Total Severance Pay received $530,000.00
Less Statutory Limit (Exempt) $300,000.00
Chargeable at Average Rate $230,000.00
Taxpayer’s Ch. Inc. for 2008 (year preceding termination) was
$175,000.00.
Tax payable on $175,000.00:
$175,000.00 @ 25% - $43,750.00
Tax Payable - $43.750.00
26
Average Rate of Tax = $ 43,750.00 x 100 = 25%
$175,000.00
Tax on Severance Pay excess = $230,000.00 x 25%
Tax Payable = $57,500.00
Retirement Severance Benefit and Computation
This is an amount paid to an individual who:
(a) Is not entitled to a pension other than under the National Insurance
Act or the Old Age Pension Act;
(b) Is not a member of an approved Pension Fund Plan, or a Fund or
Scheme that is a Provident Fund and
(c) Who produces evidence to the satisfaction of the Board of Inland
Revenue that he has;
(i) Retired from insurable Employment within the meaning of
the National Insurance Act; and
(ii) Reached the age of 60 years.
Subject to the above conditions, an amount of $300,000.00 of the
retirement severance benefit is exempt from Income Tax. Any amount
remaining in excess of the exemption of $300,000.00 is to be included in
the individual’s chargeable income and charged to tax using the rate of
tax for the current year.
Example
2011: Total Retirement Severance Benefit $441,000.00
Less Statutory Limit (Exempt) $300,000.00
Income Chargeable at Scale Rate $141,000.00
Taxpayer Income for 2011 as at 31/3/11 $ 53,500.00
27
Tax Computation
*Taxpayer’s Income as at 31/3/11 $ 53,500.00
Plus excess over $300,000.00 $141,000.00
Total Income $194,500.00
Less Personal Allowance $ 60,000.00
Total Net Income $134,500.00
Less Approved Deductions (TD 1 Approval) $ 14,000.00
Chargeable Income $120,500.00
Tax on $120,500.00 @ 25%
Total Tax Liability for 2011 = $ 30,125.00
: NB: Tax Deduction on Retirement Income =
(Total Tax Liability – P.A.Y.E. deduction to date from *income)
Before payment of a Retirement Severance Benefit is made, the employer must
write the Board of Inland Revenue (P.A.Y.E. Section) for approval.
Ex-Gratia Payments This payment is not normally classified as one of the types of Severance Payments.
Upon approval by the PAYE Section of the Inland Revenue Division, the first
$300,000.00 of ex-gratia payment is exempt from tax and the balance shall be
charged to tax using the average rate of tax.
Retirement Benefit Payments – Public Sector
In the Public Sector, Retirement Benefit Payments may take the form of:
- Contract Gratuity
- Retirement at 60 – compulsory retirement
- Permission to retire at 50/55
- Retirement on medical grounds due to ill health
In all cases of Public Sector Retirement Benefits, a Statement of Indebtedness must
be obtained from the Board of Inland Revenue before payment is made.
Contract Gratuity payment arises where a person (both within the public and
private sectors) was employed on contract for a specific period, and in accordance
with the terms and conditions of the contract, the employment is terminated. This
payment must be provided for in the contract of employment.
28
Contract Gratuity - Statement of Indebtedness
Prior to the payment being made, the employer must request a Statement of
Indebtedness from the Board of Inland Revenue.
The request should include:
The employee’s name
Tax deducted to date
The contract gratuity payable
A completed TD 1 Form
The total income for the year (this includes income paid to date and payable
for the remainder of the year, and any other source of income. eg. Pension)
If the contract is to be renewed this should be also stated together with the
projected earnings for the remainder of the year.
The approval from the Board can only be granted where all outstanding taxes are
cleared.
Where these taxes cannot be paid, a Garnishee Order would be issued to deduct the
arrears from any payment to the individual.
Taxation of Contract Gratuity and the Approval
Provided all liabilities are cleared, the Board of Inland Revenue will issue a
Statement of Indebtedness authorizing payment and indicating how much tax is to
be withheld, in accordance with the P.A.Y.E. Regulations.
The tax is computed after taking into consideration all income to be paid to the
individual for the entire year and the necessary deductions. (Thus the need for a
TD 1 and a statement showing tax and earning to date, along with projected
income to be earned.
Statement of Indebtedness re: Payment of Retirement Benefits
A similar procedure is followed where Public Servants are due to retire.
This allows the Board of Inland Revenue to recover all outstanding debt owed by
the taxpayer, prior to him receiving his lump sum payment (gratuity) from the
state.
On receipt of the request for the Statement of Indebtedness, the Board of Inland
Revenue must ensure that all outstanding liabilities are cleared.
29
Failure to make these payments would result in a Garnishee Order being served.
All liabilities to the Board of Inland Revenue are first settled by this means, and
the taxpayer then receives what remains of his gratuity.
Not included as Severance Payments are lump-sum payments made:
(a) Under an approved pension scheme;
(b) Under an approved pension fund plan or approved deferred annuity
plan;
(c) Under a contract approved by the Board under section 134(6) of the
Income Tax Act, Chapter 75:01.
(d) In connection with the termination of the holding of an office or
employment by death of the holder or made on account of the
injury to or disability of the holder of the office or employment.
(e) On the death of an employee under his employer’s pension plan.
TAX RATES 2006 – 2011
25% of the Chargeable Income
30
PENALTIES UNDER THE INCOME TAX ACT
Specific Offences for PAYE.
Sec. 98(2) Failure to file a tax declaration.
Any person who fails to file a declaration is liable on summary
conviction to a fine of $3,000.00.
Sec. 98(4) Failure to deduct and/or remit PAYE.
A person who fails to deduct PAYE or to remit, to the Board of Inland
Revenue, the PAYE deducted is guilty of an offence and liable on
summary conviction to a fine of fifteen thousand dollars ($15,000.00) or
to imprisonment for two (2) years or both.
Sec. 99(4) Penalty for late remittance.
Failure to remit the PAYE deducted will result in a penalty of 25% or
$40.00 whichever is greater and interest at the rate of 20% per annum on
the outstanding amount plus penalty from the due date to the day of
payment.
Sec. 99(7) Failure to deliver account or certificate of tax deducted or withheld
Any person who fails to deliver an account or certificate to any person
from whose emoluments the tax was deducted or withheld or to the Board
for the purpose of accountability, is guilty of an offence and is liable on
summary conviction to a fine of seventy five dollars ($75.00) for every
day during which such failure continues.
Sec. 125(3) Any person who contravenes or fails to comply with the regulations made
under Section 125 (1) (i.e. the PAYE Regulations) may be subject on
summary conviction to a fine of five thousand dollars ($5,000.00) or three
(3) months imprisonment.
NOTE:
THIS SUMMARY OF THE PAYE SYSTEM IS NOT A SUBSTITUTE
FOR THE INCOME TAX LAWS & REGULATIONS.
In the case of any inadvertent conflict, the Laws and Regulations prevail.
31
NOTES
32
NOTES
