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The PAYE System Employers’ Guide to Personal Income Tax
16 March 2012
Government of Antigua and Barbuda Ministry of Finance, the Economy and Public Administration Inland Revenue Department
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Message from the Commissioner of Inland Revenue
Dear Employer,
I wish to state my appreciation for your cooperation in the operation of the PAYE tax system and look forward to your continued support. The Inland Revenue Department has had several consultations with many stakeholder groups, and is pleased to state that their input has been considered in this revised Guide.
The PAYE system is being administered under the Personal Income Tax Act, 2005 (Amended).
Except where specifically stated otherwise the general rules are:
(a) Benefits or allowances available to ALL employees are not taxable (e.g. subsidised meals, child care, group life insurance, pension contributions);
(b) Discounted goods and services provided or available to all employees are not taxable (e.g. bank staff loans, free education from educational institutions, groceries for supermarket staff).
The persons who will not be affected by PIT / PAYE are:
(a) Anyone whose gross income does not exceed $3,000 monthly or $36,000 annually;
(b) Pensioners whose gross income does not exceed $5,000 monthly or $60,000 annually.
Furthermore, a taxpayer is entitled to additional exemptions if he or she:
(c) Pays mortgage interest;
(d) Contributes to a private pension fund;
(e) Contributes to individual medical insurance premium;
(f) Pays tuition fees for tertiary education.
The persons who will be affected by PIT/PAYE are:
All fulltime employees, temporary and casual workers, contract workers, directors, shareholders and pensioners:
(a) Whose gross income exceeds $3,000 monthly or $36,000 annually, or $5,000 monthly or $60,000 annually in the case of pensioners.
(b) Persons who satisfy the above, and are in receipt of allowances and benefits, not specifically exempt.
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CONTENTS
Who Should Use This Guide? ............................................................................ 4
Introduction ....................................................................................................... 5
Employers’ Duties, Obligations and Responsibilities ...................................... 6
A. Duties and Obligations .................................................................................................. 6
The PAYE System Defined ............................................................................... 10
A. PAYE Exemptions ................................................................................................... 10 B. Explanatory Notes for Exemptions ............................................................................. 11 C. Employment Income Subject to PAYE ....................................................................... 14 D. Foreign Payments Emoluments Subject to PAYE ....................................................... 16 E. ABST Treatment of Employee and Shareholder Benefits ............................................. 16 F. Allowances and Benefits to be Included in Income ......................................................... 18
Appendix I: Definitions and Interpretation ..................................................... 39
Appendix II: What is an Employer? ................................................................. 41
Appendix III: Employee or Self-Employed Worker ........................................ 42
Appendix IV: Determining a Worker’s Employment Status ........................... 43
Appendix V: Special Situation ......................................................................... 44
Appendix VI: Calculating Auto Benefit Form for (2012) ................................. 45
Appendix VII: Determining a Worker’s Employment Status ........................ 48
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WHO SHOULD USE THIS GUIDE?
This Taxpayer Guide provides useful information for employers and employees. Use this Guide if you are an employer; a trustee; or a payer of other amounts (e.g. a trustee in bankruptcy) or if you pay employees any of the following types of income, such as:
Employment income;
Fees;
Allowances and benefits;
Any other payments for services rendered during the year.
For information on calculating payroll deductions see tax deduction tables and F47 PAYE Monthly Remittance Instalment Guide (2011) for Employers.
For information on filing an annual return, see F48 PAYE Annual Reconciliation Return (2011) Guide to completion.
A benefit or allowance can be paid to employees in cash (such as an auto allowance) or provided in a manner other than cash (such as a gift, transportation or housing).
The employer may have to include the value of a benefit or allowance in an employee’s income, depending on the type and purpose of the benefit or allowance.
This Guide explains the employer’s responsibilities and indicates how to calculate the value of benefits and/or allowances.
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INTRODUCTION
All employers are required to withhold and remit income tax from amounts paid to employees under the Personal Income Tax Act, 2005 (Amended). This publication is intended to clearly define those items that should be included in employment income and subjected to income tax withholdings. This Guide will also assist employers in quantifying the amount of the benefit.
An employer who withholds an amount from an employee is considered to hold the amount separate and apart from the property of the employer in trust for the Commissioner and for payment to the Commissioner in the manner and at the time provided under the Act. Put simply, PAYE deductions made from the salaries and wages of employees should be kept in a separate account, and not used for the day to day operation of the business.
The Inland Revenue Department (IRD) will administer the current Act as including emoluments in the calculation of “gross earnings” for income tax purposes. This change in IRD administrative policy will commence on 2nd April 2012.
There are compelling legal requirements for employers to make statutory deductions from emoluments. In order to comply, those involved must have a good understanding of all of the factors involved in this exercise.
The operation of the Pay as You Earn (PAYE) system is based on the Personal Income Tax Act, 2005 (Amended).
The Guide provides detailed information about a number of special subjects that fall within PAYE, and on the basic operation of the PAYE system.
From time to time, the Commissioner of Inland Revenue or his designate may issue an assessment, detailing the tax liability of a taxpayer. If the taxpayer is aggrieved, they have the right to appeal the decision of the Commissioner to the Tax Appeal Board.
For further information of the PAYE System, contact:
Inland Revenue Department
Taxpayer Services
Tel (268) 562-4877 or (268) 562-5605 or (268) 562-5606
Fax (268) 462-3175
Email: [email protected] or [email protected]
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EMPLOYERS’ DUTIES, OBLIGATIONS AND RESPONSIBILITIES
A. Duties and Obligations
Under the Personal Income Tax Act, the employer is required to do the following:
1. Apply to the IRD for a Tax Identification Number Every person who is or becomes an employer is required to register with the Commissioner of Inland Revenue and obtain a Tax Identification Number.
If a person becomes an employer at any time then the person is required to register not later than fifteen days after becoming an employer.
To obtain a Tax Identification Number the employer must complete either Form F14 Individual Enterprise Registration in case of an individual or Form F15 Non-Individual Enterprise Registration in the case of a corporation or partnership and submit it to the IRD.
2. Withhold tax from employees' emoluments Each time the employer makes a payment to an employee the employer must deduct the appropriate amount of tax in accordance with the Tax Deduction Tables supplied by the IRD.
Employers may accept an instruction from employees to increase the amount of tax withheld from their income. However, employers must not accept any instructions from employees to reduce or cease the withholding of tax from their income.
3. Remit tax withheld from employees to the Inland Revenue Department Employers will remit tax withheld by filing their F47 Pay as You Earn - Monthly Remittance form along with the F47A Emoluments and Tax Deduction form. The forms can be collected from the IRD or be downloaded at the official Government website: www.antigua.gov.ag.
The employer is required to remit the tax withheld to the IRD on the employee's behalf. The payment must be accompanied by a F47 Pay as You Earn - Monthly Remittance form along with the F47A Emoluments and Tax Deduction form and submitted not later than 15 days after the last day of each month for which the deduction was made.
If the fifteenth day of the month falls on a Saturday, Sunday or statutory holiday then the payment must be made by the next business day.
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4. Provide employees with a record of payments and deductions An employer is also required to provide each employee, whether or not tax has been withheld from the employee's income, with the following documents:
(a) at the time of payment a record showing the amount of:
Employment income;
Allowances and benefits;
Tax, if any, withheld from the employee's income in respect of the previous month; and
(b) not later than 15 February in each year or 21 days after ceasing to be the employer of a particular employee, an F55 - Statement of Remuneration paid and tax deducted with respect to the previous income year showing the amount of:
Employment income;
Allowances and benefits;
Tax withheld during the income year to which the employment relates.
5. Maintain records Every employer is required in respect of each of employee, to maintain a record showing in relation to each month and income year:
The name and Tax Identification Number of the employee;
The allowances and benefits accrued to the employee;
The employment income accrued to the employee; and
The amount of tax withheld from the emoluments of the employee.
An employer is required to retain the records relating to each employee for a period of seven years from the date on which the person first became an employee.
6. Complete an Annual Return An employer is required to complete and file with the Inland Revenue Department, a F48 Pay as You Earn Annual Declaration not later than 15 February in each year in respect of the preceding income year. This return will be a reconciliation of all payments and reporting information contained in the F47 Pay as You Earn Monthly Return forms filed throughout the year.
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7. Determine if the benefit is taxable The first step is to determine whether the benefit provided to an employee is taxable and has to be included in his or her employment income. A benefit is personal in nature and can include:
(a) A reimbursement of personal expenses;
(b) Free use of property, goods, or services owned by the employer; or
(c) An allowance.
When an employee receives a benefit as well as salary and wages, the value of the benefit must be included in the employee’s income. Whether or not the benefit is taxable depends on its type and the reason an employee or officer receives it.
The benefit may be paid in cash (such as a meal allowance) or provided in a manner other than cash (a non-cash benefit), such as a gift. To determine if the benefit is taxable, see Sections C and F in the discussion on The PAYE System Defined.
8. Calculate the value of the benefit Once the benefit is determined to be taxable, the employer must calculate its value.
The value of a benefit is generally its fair market value (FMV). This is the price that can be obtained in an open market between two individuals dealing at arm’s length. The cost to the employer for the particular property, goods, or service may be used if it reflects the FMV of the item or service.
The employer must be able to support the value if asked to do so by IRD.
9. Include the ABST When the employer calculates the value of a taxable benefit an amount must be included for the ABST. The benefit should include the ABST payable by the employer, as well as the tax that would have been payable if the employer was not exempt from paying the tax because of the nature of the use of the property or service.
The amount of the ABST included in the value of taxable benefits is based on the gross amount of the benefits, before subtracting any amounts the employee might have reimbursed.
The employer does not have to include the ABST for:
(a) Cash remuneration (such as salary, wages, and allowances); or
(b) A taxable benefit that is an exempt supply or a zero-rated supply as defined in the ABST Law.
For more information on how the ABST applies to a specific benefit or allowance see Section E Page 16.
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Employers who are ABST registrants may have to remit ABST for the taxable benefits provided to employees. For more information, see Section E Page 16.
10. Calculate payroll deductions After calculating the value of a benefit and including the ABST that may apply, this amount should be added to the employee’s income for each pay period or when the benefit is received or enjoyed. This gives the total amount of income subject to payroll deductions. The employer must then withhold the deductions from the employee’s total pay in the pay period in the normal manner.
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THE PAYE SYSTEM DEFINED
PAYE (Pay as You Earn) is the system used to calculate and collect Personal Income Tax from payments made to employees.
PAYE applies to all fulltime employees, temporary and casual workers, contract workers, directors, shareholders and pensioners. All persons in receipt of an income are entitled to a personal allowance, which is exempt from the payment of Personal Income Tax. The Personal Income Tax Act, 2005 provides the following definition: “personal allowance” means the amount of income not liable to tax as provided in the Schedule.
Based on this schedule, individuals in receipt of gross income not exceeding $3,000 monthly or $36,000 per year and pensioners whose gross earnings do not exceed $5,000 monthly or $60,000 per year are exempt from the payment of Personal Income Tax.
What are emoluments? The returns or gains derived from an office or employment usually in the form of compensation.
Emoluments are made up of pay (salary or wages), benefits and allowances.
(a) Salary and wages include leave payments, overtime payments, commissions, bonuses remuneration, etc.
(b) Self-employment and other income include director fees, board fees, rent, royalties etc.
(c) Allowances include housing, travel, duty, acting, entertainment, utility etc.
(d) Benefits include non-cash items such as free housing, free utilities, free use of a company vehicle etc.
A. PAYE Exemptions
List of items not included in emoluments (exempt income):
(a) The first $3,000 of monthly income or $36,000 per year;
(b) Gratuities granted to persons upon expiration of a fixed period contract of service not exceeding 12.5 per cent of total income;
(c) Employer’s contribution to pension plans and thrift funds not exceeding 7.5 per cent of income;
(d) Employer’s contribution to group life and group medical insurance plans, where the benefit is available to all employees;
(e) Capital sums withdrawn by individuals from pension or thrift funds on retirement;
(f) Income arising from a scholarship;
(g) Income arising from the business of shipping or air transport for non-residents of Antigua and Barbuda, where a reciprocal arrangement is in place with their home countries;
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(h) Interest on savings, capital gains and dividends;
(i) Savings realized from low-interest or interest free loans from employers, on loans not exceeding $10,000;
(j) Savings realized on loans of any amount granted by employers to their employees to purchase residential lands, construct an owner occupied residence, pay medical or educational expenses or purchase a motor vehicle;
(k) Interest saving realized on any loan, granted for any purpose by financial institutions (commercial banks, credit unions, mortgage companies and insurance companies) to their employees;
(l) A benefit, other than pension income under the Social Security Act;
(m) In addition to the standard exemption mentioned above, persons in receipt of a pension, other similar benefit or other terminal benefit are entitled to an additional personal allowance, not exceeding $2,000 per month or $24,000 per year;
(n) Income arising from any agreement to which the Government is a party and which is exempt from the tax provided the exemption is expressly stipulated in the agreement;
(o) Tips and service charges received by an individual engaged in the hospitality industry other than an individual in a management position;
(p) Housing and travel allowances, subject to the maximum exemptions set out in this Guide;
(q) Medical expenses reimbursed by employers, which must be supported by receipts and/or invoices from the medical practitioner or hospital;
(r) Child care expenses; and
(s) Salaries paid to members of the consular services of foreign countries.
B. Explanatory Notes for Exemptions
As a general rule, once a benefit is available to ALL employees, as opposed to a select number of employees, the benefit would be exempt from the payment of PAYE.
1. Board and lodging allowances paid to players on sports teams Exclude board and lodging allowances from income for a participant or member or other official of a sports team or recreational programme if all the following conditions are met:
(a) You are a registered charity or a non-profit organisation;
(b) The allowance is for board and lodging for members, and/or players that have to live away from their ordinary place of residence; and
(c) The allowance is not attributable to any services, such as coaching, refereeing, or other services to the team or programme.
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2. Child care expenses Child care is not taxable if the services are provided to all employees at little or no cost. This would apply whether or not:
(a) The services are provided at the place of business; or
(b) The services are managed directly by the employer.
3. Counselling services Payments for services such as financial counselling or income tax preparation for an employee are usually considered a taxable benefit, except in the case of accounting firms.
Employee counselling services are not taxable if they are for one of the following:
(a) An employee’s re-employment;
(b) An employee’s retirement; or
(c) An employee’s mental or physical health (such as counselling for tobacco, drug, or alcohol abuse, stress management or employee assistance programmes) or that of a person related to an employee.
4. Disability-related employment benefits Benefits provided to an employee with a disability are generally not taxable.
Reasonable (as in an arms-length transaction) transportation costs between an employee’s home and work location (including parking near that location) are not taxable if they are paid for an employee who:
(a) Is legally blind;
(b) Has a severe and prolonged mobility impairment, which markedly restricts the individual’s ability to perform a basic activity of daily living; or
(c) Suffers from temporary mobility impairment, resulting from a work-related injury.
These transportation costs can include an allowance for taxis or specially-designed public transit and parking.
Reasonable benefits for attendants to help employees with severe and prolonged mental or physical impairments to perform their duties are not taxable for the employee. The benefits can include readers for persons who are blind, signers for persons who are deaf, and coaches for persons who are intellectually impaired.
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5. Health plan premiums Contributions to private health service plans (such as medical or dental plans) for all employees are not taxed. Contributions for select employees are a fringe benefit and the amount of the premium is taxable.
6. Moving expenses and relocation benefits Reimbursement of reasonable relocation expenses is not considered a taxable benefit to the employee. This would occur where an employer reimburses an employee for the expenses incurred in moving the employee and the employee's family and household effects because the employee has been transferred from one establishment of the employer to another, or because an employee accepts a job at a place away from his/her home.
7. Reimbursement or advance for travel and other expenses A reimbursement is a payment made to employees for amounts spent while conducting the employer’s business. Generally, the employee completes a claim or expense report detailing the amounts spent. This is not a taxable benefit; it becomes part of the employer’s business expenses.
An advance is an amount given to employees for expenses they will incur while conducting the employer’s business. They will account for their expenses by producing vouchers and return any amount they did not spend.
A reimbursement or an accountable advance for travel expenses is not income for the employee unless it represents payment of the employee's personal expenses.
8. Subsidised meals Subsidised meals for employees (e.g. in an employee dining room, cafeteria or work site or for pilots on duty) are not considered a taxable benefit.
9. Overtime meal allowances Overtime meals or an allowance for overtime meals not exceeding $40.00 is not a taxable benefit.
10. Tuition fees, scholarships, and bursaries Whether the training is mainly for the employer’s benefit or that of the employee and whether or not the training leads to a degree, diploma, or certificate, there is no taxable benefit. The following guidelines consider three broad categories of training:
(a) Specific employment-related training – Courses taken to maintain or upgrade employment-related skills are mainly for the employer’s benefit when it is reasonable to assume that the employee will resume his or her employment for a reasonable period of time after completing the course.
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For example, tuition fees and other associated costs such as books, meals, travel, and accommodation for courses leading to a degree, diploma, or certificate in a field related to the employee's current or future responsibilities are not a taxable benefit.
(b) General employment-related training – Other business-related courses, although not directly related to the employer’s business, are taken mainly for the employer’s benefit.
For example, fees for stress management, employment equity, first-aid, and language courses are not a taxable benefit.
(c) Personal interest training – Courses for personal interest or technical skills not related to the employer’s business are taken mainly for the employee's benefit and are not a taxable benefit.
However, tuition fees, books, and supplies paid or reimbursed for a person related to the employee are a taxable benefit for the employee for the year the payment was made, unless, as an educational institution, an employer provides free or subsidised tuition to employees or their spouses or common-law partners or children. This will not be considered a taxable benefit.
11. Uniforms and special clothing Employees do not receive a taxable benefit when:
(a) They are supplied with a distinctive uniform they have to wear while they carry out their employment duties; or
(b) They are provided with special clothing (including safety footwear) designed to protect them from hazards associated with the employment.
(c) Accountable allowances (where receipts are required) to employees to buy uniforms or protective clothing, are a reimbursement of expenses and not a taxable benefit.
C. Employment Income Subject to PAYE
The following is an indication of the items that should be included in employment income for purposes of calculating PAYE:
1. Pay (salary and wages): (a) Housing and travel allowances that exceed the cap established in this Guide;
(b) All pensions or other payments made in respect of past services in any office or employment of profit, over and above the exemptions applicable to pensioners;
(c) Any payment (other than severance) made as a result of a post being made redundant;
(d) Basic wage or salary;
(e) Bonus payments;
(f) Cash allowances;
(g) Commissions;
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(h) Fees;
(i) Gratuities or ex-gratia payments (other than tips received in the hospitality industry but excluding those in management positions);
(j) Honoraria;
(k) Overtime pay;
(l) Duty allowance;
(m) Production bonus.
2. Allowances: (a) Allowances (other than an allowance which is wholly and exclusively used in the production
of the employer’s assessable income);
(b) Amounts paid to directors, shareholders and business owners for their domestic private expenses (vacation travel, utilities, groceries etc.);
(c) Any employee’s liabilities (including tax) paid on his behalf by the employer ;
(d) Loan forgiveness and write-offs;
(e) Personal expenses incurred by an employee, which are charged to a corporate credit/debit card, and paid by the employer;
(f) Shares/equity/securities options;
(g) Utilities and other benefits of employment in money, kind or otherwise, subject to the following caps: electricity $250.00 per month; mobile or land telephone $50.00 per month and water $25.00 per month.
3. Benefits: (a) Value of private use of motor cars given/provided to employees;
(b) Value of private use of aircraft and/or boats given/provided to employees;
(c) Value of private use of employer provided living accommodation.
The term ‘employment income’ has also been extended to include payments made under a contract or arrangement where:
(a) One person is under obligation to render personal services to another whether on his/her own behalf; or on behalf of a company, and
(b) Where the person mentioned above is subject to supervision, direction or control by the other person as to the manner in which he renders those services and the remuneration for the services would not, except for these provisions, be treated as emoluments.
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D. Foreign Payments Emoluments Subject to PAYE
Where the foreign or home base salary paid to expatriates or other employees has any connection or nexus with work performed or service provided in Antigua and Barbuda, the amount paid overseas shall be included as a taxable benefit in Antigua and Barbuda. In this context, even if the payment of salary is made by a foreign employer to an expatriate employee or employee outside Antigua and Barbuda and in foreign currency, the salary paid would be liable for Antigua and Barbuda tax.
All Antigua and Barbuda entities are to deduct tax at source from the salary/allowances paid by them to expatriate and other employees and from the salary/allowances paid abroad by Antigua and Barbuda entities and related and associated foreign employers, provided that the employee worked or rendered services in Antigua and Barbuda during the period in question.
In summary, the Antigua and Barbuda entity “tax deductor/employer” is duty bound to deduct tax at source from the total salary, benefits and allowances (subject to any exemptions detailed in this Guide) paid in Antigua and Barbuda and/or overseas by the related and associated company, when no work was performed for the related and associated foreign company and the total remuneration was paid on account of services rendered in Antigua and Barbuda during the tax period in question.
E. ABST Treatment of Employee and Shareholder Benefits
1. Employee benefits Salaries, wages, commissions, and other cash remuneration, including gratuities, paid to employees are not subject to ABST. However, non-monetary means of compensating employees, commonly referred to as fringe or employee taxable benefits, may be subject to ABST.
For the most part, the ABST treatment of these benefits is based on their treatment under the Personal Income Tax Act. Generally, if a benefit is taxable for personal income tax purposes, the employer will be considered to have made a supply of goods or service to the employee. If the good or service that gives rise to the taxable benefit is subject to ABST, the employer is considered to have collected ABST on that benefit. However, there are situations where the employer will not be considered to have collected ABST on taxable benefits given to employees. These are explained below.
2. Situations where the employer is not considered to have collected ABST
(a) When the goods or services that give rise to a taxable benefit are ABST-exempt or zero-rated;
(b) When a taxable benefit results from an allowance included in the income of the employee, such as an unreasonable allowance for automobile expenses.
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Example An employer registered for ABST would like to reward an employee for outstanding performance, and has agreed to pay for the hotel accommodation, and three meals a day, for one week, in Barbados. An amount will be included in the income of the employee as a taxable benefit. However, the employer will not be considered to have collected tax with respect to the "benefit" provided to the employee since the supplies were made, enjoyed and/or consumed outside of Antigua and Barbuda.
3. When is an employer considered to have collected ABST? An employer is considered to have collected ABST on a taxable benefit subject to ABST at the end of the month in which the benefit was provided to the employee.
4. How to calculate the amount of ABST? The amount of ABST collected on a taxable benefit is calculated as a percentage of the value of the benefit for ABST purposes.
Summary
The following steps will help to determine whether an employer has to remit ABST on employee benefits.
Step 1: Establish whether the benefit is taxable under the Personal Income Tax Act and subject to ABST. If the benefit is not taxable or is not subject to ABST, the employer will not have to remit ABST on the benefit.
Step 2: If ABST is collected on a taxable benefit, the employer must calculate the amount of ABST due.
Employees do not pay ABST on taxable benefits - The employee does not pay the ABST that the employer has to remit on taxable benefits. An amount for ABST has already been added to the taxable benefit.
5. Non-registrants Non-registrants are not deemed as having made a supply for consideration when they provide taxable benefits. As a result, they are not required to remit ABST on taxable benefits provided for ABST purposes.
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F. Allowances and Benefits to be Included in Income
1. Automobile Benefits and Allowances
Definitions
Motor vehicle
A motor vehicle is an automotive vehicle designed or adapted for use on highways and streets. It does not include a vehicle designed or adapted for any other use.
Automobile
An automobile is a motor vehicle that is designed or adapted mainly to carry individuals on highways and streets, with a seating capacity of not more than the driver and eight passengers.
An automobile does not include:
An ambulance;
A motor vehicle bought to use mainly as a taxi, a bus used in a business of transporting passengers, or a hearse in a funeral business;
A motor vehicle (except a hearse) for use in a funeral business to transport passengers; or
Clearly marked police and fire emergency-response vehicles
Automobile availability
An automobile is available to employees if they have access to or control over the vehicle. Access ends when an employee returns all the automobile's keys.
If you provide an employee with an automobile or an allowance for driving between home and a regular place of employment, the employee receives a taxable benefit. Any location at or from which the employee regularly reports for work or performs the duties of employment is generally considered a regular place of employment. If ABST applies, you have to include it in the value of the benefit. See Section E on Page 16 of this Guide.
For security or other reasons, there are times when public and private vehicles are neither allowed nor practical at an employment location. As a result, you may need to provide your employees with transportation from pick-up points to that location. This transportation is not a taxable benefit.
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Travelling officer
A travelling officer is any employee who, by the nature of their employment, is required to spend a minimum of 60 per cent of their working hours travelling from one location to another. Further, this travel should be related to the production of the employer’s assessable income.
While employers are free to designate employees as travelling officers, the burden of proof rests with the employer, who must be in a position to provide the Inland Revenue Department with a travel log or other credible evidence of the time spent by the employee travelling on employer related business.
Personal driving or use
Personal driving is any driving by an employee, director, shareholder or a person related to the employee, director or shareholder for purposes not related to his or her employment. This includes:
Vacation trips;
Driving for personal use;
Driving to conduct personal activities; and
Travel between home and work (even if the employer insists that the employee drive the vehicle home).
This is considered personal use of the employer-provided vehicle, whether it is owned or leased by the employer, and is a taxable benefit to the employee, subject to the exemption detailed in this Guide.
The personal driving of an employer's vehicle could be a taxable benefit for the employee.
Personal driving is any driving by an employee, or a person related to the employee, for purposes not related to his or her employment.
IRD does not consider it to be personal driving in the following exceptions:
When the employer requires the employee to proceed directly from home to a point of call other than the employer’s regular place of business to which the employee normally reports, or to return home from such a point. In other words, travel that is considered to be for the benefit of the employer.
There is not a personal use component when an employee is required to work at least three additional hours immediately subsequent to the regular hours of work and public transportation is not available, or the physical safety of the employee could be at risk at the time of travel.
Employer-provided transportation to a location or at a time where public transportation is non-existent.
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(a) Calculating a benefit to employee for use of employer owned automobiles
To clarify the administration of an automobile benefit to employees, a simplified model is being adopted. The automobile benefit charge represents the benefit employees enjoy when an automobile is available for their personal use. Please see Appendix VI for the actual calculation of the benefit charge or amount.
If the employee does not use the automobile for personal driving, there is no taxable benefit, even if the vehicle was available to the employee for the entire year. This applies as long as the employee is required to use the automobile in the course of his or her employment.
Once an employer determines that there is personal driving with respect to an employer’s vehicle the employer must calculate the amount of the benefit and include the amount in the employee’s income. These benefits or amounts are to be allocated to the associated employee pay period and income tax deducted accordingly.
Partnerships – (accountants, lawyers, doctors etc.) Include the amount of the vehicle benefit in the income of a partner or an employee of a partner if a partnership makes an automobile available for personal use to:
A partner or a person related to the partner; or
An employee of a partner or a person related to an employee of a partner.
(b) Automobile allowances
An automobile allowance means any payment employees receive from an employer for using their own motor vehicle in connection with or in the course of their office or employment. This payment is in addition to their salary or wages, with an account for its use. An automobile allowance is taxable unless it is a reasonable per-mile/per-kilometre allowance, as provided for in this Guide. The other exception is in respect of employees designated as travelling officers who satisfy the criteria stipulated earlier.
Instead of providing the employee with a vehicle, employers may give the employee an allowance for using his or her own vehicle for work. This type of allowance is not a taxable benefit as long as the allowance is calculated solely on the number of business miles/kilometres driven in a year multiplied by a rate of $2.30 per mile or $1.45 per kilometre.
This type of allowance is not a taxable benefit as long as the employee is required to use his or her vehicle for business purposes on a regular basis and the allowance does not exceed $2.30 per mile or $1.45 per kilometre.
All amounts per month must be supported by a mileage/kilometre log and a breakdown of business and personal travel.
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(c) Flat-rate allowance
If an employee (who is required to use his/her automobile on official business on a regular basis) is paid an allowance based on a flat rate that is not related to the number of business miles/kilometres driven, then the allowance is a taxable benefit, and has to be included in the employee's income, as determined in the guidelines below.
The cap on monthly flat-rate allowances is based on the employee’s salary scale/level as detailed below. Any allowance paid in excess of the cap will be a taxable benefit.
Band # Monthly Salary Scale Maximum Allowance
1 $0 to $6,500 $550
2 $6,501 to $9,500 $750
3 $9,501 to $12,500 $900
4 $12,501 and over $1,000
(d) Reasonable per-mile/per-kilometre allowance
A travelling allowance based on an actual per-mile/per-kilometre rate that IRD considers reasonable is not considered a taxable benefit.
IRD considers an allowance to be reasonable if all the following conditions apply:
The allowance is based only on the actual number of business miles/kilometres driven in a year;
The rate per mile/kilometre is reasonable (not greater than $2.30 per mile or $1.45 per kilometre); and
The employee was not reimbursed for expenses related to the use of the vehicle. This does not apply to situations where an employee is reimbursed for parking fees or supplementary business insurance, if the allowance was determined without including these reimbursements.
For greater certainty with regard to reasonable per-mile/per-kilometre allowances, employees must file mileage or expense claims and related automobile/vehicle travel logs with the employer on an ongoing basis, starting at the beginning of the year.
The IRD understands the administrative problems that can result from this and would like to provide an alternative. If the employer makes accountable advances to employees for vehicle expenses, these advances do not have to be included in the employee's income if all the following conditions are met:
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• There is a pre-established per-mile/per-kilometre rate that is not more than the amount stated above;
The rate and the advances are reasonable and are linked/supported by an automobile/vehicle travel log of the business miles/kilometres travelled; and
This method is documented in the employee's record.
Employees must account for the business miles/kilometres they travel and any advances they receive. They have to do so on the date their employment ends in the year, or by the calendar year-end, whichever is earlier.
(e) Allowance rates
For 2012, the rates are $2.30 per mile or $1.45 per kilometre driven for business purposes.
Auto travel allowance rates above $2.30 per mile or $1.45 per kilometre will be a taxable benefit and must be included in the employee's income.
2. Other Benefits and Allowances
(a) Aircraft and boats
Where an employer provides an aircraft or boat, either owned or leased, for personal use by an employee, director or shareholder, at less than reasonable charge and the employee, director or shareholder is considered to have derived a benefit; the benefit amount is to be included in employment income and subject to the ABST if the aircraft/boat is used in commercial activities.
(b) Housing allowances
Housing allowances or free or subsidised board and lodging to an employee, including a cash allowance, is a taxable benefit, subject to the monthly allowances detailed below. As a result, the employer must add to the employee's remuneration the fair market value of the accommodation provided which exceeds the cap stipulated below.
Band # Monthly Salary
Scale Maximum Allowance
1 $0 to $7,500 $500
2 $7,501 to $10,000 $750
3 $10,001 to $12,500 $1,000
4 $12,501 to $15,000 $1,250
5 $15,001 to $20,000 $1,500
6 $20,001 and over $2,000
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In instances where the employer pays the rent for premises occupied by employees, this should be reported as a benefit. If the property is owned by the employer the benefit to the employee is the rent the property could fetch in the open market. The value of the benefit should be reduced by any amount paid by the employee.
(c) Bonuses
Bonuses and/or retroactive pay increases paid to employees must be included in employment income and are subject to income tax.
(d) Commissions
Commissions paid to employees are to be included in employment income and are subject to income tax.
(e) Loan forgiveness and write-offs
All employee, director, and shareholder loan forgiveness and loan write-offs will be included in employment income of the employee, director and/or shareholder.
(f) Credit cards
Any payments made with respect to credit cards should be considered as emoluments to the employee unless it can be proven that the credit card was used for the purpose of acquiring income for the business.
Where the company provides the employee with a credit card and it is used solely for the purpose of business entertainment, then it is not an emolument and all expenditure should be treated as allowable for the business for tax purposes.
Where the company provides the credit card and the employee uses the card for both business and personal reasons, then the amounts that are personal will be considered as emoluments and are subject to the relevant taxes.
Where the employee has a personal card and the employer pays all the expenses related to the card and these expenses are of a personal nature then the amounts paid will be taxable as emoluments for tax purposes.
(g) Director’s fees/board fees
The employer must deduct income tax from directors' fees/board fees.
The Director/Board Member shall inform the employer of the applicable tax bracket. This is to facilitate the withholding of income tax from the fees paid. In instances where the director/board member does not provide the information, tax the fee at the highest rate. If the employer pays both a salary and directors' fees/board fees to an individual, the fees must be added to the salary for that pay period to calculate the amount of tax to deduct. All such deductions must be remitted to the Inland Revenue Department in the normal manner.
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(h) Discounts on services and merchandise and commissions on sales
Employers may provide services or sell merchandise to employees at a discount without it being a taxable benefit, provided that the discounted price is equal to or exceeds cost. If a service or merchandise is provided to employees below cost, this is a taxable benefit. The exception to this is where the goods are damaged or soiled, in which event the benefit is not subject to tax.
If employers sell merchandise in good condition to employees below cost, the taxable benefit is the difference between the fair market value of the goods and the price the employees pay.
If a taxable benefit arises under any discount arrangement and it is not for an exempt or zero-rated supply, include ABST in the value of the benefit.
Commissions that sales employees receive on merchandise they buy for personal use are not taxable. Similarly, when life insurance salespeople acquire life insurance policies, the commissions they receive are not taxable as long as they own the policies and have to make the required premium payments.
(i) Educational allowances for children
Amounts paid to an employee as an educational allowance for the employee's child, must be included in the employee's income for the year, except in the case of an educational institution offering such services to its employees.
(j) Entertainment
Reimbursed expenses incurred by employees to entertain clients of the business, do not constitute a taxable benefit. However, in instances where an allowance is paid and the employee is not required to specifically account for the expenditure, in order to be reimbursed, that allowance should be treated as a taxable benefit and included in the employee’s income.
(k) Group life insurance policies - Employer-paid premiums
This section applies to current and former employees (retirees) who receive group term life insurance benefits from their employer or former employer.
Definitions
Group life insurance policy means a policy where the only amounts payable by the insurer are policy dividends, experience rating refunds, and amounts payable on the death or disability of an employee or former employee.
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Calculation
If the premiums are paid regularly for all employees and the premium rate for each individual is not dependent on age or sex, there is no taxable benefit. A taxable benefit occurs when the policy is only applicable to certain employees. The value of the benefit is the total of:
The premiums payable for term insurance on the individual's life LESS
The premiums and any taxes the employee paid either directly or through reimbursements to the employer.
(l) Holiday trips and incentive awards
Where an employer pays for a vacation for an employee, the employee’s family or both, the cost to the employer constitutes a taxable benefit to the employee. Similarly, where a vacation property owned by an employer is used for vacation purposes by an employee, the employee’s family or both, there is a taxable benefit conferred on the employee, the value of which is equivalent to the fair market value of the accommodation less any amount which the employee paid to the employer.
The taxable benefit may be reduced if there is conclusive evidence to show that the employee was involved in business activities for the employer during the vacation. In a situation where an employee’s presence is required for business purposes and this function is the main purpose of the trip, no benefit will be associated with the employee’s travelling expenses necessary to accomplish the business objectives of the trip if the expenditures are reasonable in relation to the business function.
The exception to this rule is in the case of long service awards. As well as the gifts and awards in the policy stated, you can, once every five years, give your employee a non-cash long-service or anniversary award. The value of the award shall be in accordance with standard procedures for the particular industry, or as stipulated in a union contract of employment.
For greater clarity, the award must be for a minimum of five years’ service and it has to be at least five years since you gave the employee the last long-service or anniversary award.
Where a business trip is extended to provide for a paid holiday or vacation, the employee is in receipt of a taxable benefit equal to the costs borne by the employer with respect to that extension.
There may be instances where an employee acts as a host or hostess for an incentive award trip arranged for employees, suppliers or customers of the employer. Such a trip will be viewed as a business trip provided the employee is engaged directly in business activities during a substantial part of each day (e.g., as organizer of activities); otherwise it will be
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viewed as a vacation and a taxable benefit, subject, of course, to a reduction for any actual business activity.
(m) Gifts (including Christmas gifts), awards, and long-service awards
A gift or award that you give an employee must be for a special occasion or for employment-related accomplishments for it not to be considered a taxable benefit. The following rules will apply:
The value of the gift, whether in cash or kind, may not exceed an annual maximum of $2,700;
Trivial and promotional items such as tea cups, plaques, t-shirts etc are in addition to the cap mentioned above;
The fair market value of the gift is to be used in calculating/reporting the value of the gift.
Example 1
You give your employee a $10,000 gift card or gift certificate to a department store. The employee can use this to choose whatever merchandise or service the store offers. We consider that the gift card or gift certificate represents a taxable benefit of $7,300 for the employee.
Example 2
You give your employee tickets to an event on a specific date and time. This is not a taxable benefit for the employee since there is no element of choice.
Rules for gifts and awards
A gift has to be for a special occasion such as a religious holiday, a birthday, a wedding, or the birth of a child.
An award has to be for an employment-related accomplishment such as outstanding service, employees’ suggestions, or meeting or exceeding safety standards.
If you give your employee a non-cash gift or award for any other reason, this policy does not apply and you have to include the fair market value of the gift or award in the employee’s income.
The gifts and awards policy does not apply to cash and near-cash items or to gifts or awards given to non-arm’s length employees, such as your relatives, shareholders, or people related to them.
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Value
Use the fair market value (FMV) of each gift to calculate the total value of gifts and awards given in the year, not its cost to you. You have to include the value of the ABST.
Policy for non-cash gifts and awards
You may give an employee an unlimited number of non-cash gifts and awards with a combined total value of $2,700 or less annually. If the FMV of the gifts and awards you give your employee is greater than $2,700, the amount over $2,700 must be included in the employee’s income.
For example, if you give gifts and awards with a total value of $4,650, there is a taxable benefit of $1,950 ($4,650 – $2,700).
Items of small or trivial value will not be considered a taxable benefit. These items are not included when calculating the total value of gifts and awards given in the year for the purpose of the exemption.
Examples of items of small or trivial value include:
Coffee or tea;
T-shirts with employer’s logos;
Mugs;
Plaques or trophies.
(n) Payment for personal household services
Amount paid to or on behalf of an employee for household personnel such as maid, cook, gardener, and security, etc., must be included in the employee's income for the year.
(o) Accommodation provided by employer
If an employer provides an employee, including a building superintendent, with a house, apartment, or similar accommodation rent-free or for less than the fair market value of such accommodation, the employee is considered to be receiving a taxable benefit. Amounts paid for employees for utilities (such as phone, electricity, internet and LPG) are also a taxable benefit. Such employees are not entitled to the exemption noted under 2(b) above.
The employer must estimate a reasonable amount for the benefit. It is usually the fair market value for the same type of accommodation minus any rent the employee paid. For 2012, the maximum taxable benefit for employer provided accommodation is $10,000 per month.
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If an employer gives cash to an employee for rent or utilities, the value of the housing benefit is the amount of the cash payment. This is the amount that should be included in the employee's income.
(p) Legal fees
Where personal legal expenses of an employee (or of his or her family) are paid or reimbursed by the employer, the amount paid is a taxable benefit to the employee. To the extent that the IRD considers that the amount so paid does not exceed a reasonable amount, it will normally be deductible to the employer as a business expense on account of the employee’s wages or benefits. The exception is in respect of employees of legal firms, whose employers are permitted to provide free or subsidised legal services for employees, without it being a taxable benefit.
(q) Interest-free and low-interest loans
Employers must include in income any benefit that an individual receives as a result of an interest-free or low-interest loan greater than $10,000. The exceptions are where the loan is used to:
Purchase residential land;
Construct an owner occupied residence;
Pay medical expenses;
Pay educational expenses; or
Purchase a motor vehicle.
The benefit is the amount of interest that the individual would have paid on the loan for the year at the Antigua and Barbuda standard customer rates minus the amount of interest that he or she actually paid on the loan in the year or no later than 15 days after the end of the year. The exception is in respect of employees of financial institutions (commercial banks, credit unions, insurance companies, mortgage companies etc.), whose employers are permitted to provide interest-free or low-interest loans to them.
Example 1: Calculate Taxable Benefit Mr John Davis is your employee, and you grant him a loan of $20,000 to purchase shares in your company. The standard rate charged by a bank for such a loan is 10% per annum, but you charge Mr Davis a rate of 5% per annum on the loan. Assuming that only interest was paid on a monthly basis, but no payments were made to the principal debt, the value of the benefit is calculated as follows:
$20,000 @ 10% (standard bank rate) per annum $2,000 (A)
Less interest paid by Mr Davis as follows
$20,000 @ 5% (preferential rate) per annum $1,000 (B) Taxable Benefit A minus B or $2,000 minus $1,000 = $1,000
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Even if Mr Davis is in the highest tax band of 25%, his maximum tax liability from this benefit would be 25% of $1,000 or $250. In this case, he still saves $750 compared with borrowing from a bank. If he is in the 10% tax bracket, the tax paid would reduce to $100 and the saving increase to $900.
(r) Staff loans
An employee receives a taxable benefit if he or she receives loans greater than $10,000 because of an office or employment or intended office or employment. IRD considers a loan to be received because of employment if it is reasonable to conclude that the loan would not have been received, or the conditions of the loan would have been different, had there been no employment or intended employment.
The loan can be received by the employee or by another person. A loan includes any other indebtedness such as the unpaid purchase price of goods or services.
The taxable benefit the employee receives in the taxation year is the total of the following two amounts:
The interest on each loan and debt (total loans and debt greater than $10,000) calculated at the Antigua and Barbuda prescribed rate for the periods in the year during which it was outstanding; and
The interest on the loans or debt that was paid or payable for the year by the employer (for this purpose, an employer is a person or partnership that employs or intends to employ the individual and also includes a person related to the person or partnership);
Minus the total of the following two amounts:
The actual interest for the year that any person or partnership paid on each loan or debt no later than 15 days after the end of the year; and
Any part of the actual interest that the employee pays back to the employer no later than 15 days after the end of the year.
For 2012, the prescribed rate in Antigua and Barbuda is 10% per annum.
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Example 2: Calculating the taxable benefit
Mr Theodore Williams is your employee. He borrowed $100,000 from you on January 2, 2012. The prescribed rate of interest for the loan for 2012 is 10%. However, because he is an employee, you charge him a rate of 7% per annum. Mr Williams paid you $6,000 interest on the loan no later than 15 days after the end of the year. During the year, a company related to you paid $1,000 interest on the loan for Mr Williams. Before the end of the same year, Mr Williams repaid $850 of the $1,000 to the company. Calculate the benefit to include in his income as follows: 1/ Prescribed rate × loan amount for the year:
10% x $100,000 = $10,000 (A)
plus 2/ Amount interest paid by a related third party $ 1,000 Total interest $11,000 (B)
minus 3/ Interest paid ($6,000 + $1,000)= $7,000 4/ Amount Mr Williams repaid $ 850 $7,850 (C) Mr Williams’ Taxable Benefit (B) – (C) or ($11,000 - $7,850) = $3,150
Mr Williams’ Taxable Benefit is $3,150 for the year. Tax will be charged on this amount at either 10% or 25%, depending on his tax band.
(s) Redundancy, lump sum, honorarium, and ex-gratia payments
An amount paid to an employee in lieu of termination notice under the terms of an employment contract is considered employment income, whether or not it is paid on termination of the employment. Such an amount is subject to income tax. To determine the amount to deduct, include the wages in lieu of termination notice with the regular income, if any, for the pay period.
Lump sum payments include:
Payments for loss of office;
Ex-gratia payments;
Payments in commutation or in lieu of pensions (except commutation payments made through an approved superannuation scheme).
(t) Premiums under hospitalisation and medical care insurance plans
This section applies to current and former employees (retirees) who receive group hospitalisation and medical care insurance benefits from their employer or former employer.
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Definitions
Group hospitalisation and medical care insurance policy means a group policy where the only amounts payable by the insurer are amounts payable on the hospitalisation and medical care expenses of an employee or former employee.
Lump-sum premium is a premium for insurance on hospitalisation and medical care where all or part of the premium is for insurance for a period that extends more than 13 months after the payment of the premium (or more than 13 months after the time the premium became payable, if it is paid after it became payable).
Calculation
If the premiums or contributions to a hospital or medical care insurance plan are paid regularly for all employees and the premium rate for each individual is not dependent on age or sex, there is no taxable benefit. A taxable benefit occurs when the policy is only applicable to certain employees. The value of the benefit is the total of:
The premiums payable for group insurance on the individual's hospitalisation and medical care;
LESS
The premiums and any amounts the employee paid either directly or through reimbursements to the employer, related to the hospital or medical care insurance plan.
(u) Professional membership fees
If an employer pays professional membership dues for an employee and the employer is the primary beneficiary of the payment, there is no taxable benefit for the employee.
The primary beneficiary is a question of fact. If the employer pays or reimburses professional membership dues because membership in the organisation or association is a condition of employment, the employer is the primary beneficiary and there is no taxable benefit for the employee.
When membership is not a condition of employment, the employer must determine the primary beneficiary. The employer must be prepared to justify this position if asked by the IRD. In all situations where the employer pays or reimburses an employee’s professional membership dues and the primary beneficiary is the employee, there is a taxable benefit for the employee.
Employees cannot deduct from their employment income professional dues that the employer has paid or reimbursed.
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(v) Recreational facilities and club dues
Recreational facilities for employees such as an exercise room, swimming pool, or gymnasium, or employer-paid membership to a business or professional club (that operates fitness, recreational, sports, or dining facilities for the use of their members but their primary purpose is something other than recreation) are a taxable benefit. This occurs when the employer subsidises, pays, or reimburses the cost of the membership for employees. However, the use of the facility or club does not give rise to a taxable benefit if it can be clearly shown that such membership is principally for the employer’s advantage rather than the employee's.
(w) Retirement allowance
A retiring allowance (also called a gratuity) is an amount paid to officers or employees when or after they retire from an office or employment, in recognition of long service or for the loss of office or employment. A retiring allowance includes:
• Any ex-gratia payment made, over and above the standard severance payment due
Payment for accumulated vacation leave not taken prior to retirement;
A retiring allowance does not include:
A superannuation or pension benefit;
An amount an individual receives as a result of an employee’s death (these payments may be treated as death benefits);
A benefit derived from certain counselling services;
Wages in lieu of termination notice;
Damages for wrongful dismissal; and
Damages for violations or alleged violations of an employee’s human rights awarded under human rights legislation to the extent these amounts are not taxable.
Retiring allowances for services rendered in Antigua and Barbuda are subject to income tax from any part paid directly to the recipient, after accounting for the personal and pension exemptions set out in this Guide. This applies whether or not the beneficiary is resident in Antigua and Barbuda.
(x) Salary deferral arrangements
A salary deferral arrangement is a plan or arrangement made between an employee and an employer. Under such an arrangement, an employee postpones receiving salary and wages to a later year. Treat the deferred salary and wages as employment income in the year the employee earns the amount. In short, the employer and employee may agree that the employee will receive the salary/wages at a future time; however the amount must be included in employment income when it was earned.
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(y) Securities, shares and stock options
When a corporation agrees to sell or issue its shares to an employee, or when a mutual fund trust grants options to an employee to acquire trust units, the employee may receive a taxable benefit.
The taxable benefit is the difference between the fair market value of the shares or units when the employee acquired them and the amount paid, or to be paid, for them, including any amount paid for the rights to acquire the shares or units.
In addition, a benefit can accrue to the employee if his or her rights under the agreement become vested in another person, or if they transfer or sell the rights.
The shares or trust units are considered to be acquired when legal ownership of the shares has been transferred and the vendor has entitlement to receive payment. In general, this would occur where the shares have been transferred to the employee/broker and paid for.
Include this benefit in “Employment income.”
For clarity, this does not refer to benefits derived by employees under an Employee Share Purchase Plan, made available to all employees, who purchase the shares at market value.
(z) Shareholder benefits and allowances
A shareholder is a member or other person that has an equity position in the entity or is entitled to receive payment of a dividend.
The amount or value of a benefit or an allowance conferred on a shareholder by a corporation in a taxation year is included in the shareholder’s income for the year.
A benefit or an allowance conferred by a corporation can also be included in the income of a person who at the time the benefit was conferred was not a shareholder, if it was contemplated that the person would become a shareholder.
The word “benefit and allowance” is broad enough to include:
A payment by a corporation to a shareholder otherwise than pursuant to a bona fide business transaction;
An appropriation of a corporation’s funds or other property in any manner whatever to, or for the benefit of, a shareholder; or
Any other benefit, allowance or advantage conferred on a shareholder by a corporation.
If the person who receives the benefit is both a shareholder and an employee of the corporation, a determination will have to be made, taking into consideration all the relevant facts and circumstances of the particular case, as to whether the benefit was conferred by the corporation on the person as a shareholder or as an employee.
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The consideration for shareholder and employee benefits is determined to become due to the ABST registrant or employer on the last day of the registrant's taxation year in which the benefit was made available to or received by the shareholder. For example, where the corporation's taxation year ends on 31 December 2011, the ABST on a taxable benefit received by a shareholder in the 2011 taxation year is deemed to become due to the registrant on 31 December 2011.
The registrant is required to remit the ABST in respect of the shareholder's taxable benefit in the reporting period following the period in which the consideration became due. For example, a registrant who remits monthly would remit the ABST on the shareholder's taxable benefits conferred in the registrant's 2011 taxation year ending 31 December 2011, on 15 February 2012, when submitting the prescribed annual return.
(aa) Spouse or common-law partner's travelling expenses
If a spouse or common-law partner accompanies an employee on a business trip, the amount reimbursed to the employee for the spouse or common-law partner's travelling expenses is a taxable benefit to the employee. If ABST applies to the travelling expenses, the employer must include it in the value of the benefit.
The reimbursement is not considered a taxable benefit if the spouse or common-law partner went at the employer’s request and was mostly engaged in business activities during the trip.
(bb) Subsistence allowance
Reasonable subsistence allowances given to employees for deemed/actual expenses incurred while working at a special work site or on travel status are reimbursable expenses and as a result would not be considered as a benefit and would not be taxed. Payments made to employees, that are termed subsistence allowances, should be paid at a scale rate as determined by the location of the work site or travel.
Subsistence in excess of rates set by the IRD will be deemed a taxable benefit. The IRD will set the rates on an annual basis.
(cc) Transportation passes and assistance benefits
Employees of airline companies may receive an unlimited number of tickets at a rate below 50 per cent of the regular economy fare, without that benefit being deemed subject to income tax, provided the employees travel on a space available (stand-by) basis.
However, airline passes available to airline employees will become taxable if the employee travels on a seat-confirmed basis and is paying less than 50 per cent of the economy fare available on that carrier for that trip on the day of travel.
The value of the benefit will be the difference between 50 per cent of the economy fare and any amount reimbursed to the carrier for that trip.
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Retired employees of airline companies will not be taxed on such benefits under any circumstances.
(dd) Utilities provided by the employer
Some employers may pay for the utilities (water, electricity, telephone, Internet, etc.) of their employees. In these cases the full cost of the amount either reimbursed or provided cost free must be included in income earned including the ABST where applicable. See caps detailed in Section C 2(g) on Page 15 of this Guide.
(ee) Wage loss replacement plans
If an employer arranges for insurance coverage that guarantees the income of any employee or director, otherwise referred to as a wage-loss replacement plan or an income maintenance plan, the premium paid is a taxable benefit if this benefit is not available to all employees or groups of employees e.g. pilots.
If the employer pays a premium for an employee for such plans that are group plans, the employer-paid premium is not a taxable benefit for the employee.
For greater clarity, the premium paid to acquire Key-man insurance is not a taxable benefit to the employee as the coverage obtained is for the benefit of the company.
(ff) Restructuring of remuneration package
The IRD has uncovered empirical data, which suggest that following the reintroduction of Personal Income Tax in 2005, some employers and self-employed persons have restructured their remuneration packages to reflect the transitioning of a portion of basic salaries to benefits and allowances. Upon implementing the provisions for taxing allowances contained in this document, and for administrative purposes, the IRD will call on employers to provide satisfactory justification for all such transfers. In instances where the Commissioner is dissatisfied with the explanation provided, he will exercise his best judgement, and consider the full amount of the remuneration package as being subject to tax.
In addition, the Department shall levy the applicable penalties in respect of false reporting of information.
(gg) Players, administrators, and executives employed by sporting clubs
Players’ income from employment includes any of the following items received in respect of employment:
Salaries, including income from personal service contracts;
Bonuses - for good performance, for all-star rating, for signing contracts, etc.;
Fees - for promotional activities or special services performed on behalf of the club;
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Living and travelling allowances;
Honoraria;
Payment for time lost from other employment;
Commuting expenses;
Free use of automobiles;
Awards - including cash and the fair market value of bonds, automobiles and other merchandise;
Payments made by a club on a player's behalf that would otherwise be a non-deductible expense to the player, such as agents' fees, legal fees, taxes, fines, etc.;
Other benefits.
Players' living and travelling expenses that are borne by the club are treated as non-accountable allowances paid to players, including those paid in the training and try out period.
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Special Provisions for Members of the Military Service
Defence Force Allowances
Benefit/Allowance Taxable Training No Rent Free Accommodation No Rent No Ration No Efficiency No Subsistence No Overseas Duty No Warm Clothing No Hard-Lying No Proficiency Grade No Duty Yes Entertainment No Chaplaincy Fees No Conference/Meeting No Sporting Events No Intelligence No Plain Clothes No Command Pay Yes Operations Overseas No Acting Yes Telephones No
Police Force Allowances Benefit/Allowance Taxable Special Service Unit No Technical Mechanical No Barbuda No Special Skills No Detective No Duty Yes Travelling No Fire Brigade Resp. No Housing No Plain Clothes No Band No Transfer No Subsistence No
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Fire Brigade Allowances
Benefit/Allowance Taxable Duty Yes Travelling No Technical No Barbuda No Ambulance No
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APPENDIX I: DEFINITIONS AND INTERPRETATION
“assessable income” means an individual’s income other than —
(a) income which is exempt from the tax by/or under this Act or any other law;
(b) income which is, under any agreement to which the Government is a party,
exempt from the tax;
“assessable employment income” means income derived from any of the sources mentioned in Section 11 of the Income Tax Act; which states: Subject to this Act tax shall be paid on employment income including —
(a) Salary, wages, leave payments, overtime payments, gratuities, commissions, and bonuses;
(b) Director’s fees;
(c) Any allowance, other than an allowance provided by the employer which is wholly and exclusively utilized in the production of the employer’s assessable income;
(d) Any payments, however described, made on termination of employment in respect of entitlements outstanding at the time of termination, excluding severance payment;
(e) The reimbursement or discharge by an employer of any expense of the employee other than an expense wholly and exclusively incurred in the production of the employer’s assessable income;
(f) The amount of any waiver where an employer waives an obligation of the employee to pay an amount owing to the employer.
“chargeable income” means an individual’s assessable income from all sources less deductions permitted under the Income Tax Act,
(a) Employment income;
(b) Self-employment and other income; or
(c) Both employment income and self-employment and other income.
“Commissioner” means the Commissioner of Inland Revenue appointed pursuant to the Inland Revenue Administration Act;
“contract of employment” means any arrangement, whether executed by a formal contract, informal agreement, or any other means, for the establishment of an employment relationship;
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“employee” means a person who performs services pursuant to a contract of employment and also means a former employee;
“employer” means a person who receives the benefit of services performed pursuant to a contract of employment or the person responsible for providing an employee with income from employment and also means a former employer;
“employment” means the provision of personal services by an individual where:
(a) The services are provided under the control or guidance or responsibility of the person for whom the services are performed; and
(b) The resources required to provide the service are mostly provided by the person for whom the services are performed;
“employment income” means any emoluments or benefits whether in cash or in kind accruing to or received by an employee in respect of employment;
“income year” means —
(a) The period commencing on 1 April 2005 and ending on 31 December 2005; and
(b) In respect of any period subsequent to 31 December 2005, the period commencing on 1 January and ending on 31 December of the same year;
“individual” includes a minor;
“Minister” means the Minister responsible for finance;
“personal allowance” means the amount of income not liable to tax as provided in the Schedule;
“resident in Antigua and Barbuda” has the same meaning as in Section 2 of the Income Tax Act;
“self-employment and other income” means an individual’s income other than employment income; and the expression shall be construed either conjunctively or disjunctively, as the case may require;
“tax” means the personal income tax imposed by section8, and includes tax penalties and interest provided for in this Act;
“tax tables” means tax tables referred to in Section 10 of the Income Tax Act;
“trade” has the same meaning as in Section 2 of the Income Tax Act.
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APPENDIX II: WHAT IS AN EMPLOYER?
An employer/employee relationship exists where a person or entity has the right to control and direct the person or people who perform services or if there is any arrangement, whether formal or informal or any other means, for the establishment of an employer-employee relationship. See Appendix VII on Page 40 of this Guide.
Employers must:
(a) Deduct income tax from amounts paid to employees;
(b) Remit these deductions on the employees' behalf to IRD.
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APPENDIX III: EMPLOYEE OR SELF-EMPLOYED WORKER
It is important to determine whether a worker is an employee or a self-employed individual, as it can also have an impact on how a worker is treated under legislation such as the Personal Income Tax Act. The facts of the working relationship as a whole determine the employment status.
If the worker is an employee (employer-employee relationship), the payer is considered an employer.
Employers are responsible for deducting income tax from remuneration or other amounts they pay to their employees and remit these deductions to the Inland Revenue Department.
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APPENDIX IV: DETERMINING A WORKER’S EMPLOYMENT STATUS
Certain factors have to be considered when determining if a worker is an employee or a self-employed individual. In this regard please refer to Appendix VII for details.
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APPENDIX V: SPECIAL SITUATION
Placement or employment agency worker
These guidelines apply to employees/workers engaged by placement or employment agencies, in the following four situations:
Agency that hires the employee;
Agency that pays the worker;
Agency whose client pays the worker; or
Agency that hires a worker under a contract for service.
Agency that hires the employee
An agency that hires an employee (even if he or she is located at a client’s premises) has to deduct income tax from amounts paid to these employees. The agency also has to report these amounts on an F47 Pay as You Earn – Monthly Declaration form and an F47A Emoluments and Tax Deduction form.
Agency that pays the worker
If an agency places a worker in employment under the direction and control of a client of the agency and the agency pays the worker, the agency is required to deduct income tax from amounts paid to these workers. The agency also has to report these amounts on an F47 Pay as You Earn – Monthly Declaration form and an F47A Emoluments and Tax Deduction form for the worker.
Agency whose client pays the worker
If an agency places a worker in employment under the direction and control of a client of the agency and the client of the agency pays the worker, the client is required to deduct and remit income tax. The client of the agency has to report these amounts on an F47 Pay as You Earn – Monthly Declaration form.
Agency that hires a worker under a contract for service
An agency that hires a worker under a contract for service (that is, an independent worker) is not required to deduct income tax since the worker is self-employed. Because the worker is self-employed, neither the agency nor the client is required to file an F47 Pay as You Earn – Monthly Declaration form.
However the self-employed worker is required to file an F50 form and remit the appropriate PIT instalment, on a monthly basis.
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APPENDIX VI: CALCULATING AUTO BENEFIT FORM FOR (2012)
Personal driving is any driving by an employee, director, shareholder or a person related to the employee, director or shareholder for purposes not related to his or her employment. The personal driving of an employer's vehicle is a taxable benefit for the employee.
Employees who receive free access to an employer-provided vehicle are not entitled to the personal allowance detailed under Flat Rate Allowance, earlier in this Guide.
You should use the table below to determine the employee/director automobile benefit, in instances where the employee/director is provided with use of a company owned and maintained vehicle. This benefit should be reported on an F47 Pay as You Earn – Monthly Declaration form.
In instances where the employee was not provided with a vehicle for the entire year, you should use the table to determine the automobile benefit amount to prorate to the employee's pay periods for 2012.
Column A Column B Column C
Column D
Range Original Cost of
Automobile including Duty, ABST, etc.
Annual Taxable Benefit
Monthly Taxable
Benefit
1 Up to $12,000 $1,125 $93.75
2 $12,001 - $28,000 $1,850 $154.17
3 $28,001 - $40,000 $4,125 $343.75
4 $40,001 - $60,000 $6,000 $500.00
5 $60,001 - $80,000 $9,000 $750.00
6 $80,001- $100,000 $12,000 $1,000.00
7 $100,001 - $120,000 $15,000 $1,250.00
8 $120,001 - $140,000 $18,000 $1,500.00
9 $140,001 - $160,000 $22,500 $1,875.00
10 $160,001 - $180,000 $27,000 $2,250.00
11 $180,001 - $200,000 $31,500 $2,625.00
12 Over $200,000 $36,000 $3,000.00
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Sample Automobile Mileage Log
An automobile mileage log is very important as it will assist in determining the personal miles/ kilometres and business miles/kilometres travelled during the month and year. The determination between business and personal miles/kilometres is a critical element in calculating the automobile cost benefit under the Personal Income Tax Act.
Tracking the automobile’s mileage is just as valuable to the individual automobile and truck owner as it is for business purposes.
Your vehicle mileage record book (log) is very important. This section will walk you through the steps of creating your own vehicle mileage record book or log.
1. The first step is to determine the size of your book. Most vehicle mileage books are best kept in the glove compartment of your vehicle, so you want to keep it small enough to fit. (4" x 6" is the recommended size for placing in the glove compartment).
2. Prepare a notebook to use as your vehicle mileage record book (log). Suggest the user get one with 15-30 pages and a durable plastic cover. The number of pages is directly related to the amount of business driving/trips and related entries in the log.
3. Record your car's vital statistics on the first page. Detail the make, model, vehicle identification number (VIN) and your insurance information.
4. Set up a mileage log sheet using a simple table. See example below. Include columns to note the date, your odometer reading and the miles you drove for business purposes. This includes every business-related trip you make.
5. Write down the number of miles shown on your odometer at the beginning of each trip. Record the ending odometer reading when you reach your destination. Calculate the number of miles driven by subtracting the beginning odometer reading from the ending odometer reading. Record the number of miles driven.
6. Also record the purpose of the vehicle usage. For example; visit with Dr Smith, lunch with Acme Wholesale regarding sales, volunteering at charity event, or trip to office supply store for business needs. Also note the date of each trip in your driver's log book.
7. Total the miles driven at the end of each month. Make a copy of the month's completed mileage log sheet and put it with your work records. This way, you have two copies in case one is lost.
8. Record your odometer reading at the end of the year, and total the miles you drove for business that you recorded for all 12 months. Use this figure to calculate on your automobile benefits from below
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Example of automobile / vehicle mileage record book or log.
Daily Business Mileage Log Name: Mr. Richards
June 2011
Odometer Readings 1 Jun 11 8,077
Odometer Readings 30 Jun 11 9,632
Miles Travelled June 1,555
Date Destination (Town, or Area) Business Purpose
Odometer Readings
Start
Odometer Readings
Stop Miles
this trip 6 Jan 11 Local (St. John’s) Sales calls 8,097 8,132 35 6 Feb11 Jolly Harbor Sales calls 8,211 8,290 79
6 Mar 11 English Harbor See Bob Smith (Pot. Client) 8,486 8,550 64
6 Apr 11 Point Buy Materials 8,599 8,604 5 6 May 11 Jennings Sales calls 8,914 9,005 91 15 Jun 11 Airport Cargo pickup 9,212 9,242 30
Business Monthly Total 304 Business Total Prior Months 618 Business Total Year-to-Date 922
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APPENDIX VII: DETERMINING A WORKER’S EMPLOYMENT STATUS
Determining a worker’s employment status
Certain factors have to be considered when determining if a worker is an employee or a self-employed individual. These factors may differ if the contract is formed in another country. Usually, the country where the contract was formed will determine which set of factors to use.
In a written contract, the parties may state that, in the event of a disagreement respecting the contents of the contract, the applicable law may be the Guadeloupe (Civil Code), even though the contract was formed for example in Antigua and Barbuda (common law). Depending on where the contract is formed, unless it is stated differently in the written contract, use the following set of factors.
Factors you should consider
To help the employer understand the process, we explain each factor and show some indicators that the worker may be an employee or a self-employed individual.
Control
Control is the ability, authority, or right of a payer to exercise control over a worker concerning the manner in which the work is done and what work will be done.
Degree of control or autonomy
Consider the degree of control held by the payer or the degree of autonomy held by the worker. The actual degree of control will vary with the type of work and the skills of the worker.
The determination of the degree of control can be difficult when examining the employment of professionals such as engineers, doctors, and information technology consultants. Because of their expertise and specialized training, they may require little or no specific direction in their daily activities.
When examining the factor of control, it is necessary to focus on both the payer’s control over the worker’s daily activities, and the payer’s influence over the worker.
Payer’s right to exercise control
It is the right of the payer to exercise control that is relevant, not whether the payer actually exercises this right. It is the control of a payer over a worker that is relevant, and not the control of a payer over the end result of a product or service purchased.
Indicators that the worker is an employee:
(a) The relationship is one of subordination. The payer will often direct, scrutinise, and effectively control many elements of how and when the work is performed.
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(b) The payer controls the worker with respect to both the results of the work and the method used to do the work.
(c) The payer determines and controls the method and amount of pay. Salary negotiations may still take place in an employer-employee relationship.
(d) The worker requires permission to work for other payers while working for this payer.
(e) Where the schedule is irregular, priority on the worker’s time is an indication of control over the worker.
(f) The payer determines what jobs the worker will do.
(g) The worker receives training or direction from the payer on how to do the work. The overall work relationship between the worker and the payer is one of subordination.
(h) The payer chooses to listen to the worker’s suggestions but has the final word.
Indicators that the worker is a self-employed individual:
(a) A self-employed individual usually works independently within a defined framework.
(b) The worker does not have anyone overseeing his or her activities.
(c) The worker is usually free to work when and for whom he or she chooses and may provide his or her services to different payers at the same time.
(d) The worker can accept or refuse work from the payer.
(e) The working relationship between the payer and the worker does not present a degree of continuity, loyalty, security, subordination, or integration, all of which are generally associated with an employer-employee relationship.
Tools and equipment
Consider if the worker owns and provides tools and equipment to accomplish the work. Contractual control of, and responsibility for, an asset in a rental or lease situation is also considered under this factor. What is relevant is the significance of the investment in the tools and equipment along with the cost of replacement, repair, and insurance.
A worker who has made a significant investment is likely to retain a right over the use of these assets, diminishing the payer’s control over how the work is performed. In addition, a significant investment in tools and equipment and the maintenance and replacement costs associated with these assets may place the worker at the risk of a loss.
Tools and equipment can vary widely in terms of value and can include everything from wrenches and hammers, to costumes, appliances, stethoscopes, musical instruments, computers, and vehicles such as trucks and tractors.
Self-employed individuals often supply the tools and equipment required to complete a contract. As a result, the ownership of tools and equipment by a worker is more commonly associated with a business relationship. However, employees can also be required to provide their own tools. The common law courts within the world have acknowledged that because a worker is required to provide
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tools of the trade, this does not in itself deem that worker to be a self-employed individual. For example, many skilled trades’ people such as auto mechanics are required to supply their own tools, even if they are full-time employees.
Indicators that the worker is an employee:
(a) The payer supplies most of the tools and equipment required by the worker. In addition, the payer is responsible for repair, maintenance, and insurance costs.
(b) The worker supplies the tools and equipment and the payer reimburses the worker for their use.
(c) The payer retains the right of use over the tools and equipment provided to the worker.
Indicators that the worker is a self-employed individual:
(a) The worker provides the tools and equipment required for the work. In addition, the worker is responsible for the costs of repairs, insurance, and maintenance to the tools and equipment.
(b) The worker has made a significant investment in the tools and equipment and the worker retains the right over the use of these assets.
(c) The worker supplies his or her own workspace, is responsible for the costs to maintain it, and performs substantial work from that site.
Subcontracting work or hiring assistants
Consider if the worker can subcontract work or hire assistants. This factor can help determine a worker’s business presence because subcontracting work or hiring assistants can affect their chance of profit and risk of loss.
Indicators that the worker is an employee:
(a) The worker cannot hire helpers or assistants.
(b) The worker does not have the ability to hire and send replacements. The worker has to perform the services personally.
Indicators that the worker is a self-employed individual:
(a) The worker does not have to perform the services personally. He or she can hire another party to either complete the work or help complete the work, and pays the costs for doing so.
(b) The payer has no say in whom the worker hires.
Financial risk
Consider the degree of financial risk taken by the worker. Determine if there are any fixed ongoing costs incurred by the worker or any expenses that are not reimbursed.
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Usually, employees will not have any financial risk as their expenses will be reimbursed, and they will not have fixed ongoing costs.
Self-employed individuals, on the other hand, can have financial risk and incur losses because they usually pay fixed monthly costs whether or not work is currently being performed.
Employees and self-employed individuals may be reimbursed for business or travel expenses. Consider only the expenses that are not reimbursed by the payer.
Indicators that the worker is an employee:
(a) The worker is not usually responsible for any operating expenses.
(b) Generally, the working relationship between the worker and the payer is continuous.
(c) The worker is not financially liable if he or she does not fulfil the obligations of the contract.
(d) The payer determines and controls the method and amount of pay.
Indicators that the worker is a self-employed individual:
(a) The worker hires helpers to assist in the work. The worker pays the hired helpers.
(b) The worker performs a substantial amount of work from his or her own workspace and incurs expenses relating to the operation of that workspace.
(c) The worker is hired for a specific job rather than an ongoing relationship.
(d) The worker is financially liable if he or she does not fulfil the obligations of the contract.
(e) The worker does not receive any protection or benefits from the payer.
(f) The worker advertises and actively markets his or her services.
Responsibility for investment and management
Consider the degree of responsibility for investment and management held by the worker.
Is the worker required to make any investment in order to provide the services?
A significant investment is evidence that a business relationship may exist. You should also consider if the worker is free to make business decisions that affect his or her profit or loss.
Indicators that the worker is an employee:
(a) The worker has no capital investment in the business.
(b) The worker does not have a business presence.
Indicators that the worker is a self-employed individual:
(a) The worker has capital investment.
(b) The worker manages his or her staff.
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(c) The worker hires and pays individuals to help perform the work.
(d) The worker has established a business presence.
Opportunity for profit
Consider whether the worker can realize a profit or incur a loss, as this indicates that a worker controls the business aspects of services rendered and that a business relationship likely exists. To have a chance of a profit and a risk of a loss, a worker has to have potential proceeds and expenses, and one could exceed the other.
Employees normally do not have the chance of a profit and risk of a loss even though their remuneration can vary depending on the terms of their employment contracts. For example, employees working on a commission or piece-rate basis, or employees with a productivity bonus clause in their contracts can increase their earnings based on their productivity. This increase in income is not normally viewed as a profit, as it is not the excess of proceeds over expenses.
Employees may have expenses directly related to their employment, such as automobile expenses, board and lodging costs. Normally, expenses would not place employees at risk of incurring a loss because it is unlikely that the expenses would be in excess of their remuneration.
Self-employed individuals normally have the chance of profit or risk of loss, because they have the ability to pursue and accept contracts as they see fit. They can negotiate the price (or unilaterally set their prices) for their services and have the right to offer those services to more than one payer.
Self-employed individuals will normally incur expenses to carry out the terms and conditions of their contracts, and to manage those expenses to maximize net earnings. Self-employed individuals can increase their proceeds and/or decrease their expenses in an effort to increase profit. This factor has to be considered from the worker’s perspective, not the payer’s. It is for the most part an assessment of the degree to which the worker can control his or her proceeds and expenses.
Employees generally do not share in profits or suffer losses incurred by the business.
The method of payment may help to determine if the worker has the opportunity to make a profit or incur a loss.
In an employer-employee relationship, the worker is normally guaranteed a return for the work done and is usually paid on an hourly, daily, weekly, or similar basis. Similarly, some self-employed individuals may be paid on an hourly basis. However, when a worker is paid a flat rate for the work performed, it generally indicates a business relationship, especially if the worker incurs expenses in performing the services.
Indicators that the worker is an employee:
(a) The worker is not normally in a position to realize a business profit or loss.
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(b) The worker is entitled to benefit plans which are normally only offered to employees. These include registered pension plans, and group accident, health, and dental insurance plans.
Indicators that the worker is a self-employed individual:
(a) The worker can hire a substitute and the worker pays the substitute.
(b) The worker is compensated by a flat fee and incurs expenses in performing the services.
