Home' Trinidad and Tobago Guardian : October 2nd 2016 Contents Sunday Guardian guardian.co.tt October 2, 2016
The Minister indicated that the government
had engaged the Inter-American Centre of Tax
Administrators to work on a policy and legisla-
tion to govern transfer pricing. Pending compre-
hensive legislation, he further indicated that the
government had engaged with a transfer pric-
ing consultant to assist in formulating an arm's
length pricing framework as part of its negotia-
tions with Atlantic LNG.
Transfer pricing rules seek to prevent pricing
manipulation between related parties in order
to achieve a tax advantage. These rules achieve
Our readers may recall that during the pres-
entation of the 2015/2016 National Budget, the
Minister of Finance signaled his intention not to
extend the waiver of Property Taxes beyond 31
December 2015 and to enforce collection from 1
January 2016 using the old levels and rates as a
In his 2017 National Budget presentation the
Minister indicated that he was advised that it
would be unconstitutional to collect property
taxes using the old rates, since different rates
applied in different areas of T&T.
The Minister has announced that the existing
Property Tax Act would be put into full effect in
fiscal year 2017 with the population of the valu-
ations roll and minor amendments to the Valua-
tion of Land Act. In addition, he stated that
under the Valuation of Land Act every owner is
required to submit a return, which will be used
by the Valuation Division of the Ministry of Fi-
nance (MoF) to calculate the annual rental
value of the property, failing which the Valua-
tion Division would prepare its own assess-
The Valuation of Land Act as it stands re-
quired that owners submit a return in the form
prescribed by 1 April 2010. The penalty under
the existing legislation is TT$500 on summary
conviction. This provision would have to be up-
dated and it may be one of the amendments to
which the Minister alluded.
We have provided below a brief overview of
the provisions contained in the Property Tax
Rate: 6% (Housed in a Building)/3% (Not
Housed in a Building)
ATV: 6% of installed cost of plant, machin-
ery and associated buildings
With respect to industrial properties, the ATV
is to be calculated based upon the installed cost
of machinery, plant and associated buildings
minus a depreciation factor calculated by the
Valuation Division. The depreciation factor is ex-
pected to take into consideration real declines in
productivity and efficiency of the machinery
and plant and has no reference to the account-
All immovable plant and machinery would
otherwise be assessed to tax whether or not
housed within a building.
Certain buildings that are not specialized (in-
cluding warehouses or factory shells not
adapted for special use of a particular industry)
to be taxed on ATV based upon the annual
rental value (see Commercial Property Tax).
ATV: For commercial properties, the ATV is
determined by reference to the an-
nual rent income expected to be
earned from the property less 10%
(for the average time the property
may not be rented).
Basis: 2% of capital value of lands and agri-
ATV: The capital value means the sum
which the fee simple might be ex-
pected to realize if offered for sale on
such reasonable terms and conditions
as a bona fide seller would require.
ATV: The ATV is determined by reference
to the annual rental income expected
to be earned from the property less
10% (for the average time the prop-
erty may not be rented). Previous
pronouncements by the MoF indi-
cated that the ATV is the expected
annual rent to be obtained from T&T
resident tenants and, as such, rental
rates expected to be obtained from
expatriate tenants would not form
the basis for assessments.
The Minister only referred to residential prop-
erties and made no mention of the property
taxes that are currently included in the Property
Tax Act that would apply to industrial, commer-
cial and agricultural properties.
In keeping with the government's intention to
move towards the elimination of the burden of
the fuel subsidy, the Minister proposes to in-
crease the current market price of diesel by
15%, from $1.98 per litre to $2.30 per litre. The
change in price will take effect immediately.
It should be noted that the price of diesel was
previously increased in September 2015 and
April 2016 from $1.50 to $1.72 and from $1.72
to $1.98 respectively, an increase of 15% in both
Given current oil prices, the impact of the fuel
subsidy has been significantly reduced.
Notwithstanding the positive impact of this
measure on the government's budget, the in-
crease in the price of diesel may result in infla-
tionary effects, primarily on transportation
costs to both individuals and businesses. More-
over, businesses may seek to pass on their in-
creased costs to consumers translating to
higher prices for goods and services.
The 2017 Budget proposes to increase the
excise duty on locally-manufactured tobacco
and tobacco imported from the Common Mar-
kets by 15% effective 20 October 2016.
Similarly, the excise duty on locally-manufac-
tured alcohol and alcohol imported from the
Common Markets is proposed to increase by
20% effective 20 October 2016. The current ex-
cise rates vary for beers, wines and spirts.
For alcoholic beverages and tobacco products
imported into T&T from extra- regional sources,
customs duty will be adjusted to receive equal
treatment to that of the Common Market.
The Minister has signaled the government's
intent to enact, in 2017, The Gambling (Gaming
and Betting) Control Bill, 2016, which was first
introduced and read in the House of Represen-
tatives on 1 July 2016.
The Gaming legislation is geared towards
leveraging every potential source of tax rev-
enue and creating an environment conducive to
the generation of quality, sustainable jobs.
The legislation is additionally intended to re-
dress an industry which is currently loosely reg-
ulated and the associated negative social ef-
fects. The 2016 Bill seeks to establish a License
Regime with a comprehensive, robust and strin-
gent regulatory framework, which will curtail
fraudulent acts of money laundering and terror-
ism financing, and meet globally recommended
standards required by the Financial Action Task
Force and the Caribbean Financial Action Task
1. Barbados - A 15% rate applies to manufacturing companies and to net income derived from the
rental of residential property.
2. Jamaica - Unregulated companies are taxed at the rate of 25% and regulated companies (exclud-
ing life insurance companies) are taxed at a rate of 33.3%. Building societies are taxed at a rate of
3. Guyana - Non-commercial companies are subject to tax at a rate of 30% whereas commercial
companies (as defined) are subject to tax at a rate of 40%. Companies engaged in the business of
telecommunications are subject to tax at the rate of 45%.
4. Antigua & Barbuda - Banks which offer mortgages at a rate of 7% or below are subject to tax at
the rate of 22.5%.
Valued Added Tax
Alcohol and Tobacco
In the 2017 Budget Speech, the Minister re-
introduced the concept of the 7% levy on goods
purchased online from non-resident vendors.
This levy as proposed will only be applicable on
the purchases that enter T&T via courier com-
panies or air freight.
The levy will be due and payable at the
bonded warehouses before clearance of goods
or directly to customs, similar to the manner in
which VAT and customs duty are currently col-
lected. The effective date for implementation of
this levy is 20 October 2016.
Tax on Online Purchases
The Finance (No. 2) Act, 2016 enacted the
multi-family dwelling tax incentive, which pro-
vides that the gains or profits from the initial
sale, or premiums and rents derived from the
letting of a newly constructed multi-family
dwelling, construction of which commenced on
or after 1 July 2016, will be exempt from income
tax until the year ending 31 December 2025.
Notwithstanding the foregoing, no regula-
tions were subsequently passed allowing in-
vestors access to this incentive. The Finance
(No.2) Act, 2016 did not provide a definition of
the term multi-family dwelling. In the presenta-
tion, the Minister proposed to introduce regula-
tion allowing access to the multi-family
dwelling tax incentive.
The aforementioned tax incentives are aimed
at promoting and encouraging investment in
the development of public infrastructure. In the
absence of a definition of "multi-family
dwelling", there appears to be no distinction
In relation to other Caribbean territories, see the table below for details on the current rates of
Corporation Tax Rate
Antigua & Barbuda
St. Vincent & the Grenadines
25%/15% (Note 1)
25%/30%/33.3% (Note 2)
30%/40%/45% (Note 3)
25%/22.5% (Note 4)
As illustrated above, the basic Corporation Tax rate in T&T has remained at 25% from income
year 2006 to present. From a Pan-Caribbean perspective, the new tax bracket of 30% is still com-
petitive relative to the tax rates in other Caribbean territories.
their purpose by treating related parties as if
they were independent entities so as to ensure
that the prices charged between them accord
with the arm's length principle.
Transfer pricing in T&T must also be viewed
in the context of the current tax legislation
framework. We note that the Income Tax Act
arbitrarily restricts the deduction of manage-
ment charges paid to non-residents to 2% of all
out goings and expenses (exclusive of such
management charges and capital allowances).
In this regard, the definition of "management
charges" was expanded in 2006 to include per-
sonal and technical services, as well as the allo-
cation of head office costs. As presently
worded, the management charge restriction
disallows legitimate charges incurred for the
purposes of the business.
It is hoped that the introduction of transfer
pricing rules would see the repeal of the arbi-
trary 2% management charge restriction so
that unreasonable charges would now be more
appropriately disallowed under accepted trans-
fer pricing methodology. Conversely, all reason-
able charges based on arm's length principles
would be fully deductible.
We note that transfer pricing legislation was
promised as far back as the Budget Statement
of October 2011. To date, however, little
progress appears to have been made in imple-
menting such legislation. In this regard, the
OECD has estimated that worldwide revenue
losses from abusive pricing practices are be-
tween 4%-10% of global corporate income tax
revenues. Given our present economic circum-
stances, we can ill afford to lose such revenues
and it is hoped that the long promised transfer
pricing legislation will be finally enacted as a
matter of priority.
The Minister proposed that foreign yacht re-
pair services be exempt from VAT for yacht
owners with effect from the first quarter of
Prior to the 2016 amendments to Schedule 2
of the VAT Act, such repairs were classified as
zero rated supplies for VAT purposes. Effective
1 February 2016, repair services became stan-
As a consequence of the proposed exemp-
tion on such services, VAT registered suppliers
would not be able to recover the input VAT in-
curred in the making of the exempt yacht repair
Links Archive October 1st 2016 October 3rd 2016 Navigation Previous Page Next Page