Know Your Income Tax

Inland Revenue Division Trinidad House St. Vincent Street PORT OF SPAIN

YOUR TAX DOLLAR

TEXT PREPARED BY INLAND REVENUE 2011

TRINIDAD AND TOBAGO

CONTENTS

IRD Mission
Introduction

Page 1 1 1 1 1 1 1 1 2 2 2 3 3 3 3 4 4 4 4 4 4 5 5 5 5 6 6

To improve Voluntary Compliance by: Providing quality customer service and education; Improving our employees wellbeing, knowledge and skills; Enforcing the tax law effectively and efficiently; In an environment of integrity, fairness and mutual respect.

Definitions Chargeable Income Employee Employer Emoluments Allowable Deductions Office Total Income

Board of Inland Revenue File Number Non-Resident Individual

Responsibilities of the Employee Submit TD 1 Form to Employer Submit TD 1 Form for BIR Approval Submit BIR File No. to Employer

Responsibilities of Employer Deduct Taxes from Emoluments Remit Taxes to B.I.R. Issue Pay slips Submit PAYE/Health Surcharge Monthly Return Issue TD.4 Certificates Keep Records Responsibilities of BIR

Declaration of Emoluments, Deductions and Allowances Tax Declaration Form (TD 1 Form) Approval by the BIR When is BIR Approval not required

Tax Deductions and Allowances Personal Allowance Tertiary Education Expenses Allowance for First-time Home Owners Contributions to Approved Pension Fund/Scheme Deferred Annuity Plans & NIS Alimony/ Maintenance Payments Deed of Covenant Tax Credit Guidelines for Approval of TD 1 Form

...

7 7 7 7 7 8 8 8 9

Severance Pay and Computation Redundancy Retirement Severance Benefit Severance Ill Health Calculations Ex Gratia payments Retirement Benefit Payments Public Sector Contract Gratuity 2006 2011 Tax Rates

22 23 23 23 25 27 27 28 29 30

Penalties under the Income Tax Act How to compute P.A.Y.E. Retirement or Death Use of Tax Deduction and Calculations Benefits-In-Kind 11 12 12 13 14 15 16 17 17 18 19 20 21 21 22

TD4 Certificates Completion of TD 4 Certificates Specimen of TD 4 Certificate Completion/Issuance of IT 76 Certificate and Summary Forms Health Surcharge Garnishee Order Monthly Return Specimen of Return

Payment and Accounting for Tax Acceptance of Payments by the Bank Accounting for Tax deducted and Keeping Records

1 INTRODUCTION The Pay-As-You-Earn System (PAYE) was introduced in Trinidad and Tobago in 1958. The legislation relating to its operation is contained in the Income Tax Act, Chap. 75:01, and the Income Tax (Employment Regulations 1957 (Act 77/57) as amended by Income Tax Act 13/68; Government Notice 76/76 and the Income Tax (Employment) (Amendment) Regulations, 1989, the system entrusted responsibility on the employee, employer and the Board of Inland Revenue. P.A.Y.E. is not a method of assessment of Income Tax. It is the system by which tax is withheld from emolument Income (The PAYE System). Therefore it is necessary for the employee to submit a TD 1 Form to the employer. (see TD 1 Form on pg. 3). Definitions Allowable Deductions means any deduction allowed in accordance with the Income Tax Act in determining a persons chargeable income. Chargeable Income for the purpose of a person, whose sole source of income is from an office or employment, means the total emoluments of the person for the year of income less the appropriate deductions and exemptions granted under the Income Tax Act. Employee means any person, not being the holder of an office, in receipt of emoluments. Employer means any person paying emoluments whether on his own account or on behalf of another person to an employee, and shall be deemed to include any person paying emoluments whether on his own account or on behalf of another person, to the holder of an office. In relation to an employee or officer, employer means the person from whom the employee or officer receives his remuneration. Emoluments means all salary, wages, bonus, overtime, remuneration, perquisites, includes value of board or lodging, stipend, commission or other amounts for services, directors fees, retiring allowances or pensions, arising or accruing in or derived from or received in Trinidad and Tobago and which are assessable to income tax, but shall not include any salary or share of profits arising from a trade, profession or vocation carried on by any person wither by himself or in partnership with any other person. Office means a position not being an employment or place, entitling the holder thereof to a fixed or ascertainable stipend or remuneration and includes the office of a Minister of Government, the Office of a member of the Senate or the House of

2 Representatives of Trinidad and Tobago, a member of the municipal or Regional Corporation and any other office, the holder of which is elected by a popular vote or is elected or appointed in a representative capacity and also includes the position of a company director. N.B. Although the holder of an office is not an employee, the holder of an office is subject to Tax under the PAYE System. Total Income means the aggregate amount of income under Section 5 of the Income Tax Act before allowing any deductions other than those under Section 10, 11, 16 and Income Tax Act (In Aid of Industry) Act. Board of Inland Revenue File Number Every employee or office holder is required to furnish his employer with his Board of Inland Revenue File Number and the employer must record this number on the certificate (TD. 4 Certificate) he issues to the employee by the last day of February of the year following the year of income. According to Section 119 of the Income Tax Act, any person who (a) Being an employee or an officer and who, with the intent to deceive, furnishes his employer under section 76B of the Income Tax Act Ch. 75:01 with a Board of Inland Revenue File Number which is not his own. (b) Being an employer, and who knowingly or recklessly records under section 76B of the Income Tax Act Ch. 75:01, a Board of Inland Revenue File Number of an employee or officer which is different from the number furnished by that employee or officer. is guilty of an offence, and in addition to any penalty provided is liable on summary conviction to a fine of fifty thousand dollars ($50,000) and to imprisonment for three years. Non-Resident Individual An individual under 60 years, who is non-resident in Trinidad & Tobago and is in receipt of emolument income arising in Trinidad & Tobago, is subject to tax under the PAYE System. Such an individual is not eligible for any deductions/tax credit including the Personal Allowance.

3 Therefore the total amount of income earned in Trinidad and Tobago is taxable whether or not it is received here. Where the non-resident individual is 60 years and over and receives income which accrues or derived in Trinidad and Tobago, the person is entitled to a personal allowance. The allowance was introduced in 2004 at $40,000 and increased to $60,000 in 2006. Responsibilities of the Employee 1) Submit TD 1 Form to the Employer To ensure the correct amount of PAYE is deducted from emolument income, each employee must submit a TD 1 Form to his employer The day on which he/she takes up employment Within seven (7) days of a change in allowable deductions When required to do so by the Board of Inland Revenue 2) Submit TD 1 Form for Board of Inland Revenue Approval It is the responsibility of the employee to ensure that the Board of Inland Revenue approves his/her TD 1 Form, where necessary. 3) Submit BIR File Number to Employer Each employee must give his/her Board of Inland Revenue (BIR) file number to the employer. Where the employee does not have a file number, an application for one must be completed using the application for BIR Number form together with a copy of a valid ID and a job letter or TD 4 Certificate (or completed return). These are submitted for processing at the Registration Unit, Queen Street, Port of Spain. This can be done through the employer or individually. 3)

4 Responsibilities of the Employer 1) Deduct taxes from emoluments The employer has the responsibility to deduct taxes from the emoluments (salary, wages, etc.) of his employees in accordance with the P.A.Y.E. Regulations each time a payment is made weekly/fortnightly/monthly. The employer should ensure that he receives a TD1 Form from the employee to accurately determine the amount of tax to be deducted. 2) Remit taxes to Board of Inland Revenue The total amount of taxes deducted from the emoluments of employees must be remitted to the Board of Inland Revenue using the PAYE/Health Surcharge Monthly Return on or before the 15th day of the month following the month in which the deductions were made (eg. Deductions made in January must be remitted by the 15th February). An employer who fails to deduct and remit the amount deducted from his employees, after the statutory date will be liable to (i) *A penalty of 25% of the deduction or $40.00 whichever is greater and interest on both the amount deducted and the penalty at the rate of 20% per annum from the due date to the date of payment. (ii) A fine of thirty thousand dollars ($30,000.00) or imprisonment for two (2) years or both, upon summary conviction. * The 25% penalty came into effect from 1/1/2008 and is not to be treated retroactively. Issue Payslip The PAYE Regulations require the employer to give a statement of emoluments paid and the taxes deducted for each pay period (payslips).

4) Submit a PAYE Monthly Return The employer is required to submit the monthly return when remitting the taxes deducted. 5) Issue TD. 4 Certificates At the end of the year during which tax was deducted (including Health Surcharge), but no later than the last day of February of the following year, the employer must: (i) Issue the original and one (1) copy of the TD.4 Certificate to each employee showing total emoluments paid during the year and the total tax and other amounts deducted;

N.B. Each employee should ensure that (a) He obtains a TD 4 certificate (original and duplicate) from his employer on or before the last day of February following the year of income. (b) The correct amount of tax is deducted from his/her salary/wages.

5 (ii) Forward to the Board of Inland Revenue one (1) copy (triplicate) of the TD. 4 Certificate of each employee and TD. 4 Summary (original & duplicate) showing the total emolument paid and the total tax deducted during the year. The relevant forms may be obtained from the Board of Inland Revenue (P.A.Y.E. Section). (iii) Keep for his records a copy of the TD. 4 Certificate (quadruplicate) of each employee and a copy of the TD. 4 Summary. 6) To keep records of employees earnings The employer must keep records of employees earnings and tax deducted therefrom, and makes them available for inspection by the Board, (Penalty applicable for non-compliance $15,000 and/or 2 years imprisonment). The Responsibilities of the BIR (i) To provide Tax Deduction Tables and Instructions for ensuring correct deduction of taxes. (ii) To provide literature and guidelines to ensure the proper administering of the system. (iii) To offer assistance whenever necessary or requested. Declaration of Emoluments Deductions and Allowances Tax Declaration Form (TD 1 Form) A TD 1 Form is a form that is designed solely for the purpose of making the appropriate deduction of tax from emoluments. The Form requires the taxpayers Board of Inland Revenue file number, Electoral Identification Card number and signature. All source of income are declared and claims for tax deductions are made on this form. Since the information is necessary for the correct amount of tax to be deducted, each employee, on taking up employment, MUST submit a Tax Declaration 1 Form to his employer (a) On the date of commencement of his employment; (b) Within seven (7) days, deductions/allowances; if there is a change in his tax

6 Where an employee has more than one employment or in receipt of both pension and salary or wages, details of each source of emolument income must be stated separately on the same form. In such case, the Board of Inland Revenue must approve the TD. 1 Form. (The Board would advise each employer separately to the tax to be deducted) Approval by the Board of Inland Revenue Where an employee has any or all of the following claims for deductions, he/she is required to present a TD 1 Form for the Board approval: (i) Tertiary Education Expenses (relates to institutions situated outside of T&T except Public Regional Institution) (ii) First Time Home Ownership (homes acquired with effect from January 01, 2011) (iii) Contributions/Premiums paid towards an Approved Pension Fund/Deferred Annuity Plan (iv) Alimony/Maintenance payments (v) Venture Capital Tax Credit Where an employee fails to submit a Tax Declaration (TD 1 Form), the employer may deduct taxes without allowing any deductions. The effect of this is that the tax deducted will be in excess of the amount which would normally have been deducted if a declaration form had been filed. This method of deducting tax should also be used where (i) Overtime is paid to an employee and his/her tax deduction was already applied to determine tax on the salary. (ii) A bonus is paid to an ex-employee. (iii) Emoluments are paid to a non-resident individual who is 60 years and under. When Is The Board of Inland Revenue Not Required To Approve a TD 1 Form? Where a person has the following deductions only, the Board does not require the TD 1 Form to be approved Personal Allowance, NIS and Companys Approved Pension Fund/Scheme.

(c) When required to do so by the Board of Inland Revenue.

7 Tax Deductions/Allowances To determine the chargeable income that would be subject to tax, a resident individual is entitled to the following allowances, deductions and tax credits: 1. Personal Allowance A Personal Allowance of sixty thousand dollars ($60,000) with effect from 2006. Tertiary Education Expenses (a) Reasonable expenses incurred in respect of tertiary education by the taxpayer for self, spouse or child/children of both spouses at an institution situated outside of T&T except a public regional institution. These expenses include Tuition, Exam Fees, Books, 1 return airfare, Accommodation, etc. This claim is limited $60,000 and may be claimed in such proportion as may be determined by both spouses. ($18,000 up to 2007). 3. Allowance for First Time Home Owners An individual who acquires a home for the first time with effect from January 1, 2011, by way of purchase or construction, is allowed a deduction of up to $18,000, on the cost of this home, for the first five (5) years of acquisition. Where ownership is shared, the aggregate amount allowed is $18,000. Contributions (a) Contributions to an Approved Pension Fund Plan/Scheme. Contributions made under the Retiring Allowances(Legislative Services) Act. (b) Premiums paid under An Approved Deferred Annuity Plan TISP (Republic Bank) Future Cash (RBTT Bank) SAFE (Scotia Bank) Retirement Provider (FCB) (c) N.I.S. 70% of the annual contributions made in accordance with the National Insurance Act. Where a taxpayer contributes to the Widows and Orphan Fund (this is usually the male appointed Public Servant) deduction allowed is 100% of this contribution and 70% of the difference between this contribution and the N.I.S. deduction.

8 Total deduction in respect of item 4(a)(b) & (c) is limited to $30,000 (with effect from 2009). 5. Alimony/Maintenance Payments This is a payment made to a spouse or former spouse under a Deed of Separation or Court Order. This deduction shall not be allowed unless the spouse or former spouse in receipt for such alimony/maintenance is chargeable to tax under the Income Tax Act Ch. 75:01. 6. Deed of Covenant. (With effect from January 01, 2011) Payments made to a charity under a deed of covenant in favour of - a sporting body of persons as defined in Section 6(2) of the Corporation Tax Act and approved by the President in writing; - an ecclesiastical, charitable or educational institution of public character approved by the President in writing; - the Childrens Life Fund established under the Childrens Life Fund act 2010. This claim is equal to the amount donated but limited to 15% of total annual income. (Not to be included on TD1 Form). 7. Tax Credits Venture Capital The Venture Capital Tax Credit is equivalent to 25% of the investment in any Venture Capital Company. The tax credit is offset against the tax on chargeable income thereby reducing the tax liability. Where this tax credit exceeds the tax on chargeable, the excess tax credit may be carried forward to the following year(s), until it is exhausted. CNG Kit and Cylinder (with effect from 1/1/2011) A tax credit equal to 25% of cost of CNG Kit and Cylinder purchased and installed in his motor vehicle. This credit is limited to $10,000. Solar Water Heating System (with effect from 1/1/2011) A credit equal to 25% of cost of solar water heating system equipment purchased for household use. This credit is limited to $10,000. NB: All tax credits are offset against the tax on chargeable income.

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9 Guidelines to be followed when submitting a TD 1 Form for Approval With effect from January 2009 when a TD1 Form is approved by the Board of Inland Revenue, a Certificate of Approval for PAYE Tax Deductions is issued to the employer. The certificate shows: An approval letter will be issued to the employer identifying - The Employers name, address and PAYE Account Number - The Employees name and BIR# - The Employees Total Allowances and Credits - The Expiration date of the TD1 Form - The Board of Inland Revenue Stamp - Date and Signature of an IRD Officer Complete one (1) TD1 Form and submit to the Inland Revenue Division for approval together with the following documents for the relevant claimsTertiary Education Expenses - Copy of letter of acceptance from the Educational Institution showing the course and duration of studies, - Proof of payment of expenses, - Statement showing all expenses claimed. First-Time Home Owner - Letter for Financial Institution confirming first time acquisition, date of acquisition and address of property. - Completion certificate if property was constructed. - Lands and Buildings Tax Receipt. - Sworn affidavit, if property was built without mortgage. Approved Pension Fund/Plan/Schemes - Salary deductions slip for the most recent pay period, identifying pension contribution. (i) Approved Deferred Annuity - Policy Statement showing that the policy is in force and paid up to date. - Where the Board approved the policy, the following words must be marked on the statement THIS PLAN IS APPROVED BY THE BOARD OF INLAND REVENUE

10 (ii) Tax Incentive Savings Plan (T.I.S.P.) - Republic Bank Royal Future Cash - RBTT Scotia Assured Future Earnings (S.A.F.E.) - Scotia Bank Retirement Provider - FCB - Receipt showing payments made in previous year. - Where the Board approved the policy, the following words must be marked on the statement THIS PLAN IS APPROVED BY THE BOARD OF INLAND REVENUE 5. Alimony/Maintenance - Original Copy of Court Order, Decree or Registered Deed of Separation. (The Income Tax File Number of the recipient is also required). Copy of receipt of payments made in previous year.

1.

For Common-Law Relationships - Copy of receipt of payments made in previous year. - Sworn affidavit stating that the union, which produced the child/children, was a common-law relationship established under the Co-habitational Relationship Act. 6. Venture Capital Tax Credit - Certificate from the Venture Capital Company showing investment made. Income from two or more sources Where the taxpayer has income from two or more sources, he must submit a TD 1 Form to the Board for approval together with pay slips of salaries paid to date for the current year. A TD 1 A (directive) will be issued to the respective employers, advising of the amount of tax to be deducted from each source of income for the current year. THE BOARD OF INLAND REVENUE MAY REQUEST ADDITIONAL INFORMATION OR DOCUMENTS, IF CONSIDERED NECESSARY, TO EFFECT THE APPROVAL OF THE TD 1 FORM. Where there is doubt concerning any claim or the procedure to be followed, please call the following Sections for clarification: Taxpayer Services Telephone Number 623-2981 Ext. 201/204/520 or Taxpayer Relations Section Telephone Number 623-2981 Ext. 321, 323-6

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11 How to Compute P.A.Y.E Under the Income Tax (Employment) Regulations every employer shall deduct tax from the payment of emoluments to any employee or holder of an office. Taxable emoluments are those arising or accruing in or derived from or received in Trinidad and Tobago. In accordance with the PAYE Regulations, the employer is required to make deductions from salary or wages. Only the Board has the authority to reduce or amend the tax deductions of an employee in the case of a dispute. The Board will determine the amount to be deducted in the following cases: (a) Where payment is made at other than regular weekly, fortnightly, monthly or annual intervals, e.g. persons paid on a commission basis only; (b) In the case of casual or seasonal workers, where tax was deducted using to the Tax Deduction Tables for the six(6) months during which they were employed and therefore the total tax would far exceed their liability calculated on an annual basis; (c) Where the Board decides that the class of employee or nature of the emolument is such that it makes the application of the Tax Deduction Tables impracticable; (d) In the case of an employee with more than one employment. Tax should not be deducted from emoluments in the following cases: (a) Where persons who are exempt from tax receive the emolument income, (b) Where the emoluments are pensions earned outside Trinidad and Tobago, (c) Where a resident individual or non resident individual 60 years and over is in receipt of total annual income of $60,000 annually and under, ie Weekly Fortnightly Monthly $1154.00 $2308.00 $5000.00

12 In all other cases the employer will use the information on the Tax Declaration Form (TD. 1) submitted by the employee together with the Income Tax Declaration Tables or the stipulation made by the Board of Inland Revenue to determine the amount of tax to be deducted at each pay period. Where a taxpayer works for short or irregular periods, the employer has to be much more vigilant in ensuring that the correct PAYE deducted. In such circumstances, to avoid under deductions of tax, the employer should consult with the Board of Inland Revenue. The Board of Inland Revenues approval is also necessary where an employee takes up employment late in any income year and would not earn in excess of $60,000, but the employer is uncertain as to whether there is other employment income. EMPLOYERS MUST NOT ACCEPT ANY INSTRUCTIONS FROM EMPLOYEES TO REDUCE OR CEASE THE DEDUCTION OF TAX FROM THEIR INCOME. Retirement or Death When an employee retires and a pension is paid, tax must be deducted in accordance with the PAYE Regulations. Retirees who receive other income, in addition to their pension, must include such income on a TD 1 Form to be approved by the Board to determine the correct amount of tax to be paid from each source of income. When an employee dies, tax is to be deducted from the emoluments due to the deceased person, as if he was alive. When an employer dies or there is a change in employer, the person assuming control of the business must continue to deduct taxes from the employees. Use of tax deductions (on TD 1 Form) and calculation of Tax To determine the tax deducted from an employees income, the employer must consider the deductions on the TD 1 Form (approved where necessary) that the employee would have submitted. The formula is as follows Total Annual Income Total Deductions = Chargeable Income Chargeable Income x Tax Rate = Tax on Chargeable Income (tax liability) Tax Liability * Pay Periods = Tax per pay period * Weekly paid employees Divide annual tax by 52 * F/nightly paid employees Divide annual tax by 26 * Monthly paid employees Divide annual tax by 12

(d) Where the emoluments are paid outside of Trinidad and tobago to an employee outside of Trinidad and Tobago; (e) Where the payment is made in respect of domestic services performed in a residence where the employee sleeps or eats when in Trinidad and Tobago.

13 Examples (a) Weekly paid wages and benefits Annual emolument $1,500 x 52 = = = = = $ 1,500.00 $ 78,000.00 $ 61,933.00 $ 16,067.00 $ 4,016.75

14 TD 4 Certificates Employers must note the following: (1) Total taxes shown on the TD. 4 Certificate as deductions must agree with the total P.A.Y.E. remitted to the Board of Inland Revenue for the Income Year. (2) Total emoluments shown on the TD. 4 Summary must agree with the pay records of the business and with the total of the TD. 4 Certificates attached to the Summary. Under the following circumstances every employer is under an obligation to deduct tax (where applicable) and issue a TD 4 Certificate: (a) Change of Employment If an employee changes his job, the former employer will cease to deduct tax. The new employer would now deduct tax on the basis of a new Certificate of approval for PAYE tax deductions submitted to him by the employee or by instruction from the Board. (b) Death of the Employee Where an employee dies and emoluments are due to him after his death, deductions are to continue as if he were alive. (TD 4 Certificates must be sent to his Legal Personal Representative by the 15th day of the month following the month in which he died). (c) Death of Employer If an employer dies (but his business continues) his Legal Personal Representative must continue to make PAYE deductions. (d) Change of Ownership-Business If a business changes hands, the new employer is responsible for the PAYE deductions. (e) Cessation of Business If an employer ceases to carry on business he must, within one month after cessation, issue TD 4 Certificates to all employees from whose emoluments any tax was deducted. Where a business ceases operations, PAYE deductions, which had not yet been remitted to the Board, must be paid to the Inland Revenue Division within seven days after cessation of the business.

Deduct Total deductions (as shown on TD 1 Form) Chargeable Income $78,000 - $61,933 Tax liability = $16,067 x 25% Weekly tax = $4, 016.75 52 = $77.25 (b) Fortnightly paid wages and benefits Annual emoluments - $4,000 x 26

= = = = =

$ 4,000.00 $ 104,000.00 $ 65,000.00 $ 39,000.00 $ 9750.00

Deduct Total deductions (as shown on TD 1Approval) Chargeable Income - $104,000 - $65,000 Tax liability = $39,000 x 25% Fortnightly tax = $9750 26 = $375.00 (c) Monthly paid salary and benefits Annual emoluments - $11,500 x 12

= = = = =

$ 11,500.00 $ 138,000.00 $ 90,000.00 $ 48,000.00 $ 12,000.00

Deduct Total deductions (as shown on TD1Approval) Chargeable Income - $138,000 - $90,000 Tax liability = $48,000 x 25% Monthly tax = $12,000 12 = $1,000.00 Benefits-In-Kind

The provision of Sections 133-141of the Income Tax Act state that where a company pays expenses on behalf of its directors/employees or grants allowances or benefits to any such director/employee, the amount paid or granted shall be treated as a perquisite (BIK) of the office/employment and included as income of the director/employee. (See our Booklet Expenses, Allowances and BIK for more information).

15 (f) Retirement of Employee If an employee retires and is given a pension, such retirement shall not be treated as a cessation of employment for the purposes of the PAYE Regulation if the emoluments are paid by or on behalf of the same person both before and after the retirement. If the pension is paid by a person other than the former employer, (e.g. Trustee) the pensioner must provide the other person with a certificate of approval for PAYE tax deductions for the purpose of tax deductions and the Trustee must give TD 4 Certificates to the retiree on the appointed date. Where retroactive payments are made, these payments must be included on the TD4 Certificate in Box 7.
Number of Weeks at $8.25 Employers Contribution To Approved Fund/ Contract Sect. 134 (6)

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TD4 - 2011
Number of Weeks for which Health Surcharge was Deducted EMPLOYEES NAME AND RESIDENTIAL ADDRESS (8) Savings Plan Withdrawals of Contributions made by company (9) GROSS EARNINGS (3 8) Employees BIR File Number

(1) Total Deductions (2) Weeks Employed

Employees NIS Number

GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO BOARD OF INLAND REVENUE RETURN OF EMOLUMENTS PAID AND PAYE DEDUCTED Employees Note Attach original only to Income Tax Return 2011 PLEASE TYPE OR PRINT IN BLOCK LETTERS

Completion of the TD 4 Certificate

PLEASE READ INSTRUCTION SHEET CAREFULLY

(3) Remuneration Before Deductions

(10) BIR Approved Non-taxed Allowances and Benefits

All TD 4 Certificates must bear the official name, address, stamp, BIR and P.A.Y.E. File number of the Employer. They should also bear the N.I.S. Number and Board of Inland Revenue File Number of the Employee and should be initialled by the officer with such delegated responsibility. Where applicable, the following information must be inserted in the appropriate boxes on the TD 4 Certificate: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Total deductions (as shown on the TD 1 Form). Weeks employed for the year. Remuneration before deductions. Commissions. Taxable Allowances (Form IT 76. See page 18) Other Taxable Allowances. (e.g. Travelling allowance for which no dispensation is granted). Income relating to previous year(s) paid in current year. Savings Plan withdrawals of Contributions made by Company. Gross Earnings. (Total of boxes 3-8) Non-Taxed Allowances and Benefits. viz.:(i) Employers Contribution to Approved Fund/Contract (This refers to payments made by the employer in accordance with Section 134(6) of the Income Tax Act ONLY). NB: Employees do not contribute to this plan. (ii) ONLY Travelling allowances for which the Board has approved a dispensation. Approved Pension Fund Plan/Approved Deferred Annuity Plan (Employees contributions). National Insurance deducted. Income Tax deducted. (PAYE) Health Surcharge deducted. (see Specimen of TD 4 Certificate on next page)

EMPLOYERS NAME AND ADDRESS

(14) Health Surcharge Calculation

Travelling Dispensation only

(4) Commissions

Employers PAYE File Number

Number of Weeks at $4.80 Health Surcharge Deducted

(11) Employees Contribution to Approved Pension Fund Plan/Scheme Travellin g (12) National Insurance Deducted (13) Income Tax Deducted (PAYE) Other

(5) Taxable Allowances (IT 76) (6) Other Taxable Allowances (7) Income relating to previous year(s) paid in current year

EMPLOYERS STAMP AND INITIALS

Employers BIR File Number

TD4 Supplementary (Revised)

(11) (12) (13) (14)

17 Completion/Issuance of I.T. 76 Certificates and Summary The Income Tax Act Ch. 75:01 and the Income Tax (Employment) Regulations require an employer who pays allowances or expenses on behalf of an employee or provide an employee with benefits in kind, to furnish such an employee with particulars in respect of these payments/benefits. The particulars must be included on the Form IT 76 prescribed by the Board of Inland Revenue for this purpose. This form is to be prepared in triplicate. One copy (original) is to be given to the employee; one copy (duplicate) is to be submitted to the B.I.R. together with the original IT 76 Summary; and one copy (triplicate) is to be retained by the employer for his records. The IT 76 Summary must state the names of all the employees in respect of whom IT 76 Certificates were completed. NB. These forms, the IT 76 Certificates and Summary are to be submitted together with the TD 4 Certificate and Summary to both the employee and the Board of Inland Revenue on the appointed day (last day of February of the year following the income year). Rates of Payment

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Health Surcharge is payable at two (2) rates as follows:Where the monthly/weekly income is more than $469.99/$109.00 respectively the rate is $8.25 per week. Where the monthly/weekly income is less than $469.99/$109.00 respectively the rate is $4.80 per week.

Method of Payment of Health Surcharge The employer must make this payment after deducting the correct amount from the emoluments of his employees at each pay period. This amount is payable to the Board on or before the 15 th day of the month following the month in which the deduction was made. Health Surcharge is payable in cash or by certified cheque and must be accompanied with the PAYE/Health Surcharge Monthly Return. Penalties for late/non-payment of health surcharge Employed Persons An employer who fails or neglects to deduct health surcharge and or remit to the Board is guilty of an offence; and in addition to the amount not deducted and or remitted is liable to a penalty of 25% of such amount and interest at the rate of 20% on both the outstanding amount and penalty from due date of payment.

A person who fails to make the return within the time specified is guilty of an offence and may be prosecuted. Health Surcharge Health Surcharge is a tax, which is charged on income. Finance Act 14/87 transferred the responsibility for the due administration, computation, collection and recovery of health surcharge from the National Insurance Board to the Board of Inland Revenue. Health Surcharge is charged and payable: (a) (b) By every employed person who pays or is liable to pay contribution under the National insurance Act; and By individuals other than employed persons who are liable to furnish a return of income (self-employed)

NB Health Surcharge deductions must be included on the TD 4 Certificate. (Box 14). Garnishee Order Where a taxpayer (including an employee) has outstanding taxes and refuses or neglects to make payments to liquidate this arrears, the Board of Inland Revenue can enforce collection using various methods empowered by the Income Tax Act. One of these methods is the issuing of a Garnishee Order. A copy of the Garnishee Order is also sent to the taxpayer. Section 112 of the Income Tax Act enables the Board to instruct the employer via a Garnishee Order to deduct arrears of taxes from emolument of the delinquent employee for a specific period.

Individuals who are exempt from the payment of health surcharge are those: Under the age of sixteen (16) years Sixty (60) years and over Whose only source of income is pension

19 This arrears is deducted in addition to any tax which is due under the PAYE System. A deduction under a Garnishee Order must be remitted to the Board of Inland Revenue at the end of the month in which the deduction was made. This payment must not be included in the monthly PAYE deductions. separate PAYE Remittance Form must be used. Information in respect of the Garnishee Order must include: ~ Garnishee Order No. ~ Name of Employee ~ BIR No. of Employee ~ Current Remittance ~ Amount Remitted to Date N.B. Deductions made via a Garnishee Order MUST NOT be included on the TD 4 Certificate for the respective year of income. A
JOHN DOE 3 BENCH PARK WOODFORD SQUARE PORT OF SPAIN

20

PYE-00004231 31-OCT-2011

Monthly Return - PAYE/Health Surcharge Every registered employer would receive a monthly PAYE/Health Surcharge Return in the mail. The employer is required to submit this return along with PAYE/Health Surcharge deducted from emolument at any of our payment centres on or before the 15 th day of month following the month of deductions. If an employer does not receive a Return in the mail he can request one, in writing, from any of our Regional offices. An employer shall submit only one(1) Return for a filing period (month). Therefore, if more than one payment is made for a period; all the payments must be totaled and entered on the Return. Failure to submit a Return for any month means that the respective payment would be suspended.
JOHN DOE 3 BENCH PARK WOODFORD SQUARE PORT OF SPAIN

PYE-00004231 31-OCT-2011

21 Payment and Accounting For Tax All taxes deducted must be paid by the employer to the Board on or before the stipulated date, i.e. 15th day of the month following the month in which the deductions were made. Where a person ceases business, the tax must be paid within seven (7) days after the cessation of the business. All queries and payments can be made to:
Head Office (POS):
Inland Revenue Division Office Collections Victoria Courts Cor. Queen & Edward St. Port of Spain Telephone:625-0895 Fax:623-0426

22 (b) By certified cheque, except where the employer is an account holder of the Branch; (c) Over the counter during normal hours and by way off the Banks Fast Service 24; (d) Where the amount received agrees with the amount shown on the PAYE/Health Surcharge Monthly Return; (e) And issue as a receipt the smaller segment of the official form with its (Banks) official stamp affixed. The larger segment will be sent to the Board;

Arima Regional Office:

Inland Revenue Division Prince Street Arima

San Fernando Regional Office:

Inland Revenue Division Taxpayer Services 52, Cipero Street San Fernando

Tobago Regional Office:

Inland Revenue Division Sangsters Hill Scarborough Tobago

(f) Not later than the due date. i.e. The Bank will not accept late payment nor collect penalty and interest. This system has been devised in an effort to assist the taxpayer to expedite payments. It is advisable to take advantage of this convenient method of effecting payments. Accounting for Tax Deducted and Keeping Records

Telephone: 667-7639 Fax: 667-5589

Telephone :657-5000 Ext 106 Fax: 657-6057

Telephone: 635-1420 Fax: 639-2538

Payments can also be made at the following District Offices: Chaguanas - #20 Ramsaran Street, Chaguanas Couva railway Road, Couva Pt.Fortin Teshier Road, Point Fortin Siparia High Street, Siparia Sangre Grande Damarie Hill, Guaico Princes Town Naparima Mayaro Road, Princes town Rio Claro Naparima Mayaro Road, Rio Claro Acceptance of Payment by the Bank The Royal Bank of Trinidad and Tobago, through all its branches, has entered into an agreement with the Government to accept, from the employer, payment of monthly PAYE and Health Surcharge remittances deducted from employees. The Bank will accept payment made (a) On pre-validated computerized forms received in the mail. Where no prevalidate form is available the employer must make payments directly to the Board;

When an employer makes any payment of emoluments to an employee or holder of an office from which tax is deducted as required by the Regulations, he shall furnish the employee or office older with particulars of the payment including particulars of the gross emoluments for the pay period and the amount of tax deducted there from in such form as may be approved by the Board (Payslip). The Board may, in its discretion, exempt in writing any or all employers from complying with the provisions of this regulation in respect of such classes of employees or office holders as the Board shall think fit, and such exemption may at any time be revoked by the Board. Every person who makes any payment of emoluments to an employee or holder of an office (from whose emoluments tax is deducted) must keep, to the satisfaction of the Board, a record of emoluments paid to each employee and tax deducted from each payment. Upon request, all records relating to the payment of emoluments and taxes must be made available for inspection by the Board at the premises of the employer. Severance Pay and Computation Severance Pay refers to a lump sum payment made to an employee, under a contract of emolument, in respect of past services where the (i) Employees position is made redundant, or (iv) Employees services were terminated due to ill health.

23 Payments made to an employee by reason of voluntary resignation would not qualify as severance pay. Requirements for processing of Severance Approvals for Employees (v) Details of computation. Prior to the payment, the following information must be supplied to the Taxpayer Services II (P.A.Y.E. Section) in writing, on a Companys letterhead:a) Redundancy1) Employees name Date of Birth Address Contact Number BIR Number Post of Employee 2) Date of start of employment 3) Copy of Employment Contract (with details of permanent employment) 4) Date of Severance 5) Amount of Severance 6) Reason for Severance 7) Computation of how severance amount was calculated 8) PAYE number of company 9) Individual Termination letters In addition to the general requirement at (1) (9) the following information is needed in respect of the specific severance areas listed below: b) Severance payment to be classified as Retirement Severance Benefit (i) Employee must be 60 years of age (copy of Birth Certificate and Affidavit) (ii) Letter from National Insurance Board stating the employee has retired from insurable employment. (iii) Letter from the company stating whether the employee is part of the companys pension plan. c) Severance payment due to Ill Health (i) Original Letter from Medical Doctor stating the nature of the illness and whether or not the employee is able to continue to work. NB:

24 (ii) Photocopy of the relevant section from the Companys Terms and Condition of employment or the Trade Union Agreement covering severance payment.

With respect to payments connected with termination of employment or office which would not otherwise be chargeable to tax:(a) Where payments are to be made to a spouse, relative or dependant the names of the spouse/relative/dependant and the circumstances under which the payment is to be made to him/her and (b) Where payment is in the form of a valuable consideration other than money details of the consideration, the dates it is to be given and evidence of its value at that date. It should be noted that where a payment is made to a spouse or any relative or dependant of a person who holds or has held an office of employment, the payment shall be treated as if it were made to that person (the employee). It is important that this information be forwarded to the Board for determining the nature of the payment and the rate at which tax is to be deducted. N.B Tax deducted from a Severance payment is not PAYE. A separate TD4 Certificate with the details of the Severance Pay only, must be prepared and issued to the Board of Inland Revenue and the employee. The words SEVERANCE PAYMENT should be clearly marked on this TD 4 Certificate. The first $300,000.00 received by an employee as Severance Pay upon termination of employment where the position has become redundant or on grounds of ill health is exempt from tax under the Income Tax Act. The amount in excess of that which was exempted is to be taxed at the average rate of tax paid by the employee for the year immediately preceding the year in which the employment is terminated. The average rate of tax is computed by the Board of Inland Revenue as follows: Tax Payable Chargeable Income x 100

25 Example: No. 1 2011: Total Severance Pay received Less Statutory Limit (Exempt) Chargeable at Average Rate $449,000.00 $300,000.00 $149,000.00 Tax Payable Taxpayers Chargeable Income for 2010 was $63,500.00 Tax payable on $63,500.00 = $63,500 @ 25% = $15,875.00 = $15,875.00 Average rate = 2010 Tax Payable x 100 2010 Chargeable Income = $15,875 $63,500 Tax on Severance Pay excess = $149,000 at 25% Tax Payable = $37,250.00 Example: No. 2 (Employment was terminated in 2009. Severance was received in 2011). 2011 Total Severance Pay received Less Statutory Limit (Exempt) Chargeable at Average Rate $530,000.00 $300,000.00 $230,000.00 Example x 100 = 25% Average Rate of Tax =

26 $ 43,750.00 $175,000.00 Tax on Severance Pay excess = = $230,000.00 x 25% $57,500.00 x 100 = 25%

Retirement Severance Benefit and Computation This is an amount paid to an individual who: (a) Is not entitled to a pension other than under the National Insurance Act or the Old Age Pension Act; (b) Is not a member of an approved Pension Fund Plan, or a Fund or Scheme that is a Provident Fund and (c) Who produces evidence to the satisfaction of the Board of Inland Revenue that he has; (i) Retired from insurable Employment within the meaning of the National Insurance Act; and Reached the age of 60 years.

(ii)

Subject to the above conditions, an amount of $300,000.00 of the retirement severance benefit is exempt from Income Tax. Any amount remaining in excess of the exemption of $300,000.00 is to be included in the individuals chargeable income and charged to tax using the rate of tax for the current year.

Taxpayers Ch. Inc. for 2008 (year preceding termination) was $175,000.00. Tax payable on $175,000.00: $175,000.00 @ 25% Tax Payable $43,750.00 $43.750.00

2011: Total Retirement Severance Benefit Less Statutory Limit (Exempt) Income Chargeable at Scale Rate Taxpayer Income for 2011 as at 31/3/11

$441,000.00 $300,000.00 $141,000.00 $ 53,500.00

27 Tax Computation *Taxpayers Income as at 31/3/11 Plus excess over $300,000.00 Total Income Less Personal Allowance Total Net Income Less Approved Deductions (TD 1 Approval) Chargeable Income Tax on $120,500.00 @ 25% Total Tax Liability for 2011 : = $ 30,125.00 = $ 53,500.00 $141,000.00 $194,500.00 $ 60,000.00 $134,500.00 $ 14,000.00 $120,500.00

28 Contract Gratuity - Statement of Indebtedness Prior to the payment being made, the employer must request a Statement of Indebtedness from the Board of Inland Revenue. The request should include: The employees name Tax deducted to date The contract gratuity payable A completed TD 1 Form The total income for the year (this includes income paid to date and payable for the remainder of the year, and any other source of income. eg. Pension)

NB: Tax Deduction on Retirement Income

If the contract is to be renewed this should be also stated together with the projected earnings for the remainder of the year. The approval from the Board can only be granted where all outstanding taxes are cleared. Where these taxes cannot be paid, a Garnishee Order would be issued to deduct the arrears from any payment to the individual.

(Total Tax Liability P.A.Y.E. deduction to date from *income) Before payment of a Retirement Severance Benefit is made, the employer must write the Board of Inland Revenue (P.A.Y.E. Section) for approval. Ex-Gratia Payments This payment is not normally classified as one of the types of Severance Payments. Upon approval by the PAYE Section of the Inland Revenue Division, the first $300,000.00 of ex-gratia payment is exempt from tax and the balance shall be charged to tax using the average rate of tax. Retirement Benefit Payments Public Sector In the Public Sector, Retirement Benefit Payments may take the form of: Contract Gratuity Retirement at 60 compulsory retirement Permission to retire at 50/55 Retirement on medical grounds due to ill health

Taxation of Contract Gratuity and the Approval Provided all liabilities are cleared, the Board of Inland Revenue will issue a Statement of Indebtedness authorizing payment and indicating how much tax is to be withheld, in accordance with the P.A.Y.E. Regulations. The tax is computed after taking into consideration all income to be paid to the individual for the entire year and the necessary deductions. (Thus the need for a TD 1 and a statement showing tax and earning to date, along with projected income to be earned.

Statement of Indebtedness re: Payment of Retirement Benefits A similar procedure is followed where Public Servants are due to retire. This allows the Board of Inland Revenue to recover all outstanding debt owed by the taxpayer, prior to him receiving his lump sum payment (gratuity) from the state. On receipt of the request for the Statement of Indebtedness, the Board of Inland Revenue must ensure that all outstanding liabilities are cleared.

In all cases of Public Sector Retirement Benefits, a Statement of Indebtedness must be obtained from the Board of Inland Revenue before payment is made. Contract Gratuity payment arises where a person (both within the public and private sectors) was employed on contract for a specific period, and in accordance with the terms and conditions of the contract, the employment is terminated. This payment must be provided for in the contract of employment.

29 Failure to make these payments would result in a Garnishee Order being served. All liabilities to the Board of Inland Revenue are first settled by this means, and the taxpayer then receives what remains of his gratuity. Not included as Severance Payments are lump-sum payments made: (a) (b) (c) (d) Under an approved pension scheme; Under an approved pension fund plan or approved deferred annuity plan; Under a contract approved by the Board under section 134(6) of the Income Tax Act, Chapter 75:01. In connection with the termination of the holding of an office or employment by death of the holder or made on account of the injury to or disability of the holder of the office or employment. On the death of an employee under his employers pension plan. Sec. 99(4)

30 PENALTIES UNDER THE INCOME TAX ACT Specific Offences for PAYE. Sec. 98(2) Failure to file a tax declaration. Any person who fails to file a declaration is liable on summary conviction to a fine of $3,000.00. Sec. 98(4) Failure to deduct and/or remit PAYE. A person who fails to deduct PAYE or to remit, to the Board of Inland Revenue, the PAYE deducted is guilty of an offence and liable on summary conviction to a fine of fifteen thousand dollars ($15,000.00) or to imprisonment for two (2) years or both. Penalty for late remittance. Failure to remit the PAYE deducted will result in a penalty of 25% or $40.00 whichever is greater and interest at the rate of 20% per annum on the outstanding amount plus penalty from the due date to the day of payment. Sec. 99(7) Failure to deliver account or certificate of tax deducted or withheld Any person who fails to deliver an account or certificate to any person from whose emoluments the tax was deducted or withheld or to the Board for the purpose of accountability, is guilty of an offence and is liable on summary conviction to a fine of seventy five dollars ($75.00) for every day during which such failure continues. Sec. 125(3) Any person who contravenes or fails to comply with the regulations made under Section 125 (1) (i.e. the PAYE Regulations) may be subject on summary conviction to a fine of five thousand dollars ($5,000.00) or three (3) months imprisonment. NOTE: THIS SUMMARY OF THE PAYE SYSTEM IS NOT A SUBSTITUTE FOR THE INCOME TAX LAWS & REGULATIONS. In the case of any inadvertent conflict, the Laws and Regulations prevail.

(e)

TAX RATES 2006 2011 25% of the Chargeable Income

31 NOTES

32 NOTES