from the assets supporting liabilities to Trinidad and Tobago policyholders, as required under Section 83(2) of the Insurance Act, 2018. Such profits are credited to the policy account and included in the insurance reserves reported pursuant to Section 145 of the Insurance Act, 2018.
Insurance companies carrying on insurance business other than long-term insurance business are generally taxed on the same basis as ordinary companies and are subject to corporation tax at the standard rate of 30%.
The rate of corporation tax on the profits from a long-term insurance business for the 2024 year of income is 15%. However, if such profits are transferred to the shareholders’ account, such transferred amounts are subject to tax at a rate of 25%.
In the case of a Small and Medium Enterprise (SME) company that is listed on the Trinidad and Tobago Stock Exchange, a 0% rate applies for the first five years from listing, while such SME listed company will be subject to tax at 50% of the standard rate for the next five succeeding years and thereafter at the standard tax rate. A SME listed company is also subject to business levy and green fund levy at a 0% rate for the first five years from listing, at 50% of the standard rates of business levy and green fund levy for the next five succeeding years and thereafter at the standard rates of business levy and green fund levy.
Capital gains. Capital gains are generally not subject to tax. Depending on the class of asset and the nature of the company’s business activities, however, the profit or loss on depreciable assets disposed of after being held for more than 12 months may require a balancing adjustment (see Section C).
Short-term capital gains are profits on the disposal of assets within 12 months of their acquisition. Although these gains are of a capital nature, they are generally subject to tax. Profits derived from the partial disposal of an asset within 12 months of acquisition are also subject to tax. For the 2023 year of income, the applicable rate is 30%.
Administration. The tax year is the calendar year. Tax is calculated on the profits for the accounting period that ends during the tax year. For each quarter, a company is required to pay a green fund levy installment, as well as either a corporation tax or business levy installment, whichever is greater. The quarterly payments must be made by 31 March, 30 June, 30 September and 31 December in each tax year. Quarterly payments of corporation tax are determined based on the taxable income for the preceding accounting period. Business levy and green fund levy installments are based on the actual gross sales or receipts of the company for the relevant quarter. The business levy calculation excludes income that is exempt for corporation tax purposes such as dividends received from Trinidad and Tobago resident companies, but the green fund levy calculation takes into account such tax-exempt income.
If the current year’s profits exceed the preceding year’s profits, a company must pay by 31 December the sum of the tax liability on the preceding year’s taxable profits plus 80% of the increase in tax liability over the preceding year. Annual tax returns must
be filed by 30 April in the year following the tax year, and any balance of tax due is payable at that time.
If the balance of tax due is not paid by the 30 April deadline, interest accrues at a rate of 20% per year on the outstanding amount beginning on 1 May. A grace period to 31 October is granted for the filing of the tax return. If the return is not filed by 31 October, a penalty of TTD1,000 accrues beginning 1 November for each six-month period or part of such period that the return remains outstanding.
Dividends. Dividends received from nonresident companies out of profits not derived from or accruing in Trinidad and Tobago are subject to tax. Dividends received by resident companies from other resident companies are tax-exempt.
Effective from 1 January 2022, dividends paid to nonresident companies and individuals are generally subject to a withholding tax of 8%. The rate is reduced to 3% if the recipient is a corporation owning 50% or more of the voting power of the distributing company.
Double tax relief. Bilateral agreements have been entered into between the government of Trinidad and Tobago and the governments of certain other countries to provide relief from double taxation. These agreements assure taxpayers that their trade or investment in the other countries is free from the deterrent of double taxation. Relief from double taxation is achieved by one of the following two methods:
• Exemption or a reduced rate on certain classes of income in one of the two countries concerned.
• Credit if the income is fully or partially taxed in the two countries. The tax in the country where the income arises is allowed as a credit against the tax on the same income in the country where the recipient is resident. The credit is the lower of the Trinidad and Tobago tax or the foreign tax on the same income.
C. Determination of taxable income
General. The assessment is based on financial statements prepared according to international accounting standards, subject to certain adjustments.
To be deductible, expenses must be incurred wholly and exclusively in the production of income. The deduction for business meals and entertainment expenses is limited to 75% of actual expenses. Deductions for management charges (now more broadly defined) paid to a nonresident company may not exceed 2% of the payer’s total expenses, exclusive of such charges, capital allowances and expenses not allowed under the Corporation Tax Act.
Donations made under a registered deed of covenant to an approved charity that are actually paid during the year of income are deductible, up to a maximum of 15% of the total income of the company (as defined in the law).
Inventories. Inventory may be valued at cost or market value, whichever is lower. A method of stock valuation, once properly adopted, is binding until permission to change is obtained from the Board of Inland Revenue.
foreign-exchange dealers set the exchange rate. Residents may hold foreign currencies for their own account. Profits may be repatriated without the approval of the Central Bank of Trinidad and Tobago.
Debt-to-equity rules. In general, no thin-capitalization rules are imposed in Trinidad and Tobago. However, if a local company pays or accrues interest on securities issued to a nonresident company and if the local company is a subsidiary of, or a fellow subsidiary in relation to, the nonresident company, the interest is treated as a distribution and may not be claimed as a deduction against the profits of the local company.
F. Treaty withholding tax rates
The following table lists the withholding tax rates under Trinidad and Tobago’s tax treaties. If the treaty rates are higher than the rates prescribed in the domestic law, the lower domestic rates apply.
(a) The rate applies to interest paid to banks and financial institutions. Interest paid to other recipients is taxed at 15%.
(b) See footnote (d) to Section A.
(c) The lower rate applies if the recipient is a corporation owning 25% or more of the voting power of the distributing company.
(d) The lower rate applies if the recipient is a corporation owning 10% or more of the voting power of the distributing company.
(e) The lower rate applies to interest paid on deposits, commercial debts and borrowings from banking enterprises.
(f) The listed countries have ratified the Caribbean Community and Common Market (CARICOM) double tax treaty.
(g) The lower rate applies if the recipient is a company holding directly at least 10% of the capital of the distributing company.
(h) The lower rate applies if the recipient is a company holding directly or indirectly at least 25% of the capital of the distributing company.
(i) The 0% rate applies if the recipient is a company holding directly at least 50% of the capital of the distributing company. The 5% rate applies if the recipient is a company holding directly at least 25% of the capital of the distributing company.