A "Company" refers to any body corporate or unincorporated association, but does not include a partnership.
Summary of Tax Obligations
All companies are required to register with the Board of Inland Revenue to obtain a BIR File Number.
Companies are required to determine their Established Accounting Terminal Date (EATD) at registration. EATD means the accounting date to which the accounts of the company are ordinarily made up and accepted for the purposes of assessment.
Companies are required to pay
Corporation Tax is charged for each year of income on the chargable profits of the company arising in that year at the rate of 25%, up to 2016-12-31. For income year 2017 the rate was 25% up to $1,000,000.00 and 30% for every dollar over $1,000,000.00. For Income year 2018 the rate has been adjusted to 30%.
Petrochemical Companies pay at the rate of 35%
- Liquefaction of natural gas
- Manufacture of petrochemicals
- Physical sereration of liquids/processing from a natural gas stream
- Transmission and distribution of natural gas
- Wholesale marketing and distribution of petroleum products as defined
- Any other activity so prescribed
Calculation for chargable profits
Business Levy is computed at the rate of 0.6% on actual gross sales or receipts with effect 2016-01-21.
An exenption applies for the first three (3) years from the date of registration of the business.
Green Fund Levy
Green Fund Levy is computed at the rate of 0.3% on actual gross sales or receipts with effect from 2016-01-21.
(Exempt Income is included in this calculation).
All of the aforementioned taxes are paid via the quarterly installment method - that is, at the end of March, June, September, and December each year.
Value Added Tax (VAT)
The company is required to register for VAT where the total sales or receipts (commercial supplies) are in excess of $500,000.00 in a twelve (12) month period (or if it is expected that fross sales/receipts shall be in excess of $500,000.00).
Pay As You Earn (PAYE)
PAYE is the system by which the employer withholds tax from emplument income (The PAYE System)
Companies are required to register with th eBoard of Inland Revenue to obtain a PAYE Account Number to remit Health Surcharge and Income Tax deducted from the Salaries/Wages of the employees and directors.
How to Compute PAYE
To determine the tax to be deducted from the employee's income, the employer must use the deductions and tax credits on the TD1 Form/Certified Approval of Tax declaration submitted by the employee
The formula for the calculation of income tax is-
- Total Annual Income - Total Tax Deductions = Chargeable Income
- Chargable Income x Tax Rate* = Tax on Chargable Income
- Tax on Chargable Income - Tax Credits = Income Tax Liability
- Income Tax Liability ÷ Number of pay periods per year = Tax per pay period
* 2017 Income Tax rate is 25% for every dollar up to $1,000,000.00 and 30% for every dollar over $1,000,000.00 of chargable Income
Health Surcharge MUST be deducted and remitted for all employees except those
- Under the age of sixteen (16) years
- Sixty (60) years and over
- Whose only source of income is pension
Employees whose monthly emoluments are more than $469.99 or whose weekly emoluments are more than $109.00 - the rate is $8.25 per week. All other employed persons - the rate is $4.80 per week.
Dedcutions & Reliefs
- Promotional Expenses - 150%
- Scholarship - 100%
- Audio, Visual and Video Productions* - 150%
- Art and Culture* - 100%
- Sports and Sportsmen* - 100%
- Sponsorship of Audio, Visual, and Video Productions* - 150%
- Covenanted Donations - Limited to 15% of Total Income
* The cumulative amount of Art and Culture, Sponsorship of Sports/Sportsmen, Sponsorship of Audio, Visual, and Bideo Production are capped at $3,000,000.00
- Renumeration of Directors
- Salaries and Wages
- Severance Pay*
- Bad and Doubtful Debts*
- Rates and Taxes*
- Contributions to Approved Funds, Schemes, or Plans*
- Preference Dividends Paid
- Expenditure on the Construction or Setting up of a Child Care or Home Work Facility
- Initial Allowance
- Wear and Tear Allowance
- Balancing Allowance
- Promotional Expenses*
- Business Expenses not Mentioned Above*
* A schedule must be submitted to support these deductions
- Double Taxation
- Venture Capital Credit
- Corporation Tax
Reliefs from Corporation Tax for certain companies
- An approved small company
- An approved company carrying on business in a regional development area
- An approved activity company