A self-employed individual is one who works for themselves rather than being an employee of another business.
A sole trader, also known as a sole proprietorship, individual entrepreneurship or proprietorship, is a type of business structure where the enterprise is owned and run by one person and in which there is no legal distinction between the owner and the business entity.
A sole trader is somebody who is self-employed but is also the exclusive owner of their business.
A Self Employed person must
- Register for a Board of Inland Revenue file number
- . Pay Quarterly Taxes
- Income Tax and / or Business Levy
- Health Surcharge
- . File your Annual Individual Tax Return
- . Maintain Proper Books & Records
If a Self-Employed person has workers they must:
- Request a Health Surcharge Account
- Request a PAYE Account
- For ALL workers:
- Make sure ALL workers (including part time and casual workers) have BIR numbers
- Workers who have deductions must get a TD1 approval
- By the 15th of the following month:
- File Monthly PAYE/Health Surcharge return<
- Pay Health Surcharge deducted from your workers
- Pay PAYE where tax was deducted from your workers
- By the last of February of the following year:
- Submit Annual PAYE Summary by the last of February of the following year
- Issue TD4 certificates to all employees
If a Self-Employed Person's trade or business makes more than TT $500,000 every year they must
- be VAT registered
- Request a VAT Account
- File VAT return every two (2) months
- Pay VAT every two (2) months
If a Self-Employed Person's trade or business sends money out of Trinidad & Tobago, they must:
- Request a Withholding Tax account
- Pay withholding tax within thirty (30) days after the money is sent
Summary of Tax Obligations
All self-employed individuals/sole traders are required to register with the Board of Inland Revenue to obtain a BIR File Number.
Self-employed Individuals/Sole Traders are required to pay
Income Tax is charged for each year of income on the chargeable profits arising in that year at the rate of:
- 25% up to $1,000,000.00 and;
- 30% for every dollar over $1,000,000.00. (with effect from 2017-01-01)
How to calculate chargeable profits
Example – Calculation of Chargeable Profit
|Cost of Goods Sold||$200,000|
|Less Allowances and Deductions|
|Approved Deferred Annuity||$33,000|
Business Levy is computed at the rate of 0.6% on actual gross sales or receipts with effect 2016-01-21.
An exemption applies for the first three (3) years from the date of registration of the business.
Health Surcharge MUST be deducted and remitted
Where the total sales/receipts for the year average more than $469.99 per month - the rate is $8.25 per week. Where the total sales/receipts for the year average less than or equal to $469.99 per month - the rate is $4.80 per week.
all of the aforementioned taxes are paid via quarterly installments - that is, at end of March, June, September, and December each year.
Value Added Tax (VAT)
A self-employed individual/sole trader 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 gross sales/receipts shall be in excess of $500,000.00).
Deductions, Expenses & Credits
- Personal Allowance
- Tertiary Education Expenses
- First Time Home Owner Allowance
- Covenanted Donations
- Alimony and Maintenance Payments
- Contributions to Approved Deferred Annuity/Pension Plans
- Wear and Tear Allowance
- Specific Bad Debts
- Promotional Expenses
- Bank and Interest Charges
- 30% of the Investment in a Venture Capital Company
- 25% of the cost of Solar Water Heating System (the tax credit is limited to $10,000)
- 25% of the cost of Purchase and Installation of CNG Kit and cylinder (the tax credit is limited to $10,000)
- 25% of the face value of the National Tax-Free Savings Bonds purchased where the maturity period is five (5), seven (7), or ten (10) years
In addition, all business expenses, which are verifiable and wholly and exclusively incurred in the production of income, can be educated when determining Chargeable Profits.
Where expenses incurred has some private use included, e.g. rent or motor vehicle expenses - the expense must be apportioned to reflect the percentage of the business use to be deducted when computing Chargeable Profits.
Where an entity hires workers it is required to obtain a PAYE account number. This account number is used to remit taxes withheld from the salary or wages (emolument income) of their employees.