OUR REVIEW OF THE FINANCE ACT NO. 15 OF 2017

1 February 2018


A Firstline Securities Limited Blog by: Mike

In a series of two blog entries we look at the Finance Act No 15 of 2017 designed to implement the 2018 National Budget of Trinidad and Tobago. We examine what has been implemented and what has been deferred or simply left out without explanation. Those with businesses should be careful to ensure that they correctly calculate their quarterly returns, while those thinking about buying a new or foreign used car should consider changes made to the taxation of vehicles for private and commercial purposes.

On track, off track, or off the planet – let us know what you think of the course charted.

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INTRODUCTION

The Finance Act No. 15 of 2017 was proclaimed and assented to by the President of the Republic of Trinidad and Tobago on the 19th December 2017. The Act introduces a number of measures that alter the fiscal regime and, in some cases, change the rates applicable in respect of duties and taxes.

A climb in the rate of Corporation Tax

Effective from the 1st January 2018, the first schedule of the Corporation Tax Act has been amended to increase the corporation tax rate from 25% to 30% for all companies except those licensed to carry on banking business under the Financial Institutions Act.

For companies licensed under the Financial Institutions Act the rate has been increased to 35%.

If you are wondering what businesses attract the 35% rate guidance is given in Section 16(2) of the Financial Institutions Act.  Under that act banking business is defined as:

“…the business of soliciting or receiving sums of money from the public on current or deposit account which may be withdrawn on demand, by cheque, draft, order or notice, and the solicitation and granting of credit exposures by a person whether as principal or agent and includes payment card business and generally, the undertaking of any business appertaining to the business of commercial banks.”

So –  the new banking rate is going to apply to the likes of RBC, Republic, First Citizens, Scotia Bank amongst others.

Your deadlines for closing out Income Tax Year 2017

Companies should submit their 2017 Corporation Tax Return together with any payment due by the 30th April 2018. Penalties for late submission of a Corporation Tax Return for income tax year 2017 don’t “kick-in” until the 1st November 2018, but interest can be charged from the 1st May 2018 and is levied at an annual rate of 20%.

For those blog readers with employees the due date for completion and submission of TD$ certificates for income tax year 2017 is the 28th February 2018.

Make sure to review your quarterly returns from 31st March 2018

As stated above, the Act implements significant changes to the rate of Corporation Tax including the introduction of a new rate of 35% for commercial banks.

To guide blog users, we offer the following example:

If in Income Tax Year 2017 your company had chargeable profits of TT$1,000,000 you should pay tax on those profits at a rate of 25%. This amounts to TT$250,000.

When calculating your quarterly returns for Income Tax Year 2018 it is usual to base your calculation on the level of chargeable profits you had in the previous Income Tax Year (2017) at the rate prevalent for the new Financial Year (unless you have reason to believe that your profits would be materially different than the previous year).

As the rates have increased to 30% this would give a quarterly instalment for Financial Year 2018 of TT$1,000,000 x 30% / 4 instalments = TT$75,000. The first instalment for Financial Year 2018 is due by the 31st March 2018.

The key is to avoid interest on “short-payments” as this will attract interest at 20%.

Quarterly instalments for the Business Levy and the Green Fund Levy are also due quarterly and are payable at the rate of 0.6% and 0.3% respectively.

Even More Borrowing…

Two significant changes were made to increase the effective borrowing power of the Government of the Republic of Trinidad and Tobago (GORTT).

First, the Finance Act Number 15 of 2017 has amended the Central Bank Act to increase the limit on the amount of outstanding temporary advances that can be made by the Central Bank to GORTT from 15% to 20% of total recurrent revenues and capital receipts (excluding receipts from local and international loans).

Second, the Treasury Bill Act Section 2(1) was amended to increase the borrowing limit of the Minister of Finance from sums not exceeding TT$2,000m or foreign equivalent to TT$5,000m or foreign equivalent.

Applicable – but only if you run a Private Hospital

With effect from the 1st January 2018 the fines imposed on an individual convicted of an offence under the Private Hospitals Act have been increased from TT$10,000 to TT$100,000.

Applicable to new Approved Agricultural Holdings

Prior to the Finance Act No. 15 of 2017, gains or profits from commercial farming carried out as an Approved Agricultural Holding were exempt from tax for a period of 10 years from the date the approval was granted. Previously the Approved Agricultural Holding had to be less than 100 acres to comply with the terms of Section 14(5) of the Income Tax Act No. 34 of 1938.

The 100-acre limit has been removed by the Finance Act No. 15 of 2017 in an effort to stimulate agriculture in Trinidad and Tobago.

Taxing Lottery Winnings

With effect from the 19th December 2017 (see comment below) all prize money paid out in respect of any paper ticket or token sold or issued in connection with a national lottery that is in excess of TT$1,000 will be taxed at source at a rate of 10%. The National Lottery Board will be responsible for the collection of the tax with the winner being paid the net amount.

Although the legislation states that this measure comes into effect on the 19th December 2017 implementation has been deferred to allow the NLCB time to implement the new systems required to collect the tax.
 

Now you see me, now you don’t

Items promised in the 2018 budget, but not included in the Finance Act, include:

  • The 12.5% royalty tax on oil and gas intended for implementation from the 1stDecember 2017 (we will return to this in a subsequent blog entry).
  • Measures to reintroduce the Export Allowance.
  • The necessary legislation to establish the Revenue Authority.
  • Measures to implement the Property Tax:the government is currently waiting for a decision from the court in respect of the implementation of the Property Tax but expects to implement this tax as soon as the court matter is determined (it is assumed in favour of the government).
  • A new tax regime for the Gaming/Gambling Industry.

Closing thoughts – time to consider your investing strategies

Firstline Securities Limited offers comprehensive coverage of local and international markets with a bias for the energy sector. Firstline offers many unique opportunities to put surplus cash to work either as your asset manager or investment advisor. Please contact us for more details at info@firstlinesecurities.com or at 868.628.1175, we can discuss your investment needs in detail and craft a portfolio that makes sense for you. We look forward to hearing from you.

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